So the United States like Greece and several other countries are between a rock and a hard spot – a situation that it is difficult to find an answer to that doesn’t hurt – maybe pretty badly.
The only ways to get some debt paid off is to:
1) Raise taxes,
2) Cut spending
Neither of those two things has ever been good for the economy. Any time money has to be sent to payoff creditors it is money that is no longer available to be spent and circulated through the economy. So we are currently a bit bearish about the health of the economy in the near future.
Another interesting thought is how people are going to handle spending cuts if /when they come. “You’ve got just a huge number of people who, in one way or another, interact with the federal government,” President Obama said last Friday night when he announced that House Republicans had pulled out of the debt talks.
An unprecedented number of Americans now depend on the government for assistance. Roughly one in six people are receiving public aid, with Medicaid and food stamps straining in the wake of the Great Recession.
Data shows that the only way to really get things in control is to cut entitlement programs, which means the large number of people that “interact with the government” are not going to be very happy about it. We saw what happened in Greece– people rioting in the streets protesting government austerity measures.
According to a CNNMoney money article by Tami Luhby – Social Security payments aren’t the only federal lifeline payments that may have to be cut to get our federal debt under control.
The federal government supports myriad safety net programs, such as unemployment insurance, tuition grants, food stamps, child care subsidies and housing assistance. That’s not to mention the nation’s massive health insurance programs: Medicare and Medicaid.
All told, the federal government should distribute nearly $145 billion in lifeline funds this month, according to theBipartisanPolicyCenter.
A record 44.6 million people — or one in seven Americans — received food stamps in April. That’s up nearly 10% from the year before. The government is scheduled to send out $6.7 billion in food and nutrition support, which includes aid for children, pregnant women and new mothers, in August.
Medicaid, the nation’s largest safety net program, serves more than 60 million people. It not only provides health insurance for low-income Americans, but it is also the primary payer for two-thirds of the country’s nursing home residents. Some $50 billion in Medicaid and Medicare payments are set to go out in August.
Nearly 5 million low-income families depend on vouchers or other assistance from the Department of Housing and Urban Development to keep a roof over their heads. But the $6.7 billion in payments in August could be at risk.
And some 3.8 million of the long-term jobless are receiving federal unemployment benefits, which could be halted if the impasse isn’t resolved. They are scheduled to collect $12.8 billion in August.
“If the federal government cuts, people who depend on assistance for food and housing and other basic needs could find themselves in a crisis,” said Jodie Levin-Epstein, deputy director at the Center for Law and Social Policy, an advocacy group for low-income Americans.
Hmmm – things are going to get interesting!
