Chris Christie Rocks on Taxes

[guido911]

http://www.cnn.com/2010/US/10/07/new.jersey.tunnel.project/index.html

(CNN) -- New Jersey Gov. Chris Christie killed plans for a new train tunnel to connect his state with New York's Manhattan island Thursday, saying billions of dollars in possible cost overruns made the project "completely unthinkable."

Local politicians and union bosses deeply saddened.

[we vs us]

Local politicians and union bosses deeply saddened.

And commuters.

[guido911]

And commuters.

And those not paying taxes. 

You cannot have something you cannot afford. Why is that such a hard freakin concept for you and others? Is it that you think money just falls out of the damned sky?

Christie said the tunnel project costs "far more than New Jersey taxpayers can afford and the only prudent move is to end this project."

James Weinstein, the executive director of NJ Transit, in a statement, said while the state recognized the importance and value of a cross-Hudson transportation improvement project, "the current economic climate in New Jersey simply does not allow for this project to continue considering the substantial additional costs that are required."

The governor said he has directed the state's transportation officials to explore other approaches to modernize and expand rail capacity into New York. "However, any future project must recognize the regional and national scale of such an effort and work within the scope of the State's current fiscal and economic realities," he said.
PREVIOUS COVERAGE:

Christie called a 30-day temporary halt in September on new tunnel construction, as behind-the-scenes cost projections suggested the tunnel project costs would swell more than $1 billion above the $8.7 million proposed price tag. He said he didn't want the New Jersey version of Boston's "Big Dig" — a tunnel mega-project that saw the final tally climb to nearly ten times the original $2.8 billion estimate.

http://www.nj.com/news/index.ssf/2010/10/hudson_river_tunnel_project_is.html

[we vs us]

And those not paying taxes. 

You cannot have something you cannot afford. Why is that such a hard freakin concept for you and others? Is it that you think money just falls out of the damned sky?

http://www.nj.com/news/index.ssf/2010/10/hudson_river_tunnel_project_is.html

That's an interesting statement.  In the context of our budget deficit, define "can't afford." 

Hint:  not as easy as it sounds.

[guido911]

That's an interesting statement.  In the context of our budget deficit, define "can't afford."  

Hint:  not as easy as it sounds.

The fact that you even asked that question speaks volumes about your views. And by the way, the answer in this context is, in fact, easy. Christie says N.J. can't afford it. You care to prove him wrong? Let's hear it.

[Conan71]

That's an interesting statement.  In the context of our budget deficit, define "can't afford." 

Hint:  not as easy as it sounds.

Well, I dunno, it means basically we spent $1.4 trillion more than we could afford last year and $1.3 trillion more than we could afford this year and about $13 trillion all together in things we could not afford.

Just because I have a credit card in my wallet with a $20,000 credit limit doesn't mean I can afford to nor should I take it up to the max limit.

How many other ways are there to get from New Jersey to Manhattan now?  Would you feel differently if you were paying up to 70% of your income in effective taxes to afford all these government services and conveniences?  That's where it's headed.

[we vs us]

Just because I have a credit card in my wallet with a $20,000 credit limit doesn't mean I can afford to nor should I take it up to the max limit.

It's not a good analogy, actually.  The US government doesn't have a credit limit.  No one will foreclose on us, no one will confiscate our assets.  They will only cease to buy our debt.  And right now there're no signs that our debt has been debased at all.  In fact, in a turbulent world, our T-bills are still one of the strongest bets out there.

Yes our debt is going up, but as a portion of our net worth (GDP) it's still not at a major red line. As we've discussed, much of the projected indebtedness has to do with lowered tax revenues because of the recession, and one assumes that will change when the economy comes back . . . if we can get it to come back. 

I have no idea about this specific tunnel, and since I don't have access to NJ's budget, I can't give you a good analysis.  So, sure, Christie absolutely knows what can and can't be afforded better than I do.  State budgets are different than the Federal Gov's, and they are much more limited in their flexibility to pay for these things.  My point was, though, that it's not at all clear that we've reached a threshold of affordability -- that suddenly we can't do anything or spend any money and that any talk of money at all coming out of any coffers (regardless of whether it's already paid for) is verboten. 

There's all this deficit panic amongst conservatives right now and it's unwarranted.  After the November elections, the GOP is champing at the bit to freeze all federal funding immediately -- even force a shutdown -- just because they can.  It has nothing to do with an orderly or logical or effective plan to attack the deficit.  It's all about responding to the fear they're ginning up. 

I think reducing the deficit is an important long term goal, but, since we have the lowest debt to GDP ratio of the G8 countries (essentially the ratio of debt to income), it's not nearly the immediate worry that the GOP is making it out to be.

[bokworker]

It's not a good analogy, actually.  The US government doesn't have a credit limit.  No one will foreclose on us, no one will confiscate our assets.  They will only cease to buy our debt.  And right now there're no signs that our debt has been debased at all.  In fact, in a turbulent world, our T-bills are still one of the strongest bets out there.

Yes our debt is going up, but as a portion of our net worth (GDP) it's still not at a major red line. As we've discussed, much of the projected indebtedness has to do with lowered tax revenues because of the recession, and one assumes that will change when the economy comes back . . . if we can get it to come back. 

I have no idea about this specific tunnel, and since I don't have access to NJ's budget, I can't give you a good analysis.  So, sure, Christie absolutely knows what can and can't be afforded better than I do.  State budgets are different than the Federal Gov's, and they are much more limited in their flexibility to pay for these things.  My point was, though, that it's not at all clear that we've reached a threshold of affordability -- that suddenly we can't do anything or spend any money and that any talk of money at all coming out of any coffers (regardless of whether it's already paid for) is verboten. 

There's all this deficit panic amongst conservatives right now and it's unwarranted.  After the November elections, the GOP is champing at the bit to freeze all federal funding immediately -- even force a shutdown -- just because they can.  It has nothing to do with an orderly or logical or effective plan to attack the deficit.  It's all about responding to the fear they're ginning up. 

I think reducing the deficit is an important long term goal, but, since we have the lowest debt to GDP ratio of the G8 countries (essentially the ratio of debt to income), it's not nearly the immediate worry that the GOP is making it out to be.

While true that the US does not have a set credit limit like a credit card limit, a statement that there isn't one is, in my view, absolutely not true. The fact that it isn't a set number (although any number of studies have been attempted looking at debt to GDP or some other measure) doesn't change the financial reality that ALL borrowers are limited in the amount they can borrow. In addition, a huge amount of our debt is financed by foreign sources. This in and of itself is not bad but it opens you up to the risk of a change in perception from your borrower. Think of it this way, when you are a borrower, or want to be, to buy a car or a house, who's opinion of your creditworthiness matters. Your lenders, that's who. It matters not what you think about your ability to repay. When we, the US, are indebted to level we are to foreign lenders then all that matters is what they THINK about our ability to repay. I personally find this a tenuous position and without a doubt we can say that our cumulative deficit and national debt are going the wrong way. Sure, the ratio of debt to GDP can go down as the economy grows but that is the source of the angst today....is the increase in our deficit going to lead to higher GDP?

Leverage when used judiciously can be a powerful growth engine. Leverage that does not produce a rate of return higher than the cost of said leverage leads to ultimate bankruptcy.

Yes, we are asset rich , but, do we really want to get to a point where we are having to monetize the "equity" we have in our national parks and such to pay off our debt? I would certainly hope not. Blindly thinking that we are nowhere close to our maximum borrowing capacity while not being aware of just who our lenders are could lead to disastrous outcomes.

There are conutries with higher debt to GDP ratios than ours,Japan for instance. Yet the vast majority of their debt is internally funded so their default risk is less.

[we vs us]

While true that the US does not have a set credit limit like a credit card limit, a statement that there isn't one is, in my view, absolutely not true. The fact that it isn't a set number (although any number of studies have been attempted looking at debt to GDP or some other measure) doesn't change the financial reality that ALL borrowers are limited in the amount they can borrow. In addition, a huge amount of our debt is financed by foreign sources. This in and of itself is not bad but it opens you up to the risk of a change in perception from your borrower. Think of it this way, when you are a borrower, or want to be, to buy a car or a house, who's opinion of your creditworthiness matters. Your lenders, that's who. It matters not what you think about your ability to repay. When we, the US, are indebted to level we are to foreign lenders then all that matters is what they THINK about our ability to repay. I personally find this a tenuous position and without a doubt we can say that our cumulative deficit and national debt are going the wrong way. Sure, the ratio of debt to GDP can go down as the economy grows but that is the source of the angst today....is the increase in our deficit going to lead to higher GDP?

Leverage when used judiciously can be a powerful growth engine. Leverage that does not produce a rate of return higher than the cost of said leverage leads to ultimate bankruptcy.

Yes, we are asset rich , but, do we really want to get to a point where we are having to monetize the "equity" we have in our national parks and such to pay off our debt? I would certainly hope not. Blindly thinking that we are nowhere close to our maximum borrowing capacity while not being aware of just who our lenders are could lead to disastrous outcomes.

There are conutries with higher debt to GDP ratios than ours,Japan for instance. Yet the vast majority of their debt is internally funded so their default risk is less.

I agree with your post, and that's essentially what I was trying to say . . . and most importantly to contrast with Conan's perception that we have a hard limit, like a credit card would impose on an individual lender. 

Absolutely, we are subject to the perceptions of the buyers of our debt (and further debt ceilings have to be approved by Congress, so there are internal stops as well).  I know that I come off as a huge deficit promoter -- or at the least, as Guido would attest, as one of those demonic spenders of other peoples' taxes (a liberal!  the horror!) -- but it's by and large to counteract this mad rush to freeze government spending and/or shut the whole thing down. 

Debt is a tricky thing, and functions differently within different structures and sizes (small gov, fed gov, fortune 500, small biz, personal credit, etc).  The Republicans are actively promoting the idea that all debt works like household debt, and that all debtors function like individual debtors. This includes the federal government.  But the federal government is NOT an individual debtor, and its credit and debt DOES NOT function like my credit card debt or my mortgage or my car loan.  They are using people's panic about their personal finances to instill panic about the federal government, and it's unwarranted and IMO destructive to whatever recovery we've managed to date. 

Unfortunately -- and contrary to their ideology, which says government is the root of all evil -- the government is the still the one in the best place to help ameliorate the effects of the recession.  God knows the corporate community isn't kicking in. 

[Conan71]

We actually have had a statutory limit on Federal debt since 1917.  Congress has obviously revised this multiple times, most recently raising it by $1.9 trillion in February to $14.3 trillion.  As well, any number of things could happen which negatively impact our ratings and we can wind up paying much higher interest rates.

Aside from that, Wevus, how long would you continue to borrow in your own household until you figure out you've spent yourself into a deep pit you cannot get out of?  There has to be a limit at some point.  The dynamics of borrowing and repayment are similar regardless of the entity, be it individual, corporate, or government.  At some point you lose the ability to borrow if you mis-manage it, over-spend, or your credit rating drops due to high debt or poor repayment record, or in the instance of government, your currency goes in the toilet.  

I find it interesting those with a liberal bent had a problem with Reagan's "failed" policies of deficit spending (which for you revisionists was the beginning of the longest peacetime growth in U.S. history), and Bush decimating the projected Clinton surplus, but now are perfectly fine with the United States plunging over $1 trillion a year further into debt.  What happened to that?

[Red Arrow]

I find it interesting those with a liberal bent had a problem with Reagan's "failed" policies of deficit spending (which for you revisionists was the beginning of the longest peacetime growth in U.S. history), and Bush decimating the projected Clinton surplus, but now are perfectly fine with the United States plunging over $1 trillion a year further into debt.  What happened to that?

That's easy.  The liberals like where the money is going now.

[guido911]

That's easy.  The liberals like where the money is going now.

Short and to the point.

[we vs us]

We actually have had a statutory limit on Federal debt since 1917.  Congress has obviously revised this multiple times, most recently raising it by $1.9 trillion in February to $14.3 trillion.  As well, any number of things could happen which negatively impact our ratings and we can wind up paying much higher interest rates.

Aside from that, Wevus, how long would you continue to borrow in your own household until you figure out you've spent yourself into a deep pit you cannot get out of?  There has to be a limit at some point.  The dynamics of borrowing and repayment are similar regardless of the entity, be it individual, corporate, or government.  At some point you lose the ability to borrow if you mis-manage it, over-spend, or your credit rating drops due to high debt or poor repayment record, or in the instance of government, your currency goes in the toilet.  

I find it interesting those with a liberal bent had a problem with Reagan's "failed" policies of deficit spending (which for you revisionists was the beginning of the longest peacetime growth in U.S. history), and Bush decimating the projected Clinton surplus, but now are perfectly fine with the United States plunging over $1 trillion a year further into debt.  What happened to that?

There are limits to everything, obviously, and yes you're right about interest, credit, and repayment:  tis the same dynamic for everyone.

In my household? Well, it depends.  If I'm unemployed and I'm gonna max my cards out on strippers and blow, that's one thing.  I'm a moron and will find myself in the poor house (and there's a good bet that, if I'm a moron, the credit card companies have already closed my accounts, because I'll have defaulted in the past). But if I'm going to spend it on getting a job certification, or pull some equity out of my house to support my Amway business, or maybe even borrow $1k from my Dad to get my car fixed before it breaks down entirely and keeps me from getting to job interviews . . . well, you see that the definition of what I can "afford" might change with the circumstances.  

I mean, there's good debt, there's bad debt, and there's necessary debt.  I look at, say, the war in Iraq, and can't see any way around that being bad debt.  I see the TARP (yes, the hated TARP) and see necessary debt.  I see ARRA (Obama's stimulus) as good and necessary.  Necessary because it gets $$ out the door, and good because we get something for it (road repairs, etc).  

But re: Reagan's deficits . . . you've got the wrong liberal on that one.  I won't take the fall for my cohort (since I was 7 years old when he was elected).  In general, I think deficits are a legitimate tool for running a modern government, so long as they're used correctly.  And while ours is high (and yes, it's high, I don't dispute that); it's still comparable to other functioning modern countries.

I think, in general, that Reagan's priorities were wrong (as were Bush II's) but that's a function of my ideology, and probably should be the subject of another thread.  I don't think he was wrong to use deficits as one of his tools.

[we vs us]

That's easy.  The liberals like where the money is going now.

I can't disagree.

[Hoss]

I can't disagree.

But it's no different to what party is in power.  You notice the Republicans rubber-stamped the binge spending that Bush 43 proposed.  Where were all the screechers and screamers on that side of the aisle?