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Bond Market Shows Why Boehner Saying We're Broke (U. S) Is Only Figure Of Speech

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House Speaker John Boehner routinely offers this diagnosis of the U.S.’s fiscal condition: “We’re broke; Broke going on bankrupt,” he said in a Feb. 28 speech in Nashville.

Boehner’s assessment dominates a debate over the federal budget that could lead to a government shutdown. It is a widely shared view with just one flaw: It’s wrong.

“The U.S. government is not broke,” said Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co. in New York. “There’s no evidence that the market is treating the U.S. government like it’s broke.”

The U.S. today is able to borrow at historically low interest rates, paying 0.68 percent on a two-year note that it had to offer at 5.1 percent before the financial crisis began in 2007. Financial products that pay off if Uncle Sam defaults aren’t attracting unusual investor demand. And tax revenue as a percentage of the economy is at a 60-year low, meaning if the government needs to raise cash and can summon the political will, it could do so.

To be sure, the U.S. confronts long-term fiscal dangers. Over the past two years, federal debt measured against total economic output has increased by more than 50 percent and the White House projects annual budget deficits continuing indefinitely.

“If an American family is spending more money than they’re making year after year after year, they’re broke,” said Michael Steel, a spokesman for Boehner.

$1.6 Trillion Deficit

A person, company or nation would be defined as “broke” if it couldn’t pay its bills, and that is not the case with the U.S. Despite an annual budget deficit expected to reach $1.6 trillion this year, the government continues to meet its financial obligations, and investors say there is little concern that will change.

Still, a rhetorical drumbeat has spread that the U.S. is tapped out. Republicans, including Representative Ron Paul of Texas, chairman of the House domestic monetary policy subcommittee, and Fox News commentator Bill O’Reilly, have labeled the U.S. “broke” in recent days.

I'm sure the US could increase tax rates, whether that would actually increase tax revenues is another matter especially when faced with around a 20% unemployment rate.

The US needs to find massive productive capacity to stand any chance of paying off it's debt otherwise it's bankrupt.

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The double-think required to accept that the US is not in deep doo doo even though it's deficit is 1.6 trillion per year (i.e. over $5000 per man, woman and child, over $15,000 per household) is truly astounding.

Venality? Innumeracy? Or just plain run of the mill stupidity?

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Venality? Innumeracy? Or just plain run of the mill stupidity?

Short term politics and, er, that Obama is the most Wall St funded Pres of all time (spent twice as much as McCain. Where did the money come from?)

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By going back to the tax rates under Clinton they could raise hundreds of billions of dollars a year.

They keep cutting taxes on the richest, then saying they can't fund government support for the poor and cutting that.

It is ideological terrorism on the poorest in the US.

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  • 312 Brexit, House prices and Summer 2020

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      • down 5% +
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