Published by El Nuevo Herald on January 18, 2013
If you say this month you owe $ 5,000 for your home, obviously you'll want to pay this amount to avoid losing it. However, if you don't have the money in hand, then you become creative and ask the bank to let you pay only the interest for three months until get that money. After three months you do not have the money and the bank threaten to take away your house. But you have a brilliant solution.
As the total value of your home is $ 100,000 and you could not pay the monthly $ 5,000 for the last three months, you ask the bank to make a new loan for $ 115,000 to replace the previous $ 100,000. The bank barely accepts, but requires you to pay higher monthly interest on your new loan. As you have no other solution, you take the deal even though your salary this year will be lower.
Because now your income has dropped, next year you face the same situation. This time you ask the bank for a new loan for $ 130,000. As your salary is decreasing and increasing your expenses, you have two alternatives: either you manage to increase your income or bank takes your house.
This hypothetical situation is very similar to the current debt of $ 16.4 trillion facing the great American nation, with one exception: over 90% of homeowners seeking to refinance your loan with any of the major U.S. banks, simply do not qualify. And the reason is that usually the owners want to lower your monthly payment and the banks do not want to cut their collection, so they are opposing positions.
In the case of the U.S. debt ceiling, there is no choice but to raise it to avoid falling into the debt default . And to default, it would suffice to stop paying interest for about $ 38 billion that will accrue from February 15, 2013 and March 15, 2013. Of course, for that period are expected about $ 277 billion in revenue to federal coffers in taxes mostly. In other words, there will be enough money to pay the interest, Social Security and the military salaries, but public spending from $ 452 billion will have to be controlled to avoid raise too much the debt ceiling.
Traditionally and for many years, the intrinsic behavior of the U.S. economy has been debtor, such as report the New York Times in 1981: "Although the routine increase in the debt ceiling has been essential to meet public obligations, the vote in Congress has been delayed up to eleven hours, always with the opposition party demanding the party in power cuts in current spending. "
Of course, the most important thing now is to prevent a return to downgrade U.S. credit, which would further increase the interest that the country would have to pay. Also financial markets could react adversely by the loss of consumer confidence, if not reached to raise the debt ceiling.
Logically, continued growing spending and declining limited income lead to inevitable bankruptcy. So, there is no choice but to prioritize spending and increase income.
How do we increase revenue? Intensifying domestic manufacturing, making return to U.S. domestic factories. How do we reduce spending? Hiring immigrant labor already established in the U.S., who accrue bonds instead of regular pay to compensate the national payroll for relocated factories now in the U.S.
!!! Let us raise the debt ceiling !!!
Benjamin F. DeYurre
Economist and Journalist
