USA Debt Drama

Obama Swims in a Sea of Debt

We have all heard a lot about the current debt crisis facing the USA right now. It has become a daily headline. So has all the bickering between the democrats and republicans about how to handle the situation.

A little background information might be in order for some readers. The US is nearing a debt collapse. The amount of debt the US is allowed to hold at any given time is set in law. Currently, by law, the US is allowed to hold $14.3 trillion of debt. With it's current financial situation, the US will reach this debt ceiling by August 2, 2011.

This allows for 3 possible options.

1) The government passes a resolution to allow for an increase to the debt ceiling, allowing the government to borrow more money to keep things status quo,

2) The government drastically cuts spending, and reassigns existing money from other areas of the budget to pay creditors to avoid a default on debt payments

3) The government does neither of the above and defaults on debt payments, (and likely doesn't have enough liquid capital to continue running as is)

Let's examine each of the following options.

In the past, option 1 has always been the most likely course of action. This is by no means the first time that the government has faced the prospect of increasing it's debt ceiling. In fact, in the last few decades, they have actually allowed a debt ceiling increase nearly every year or two. If you look at George W. Bush's administration, the debt ceiling was increased EVERY year he was in office except for 2, going from $5.9 trillion to more than $11 trillion. Bill Clinton actually did a bit better, only raising the ceiling twice in his 8 years in office from $4.9 to $5.9 trillion.

The only difference as to why we have not heard much about this situation in the past, is that the ruling president's political party controlled the house and the senate, practically ensuring the motion for increase passed. Clearly this is not the case this year, as there is a democrat president, and a republican majority in the house. While it is likely both parties will come to an agreement to increase the ceiling prior to the August 2nd deadline, this year there is an added caveat: an increase to the debt ceiling will likely push the American debt ratio to MORE than 100% of GDP. This would be the first time in history where America will essentially owe more than the nation is worth in fiscal terms.

Option 2 would mean that the acting government puts its foot down and does not allow an increase to the allowable amount of debt, essentially forcing it to drastically slash spending on social programs, likely increasing taxes and reassigning funds that have been allocated to future capital projects (ie, roads, libraries etc) to pay off some of the existing debt in the hopes of not hitting the debt ceiling. This is not a pleasant option, as it means the state of the nation will drastically change, most notably on low income and middle class citizens. Social programs will be massively scaled back if not axed all together, and any tax credits or deductions citizens receive will likely be axed.

Option 3 is the most disastrous. This is where the government runs with the status quo until the debt ceiling is reached on August 2nd. At that point, there is no money left to borrow, and all other income is already allocated. This means the government will default on their debts because there is simply no funds to make debt payments left. This has never actually occurred in US history, and what exactly would happen is open to mass speculation. However, over the last year, we have a better indication as this is the scenario that Greece faced last year. The ramifications will be discussed in detail below.

So, the question is which option will the government choose?

I believe the final outcome will be a combination of options 1 and 2. Government representatives WILL increase the debt ceiling prior to the August 2nd date. But, they will also drastically reduce spending (mostly on social programs) and it is likely that there will be some modest tax increases.

Over the past several months, both republicans and democrats have been fighting over what will be cut, by how much and what the tax increases will be and whom will pay them.

The republican position is that only spending cuts will be considered, and tax increases are simply not an option. Democrats maintain that spending cut are needed, but tax increases to the wealthy and large corporations are necessary to add additional funds to replace some of the spending cuts, lest social programs be decimated and devastate the lower class.

John Boehner: Tough Guy

While there has been significant political posturing from Obama, and more so from republican House Speaker John Boehner, eventually they will have to agree to both cuts and taxes. Cuts will probably be more drastic than the democrats want, and small increases to taxes will occur.

The increase to the debt ceiling will calm international markets for the time being, and the spending cuts will reinforce the nation's current credit rating with international agencies like Moody's. However, there will likely be a small slow down in the American economy until a long term fiscal plan can be set out. We have to remember that spending cuts also means that infrastructure projects like road and highway repair will be scrapped, and this will cause layoffs and less disposable income in the economy.

There is, however, always a small chance that democrats and republicans do not come to and agreement, and option 3 occurs - default. It is likely that international markets would take a beating, and every industrialized nation will suffer the fallout. The US is the world's largest economy. The consumerism of 300 million people creates jobs and investment worldwide. China would suffer dramatically since such a large portion of their economy is manufacturing goods exported to North America. Canada, naturally, would suffer considerably since the US is it's largest trading partner. The vast majority of exports from Canada go directly south of the boarder. Additionally, most large European economies would be otherwise affected by harsher scrutiny from ratings agencies like Moody's. After all, if the economic giant the USA is at risk for defaulting on loans, what chance does Germany, France and Britain have when they are also responsible for continuous bailouts to Greece, Ireland, Portugal and possibly Spain and Italy?

Speculation is just that however. But one thing is certain - the current economic situation of the US is not sustainable. US debt has drastically spiked since the Bush administration - presumably largely due to US military operations in the Middle East. I recommend drastic reduction in the operations of the military abroad. Also, closing many of the tax loopholes for large corporations would be a vast source of additional income. US corporate tax law is some of the laxest in the modern world. These corporations would not likely go somewhere else, as the low tax rates are still favourable, but would also force corporations to pay their fair share.

The world can do nothing but wait and see as the clock ticks down to August 2nd.

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Naheed Nenshi: Poetic Tax Grab

Naheed Nenshi: Paying The Poet

So, here's a little tidbit to outrage the Calgary tax payer.

You may have heard that city council boosted property taxes this year. The funny thing is, council announced a 4.4% tax hike. But guess what? You'll actually be paying an additional 10%.

And it's quite sneaky the way they did it. Here's how:

Each year, city council approves the budget for the next fiscal year. In doing so, council decides what the property tax rate needs to be to create a balanced budget. Through natural inflation and depending on what spending projects are on the books for the next year, this typically includes a tax increase. This is the same for every city in Canada.

Usually, anything more than 4 or 5% increases causes vocal outrage from the public, so council stayed within the "safe zone".

Additionally, the city is responsible for collecting a nominal charge from property taxes and giving it to the Alberta government to pay for province wide education. This creates a situation where the city sometimes has to "guess" what the provincial tax rate will be, since the city's budget is completed before the province's budget. To this effect, city council collects these fees in addition to it's announced tax hikes.

As it turns out this year, council grossly overestimated the amount of money which was needed to pay the province for education. In fact, it collected an additional $42 million from property owners. Roughly $40 for EVERY man, woman and child in the city.

The Alberta government was rather responsible, and told the City of Calgary that the money did not belong to the province, and was not needed for the budget. So, tax payers were expecting to have the money returned on their next property tax assessment.

Not so. Council passed a motion a couple months ago, allowing them to NOT refund the money, and keep it in a separate fund to be used for "capital and infrastructure" projects for the next 30 years.

That's kind of dirty, no? No. What's REALLY dirty, is that this handy little motion that was passed allows the city to do this any year where provincial taxes have been "overestimated" for the next 30 years.

How cleaver! So in addition to the 4.4% tax hike levied on us by the city, we actually paid an additional 6% for the province that was not needed or required, and the city gets to keep it all!

Now the next question would be: how often do we think the city will UNDER estimate the provincial tax rate? My guess is probably never.

Now forgetting all of that, let's look at the most recent bout of stupidity by city council. A Poet Laureate! Naheed Nenshi and council decided that a valuable use of taxpayer dollars would be to hire a full time poet! You know, so that we can have original poetry at hand for special events or city functions.

Clearly, this is a necessary service that the citizens of Calgary cannot live without! And how handy that they now have a $42 million slush fund to pay the piper (ahem... Poet) with.

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Brian McPherson: Canadian Tire Money Mogul

This week, and Edmonton Man, Brian McPherson fulfilled a 15 year dream to purchase a lawn tractor entirely with Canadian Tire money.

McPherson, 29, had been saving Canadian Tire money for 15 years, since he bought a hockey stick at the iconic Canadian retailer as a teen-ager. At that time, McPherson had received 10 cents in Canadian Tire money for his purchase, and a dream was born.

"I thought it'd be a good idea to save up all the money, and buy what at the time was the most expensive thing in the store, which was a riding lawn mower." said McPherson.

And so save he did. For 15 years, McPherson saved the Canadian Tire money from purchases on gas, household items, and well, anything else one can buy at Canadian Tire.

So a few weeks back, the McPherson family knew they were getting close to hitting their goal, and decided to count their dollars and cents. Sure enough, they had $1053 in Canadian Tire money. They bundled the money and took it to the store in a brief case.

Several local news outlets showed McPherson using his new lawn tractor on his yard. It's not a yard that really needs a lawn tractor, and McPherson does already own a standard push mower. When asked why he didn't choose to buy something else with the money, McPherson thought that would be ridiculous.

"This is one of those things that you set the goal (when you're a kid) and told your friends and family about what you were saving this ridiculous amount of Canadian Tire money for."

The Canadian Tire store manager, Bruce Duvander said he has worked for the company for 20 years, and only ever seen a similar amount of money redeemed once before.

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Canadian Tire Money Fun Facts:

- Originally introduced in 1958

- The man's face on the front of the notes are a fictional character named "Sandy McTire"

- Over the last 50 years, there have been at least 19 different denominations of Canadian Tire money in circulation. Several of the denominations have been discontinued.

- Was at one time considered a form of legal tender for users of the Canadian E-Bay website, if the seller was willing to accept it.

- In 2004, several customers using an ATM machine at a CIBC branch in Moncton, New Brunswick were dispensed no less than 11 bills of Canadian Tire money instead of actual currency. The bank compensated the customers accordingly.

- In the mid 1990's, a German man was caught with $11,000,000 of counterfeit Canadian Tire money. The fakes were recovered before he was able to fly to Canada to redeem them.

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Fish Pedicures Banned By BC Health Authority

The BC Health Authority has done an apparent about-face on a decision it made last year, to allow spa owner Dixie Simpson to offer "fish pedicures".

Fish pedicures are a popular procedure in which clients place their feet in pools of water containing Garra Rufa rish. The fish are similar in size to minnows. They do not have teeth, but gulp up dead skin cells off the customer's feet.

The practise was first popularized in Turkey, as a means of alleviating the symptoms of psoriasis and eczema. In more recent years, it has become a popular feature in spas world wide, including France, Japan and the UK.

Dixie Simpson first began offering the service in her spa in Duncan, BC last year. She says she contacted the health authority to ensure everything was above board. The health authority gave her the go ahead.

But, in the last few weeks, the BC Health Authority has changed their mind, stating that the practise is not sanitary, despite the fact that Dixie uses UV filtration systems. The health authority feels there are potential chances for bacterial infections to be passed on from one customer to another, and so, they have since classified the Garra Rufa fish as "tools" of the spa owner. Under BC law, any "tools" used in a spa must be sterilized between customers.

Obviously, since they are live fish, it is impossible to sterilize them without killing them.

Dixie says that she will have no choice but to shut down if she can't use her fish for foot therapy.

The actual real risk is patients is low if not negligible. Why not just insist that the spa operators have customers read and sign a waiver stating the risks and reducing the liability of the spa owner?

Frankly, if your not allowed to dip your feet in a pool with harmless fish that can be found in spas around the world, one has to question the amount of government control being exorcised.

Will and Kate Make Me A Liar (And They Don't Have To "Suck It")

Alright, alright! So obviously, yesterday I wrote a post about the major insult to the City of Calgary, as Prince William and Kate Middleton would not don the white hats that they received upon arriving to Calgary.

As a recap for those of you who don't know, or didn't read my last post, receiving a "white hat" as they are called, is one of the city's highest honours for elite VIP'S or local heroes that have performed extraordinary feats of goodwill or bravery.

The couple received the white hats from the Mayor, Naheed Nenshi yesterday. It was reported by most major Canadian news outlets (ie CBC & CTV) that the Royal Couple wouldn't don their hats. Not even for a photo op. This was confirmed by video footage released by both news outlets.

So, I then went on a rampage of what a terrible insult this was to Calgary and it's citizens. (And I stand by that... not wearing the hat, at least for a photo op IS an insult.)

I posted my blog entry with a smug sense of self satisfaction. I think mainly because I uh... told the Duke... and, uh... maybe the Duchess... um... to "go suck it!".

So then, a few hours later, I was watching the local news update on TV, and low and behold, there was Will and Kate, seen EVERYWHERE in public, wearing their white hats.

Umm. Oops.

Now, suspiciously, this happened a few hours after they had received the white hats. And conveniently, after rechecking both CTV and CBC's websites, stories mentioning the Royals refusing to wear the white hats seemingly disappeared, with no explanation or further discussion on the topic.

So, I contemplated retracting my statement last night, but had got busy and thought I would do so today.

HMMM. In retrospect, I wish I had done this task last night. There were SEVERAL vicious emails in my inbox accusing me of spreading inflammatory lies about the Royals. There were also emails calling me names because I told members of the Royal Family to "suck it!" (which I actually think is rather ironic).

So. I have nothing against supporters of the Royals. And let me be the first to say that I am sorry to any who have taken personal offence. Similarly, I apologize directly to the Duke and Duchess for my comments, and wish them the best. (Though I am still confused as to why you did not don your hats for a photo op when you received them? Any explanation would be great, thanks).

William And Kate Can Suck It!

The media of Canada has been in a rabid-dog-like frenzy for the last week as Prince William and Kate Middleton have been touring Canada.

Great. Wonderful for them. They seem to be a nice young couple and I wish them the best.

I personally am not a "Royal Watcher" as they are called. To me they are people like everyone else. But, I do respect the history of our nation that is attached to the British Monarchy.

That being said, as a Canadian, and more specifically, a Calgarian, I was actually insulted by William and Kate this afternoon.

As is tradition in Calgary, William and Kate were being "White Hatted" upon their arrival to our fair city today. Being "White Hatted" means that you are invited to a special ceremony wherein you are welcomed to Calgary by receiving a top of the line, exclusive and expensive hand crafted white cowboy hat. It is important to note that this honour is specifically reserved for super important VIP'S or exceptional heros within our city. Only a handful of people each year receive a white hat.

While I normally would have been in favour of giving the Royals a white hat, I was dismayed and somewhat angry to find that they would not wear it.

Of course, no one expects them to wear it all day, or outside of the ceremony, but at least have the decency to put it on for a single photo op. Doing so would show respect for our people and our customs. Refusing to do so is an insult.

I understand that the Royals are given souvenirs or keepsakes from hundreds of people and organizations over the course of a year, and making a choice not to don all articles. However, that being said, it is not as though they were given shirts, or footwear or some cumbersome piece of clothing. It's a hat. If there is some sort of Royal rule that says it is undignified for members of the Royal family to be seen wearing such an article in public, that is fine too - just don't accept the honour!

Accepting the honour and refusing to don the hat is an insult to the city, its citizens, and the people who take pride in the meaning of the gift! Shame on the Royals! William and Kate can suck it!

iJustine: Coffee Extra Hot With A Side Of Biaaatch!

Ya, ok, so I've been on a youtube kick lately. Hey, cut me some slack... it's been really hot here, and since this new house I am living in doesn't have air conditioning, I have been up late at night waiting for things to cool down. (And while we're on that topic, what the hell kind of a real estate developer doesn't install air conditioning in a new house anyway??)

So while I was browsing youtube, I came across this crazy chick, iJustine, recounting a horror story about purchasing coffee from a local retailer. I don't want to mention the name of the store, but it rhymes with "Czarbucks". Anyway, it's pretty funny, and I must say I have had similar experiences.

By the way, iJustine has A LOT of channels on youtube. Like dozens, so go check her out.

Karmin Music & Nicki Minaj "Super Bass"

So those of you out there who haunt youtube on a frequent basis have probably heard of Karmin Music. They have been out there for quite a while and have scores of fans and subscribers.

I had heard reference to them for some time, but was late jumping on the bandwagon to check them out, and now I'm sorry it took me so long to do so.

Karmin Music is a duo made of Amy and Nick, who not only do dozens of covers of current songs, but have also started writing original music. They have covered everyone from Katy Perry and Christina Aguilera, to Usher, Nelly and Kanye West. And they also have videos for all of them!

Nifty, right? The nifty thing is they are actually really talented, and the best example of their talent (in my opinion) is this catchy cover of Nicki Minaj's Super Bass. Check out the video, and enjoy. And if you like, go visit their website at Karmin Music. They have dozens of videos that you can watch on their website.