Sunday, April 10, 2011

July 4th Insolvency Day?

Last week's budget battle in the U.S. was, unfortunately, just a portent of things to come, folks.  Round Two - which begins now - will require cuts that address $14 trillion in debt and over $53 trillion in unfunded government liabilities.  And then there's the matter of the U.S. legally mandated debt ceiling.  The Obama administration has asked Congress to raise it because Treasury Secretary Tim Geitner said this week that the current debt ceiling of $14.294 trillion will be reached no later than May 16th, although the Treasury could take certain extraordinary steps to postpone the date that the U.S. would default on its obligations by about 8 weeks - right around July 4th.  That's right, Independence Day could be renamed Insolvency Day.  He said there would be "no headroom" to borrow within the limit after July 8th.  It's pretty obvious to this observer that the horse-trading necessary for the Democrats to keep the U.S. running will be major budgetary concessions to the Teapublicans.  Goodbye Planned Parenthood, goodbye EPA, goodbye Medicare and Medicaid, goodbye U.N.  Oh, and hello higher taxes.  What are the implications for Canada in all of this?  Perhaps a migration of people and capital northward that we haven't seen since the Vietnam War, and that we're not ready for?