Sometimes, a comment by a politician is very revealing of their true feelings. Such is the case with this offhand comment by New York Mayor Michael Bloomberg.
Although the national media has been relentlessly focused on this deadline, Mayor Michael Bloomberg said it will only affect New York City if the so-called "sequestration" continues for a significant length of time.
"It depends on how long," Mr. Bloomberg said on his weekly WOR radio show with John Gambling. "If it lasts a few weeks, no. If it does, yeah. We get 10 or 12 percent of our budget from the federal government, not all of that is going to be cut back, but there would be effects-not good effects. But in the context of, 'Is anything going to change tomorrow? Are we going to run out of money tomorrow?' I'm sure I'll get that question at the [next] press conference. No."
Furthermore, while saying the federal deficit does indeed need to be curtailed, Mr. Bloomberg argued the United States could owe "an infinite amount of money" and there is no specific amount that would cause the country to default.
"We are spending money we don't have," Mr. Bloomberg explained. "It's not like your household. In your household, people are saying, 'Oh, you can't spend money you don't have.' That is true for your household because nobody is going to lend you an infinite amount of money. When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money. ... Our debt is so big and so many people own it that it's preposterous to think that they would stop selling us more. It's the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem. And that's a problem for the lenders. They can't stop lending us more money."
For the record, any of our creditors could sell their bonds on the open market and refuse to purchase any more - something China has threatened to do several times unless we get our budget and debt under control.
And what happens if the world decides not to use the dollar as a reserve currency? All it would take would be for China to choose another backstop currency and the dollar would collapse.
The post-World War II financial system that was agreed to at Bretton Woods is slowly collapsing. What replaces it may not be as kind to the US as the previous agreement was. If that's the case, then our $16 trillion debt would matter a great deal, Mr. Mayor.
Time to get your head out of your rear about our debt and help us doing something about it.