So the debt ceiling fiasco is behind us, but are we facing a debt Armageddon? To me it was fairly clear that it was unlikely the Republicans would take this too far, because previously when they did that, it hurt them at the elections. However, they were able to squeeze an effect of 12-month freeze in the growth of spending. But why not more? Why is this such a difficult problem? As a quick summary, there are three types of spending. There’s mandatory spending, discretionary spending, and interest on the debt. You could add a fourth type, and we call that tax code spending. Mandatory spending is two-thirds of the budget. It is written in the law. Social security, Medicare, Medicaid, it’s untouchable. Discretionary spending is 23%. One half of that goes to the military, and these are uncertain times. The remaining that’s discretionary is 11% of the budget….
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