Assume the crash position and brace for impact.

Jonathan Capehart is a columnist and editorial writer for the Washington Post. His July 1 piece concerning the debt limit ended with a paragraph that got my full attention: "If the United States were a jet and the American people were passengers and I were your flight attendant, you’d hear me calmly say, “Assume the crash position and brace for impact.”


Months ago, most knowledgeable people took the position that a default by the U.S. was unthinkable. "The adults," they reasoned, "will eventually take over and put an end to this foolishness." Now, those same people are beginning to think the unthinkable: the adults may not be able to gain control of the situation.


What happens if we default? It's never happened, so we're not certain, but here's a good guess:


http://www.davemanuel.com/what-would-happen-if-the-united-states-defaulted-on-its-debt-96/

Personally, I've been looking for answers concerning how to protect my savings from evaporation in the event of a default. After reading some of the possible scenarios, such as the one above, I've come to realize that my investments may be the least of my worries.

Here's an interesting column by Bruce Bartlett, a former adviser to President Ronald Reagan and a Treasury official in the George W. Bush administration:


5 myths about the debt ceiling

Bartlett makes the following point, which many Americans do not understand:

"The debt ceiling is a cap on the amount of securities the Treasury can issue, something it does to raise money to pay for government expenses. These expenses, and the deficit they’ve wrought, are a result of past actions by Congress to create entitlement programs, make appropriations and cut taxes. In that sense, raising the debt limit is about paying for past expenses, not controlling future ones. For Congress to refuse to let Treasury raise the cash to pay the bills that Congress itself has run up simply makes no sense." [Emphasis mine.]


"Don't worry about default." That seems to be an increasingly popular opinion on the far-right. "We  have more than enough income to allow timely payment of the interest on Treasury bonds when it comes due, and we will just have to prioritize the rest of our spending."


I saw a recent TV appearance by former G.W. Bush speechwriter and conservative pundit David Frum, He couldn't believe the apparent lack of forethought involved in this position. He pointed out that since the expenditures which would have to be "prioritized" have all been approved by Congress and signed into law by the president, this would put a tremendous amount of power into the hands of the executive branch, since Congress would have no say in how the expenses were prioritized.


"If I were the president in this situation, " Frum said, "I would assign very low priorities to expenses such as Medicaid payments to Texas. Defense contractors, particularly those in Georgia, might get a very low priority." You folks in Iowa who thought this was a great idea? Guess what, we're paying the troops, which means there's no money left for your farm subsidies! 


Well, that's enough good news for today. It's well worth your time to become knowledgeable about this situation. It's also worth a few minutes of your time to let your representatives in Congress in on your thoughts. Remember, yesterday's blog post contains help in finding out how to contact them.