Debt ceiling cost to taxpayers: $1.7 billion
inmytree
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http://money.cnn.com/2011/08/01/markets ... /index.htm
Debt ceiling cost to taxpayers: $1.7 billion
NEW YORK (CNNMoney) -- The debt ceiling debacle has just cost U.S. taxpayers more than $1.7 billion.
That's the amount of additional interest the government had to pay investors Monday to sell Treasury bills that finance its operations.
To be precise, the extra cost is $1,721,250,000 more in interest payments than the government would have needed to pay investors just two weeks ago, when they were willing to accept far lower rates before the debt ceiling became a crisis.
"That's real money," said IHS Chief Economist Nariman Behravesh. "Taxpayers need to wake up to the fact that these kind of shenanigans in the end cost."
As Congress and the President have stumbled ever closer to the deadline for default -- Tuesday according to the Treasury Department -- interest rates on short-term government paper have jumped.
On Monday, the U.S. Treasury auctioned $27 billion of three-month bills at an interest rate of 0.115% up from 0.02% two weeks ago. Treasury also auctioned $24 billion of six-month bills at a rate of 0.15%, an increase from 0.06% two weeks ago.
"The uncertainty has driven up yields," said John Canavan, credit market analyst with Stone & McCarthy Research Associates. "You increase uncertainty in the markets and the markets will demand compensation for that."
The cost of that uncertainty for the U.S. Treasury (and consequently U.S. taxpayers) will likely grow on Tuesday, when the government is scheduled to auction $23 billion in one-month Treasury bills.
They're currently yielding 0.14%, up from 0.01% two weeks ago. If that increase holds it would cost taxpayers an additional $249 million in interest.
The extra interest payments will add to the nation's deficit, further contributing to the problem that caused political gridlock in the capitol.
"It's already exacerbating the situation," said New York University Professor of Economics Lawrence White, who testified before Congress last week about the debt crisis.
While investors demanded higher interest rates at Monday's auctions, there was still plenty of demand. Treasury received more than 4.5 bids for every dollar's worth of T-bills it auctioned, only slightly below recent auction activity.
Deal or no deal. The economy still stinks.
T-bill rates have been creeping higher as investors have reduced holdings of short-term government paper to avoid the risk Washington may fail to make payments on its debts in the next few weeks.
"Many investors are just not willing to take the risk, even if they believe the U.S. won't default," said Anthony Crescenzi, senior vice president and market strategist with bond investment firm PIMCO, which operates the $235 billion Pimco Total Return Fund (PTTAX).
Danger remains that the credit rating agencies may downgrade the U.S. If the country were to lose its triple-A credit rating, it likely would need to pay higher interest rates to attract investors to its bonds.
Last week, however, long-term Treasury yields declined as investors -- still confident Washington will pay its debts after the current crisis has passed -- rushed into 10-year Treasury notes and 30-Treasury bonds.
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maybe we should default on all foreign owned debt....tell them if you want it, come get it....
i mean, we do have the biggest military and all.
damn iPad.....
Tres Mts. Gramercy Theatre 3/26/11
*formerly manutd3581
I have had the thought that the future may bring a war fought over our debt owed to others. After all, when a deadbeat owes you money, and refuses to pay, it often ends in altercation.
If the UN can decide to authorize force on countries acting out of line, at what point does the US become out of line?
What if China, who holds more of our debt than anyone else decides that promises to pay are just no longer good enough and come looking for their money?
We give them Texas
If this country truly defaults, and attempt to pay in dollars rendered worthless via inflation, I don't doubt that some US territories will be given away. Texas? Maybe not, but I bet a bunch of people on this board would be with you on giving up that state to someone else, haha. Texans probably just want their own country. I can't say I blame them.
As long as taxes don't go up and spending isn't cut, it's did not cost me any extra. The government's inability to control its spending cost the government an extra $1.7B.
Just add it to the tab.
Unless of course the added debt is monetized, which requires inflation, which is taxation by devaluation.
There is always this huge debate on this board about which presidents have raised taxes and who have not. The truth is, there cannot be a serious discussion about whether taxes have increased without talking about whether or not inflation was required to pay for government expansion, because that too is taxation.
pathetic....
Damn, they got us again!
I think the problem with that is if you stop paying your debts people stop loaning you money. So while they might take a hit you will probably take a hit too. Especially if you need that money to fuel your military machine.
That's how they get us without us knowing that we've been "got," while we'll all argue till we're blue in the face about whether or not about whether to extend the Bush tax cuts, or this debt ceiling nonsense. Inflation- It's the sneakiest and arguably the most vicious form of taxation, because it hurts the people carrying the least amount of dollars the most. For those who don't think the poor don't pay taxes, through this process they shoulder quite a burden. Also, as evidenced by the link I posted in the other thread, so much inflation occurs simply by the actions of the Fed, with no permission from Congress at all. This is a much larger problem than most people realize.