Topic: US govt fiscal woes

[gottaplan]

This entire debate about spending cuts & tax increases is getting clouded by discussing "what's popular" or what public opinion thinks America should do.  I don't think the country should necessarily construct it's fiscal policy based on what's popular or what a slim majority of the country prefers. 

National holiday every Friday with free ice cream would be popular & preferred by a majority of the country but it won't do much to reduce our debt or improve our long term economic outlook.

Oh of course not.  Ideas like this give representatives free reign to craft policy that is pulled from the sky...or sponsored by their special interest corporate sugar daddies. 

It's funny that you mention corporate sugar daddies like they are the only special interest with lobbying power affecting this debate.  Who do you think is holding up entitlement reform?  Chaining cost of living adjustments to the CPI instead of standard 3% increases...?  Certainly not corporate sugar daddies....

[Hts121]

What good is a tax increase on the wealthiest 1% going to do to improve the debt/deficit if it doesn't include spending controls?

There is no silver bullet.  If you want to decrease the deficit and, in turn, the debt then you have to be willing to BOTH increase revenue and cut spending.  Tax increases on the wealthiest 1% is a way to increase revenue, which will (in theory) lower the deficit.... which will (in theory) lower the debt (or at least slow down its increases).

[X]

But the real story here is the DEBT/DEFICIT.  That's what created this FISCAL CLIFF!!!   

Actually, no it isn't.  The "Fiscal Cliff" is an entirely artificial emergency foisted on us by the Republicans as a condition of raising the debt ceiling last year.  We could indeed have a debt crisis at some point, but this is not actually it.

[mrnyc]

no, the fiscal cliff situation was foisted on us by both parties. there was plenty of time here. intransigence is not doing the job.

[KJP]

Honestly, this entire failure of Congress has me thinking it may be time to revisit term limits for US Senators & Representatives.  Everyone is so worried about doing what's popular, perhaps they would be more inclined to do what's right if they knew they only had 1 term left to serve.

We did that here in Ohio, which got rid of the legislative "experts" and made the general assembly even more of a special interest-pandering body. I think the solution is to do the opposite -- lengthen the terms. House members should serve at least four-year terms, as opposed to the current two-year term which gives them just one year to govern. They spend the second year campaigning and worried more about how their votes are perceived. So little gets done in election years -- that's half the time! I want House members who are able to govern for at least three years.

[mrnyc]

yeah the two year term is too abrupt. both should be three years.

too bad any change there will never happen because leaving the chaos pays off too well.

[Hts121]

I'm not sure when Boehner said the ball is in the Senate's court, he actually thought they would do something.

Anyone surprised that Rubio and Rand Paul voted against the compromise?  I suppose they need "political cover" for the 2016 GOP primary where 'compromise' is an indictable offense

[Clevelander17]

What good is a tax increase on the wealthiest 1% going to do to improve the debt/deficit if it doesn't include spending controls?

There is no silver bullet.  If you want to decrease the deficit and, in turn, the debt then you have to be willing to BOTH increase revenue and cut spending.  Tax increases on the wealthiest 1% is a way to increase revenue, which will (in theory) lower the deficit.... which will (in theory) lower the debt (or at least slow down its increases).

And we're not even raising taxes on the wealthiest 1% all Americans, we're raising taxes on the wealthiest 1% of workers.  So many of real 1% make money through capital gains and will not see their taxes go up as much as those who work for a living will.  The Warren Buffet situation will still exist even if the Biden-McConnell compromise gets through the House.

[Loretto]

^In the Senate bill capital gains is going to 20% for income above $400,000/$450,000.

[Clevelander17]

^In the Senate bill capital gains is going to 20% for income above $400,000/$450,000.

I know, I saw that, which as I said before is nice.  But although I can definitely understand the reasons behind keeping capital gains tax rates low to encourage investment, I also think that there are good arguments for the idea that income is income and that it should be taxed at the same rate as income earned through working.  And there's no payroll tax on capital gains, which is also not insignificant.

Either way, there's still the issue of the carried interest loophole which needs to be addressed, even if lawmakers continue to believe that there should be a penalty for working.

[gottaplan]

so after all the last second wrangling to avert the cliff, which was designed to reduce the debt by increasing taxes & cutting spending, we have a CBO report that says the new deal will add almost $4 trillion in new debt over the next 10 yrs.  Way to go everybody!!!

On a side note, the White House disagrees with the CBO report, saying the estimates do not give enough credit to the improved economic growth that will result from the tax cuts.   

Wait what?  Obama says tax cuts cause economic growth?  Hold the phone!!!

http://www.politico.com/story/2013/01/will-tax-deal-balloon-or-shrink-deficits-85671.html?hp=l3

[Hts121]

^Are you under the impression that Obama has ever said anything other than tax cuts for the middle class spur economic growth?  That has been his position since day 1.

Regardless, it seems to me that the article cites the WH thinking the CBO numbers might be wrong "chiefly because of higher tax payments from the wealthy".

The bottom line, however, is that NOBODY proposed a deal which would balance the budget.  Not even falling off the "cliff" would have brought us to a balanced budget.  Applying simple logic, that means any deal would have raised the deficit over the course of several years.  For whatever reason, all the hee-hawers about the deficit don't seem to understand the correlation between the debt and the deficit.  Each year we have a deficit, it adds to the debt.  Even the Ryan budget, which was largely laughed off by his fellow GOPers, did not bring us to a balanced budget for several decades.  The hole is simply too big to dig out of in one, two, four, eight, or even twenty years.  Best we can do is set a trajectory towards a balanced budget and hope that economic conditions do not divert us. 

[Hootenany]

^^There's a bit of intellectual dishonesty going on when people say that this tax deal adds $4 trillion to the debt over 10 years.  The only reason the CBO scored it that way is because it was forced to compare the tax deal to "current law" as of the day the bill passed (1/1/2013).  Well, "current law" was clinton-era tax rates because the Bush tax cuts had technically expired.  So the CBO says that $3.638 trillion of that $4 trillion in new debt is due to an extension of many of the Bush tax policies (rates on 12/31/2012). 

No one really expected all of the Bush tax cuts to be allowed to expire so it's not exactly fair, in my opinion, to use that as the baseline.  I agree with the white house that "current policy" should be the baseline the plan is scored against.

[Hts121]

Well..... it looks like the 'Fiscal Cliff' fight is going to be minimal compared to the upcoming debt ceiling vote.  Serious question - do these Tea Party honks not understand or are they just pretending to not understand what the debt ceiling is?

[gottaplan]

They're using it as leverage to try and enforce some sort of spending controls

[Hts121]

Obviously....... but, again, do they really understand what it is or are they just pretending that it is something that it is not? 

[Keith]

The policy wonks understand the debt ceiling just fine, but they also understand that the average person doesn't, so they're using the average person's lack of knowledge to score political points.

[Hts121]

I'd like to think that, but unfortunately I think there are more than a few members of Congress who don't understand it....... especially if they think it is effective "leverage to try and enforce some sort of spending controls" regardless of whether the public is willing to buy into that BS

Let's use the household analogy the wonks like so much.  My household is $10,000 in debt.  In order to enforce some sort of spending controls, we decide to stop paying our debt.  Good plan?

[natininja]

^^There's a bit of intellectual dishonesty going on when people say that this tax deal adds $4 trillion to the debt over 10 years.  The only reason the CBO scored it that way is because it was forced to compare the tax deal to "current law" as of the day the bill passed (1/1/2013).  Well, "current law" was clinton-era tax rates because the Bush tax cuts had technically expired.  So the CBO says that $3.638 trillion of that $4 trillion in new debt is due to an extension of many of the Bush tax policies (rates on 12/31/2012). 

No one really expected all of the Bush tax cuts to be allowed to expire so it's not exactly fair, in my opinion, to use that as the baseline.  I agree with the white house that "current policy" should be the baseline the plan is scored against.

Didn't realize that. Thanks for the info.

[natininja]

This is exactly the clusterf any observer must have expected. Too small a revenue increase and too small a (no) spending cut.

People want their medicare. They don't want their payroll tax. Congress delivers.

[Gramarye]

Let's use the household analogy the wonks like so much.  My household is $10,000 in debt.  In order to enforce some sort of spending controls, we decide to stop paying our debt.  Good plan?

Neither a good plan nor a good analogy.  Hitting the debt ceiling would limit borrowing; it would not, of itself, default on payments on existing notes and bonds.  Obama might choose to do that rather than having to slash money immediately on entitlement spending, but the analogy that entitlement spending is "debt" is not consistent with U.S. law on the topic.  Entitlements legally can be lowered and entitlement beneficiaries do not have bondholder protections (including the Fourteenth Amendment guarantee).

[KJP]

I would have preferred to have the fiscal cliff than what was enacted yesterday. Yes, it probably would have spurred a recession. But I would preferred that to the many years of economic stagnation that having such high debt will bring. This nation is unable to accept short-term pain for long-term gain. It wants the joy of getting drunk to deal with its economic hangovers.

[Hts121]

Let's use the household analogy the wonks like so much.  My household is $10,000 in debt.  In order to enforce some sort of spending controls, we decide to stop paying our debt.  Good plan?

Neither a good plan nor a good analogy.  Hitting the debt ceiling would limit borrowing; it would not, of itself, default on payments on existing notes and bonds.  Obama might choose to do that rather than having to slash money immediately on entitlement spending, but the analogy that entitlement spending is "debt" is not consistent with U.S. law on the topic.  Entitlements legally can be lowered and entitlement beneficiaries do not have bondholder protections (including the Fourteenth Amendment guarantee).

It's never a good analogy when comparing household debt to the nation's debt.  But the point was that if we don't raise the debt ceiling, we can't pay our bills.  Yes, that includes entitlement spending.  But we are not borrowing on future spending.  We are borrowing on money we already committed to pay.  It is not what most people assume - that we are raising the debt ceiling so that we can implement new spending programs.  The bottom line is that if we don't raise the debt ceiling, we default on our debt already incurred because we must engage in deficit spending (which requires a higher debt ceiling) to pay our debt.  Ask any economist what impact a default would have on our economy.  It would make the so-called 'fiscal cliff' seem like small potatoes.

Does the GOP have a plan specifying what cuts need to be made to avoid raising the debt ceiling?  If not, it seems as if they are just blowing smoke anyways. 

[KJP]

Refer to the City of Cleveland in 1978 when banks refused to extend more lines of credit to the city to punish the Kucinich administration for being anti-business. Defaulting didn't solve anything, as the city's population continued to fall from 560,000 in 1980 to less than 400,000 today.

[gottaplan]

Refer to the City of Cleveland in 1978 when banks refused to extend more lines of credit to the city to punish the Kucinich administration for being anti-business. Defaulting didn't solve anything, as the city's population continued to fall from 560,000 in 1980 to less than 400,000 today.

Interesting take on that moment of history.  George Voinovich had a different take on things when I heard him describe that period of events.

[KJP]

Interesting take on that moment of history.  George Voinovich had a different take on things when I heard him describe that period of events.

Did Voinovich ever say "muny light sale" while discussing the city's default? Or did he utter Cleveland Trust? Or that Cleveland Trust and CEI had four interlocking directors on their boards? Or that Kucinich was as hated by the Mafia (they hired a hitman to kill him) as Voinovich was loved by them (he gave them no-bid contracts and appointed them to influential city [and later state] positions)?

Enjoy......

http://www.encyclopedia4u.com/d/dennis-kucinich.html (has some of the most detail)

http://www.clevelandmagazine.com/ME2/dirmod.asp?sid=E73ABD6180B44874871A91F6BA5C249C&type=Publishing&mod=Publications::Article&mid=1578600D80804596A222593669321019&tier=4&id=86C429AEDB9A46E79F575087542317CD

http://m.npr.org/story/14699914

[gottaplan]

Interesting take on that moment of history.  George Voinovich had a different take on things when I heard him describe that period of events.

Did Voinovich ever say "muny light sale" while discussing the city's default? Or did he utter Cleveland Trust? Or that Cleveland Trust and CEI had four interlocking directors on their boards? Or that Kucinich was as hated by the Mafia (they hired a hitman to kill him) as Voinovich was loved by them (he gave them no-bid contracts and appointed them to influential city [and later state] positions)?

Enjoy......

Yeah he actually did discuss the Muny Light sale in depth but mostly focused on what you left out, that Cleveland had already been shut out of the national bond market because our financial situation was so dire...  leaving local banks as the only option.  How the hell long does anyone think that situation was going to last before the City defaulted?  Talk about a game of musical chairs, which local bank would be the last to loan the city money & get screwed? 

I think the Kucinich/Cleveland Default story you brought up is more relevant than you realize.  Nowhere in the drama of Kucinich and his battle with the local banks to save Muny Light/hold off default is any mention of reforms.  History repeats itself...

[KJP]

Quite the contrary. Kucinich proposed major budget cuts and the transfer of city assets to other entities, such as lakefront parks to the state, city bridges to county or state control, etc.

Fact is, federal spending has dramatically outgrown taxes since 2000. To stop the runaway debt train, it's going to take a combination of reduced spending AND increased taxes. Going over the fiscal cliff would have been bitter medicine to swallow, but it was medicine that needed to be taken.....

[Clevelander17]

Interesting tidbit, but part of the reason why Obama was not able to get the $250K minimum that he wanted for increased tax rates was because of some backlash from coastal Democrats.  It's not something that is talked about very often, but the Federal tax code is sort of stacked against those that live in metro areas with high costs of living.  Not that that's something I really care about as a resident of Ohio, but I am kind of surprised that it's not discussed more often, especially with the media bias towards cities like NY, SF, DC, LA, Boston, Chicago, etc.

[Keith]

Interesting tidbit, but part of the reason why Obama was not able to get the $250K minimum that he wanted for increased tax rates was because of some backlash from coastal Democrats. 

That's an interesting theory, where are you getting that from?

[Clevelander17]

I heard a talking head mention it on either CNN or FOX News the other night.  I can't find an article that cites a direct connection between coastal Democrats and the final outcome of the fiscal cliff deal, but the following article does show that Senators Schumer and Boxer wanted the cutoff set at $1 million as recently as last year:

http://www.csmonitor.com/USA/DC-Decoder/Decoder-Wire/2012/1214/Taxing-the-rich-why-250-000-became-the-benchmark

[Keith]

I know that a few Democrats floated the $1Mil benchmark, over the last few years, but as far as I could tell the $400K came from negotiations between Obama and Boehner and had more to do with where to set it to meet their compromised sum of total revenue raised than anyone's definition of middle vs upper class. I'm very open to being incorrect though.

[moonloop]

Sounds like raising the debt ceiling will be tied to the automatic cuts to military and other feds programs the fiscal cliff bill delayed. Both expire around the same time, 2 months. Interesting bargaining chips.

[gottaplan]

I'm just looking forward to watching the continued decline in leadership, ethics, judgement, and compromise.

Boehner to Reid:  "Go f*@% yourself."

http://www.politico.com/story/2013/01/the-fiscal-cliff-deal-that-almost-wasnt-85663.html?hp=t1_7

[Clevelander17]

I almost have a new respect for Boehner in the way he stood up to the fringe members of his party and tried to compromise.  However it seems inevitable that his time as Speaker is coming to an end.