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What If? Questions on the Debit Ceiling


President Obama has put the country on notice that he can't guarantee Social Security and other government checks will go out if the debt ceiling isn't raised by August 2nd. Bend financial advisor Bill Valentine, of Valentine Ventures doesn't think it will come to that, but he believes the debate is good: “It’s OK for politicians to beat each other up over the shutting down of the government. It is a good, forced reason to get down to brass tacks, and to address this still huge, huge, unresolved problem with how we pay our debit off in the long term.” So, if the debit ceiling isn’t raised? On August 3,as an example; Treasury is due to send out checks to 29 million social security recipients. Of course, they may be paid but only if others are not. The bipartisan Policy Center report estimates that Treasury Secretary Tim Geithner could choose to exhaust all the tax revenue the government receives in August on just a few items: interest on the debt; Medicare, Medicaid and Social Security; unemployment insurance; and defense contractors.  Much of the discussion right now is speculation; and again, Bill Valentine doesn't think it will come to that. If it does, he says there will probably be a short-term reaction from the financial markets.

 

 

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