Atrios, Kevin Drum, and Andrew Sullivan have been knocking heads over the economy. Here's a short summary from Outside The......

As usual you do not know what you are talking about.

The United States cannot afford to default on its debt to any creditor. Default would destroy the value of our currency. Money is nothing but credit. It is the same thing as debt. Debt is freely traded on a global basis twenty four hours a day, seven days a week. Worldwide trading peaks during the New York session but continues overnight around the globe.

All China would have to do is sell the US treasury debt it now owns into this market. They could time their sales to correspond to our Treasury auctions, driving down the prices to ridiculous levels and driving up the interest rates.

Since the UST is the benchmark against with all risk is measured this would drive interest rates up on everything.

China has enough clout to cause more pain than our economy could withstand.

But if the US said it was going to default on this debt it would affect the value of all outstanding treasury debt. The UST debt is the most liquid fungible commodity in the world. A default on any of it would make all of it worth less.

James you are talking about things way above your pay grade when you say we can just not pay our debt obligations to China.

Ken, you're apparently trying to read way above your own pay grade. What James said was this:

If we�re at war with China, I suspect we�ll stop payments on our debts with them.

What idiot would you vote for, Ken, who would continue making debt payments to an enemy in war during the war?

You simply cannot be taken seriously.

China will just sell the debt on the open market driving down the prices and driving up the interest rates to a point that it can destroy our economy.

Once China starts selling, especially if it is seen as selling to gain a strategic military advantage, others will sell as well. The Euro is an alternative save haven where this money will go.

Beside the United States is the only country in the world who has never missed a single interest or principal payment on its debt. From the federal government assuming the states revolutionary war debts, through the Civil War and the depths of the depression America has never defaulted. This is why the American dollar is the reserve currency of the world and is the benchmark against which all risk is weighed.

What you are suggesting would destroy the value of our currency.

You of course, not being in touch with reality, would not know any of this.

Needless to say, and not to get sidetracked on China debts, the budget needs to be balanced asap. Our economy cannot continue like this forever...

We're in the middle of a major war which followed a mild recession. It would have been foolish to try to do it on a pay as you go basis.

There are plenty of cuts to be made and maybe even some areas for increasing revenue. But, frankly, there isn't $400 billion worth of tax hikes/spending cuts out there.

I don't want China calling the shots, especially if they invade Taiwan and at the same time economically choke us with our own debt. At this point, this is one war we *will* lose.

I believe it's possible to agree with tax cuts in principle, but to not support them because of the current situation. Isn't that the most fiscally responsible action to take?

James is right that there will occasionally be good reasons to overspend the budget for investment purposes, but I can't think of a good way to institutionalize that other than a Soviet-style '5-year plan', and I don't think anyone wants to go there... :-)