Debt Ceiling - We Are Getting Hoodwinked

[cb7010]

$2.5 Trillion over 10 years...even $4 Trillion over 10 years..sound like big numbers; but, they represent less than 25% of the annual budget deficit at most. Despite all this big talk by both sides, we will still be operating in the red, negative, and accumulating more debt each year. To me, it's complete insanity that we let this go on.

Where are the specific proposals from the leadership in Washington to balance the budget AND pay off the debt. In fact, by definition the word balance implies "even" and in order to pay off the debt we need to have surpluses each and every year. Seriously, I've only heard the kooks like Ron and Rand Paul, who are mostly marginalized in the public debate talking about really digging out of the hole.

Why haven't I heard a single member of the news media ask Mr. Obama or Boehner or Cantor or Reid or Schumer, etc..when exactly thier plan fully balances the budget and pays off the debt? If they can't figure it out, maybe they should call in Dave Ramsey!

I am sorry for ranting on this, but I am begining to get a little disgusted by what I see every day from these patronizing politicians who are getting personally wealthy while they play games with our country..

 

[Nodak]

You're looking for an honest politician - an oxymoron if there ever was one.

 

[pb4uski]

Totally agree. While we are where we are, government should live within its means just like the rest of us do. Its means should be set at a certain level of taxes, and then frozen so individuals and businesses should have some certainty when planning their financial affairs. The government should live within that level of revenue come hell or high water.

From where we are, a specific percentage of revenue should be dedicated to debt repayment so that the debt can ultimately be repaid and the remainder can be spent, but no deficit spending.

On the current crisis, the Republicans should agree to many of the tax changes the Dems want (like corporate aircraft, oil subsidies, private equity, etc) but insist that at least 1/2 of the savings be used to reduce rates overall. Spending should be significantly cut and a plan outlined for further cuts to get us out of this mess.

Many state governments find a way to live within their means - admittedly they struggle to do so - but they do it because they have to. We need a phased in federal balanced budget amendment.

But the unfortunate reality is that something like this will never happen because of the polarized politics in Washington and the blooming idiots in power who put their own personal ego and agendas ahead of the interests of the nation. I'm afraid that we are doomed unless some patriot somewhere steps up and says "enough of this lunacy".

End of rant.

 

[donheff]

Balancing the budget quickly would be disastrous. All the proposals you see aim toward gradually dropping the debt over decades. No one actually plans to get the debt to zero -- most economists say that would be counter productive. If history is prologue, even after we settle on a long range plan and get things in better shape, politicians will once again begin ranting about the need to return the bounty to the people and cut taxes precipitating debt crisis version number 4, 5, or whatever.

 

[Purron]

Warren Buffett's take on this situation:

Warren Buffett: Playing 'Russian Roulette' With Debt Ceiling Is 'Silly' : The Two-Way : NPR

 

[kcowan]

The current budget has been approved. It requires a change in the debt ceiling. It should be a rubber stamp. The time to argue the spending was during the budget debate.

Now it is just slimey politicians making points with the voters.

 

[Major Tom]

Now it is just slimey politicians making points with the voters.

I don't agree with you on the "slimey" characterization, bit I do agree with the point you're making. Using such a critical negotiation process as opportunity to score political "points" has to be turning off large numbers of voters. I know it turns me off a great deal.

 

[njonge01]

I have about 400K in cash. and then another 1.3 million still at risk. I have about 250,000 bucks in securities that would be taxed at short term Capital Gains rates if sold today. Some of those dollars just weeks away from being long term holds. I guess even a 5% drop in price alone would take away the benefit of holding to get beyond that 1 year threshold. Might sell some on Monday given the games being played in DC.

 

[njonge01]

I have about 400K in cash. and then another 1.3 million still at risk. I have about 250,000 bucks in securities that would be taxed at short term Capital Gains rates if sold today. Some of those dollars just weeks away from being long term holds. I guess even a 5% drop in price alone would take away the benefit of holding to get beyond that 1 year threshold. Might sell some on Monday given the games being played in DC.

Other than that 250K in taxable accounts, the other 1.1'isn million are in my IRA.

 

[FIREd]

I would say that:

1) we have a long term debt problem, not a short term one. So it is unnecessary to cut spending by 40+% before August 2nd. It can and should be done over time. About 20% of all US household income now comes from government safety net programs and millions of Americans depend directly or indirectly on government spending for their paycheck. What would happen to the economy if we decided to cut government spending by 40+% tomorrow?

2) we don't have to pay off the debt. We just have to keep it at a manageable level (anywhere below 60% of GDP would be considered healthy I believe).

3) we don't need to operate with budget surpluses. We can have small deficits and decrease our debt-to-GDP ratio at he same time. We just need to keep our GDP growing.

 

[cb7010]

There are some good points here; but, the theme of what I am hearing is that we simply are not willing to go through any short term hardship in order to right the ship for the long term.

If we balanced our budget this year, yes, it would be a big shock. Government employees out of work, entitlements cut and rationed..the markets would tank, etc..but, I would say within five years, we would find a new foundation and begin growing again and this time in a more sustainable manner not based on printing and borrowing money. I happen to believe that American's are resilient and can handle it. The nanny state/redistribution approach just seems to be corroding the fabric of our society and doesn't seem a sustainable way to build a prosperous nation.

 

[brewer12345]

There are some good points here; but, the theme of what I am hearing is that we simply are not willing to go through any short term hardship in order to right the ship for the long term.

If we balanced our budget this year, yes, it would be a big shock. Government employees out of work, entitlements cut and rationed..the markets would tank, etc..but, I would say within five years, we would find a new foundation and begin growing again and this time in a more sustainable manner not based on printing and borrowing money. I happen to believe that American's are resilient and can handle it. The nanny state/redistribution approach just seems to be corroding the fabric of our society and doesn't seem a sustainable way to build a prosperous nation.

Whatever you say, President Hoover.

 

[Purron]

The chances of us coming to an agreement on this issue or convincing those of a different opinion are slim to none. About as likely as Bill Maher and Ann Coulter coming to a consensus. As opposite as their opinions are, they do seem to enjoy the political banter though.

 

[clifp]

Whatever you say, President Hoover.

Well since you bring up Hoover. I found last weeks Atlantic blog post about Hoover interesting.

Hoover Was No Budget Cutter

By Megan McArdle Jul 8 2011, 10:54 PM ET 448
My colleague, James Fallows, has led a just and righteous battle against the myth of the boiling frog. I am distressed, therefore, to see him repeat another hoary old canard that dogs our policy debates:

Those days of the 1970s are now nearly 40 years in the past. And this morning's jobs report makes me wonder whether, as a political system, we ever learn anything. Even this basic thing: That when tens of millions of people cannot find work because of an overall "failure of demand" -- not enough paychecks going to not enough people who can not make enough payments to create jobs for enough other people -- the main problem facing the nation is not "runaway government spending." Any more than it was when Herbert Hoover tightened up on spending as markets crashed, in the wave of folly that Keynes and Ahamed in their different ways chronicled. A lot has changed since the 1930s, and the 1970s. But not this basic principle.​

I'm not quite sure what passages in Keynes and Ahmed he is referring to, but the evidence is not ambiguous: Hoover did not tighten up on spending. According to the historical tables of the Office of Management and Budget, spending in 1929 was $3.1 billion, up from $2.9 billion the year before. In 1930 it was $3.3 billion. In 1931, Hoover raised spending to $3.6 billion. And in 1932, he opened the taps to $4.7 billion, where it basically stayed into 1933 (most of which was a Hoover budget). As a percentage of GDP, spending rose from 3.4% in 1930 to 8% in 1933--an increase larger than the increase under FDR, though of course thankfully under FDR, the denominator (GDP) had stopped shrinking.

This spending represented a substantial increase over the Coolidge years (outlays had been steady between $2.85 billion and $2.95 billion since 1924). And in real terms they represented a very substantial increase, since both nominal and real GDP were falling.

Poor Hoover got a bad rap.

 

[youbet]

Poor Hoover got a bad rap.

My reading regarding the Great Depression era led me to the same conclusion. Lots of mistaken assumptions about Hoover's actions and what actually happened. His biggest weakness was a lack of charisma and salesmanship. Two presidents both doing similar things in similar situations can be judged completely differently based on their popularity and "like-ability." A president with extremely strong skills at the podium and who is in office primarily on personality and charm will get the best grades every time.

 

[Purron]

A president with extremely strong skills at the podium and who is in office primarily on personality and charm will get the best grades every time.

Like who for example? I'm thinking Reagan and Kennedy.

 

[clifp]

Warren Buffett's take on this situation:

Warren Buffett: Playing 'Russian Roulette' With Debt Ceiling Is 'Silly' : The Two-Way : NPR

I love his idea of passing law that if the deficit is running at more than 3% of GDP all sitting members of Congress are ineligible for re-election. That would really focus the members of Congress.

 

[chinaco]

Most people believe it will take to measures to get rid of the deficit and reduce the debt.

Cut spending and raise taxes.

If the politicians cannot agree on a plan the GWB tax cuts will expire at the end of 2012. The majority of both parties will breath a sigh of relief.

The other part that will occur is a FICA increase. Because of the lack of collaboration in Washington... That will probably not happen till the next election.

The 75 million boomers will vote in the next election.... and SS and Medicare will be issue #1 with many of them.

I suspect many of those tea party freshmen will be put out of office now that voters are seeing what is happening.

 

[samclem]

If the politicians cannot agree on a plan the GWB tax cuts will expire at the end of 2012. The majority of both parties will breath a sigh of relief.

A minor point: As these tax provisions are now in effect due to President Obama's signature in December 2010, we should rightly call them the "BHO tax cuts" if we must assign them to a president. The legislation was approved by both houses, why do you believe that a majority of both parties will be happy to see tax rates rise in 2012? The conventional wisdom is that the legislature got more conservative and tax-averse after the 2010 election.

 

[donheff]

They are the Bush cuts but a lot of Dems voted for them, Now they are afraid to touch most of them. So revenues will end up coming from the rich and loopholes - serves us right for cutting in the first place.

 

[Tadpole]

we should rightly call them the "BHO tax cuts" if we must assign them to a president.

One cannot help to be curious about people making this an important "one minor point". Are you saying that the tax cuts themselves are good or bad in your opinion? Also, do you consider tax cuts to be bad in a severe recession? Are they good or bad in periods of growth? I seriously have been scratching my head over what people mean when they switch the credit from the originator to the inheritor. Does this mean Obama "cut taxes" and GWB only borrowed tax cuts from the back to the future? If so, why do so many people chant "Obama wants to raise your taxes"?

Another question: Where can I find the legislation that enables a president to unilaterally determine tax policy? From what I have read BHO tax cuts would restore tax levels only for people over $250,000. I disagree since I think all the tax cuts should be allowed to expire. But I think that I would consider them the Obama tax cuts if the top level had expired over $250,000. Obama made a huge political mistake by negotiating this issue rather than getting voted down on the issue. He was unwilling to let the lower brackets expire with the economy so bad.

And I agree that Obama is responsible for Obama policy. I don't think this changes a thing about the impact of policies of the history that preceded him. I think people refer to the GWB tax cuts in order to single out the time in history of the original cuts and differentiate them from the additional cuts made during Obama's watch, most of which I am not at all fond of at all.

For example, we usually refer to the current Social Security taxes as a point in history when the current level was set. So the Greenspan Commission was during Reagan and the legislation and current policy is referenced back to that time. So, if the current payroll tax holiday stuff is made permanent, I and others will think of this as the Obama changes in SS.

I know that I would like to see elected officials take ownership more definitively. Obama has been real weak in this area preferring to set up cover from studies and commissions and spreading the responsibility through meetings and negotiations rather than acting. For example, I would have liked to see him risk his future for the good of the country by ignoring the debt ceiling and just letting the ambiguous issue hit the courts.

 

[samclem]

One cannot help to be curious about people making this an important "one minor point" . . .

It's minor, not important. There was a law that set tax rates. That law was approved by Congress and signed by President Bush, and the rates under that legislation expired in 2010. They were not "permanent." A new Congress approved new legislation that extended those rates for two years, until the end of 2012. President Obama signed that new law, and the rates we have now are the "BHO tax cuts" as surely as the earlier rates were the "GWB tax cuts."

It's a minor point. We should either put responsibility where it belongs (with the person who signed the legislation in question) or maybe take emotion out of it and recognize the collaborative nature of the process by referring to the legislation by date.

 

[Brett_Cameron]

I would say that:

1) we have a long term debt problem, not a short term one. So it is unnecessary to cut spending by 40+% before August 2nd. It can and should be done over time. About 20% of all US household income now comes from government safety net programs and millions of Americans depend directly or indirectly on government spending for their paycheck. What would happen to the economy if we decided to cut government spending by 40+% tomorrow?

2) we don't have to pay off the debt. We just have to keep it at a manageable level (anywhere below 60% of GDP would be considered healthy I believe).

3) we don't need to operate with budget surpluses. We can have small deficits and decrease our debt-to-GDP ratio at he same time. We just need to keep our GDP growing.

Excellent sayings. I am just saying....

 

[Alan]

‪Porky Pig Cartoon Ending "That's All Folks!"‬‏ - YouTube