The Government’s Dirty Secret About the Debt Crisis

News of the imminent government shut down has even reached reached the status of water cooler conversation at the office. The effects on the average American’s psyche are devastating already. According to recent shocking polls taken, nearly one in two Americans now believes that the country will enter a second Great Depression next year or in 2013.

 

Half of Americans believe that the greatest days of the nation economically are behind us, while forty percent believe that their children’s future will be less good than their own. You may not know what the painful and widespread effects of such a shutdown will be when you wake up on August third if Congress can not do something to get the debt ceiling raised by August second.

You probably are totally unaware of what the long term ramifications of the government shrinking down drastically in size will be. In the paragraphs that follow, you will learn what will happen if the debt ceiling is never raised, a truth that the government is desperate to keep from you.

Immediate Results of A Government Partial Shutdown on Aug. 3rd

No one is one hundred percent certain what the government will do on August third if the debt ceiling has not been raised. Here are the facts that you need to know. Since the government borrows forty-five cents of ever dollar that it actually spends, on that infamous date, the government will simply have to stop paying about forty-five percent of all of its obligations for August.

Treasury Secretary Timothy Geithner and President Barack Obama call this a catastrophe in the making. Chairman of the Federal Reserve Ben Bernake calls this calamitous. The Bipartisan Policy Center created by Congress says that this will spell major trouble for the nation’s economy.

What will the immediate effects of the expenses shortfall be? Who will you see not get compensated by the Federal government if the debt ceiling is not raised? First of all, the government will make sure that the debt holders of the $14.3 Trillion in U.S. Treasuries receive their interest payments. They will also send out the Social Security checks to the retirees, mostly because they have no choice. To neglect either of these duties would be deemed either a total or technical default by the three ratings agencies Moody’s, S&P, and Fitch.

This brings you back to the uncomfortable question of who will not be paid on August third. If you expect an IRS Federal income tax refund, you can anticipate that to be put on hiatus. Those of you who are among the legions of Federal Employees, such as post office workers, soldiers, and others, would probably not receive your salaries or benefits.

Veterans hospitals might be shut down temporarily. If you work for a defense vendor who counts on some of the $32 billion in payments that are due to defense contractors in August, then you may be in trouble. There is real speculation that defense industry stocks would plunge by fifty percent within hours of the announcement.

You can not argue that such actions would have terrible consequences for real people, who are not simply numbers and names in a database. For a long time, this would cause grief and anguish for many individuals who count on these paychecks, such as our devoted and sacrificing military families. Widespread economic hardship could multiply if the stock market tanked and the economy tipped back into recession as a result of this temporary default. It would not be the financial end of the U.S., but it would cause economic chaos that might last a long, long time.

What Are the Real Long Term Ramifications of Such A Shutdown?

Now you know the worst of the news. But there is another side of the equation that is completely ignored by the financial media and news talking heads. Should the government be unable to agree on a debt ceiling increase over the long term, there is a result that few expect and the government does not want you to know about at all. This is that after the effects of the very real hardship had lessened, you would see a United States emerge that was potentially stronger, richer, better off, and certainly less cocky than in the past.

This does not mean that you would pay less in taxes. On the contrary, the government has insufficient revenue for its size today as things currently stand. What you would see is far less government. This means that there would be substantially less government interference in the economy. You would not have so many government employee eaters, but would instead see more private sector contributors emerge as a result. You would have more license to build wealth and expand existing businesses or to open new ones. This additional freedom could start an economic revolution not seen since the bygone days of beloved President Reagan.

This would happen for two reasons. There would be more creative minds put to work since they no longer had government jobs to laze around at all day. You would also see far less government regulation and interference in the ability of people to create wealth. The number of people who sit behind government desks and interfere in the businesses of hard working Americans would drop dramatically. This means that much more wealth could be created, as there were fewer people hell bent on destroying it.

The Real Reason the Federal Government Will Raise the Debt Ceiling

The odds are great that the government will come together in a rare display of bi-partisan ship. It has nothing to do with nobility, but everything to do with what the American people would learn if the government went into a partial shut down. This is that the government is the dilemma, not the answer to the problem.

In fact, you would be significantly better off if there were far less of it. This is the real reason that President Obama and his henchmen all want you to fear and dread the potential financial Armageddon that could be unleashed if they do not raise the debt ceiling. It is simply because they wish to scare you and the Republicans into action before it becomes “too late.”

The real “too late” at stake here is for them and their monstrous government, not for the long term national economy. You may fear like most Americans that you could not get by without the massive and bloated Federal government of today. It is simply not the case that you would starve to death without them. Instead, you would see a far more dynamic, productive, and rich society result. After the pain and adjustment period ended, you would witness this scenario unfold right in front of you, if the government simply shrank by forty-five percent.

The U.S. economy never struggles because there is too little government regulation and interference. Instead, it suffers because there is far too much government meddling in the free enterprise system. The answer to an over abundance of government interference is not more government interference. It is a smaller government. Come August third, this is what you will begin to see if the fighting parties in Washington D.C. can not get their proverbial acts together.

Once the pain and adjustment of the lost jobs subside, does this smaller government that lives within its means really sound like such a frightening, catastrophic, and calamitous outcome to you?

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