Debt Ceiling and the threat of The U.S. Defaulting

[sukeban]

I'm definitely all for balancing the budget, but I think the example of Europe (specifically the UK) should be instructive in terms of deciding when the best time is to do this. The UK did the austerity thing in, what, 2009, and promptly received a double-dip recession when private industry wasn't strong enough to pick up the slack left by the disappearance of government spending. One would hope that it would be a settled matter by now that counter-cyclical spending (including deficit-spending) is what is called for during a recession and/or a depression, and that austerity is precisely what an economy does not need when it is under duress. You can also look, for a recent example, at Greece, a country that implemented strict austerity measures, yet these measures did next to nothing to stop its accumulation of sovereign debt, as the austerity measures recessed the Greek economy and, in turn, diminished tax receipts.

 

Austerity in recessions does not work and should not be attempted. Those that advocate for it during a recession likely do not care about actual economic recovery and are instead seizing upon an opportunity to shrink government for ideological reasons. Spending reductions can be contemplated when times are good and private industry can fill the void, but when private industry is weak, all that you get will be recession and social unrest.

 

Republicans obviously DGAF about actual economics (they still think that cutting taxes on billionaires creates more jobs!) and are clearly advocating for spending cuts due to their obsession with dismantling government in general. Democrats might not be 100% better intentioned (protecting inefficient programs isn't really a virtue), but they are at least on the right side of the argument when it comes to actually sustaining a recovery (so they are right by accident). As HeyYou says, the responsible position toward paying down the debt is additional revenues in tandem with spending cuts--attempting to do this using only one of these methods is unwise and ultimately self-defeating.

 

The idea of a flat-tax is interesting, but only if it is heavily progressive. Doing away with our current inefficient and corrupted tax code could be the single-most beneficial action that Congress could take in terms of breathing life into the economy, though it would, I suppose, put some accountants out of business. I would like to see lower base tax rates--but with zero deductions--in addition to taxing capital gains as earned income and some sort of "per transaction" tax such as the Tobin Tax that the EU has recently proposed (you know it must be good if the big banks, multinationals, and American government hate it!). I'd also like to see lower corporate tax rates--but again, with no deductions, subsidies or loopholes. If we did that, and reigned in our military commitments and modestly reformed budget-busting programs like Medicare, the government would likely be swimming in cash--cash that we could apply to paying down the debt. Add in some legislation mandating budget surpluses and debt repayment (say, over fifty years) and I think we would be on solid financial footing.

 

I don't believe that this is an impossible order. Certainly, there are systemic and political roadblocks in the way, but I do feel as though our gridlocked "politics as usual" is going to be ending sooner rather than later (2016-18) when the House finally tips Democratic and Republicans either a) splinter into something else or b) seriously reformulate their policies to adapt to the rising center-left preferences of the electorate. We don't want or need one party calling all of the shots, but the Republicans right now are not serious negotiating partners. Once they are out of power at all levels, they will come back to the bargaining (and electoral) table chastened and ready to compromise on actual solutions. Until then, it is just a waiting game until we can finally put the stale political paradigm of the Baby Boom to rest and get on with solving our problems.

[HeyYou]

Trouble is, the government CANNOT create jobs. At least, not jobs that lead to sustainable growth. The US is supposedly out of it's recession, (would have a hard time convincing ME of that though....) mainly due to government spending. Well, the government can't continue to spend forever.... (although, it appears that ours seem to think so....) without consequences..... The economy here is STILL weak, even after spending a trillion dollars or more on 'stiumulus' and 'bailouts'. Some of the companies that were bailed out are again failing. Including some banks. Shall we bail them out again?

 

Sure, letting the various businesses that got bailed out, fail instead, would most certainly hurt. Salvaging them with taxpayer money, (which promptly went to pay 'retention bonuses, for the very people who's poor judgement got us in to the situation in the first place) was only a temporary fix. And of course, the re-regulation came along too. Which the banks promptly ignored, or found loopholes, to work around. The people that put us in such a crappy position got THEIR money, then they got the houses and such that secured those toxic loans as well. Even in an economic collapse, they made out like bandits. It's the average american that got a royal screwing. And we are heading for yet another fall. All the government did was postpone the inevitable, it will be WORSE next time around.

 

The UK government doing its austerity thing BEFORE it was absoutely required, probably wasn't such a bad idea. Times will be tough for a bit, but, things ARE recovering, albeit, slowly. (until the bottom drops out from the US economy again, then we are all gonna be in for a world of hurt)

 

And what did the various recipients of the bailouts learn? It doesn't matter what they do, if it looks like they are going to go under, they know the fed will come along and save them. Again. Zero motivation to change their ways, and fast money to be made NOT changing. Same problem we have with our government. Coincidence? I don't think so.

[JimboUK]

I'm definitely all for balancing the budget, but I think the example of Europe (specifically the UK) should be instructive in terms of deciding when the best time is to do this. The UK did the austerity thing in, what, 2009, and promptly received a double-dip recession when private industry wasn't strong enough to pick up the slack left by the disappearance of government spending. One would hope that it would be a settled matter by now that counter-cyclical spending (including deficit-spending) is what is called for during a recession and/or a depression, and that austerity is precisely what an economy does not need when it is under duress. You can also look, for a recent example, at Greece, a country that implemented strict austerity measures, yet these measures did next to nothing to stop its accumulation of sovereign debt, as the austerity measures recessed the Greek economy and, in turn, diminished tax receipts.

 

Austerity in recessions does not work and should not be attempted. Those that advocate for it during a recession likely do not care about actual economic recovery and are instead seizing upon an opportunity to shrink government for ideological reasons. Spending reductions can be contemplated when times are good and private industry can fill the void, but when private industry is weak, all that you get will be recession and social unrest.

 

Republicans obviously DGAF about actual economics (they still think that cutting taxes on billionaires creates more jobs!) and are clearly advocating for spending cuts due to their obsession with dismantling government in general. Democrats might not be 100% better intentioned (protecting inefficient programs isn't really a virtue), but they are at least on the right side of the argument when it comes to actually sustaining a recovery (so they are right by accident). As HeyYou says, the responsible position toward paying down the debt is additional revenues in tandem with spending cuts--attempting to do this using only one of these methods is unwise and ultimately self-defeating.

 

The idea of a flat-tax is interesting, but only if it is heavily progressive. Doing away with our current inefficient and corrupted tax code could be the single-most beneficial action that Congress could take in terms of breathing life into the economy, though it would, I suppose, put some accountants out of business. I would like to see lower base tax rates--but with zero deductions--in addition to taxing capital gains as earned income and some sort of "per transaction" tax such as the Tobin Tax that the EU has recently proposed (you know it must be good if the big banks, multinationals, and American government hate it!). I'd also like to see lower corporate tax rates--but again, with no deductions, subsidies or loopholes. If we did that, and reigned in our military commitments and modestly reformed budget-busting programs like Medicare, the government would likely be swimming in cash--cash that we could apply to paying down the debt. Add in some legislation mandating budget surpluses and debt repayment (say, over fifty years) and I think we would be on solid financial footing.

 

I don't believe that this is an impossible order. Certainly, there are systemic and political roadblocks in the way, but I do feel as though our gridlocked "politics as usual" is going to be ending sooner rather than later (2016-18) when the House finally tips Democratic and Republicans either a) splinter into something else or b) seriously reformulate their policies to adapt to the rising center-left preferences of the electorate. We don't want or need one party calling all of the shots, but the Republicans right now are not serious negotiating partners. Once they are out of power at all levels, they will come back to the bargaining (and electoral) table chastened and ready to compromise on actual solutions. Until then, it is just a waiting game until we can finally put the stale political paradigm of the Baby Boom to rest and get on with solving our problems.

The problem in the UK was the government just swung the axe at everything with no thought to the knock on effects, cuts need to be targeted, our idiot government just cut budgets. Honestly we have the most inept government in living memory.

[MistTiger]

Wow, a debate on the debt ceiling that has half of the comments bashing one political party of another instead of discussing basic economics. Now let's talk.

 

1. The debt ceiling is your credit card limit applied to the US government. Can you exceed your credit limit. Get real. Everyone is screaming and ranting about balancing the budget. Hit the debt limit and guess what you get. You can now only spend what you take in.

It doesn't matter how much money you print, you can't spend more than you take in.

 

2. Governments are not efficient. There is not the accountability and responsibility for finances that individuals must exercise. Why? Because you can always blame the problem on someone else. The ultimate expression of this in the US.....Sequestration. The president and congress did not have the sand to make cuts in the budget as it would cost votes so they started a game of chicken in which no one had to take responsibility for any crashes. It wasn't my fault jobs where lost and cut....The President and Congress to voters.

 

3. People like free stuff. President Obama was elected because he promised Americans free stuff. Do you refuse free stuff? Who cares about who has to pay for health care if you get it free. No one getting free stuff is concerned about the debt limit as long as they keep getting free stuff. If they were they would be not taking the free stuff as it contributes to the debt. There is a feeling in America that America owes its citizens; that is wrong. The only thing America owes its citizens is what is in the constitution. Everything else is not a right; it is charity. Charity contributes to the debt; just like everything else.

 

4. Because of the way the US collects taxes, the rich will always be rich. Individual taxes are based on income. If I am a billionaire and I make no money, I pay NO taxes. I am still a billionaire. Taxing the rich is self defeating. Every country or group that has tried has failed. Unless one can force them into an area where they cannot go somewhere else, they will just move so they can continue to be rich. Going after the rich will not solve the debt problem which is really to inability of those in office to curb their spending. Reduced spending will solve the debt ceiling, not more taxes.

 

5. Finally, the debt problem in the US is a symptom, not the cause. The sad fact is that we have priced ourselves out of the world market by paying wages and benefits out of proportion with what we produce and sell. Why would I pay 100 dollars for a pair of jeans sewed by an American when I can by the same quality sewed in Mexico for 30 dollars. WE tried the "Buy American" campaign in the 90s and it was a dismal failure. Don't think so; why are so many companies leaving the US if the Americans are so fervent in buying only from American companies. When equivalent or near same quality goods are offered by foreign markets to Americans, they are not going to spend extra. Every green or environmental item or service in the US seems to cost a lot more than its non-green counterpart. A great way to promote protection of the planet....charge more for it.

 

Bottom line: The US can solve its debt problem before the world bank steps in and shuts off its credit cards. The answer is quite simple. The voters need to stop electing officials that promise them free stuff because there is not such thing. The voters need to stop electing officials that spend money on useless things that do not protect America or strengthen its economy. The voters need to stop electing officials that think that the US's problems can be solved by higher taxes or more spending. The voters need to hold each member of congress and the President accountable for EVERY dollar spent on ANYTHING by the government. Sadly, none of this will happen. Why? Because most of America's voters don't take the time to learn about what the government is really doing with their money and get their information from some late night talk show. I just have to read most of these other posts to see how little people know about basic economic reality and principles. Having checks in the checkbook does not mean that I have money to cover the checks. WOW!!!! OMG!!! All we have to do is eliminate the political party that we despise the worst and RAISE taxes on those evil rich people and all of our problems will be solved. I have some prime swamp land on a sandy beach to build your dream house on that I want to sell you at premium prices because its such a good deal if you even remotely believe the previous sentence. Study history and you will see that the downfall of every great empire not caused by cataclysmic natural disaster was from cutting defenses and giving people free stuff. Don't believe me. Study history.

Is this the end of the US? No, the US's center of power is capitalism and any movement away from capitalism has created disaster. Capitalism is much like the animals that flee a forest fire. After the crisis in the US burns itself out, the capitalists will be back to rebuild because most of the smart ones are already moving out. Without incentives to create success, the result is always mediocrity and lethargy.

 

 

Just my opinion. Cheers!!!! V/R MistTiger

[HeyYou]

That is all well and good, provided that your vote actually does make a difference. Currently, it is simply an illusion that we have some variety of control over our government. That is not the case. We don't get the choice of who runs. They are chosen for us. For the most part, we don't decide who wins. The folks with the money decide that. We need to get the MONEY OUT of government, before we can even begin to see some meaningful change in the way they operate. Currently, corporate america, and lobbyists have more say over the direction our country takes, than it's citizens. The minority is overruling the majority.

 

We need to start with campaign finance reform. Limit campaign contributions to 5000.00 dollars per registered voter. Corporations are NOT people too, they should be banned completely from campaign donations, or any kind of political advertising. They DO NOT have the right of free speech. That is reserved for REAL people. (I will believe a corporation is a person, about the time texas executes one.)

 

Political campaigns may only be persued within three months prior to the election for which they will be on. No more campaigning YEARS in advance of the election. It distracts politicians from doing the job they were elected to do. RUN THIS COUNTRY.

 

Term limits for congress. Just like the president. No more career politicians in Washington. This is NOT the government our forefathers wanted.

 

Ban paid lobbyists. Zero compensation permitted for those whose ONLY job is to attempt to sway government in one direction or the other. The more money you have, the more influence you have. Take them out of the equation.

 

Tax exempt organizations may NOT lobby congress. You wanna participate in government? Then pay taxes for the privilege.

 

That would be a start...... but, ONLY a start.

Edited April 7, 2013 by HeyYou