So this is it.
The edge of the abyss; the Rubicon; Armageddon.
Both sides entrenched in an all out war for the heart and soul of America. Make no mistake, this is the real deal, but not in the way you may think.
The Republicans have offered a program that encompassed a balanced budget amendment (defeated in the Senate, of course.) Democrats, and a President ever in favor of an expanding government, are opposed.
Republicans, specifically freshmen Tea Party members, are vehemently supportive. All know that it takes a constitutional amendment, and must be passed by the states (several years in the making.)
But here’s the rub. If the debt ceiling is not raised, and I sure hope it’s not, the balanced budget amendment is no longer theoretical. It’s very real, and it’s happening right NOW.
All agree that for the month of August, there is approximately $200 billion of revenue coming into the Treasury.
It’s been widely discussed that the Treasury and the President can decide which bills to pay first. Assuming the debt is paid off, so no default (not even Greek style); there still is sufficient money for Social Security, Medicare, Medicaid, and military salaries. Then it gets dicey.
The problem is there’s not enough to go around in order to meet the rest of the obligations. Isn’t that what a balanced budget amendment is? It’s spending only the money taken in.
I would dare say that if you asked not only the Democrats, who think that a balanced budget is a good idea (probably not many publicly), but also the Republicans who dramatically espoused the amendment, most would say it’s a great idea, but not now. Not on our watch.
Who really wants to make the tough decisions to cut education, Medicare, or even defense spending? No one. All politicians of both parties want others to make those decisions at another time, as most are afraid of voter backlash, and voter backlash there will be since nobody wants their favorite program cut.
Regrettably, cuts will have to be made, and made quickly. Most politicians, economists, Wall Streeters, and television pundits will argue the country is not ready yet for the draconian cuts that must be made.
They’ll say perhaps another time, maybe another set of politicians, or another administration, but certainly not now. They also claim it would be too destructive and the financial markets couldn’t handle it.
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at email@example.com and on Twitter @tatroshow.