US is in Even Worse Shape Financially Than Greece

[noxiousdog]

I think he's saying that the middle class and poor will suffer disproprtionately from the budget cuts so more taxes on the "rich" will even things out.

Kind of populist but it makes some sense. Federal government services that the "rich" avail themselves of won't be getting chopped nearly as much, if at all.

What is getting cut?

And that's ridiculous. If you decide to stop helping someone in your family less, you don't increase the chores on other family members more to compensate.

[Arcanis]

The arbitrary nature of taxing the 'rich' isn't about more money=more taxes it is about where the line gets drawn, more money than me=much bigger tax increase is the typical drawing line people have.

[LawBeefaroni]

I think he's saying that the middle class and poor will suffer disproprtionately from the budget cuts so more taxes on the "rich" will even things out.

Kind of populist but it makes some sense. Federal government services that the "rich" avail themselves of won't be getting chopped nearly as much, if at all.

What is getting cut?

And that's ridiculous. If you decide to stop helping someone in your family less, you don't increase the chores on other family members more to compensate.

I'm not supporting the notion, just saying that's what's out there.

And the family analogy isn't exactly fair. Help and chores are non-zero sum. Spending and revenue are not (at least not in the real world).

[LordMortis]

The arbitrary nature of taxing the 'rich' isn't about more money=more taxes it is about where the line gets drawn, more money than me=much bigger tax increase is the typical drawing line people have.

I was related by marriage to a very wealthy and brilliant man who worked very hard to accumulate and protect a small fortune as he continued to live by humble means, short of his passion for travel and for having people provide him the most basic of services so he didn't have to do stuff himself that wasn't part of his life. He was all about increasing taxes and providing more and more government services and literally heavy proponent of redistributing wealth to give the poor a chance a fair chance. What always annoyed me about his generosity with tax payers money is how much of his fortune and his effort was spent sheltering his own money from taxation. He'd happily raise taxes on himself along with everyone else to make society better and then proceed find better ways not to pay to them.

[noxiousdog]

And the family analogy isn't exactly fair. Help and chores are non-zero sum. Spending and revenue are not (at least not in the real world).

Ok, you don't charge your wife more rent when your cutting your kid's allowance.


And spending and revenue haven't been zero-sum for a long, long time.

[LawBeefaroni]

Ok, you don't charge your wife more rent when your cutting your kid's allowance.

I'm supposed to charge her rent? Shit, all these years...that freeloader.

And spending and revenue haven't been zero-sum for a long, long time.

Yeah, this is true. Well at least Congress has treated it that way. There's a debt clock somewhere ticking away the cost of this ignorance.

[Kraken]

It's not arbitrary if you are the one suffering from budget cuts. The $trillions that the Republicans want to cut primarily affect the middle class and poor. Raising their taxes will include the upper class in the general sacrifice.

I don't have any idea what you just wrote.

I think he's saying that the middle class and poor will suffer disproprtionately from the budget cuts so more taxes on the "rich" will even things out.

Kind of populist but it makes some sense. Federal government services that the "rich" avail themselves of won't be getting chopped nearly as much, if at all.

Right, thanks for interpreting. I see I didn't word that well.

Spending cuts will disproportionately affect the poor and elderly (assuming that they include Medicare), hence the Democrat charge of "balancing the budget on the backs of the poor." Raising taxes on the rich shares some of the pain upwards and evens out the sacrifice somewhat.

[noxiousdog]

Right, thanks for interpreting. I see I didn't word that well.

Spending cuts will disproportionately affect the poor and elderly (assuming that they include Medicare), hence the Democrat charge of "balancing the budget on the backs of the poor." Raising taxes on the rich shares some of the pain upwards and evens out the sacrifice somewhat.

But didn't spending disproportionately benefit the poor and the elderly more in the first place?

Also, what about that big gap between poor and rich?

[El Guapo]

I'm curious: what do people think would be the fallout if, a week before the debt ceiling is to be hit (for example), Obama announced the following (more or less):

"After consultation with the Office of Legal Counsel, I have determiend that the statutory debt ceiling is unconstitutional. Accordingly, I am directing the Treasury to continue to pay on the valid and lawful debts of the United States, made persuant to applicable acts of Congress. Notwithstanding this, I will continue to work with Congress to find ways to bring our budget deficit under control in ways that do not bring undue hardship during these tough economic times."

[Arcanis]

People would go ape shit and the markets will look like a seismograph during an earthquake.
Valid reasons people may go nuts:
The debt ceiling was put there for a reason, despite the fact that it isn't doing its job too well.
It isn't the president's place to declare something unconstitutional, that belongs to the SCotUS.
Congress gets to make the laws, as the executive he is responsible for enforcing them not deciding if they should be enforced.
Huge power grab for the office generating much more potential for abuse by anyone in that seat.

Invalid reasons (that will probably be the main reason for some):
He has the wrong letter behind his name screw him.
Without the debt ceiling there is nothing to hinder congress from spending us into oblivion (not like they aren't doing it already)

The markets won't know what to think about this as some people will think it great and some will be hoping the Mayans were really right about the world ending in 2012.

[Smoove_B]

I'm curious: what do people think would be the fallout if, a week before the debt ceiling is to be hit (for example), Obama announced the following (more or less):

Well, it would give the Republicans a way to defect the apparent voter rage that will strike if they approve it.

[LawBeefaroni]

The markets won't know what to think about this as some people will think it great and some will be hoping the Mayans were really right about the world ending in 2012.

Much of this is undoubtedly already priced into markets. This isn't going to blindside Wall Street.

Now if he comes out and says, "Well, we tried. Really, we did. But we will now default on all debt obligations...", then you can head down to the fallout shelter. After me, of course.

[El Guapo]

On one point, it is absolutely the President's job to declare laws unconstitutional. The President does not get to decide which valid statutes are enforced (though in practice he has considerable leeway to do so). However, if a statute is unconstitutional, then the President doesn't have a choice: the constitution trumps the statute, and the so the President is obliged to enforce the constitution rather than the statute.

Now, the SCOTUS is the final *authority* on what is or is not unconstitutional. If the President says a law is unconstitutional and someone sues over that decision, the SCOTUS can declare that the statute is in fact constitutional and issue an order, at which point the President is obligated to defer to the SCOTUS's decision. However, short of that the President can (and must) decline to enforce statutes that he concludes violates the constitution.

So for example if Congress passed a statute saying "the right of the people to assemble is hereby abbriged and declared illegal," the President is obligated not to enforce it. There are even those who argue that as a co-equal branch the President can decide constitutionality even in the face of a contrary SCOTUS decision, but those people are largely in the minority.


FWIW as I understand it the argument against the constitutionality of the debt ceiling is based on the part of the 14th amendment that says: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." The argument being, I gather, that passing a statute that limits the authority of the government to pay validly incurred debt is "questioning" the validity of that debt.

[El Guapo]

The markets won't know what to think about this as some people will think it great and some will be hoping the Mayans were really right about the world ending in 2012.

Much of this is undoubtedly already priced into markets. This isn't going to blindside Wall Street.

Now if he comes out and says, "Well, we tried. Really, we did. But we will now default on all debt obligations...", then you can head down to the fallout shelter. After me, of course.

Yeah, I think Obama saying "we're going to keep paying the debt regardless" would probably be less destablizing than him saying that they wouldn't. Of course both are less preferable than simply extending the debt ceiling.

[geezer]

The markets won't know what to think about this as some people will think it great and some will be hoping the Mayans were really right about the world ending in 2012.

Much of this is undoubtedly already priced into markets. This isn't going to blindside Wall Street.

Now if he comes out and says, "Well, we tried. Really, we did. But we will now default on all debt obligations...", then you can head down to the fallout shelter. After me, of course.

Seriously. I don't think people have any freaking clue about the horror that will result if we just default like certain factions are urging us to do.

[Kraken]

Right, thanks for interpreting. I see I didn't word that well.

Spending cuts will disproportionately affect the poor and elderly (assuming that they include Medicare), hence the Democrat charge of "balancing the budget on the backs of the poor." Raising taxes on the rich shares some of the pain upwards and evens out the sacrifice somewhat.

But didn't spending disproportionately benefit the poor and the elderly more in the first place?

Also, what about that big gap between poor and rich?

Only in direct payments. It's hard to answer that without knowing what they propose cutting and by how much.

As for the middle class, we should all be paying higher Medicare and Social Security taxes.

[Smoove_B]

TPM is suggesting (via the CBO) that if Congress does absolutely nothing, we might be better off.

While all this -- from the findings to the politicization of them -- is perfectly expected, the forecast also presents another opportunity to remind people that the medium-term budget outlook is perfectly fine if Congress adheres to the law as it's currently written. That means no repealing the health care law, for one, but more significantly it means allowing the Bush tax cuts to expire, and (unfathomably) allowing Medicare reimbursement rates for doctors to fall to the levels prescribed by the formula Congress wrote almost 15 years ago. In other words, no more "doc fixes."

Go figure.

[LawBeefaroni]

Doctors aren't going to take a 20+% haircut. Note that this won't just affect Medicare reimbursement. Most private fee-for-service reimbursement is based on Medicare rates.

[El Guapo]

Yeah, that's lunacy. There's a reason the "doc fix" keeps passing year after year. It wasn't intended to do what it would do, and it would be a terrible idea to cut Medicare by 20% immediately.

The rest of it makes sense, though.

[Pyperkub]

The markets won't know what to think about this as some people will think it great and some will be hoping the Mayans were really right about the world ending in 2012.

Much of this is undoubtedly already priced into markets. This isn't going to blindside Wall Street.

I wouldn't be so sure about that - you can make the same argument for the Real Estate bubble, and yet that took down multiple banks, brokerages, etc. The assumption is a rational market, and yet Lehmann Bros got blindsided (if you will), as did Bear Stearns, Washington Mutual, Citibank, Countrywide, etc.

I think it has the potential to be a big deal and I don't think the markets would react rationally.

[Apollo]

You are delusional if you believe the votes will not be there to raise the debt ceiling...

OK, you're a cynic and I'm delusional.

Seriously, I live in a very conservatve state and every conservative I talk to is totally against raising the debt limit. If the GOP agrees to do so they will face a HUGE backlash from the rank and file who have bought into the argument that going into default is "no big deal" and will primarily hurt the rich(?!?). And since the GOP has been putting state and local budgets into crises all over the country because of their refusal to allow any tax increases, I see a financial meltdown on the horizon.

As far as getting the rich to pay more taxes in a budget deal, to me the math is simple: The top rate when Reagan came into office was about 70% as opposed to today's 35%. It's clear who has been the biggest benificiary of decades of tax cuts. In addition, the US has a huge disparity in income where a tiny percentage of the population own the vast majority of the wealth in this nation. If you're going to raise taxes you have to go where the money is. I know some see this as "unfair" but life is unfair. When we have "fair" wages in this country, then we can worry about "fair" taxation. Finally, Federal and State taxes, as a share of GDP, are at their lowest since 1950. It's not like we can't afford some tax increases to go along with spending cuts in any budget deal.

[Smoove_B]

From Slate, three historic examples of tax cuts paying for themselves:

How do lower taxes raise the amount the government takes in? Three answers are commonly given. First, tax cuts encourage businesses and individuals to be more honest about their earnings. Rather than hiding income, taxpayers just fess up and pay their share. Second, lower taxes encourage businesses and individuals to move money from lower-productivity, tax-free investments and shelters to more productive, taxable investments. Third, most importantly, perhaps, tax cuts goose growth. The government might be taking a smaller piece of the pie, but the tax cuts make the pie bigger. (In Ireland's case, of course, there's a fourth: The country became a kind of tax haven.)

The problem, according to most economists, is that Republicans now apply that dogma to all taxes, in all situations, even though there are few times when tax cuts actually pay for themselves. And even the case studies that do argue for supply-side economics are more ambiguous than they seem at first blush.

[Kraken]

I think we got our money's worth, don't you?

WASHINGTON - Amid a growing debate over how to reduce the government’s debt, a study has concluded that US involvement in Afghanistan, Iraq, and Pakistan has cost up to $4 trillion over the past decade.

The study, by the nonpartisan Eisenhower Research Project based at Brown University’s Watson Institute for International Studies, also estimates that at least 225,000 people, including civilians, troops, and insurgents, have died as a result of the conflicts. Of that number, an estimated 6,000 were uniformed US military personnel.

$17,777,777.78 per death seems extravagant to me. I wonder what fraction of them were Bad Guys.

“Some people will say that’s an expensive price tag, but what we’re trying to do makes it worth it. Other people will say we can’t afford it,’’ Catherine Lutz, codirector of the “Costs of War’’ project, said in an interview.

Yeahhh, you keep telling yourself that.

[LordMortis]

I am believer of "peace at what price" on several different levels. Though I honestly don't know about Afghanistan. Osama/Al Queida seems (seemed?) legit enough to me but I've never felt like we've been told enough of the story by the people up top.

Now Iraq I've never wanted to be in, not since Bush the Elder, less so since Clinton, and was angrily against it with Bush the Younger.

I also have to wonder how much less we would have spent on the military had we not been involved. I don't handily know how much higher or lower our recruitment is when while in these wars. I don't know how much more hazard pay is and I don't know how much more it costs to maintain soldiers in combat versus soldiers in Germany.

Beyond that are the "non pentagon" costs but I have no idea what that means. I can't imagine it's cheap to build towns after blowing them up but I also don't know that we are paying for it.

[Zarathud]

I think the litmus test should be whether Americans are willing to pay taxes to cover any military operations. If you can't justify to the American people a tax increase to pay for a war, you shouldn't be spending their blood to wage it.

A big problem is that Iraq and Afghanistan are pretty run down, so we're doing as much in building basic infrastructure as rebuilding what's been destroyed. We're also reconfiguring areas to provide security checkpoints that can withstand hit-and-run attacks.

[Kraken]

If you can't justify to the American people a tax increase to pay for a war, you shouldn't be spending their blood to wage it.

Or at least forgo the tax cuts in wartime.

[Kraken]

If you can't justify to the American people a tax increase to pay for a war, you shouldn't be spending their blood to wage it.

Or at least forgo the tax cuts in wartime.

In the same 10 years that we spent $4T on wars, our GDP was around $130T. We could have paid for the wars out of petty cash if we had just kept taxes level.

[Kraken]

This WaPo opinion piece crossed my Facebook page today, thought you'd enjoy it.

Obama calls the GOP's bluff

Here’s how to negotiate, GOP-style: Begin by making outrageous demands. Bully your opponents into giving you almost all of what you want. Rather than accept the deal, add a host of radical new demands. Observe casually that you wouldn’t want anything bad to happen to the hostage you’ve taken — the nation’s well-being. To the extent possible, look and sound like Jack Nicholson in “The Shining.”

This strategy has worked so well for Republicans that it’s no surprise they’re using it again, this time in the unnecessary fight over what should be a routine increase in the debt ceiling. This time, however, something different is happening: President Obama seems to be channeling Robert De Niro in “Taxi Driver.” At a news conference last Wednesday, Obama’s response to the GOP was, essentially, “You talkin’ to me?”

Obama’s in-your-face attitude seems to have thrown Republicans off their stride. They thought all they had to do was convince everyone they were crazy enough to force an unthinkable default on the nation’s financial obligations. Now they have to wonder if Obama is crazy enough to let them.

[Pyperkub]

And even David Brooks is piling on, calling the Cult of Grover Norquist out (though not by name):

The members of this movement have no economic theory worthy of the name. Economists have identified many factors that contribute to economic growth, ranging from the productivity of the work force to the share of private savings that is available for private investment. Tax levels matter, but they are far from the only or even the most important factor.

But to members of this movement, tax levels are everything. Members of this tendency have taken a small piece of economic policy and turned it into a sacred fixation.

Richard Cohen (Washington Post) calls the Cult out by name:

Someone ought to study the Republican Party. I am not referring to yet another political scientist but to a mental health professional, preferably a specialist in the power of fixations, obsessions and the like. The GOP needs an intervention. It has become a cult.

To become a Republican, one has to take a pledge...

...This intellectual rigidity has produced a GOP presidential field that’s a virtual political Jonestown. The Grand Old Party, so named when it really did evoke America, has so narrowed its base that it has become a political cult. It is a redoubt of certainty over reason and in itself significantly responsible for the government deficit that matters most: leadership. That we can’t borrow from China.

[Zarathud]

In the end, the business interests in the GOP will force a compromise on the debt ceiling. Businesses can plan for and handle their tax burden, but not the turmoil that would be caused by even the spectre of default. This is a fight that Obama will win.

[Kraken]

In the end, the business interests in the GOP will force a compromise on the debt ceiling. Businesses can plan for and handle their tax burden, but not the turmoil that would be caused by even the spectre of default. This is a fight that Obama will win.

...If he doesn't buckle first.

Just out of curiosity, how much revenue do you think he would need to secure to call it a win? The consensus among economists puts the best mix at around 2/3 budget cuts, 1/3 tax hikes. ('Course, a lot of them don't think we can absorb either right now). If the Republicans go along with 1:10 revenue to cuts, is that victory?

[Exodor]

Finally a voice of sanity emerges from the Republicans

[Zarathud]

Just out of curiosity, how much revenue do you think he would need to secure to call it a win? The consensus among economists puts the best mix at around 2/3 budget cuts, 1/3 tax hikes. ('Course, a lot of them don't think we can absorb either right now). If the Republicans go along with 1:10 revenue to cuts, is that victory?

Given that this crisis has been 30 years in the making for a chance to "starve the beast," I could see the Republicans sticking to their guns until the last minute. A 10% revenue side solution isn't enough to make a sustainable change in the fiscal landscape. 20% would be the minimum. I would say 25% in tax hikes and 25% in loophole cutting (also known as "tax expenditures") would be an optimal compromise, but Obama is more likely to get 15% in tax hikes and in 20% loophole cuts. That's not too far off consensus, and it's more palatable to "cut a loophole" than "raise taxes." The previous Republican-led Congress and Administration made a mockery of the 1986 tax reform, with backroom tax cuts being announced every other holiday season.

Obama should recite that Reagan quote as much as possible. Like the fury over the War Powers Act, this is a fight Obama can win by holding out. The Republicans want more than they can swallow.

[SpaceLord]

"If the president wants to talk loopholes, we'll be glad to talk loopholes," Eric Cantor said. He added that any revenues raised from closing such loopholes "should be coupled with offsetting tax cuts somewhere else."

Apparently, the GOP loves tax loopholes. Who knew?

[Zarathud]

"If the president wants to talk loopholes, we'll be glad to talk loopholes," Eric Cantor said. He added that any revenues raised from closing such loopholes "should be coupled with offsetting tax cuts somewhere else."

Apparently, the GOP loves tax loopholes. Who knew?

So Rep. Cantor's plan is to cut loopholes and then add new ones elsewhere for no net gain.

"If you add up all of the revenues that we Republicans have agreed to, it's between $150 billion and $200 billion," said Senator Jon Kyl, the No. 2 Republican in the Senate. Kyl said two possible ways to bring additional revenue to the government would be through sales of government property and additional fees for government services. - Reuters

Sen. Kyl, those "revenue gains" from selling government property are one-time offsets you're trying to trade for permanent spending cuts. This is basic accounting.

Vice President Biden has come up with $1.3 trillion in spending cuts over 19 years, and the best the Republicans can come up with is $0.2 trillion on the revenue side? If the Republicans and Tea Party are serious about deficit reduction and fiscal responsibility rather than "starving the beast" for purely ideological principles, it's time to get real.

[LawBeefaroni]

Vice President Biden has come up with $1.3 trillion in spending cuts over 19 years, and the best the Republicans can come up with is $0.2 trillion on the revenue side? If the Republicans and Tea Party are serious about deficit reduction and fiscal responsibility rather than "starving the beast" for purely ideological principles, it's time to get real.

It's not the best they can come up with. It's they best they want to come up with and it's not purely for idological principles. It's business and they've been thoroughly bought and indoctrinated by other interests. Not just the Republicans, either.

[El Guapo]

I've been reading more commentary as to whether the "constitutional option" (Obama declaring the debt ceiling unconstitutional) is really a significant threat to the GOP - some people are suggesting that the GOP leadership would even prefer that. On the one hand the GOP doesn't want to vote to raise the debt ceiling, as that would enrage the base and threaten primary challenges. But they don't want to *not* raise it, since that would be catastrophic. If Obama declares the debt ceiling unconstitutional, they don't have to vote to raise the debt ceiling, but they don't have to cause a U.S. default either. PLUS they get a tyranny / lawlessness political narrative that they can hang on Obama going into the 2012 election.

Now, policy-wise they would lose their leverage (at the moment) to force significant spending cuts, which would be bad (from their perspective). But politically it seems beneficial in a lot of ways.

[Smoove_B]

I kind of like when Bill is all mouthy:

"The Republicans, who control the House and now have greater control of the Senate, have now decided -- having tripled the debt in the 12 years before I took office and doubled it since I left -- that it's all of a sudden the biggest problem in the world," he said.

and:

"This idea that the government is the source of all America's problems would strike the Founding Fathers as passing strange," Clinton said, adding, "There is not a single example today of a really successful wealthy country that does not have both a vibrant economy and a strong effective government."

[El Guapo]

He could so easily win a third term were that constitutionally permissible.

[SpaceLord]

He could so easily win a third term were that constitutionally permissible.

And that drives the GOP insane.