Debt Debate in Congress

[nathanm]

Hmm, I suppose if we can't incur more debt we can't keep borrowing excess funds from payroll taxes, either and giving IOUs to the SSTF. That'll hurt.

[guido911]

Hmm, I suppose if we can't incur more debt we can't keep borrowing excess funds from payroll taxes, either and giving IOUs to the SSTF. That'll hurt.

I have got no problem with that. But why don't we gut the heck out of non-essential, discretionary spending first before we all start in with this:

[nathanm]

I have got no problem with that. But why don't we gut the heck out of non-essential, discretionary spending first before we all start in with this:

Ok, what do you want to cut? Keep in mind that the discretionary budget is about a third of the total budget:

[guido911]

Every one of them Nate. Start with the military if need be.

[guido911]

Don't know if anyone heard this, but Minnesota's government shut down.

http://www.startribune.com/politics/statelocal/124824189.html

[nathanm]

Every one of them Nate. Start with the military if need be.

OK. I think VA should be off the table, though. They're already cash-strapped enough as it is.

What should be on the table is a return to pre-Bush tax rates, at least until we get all this under control. We've been running deficits ever since the cuts were enacted. Every moment we delay is that much more interest we have to pay later. And yes, if it takes taking away the middle class tax cuts also, so be it. Obama is stuck on stupid on that part.



Yeah, it won't solve the problem, at least barring a blockbuster recovery, but it will buy us the time we need to solve the problem in a more permanent way. As it stands, both middle income and upper income taxpayers are paying the lowest effective tax rates they've had since the 50s. I think we can all kick in a little more.

[guido911]

OK. I think VA should be off the table, though. They're already cash-strapped enough as it is.

What should be on the table is a return to pre-Bush tax rates, at least until we get all this under control. We've been running deficits ever since the cuts were enacted. Every moment we delay is that much more interest we have to pay later. And yes, if it takes taking away the middle class tax cuts also, so be it. Obama is stuck on stupid on that part.



Yeah, it won't solve the problem, at least barring a blockbuster recovery, but it will buy us the time we need to solve the problem in a more permanent way. As it stands, both middle income and upper income taxpayers are paying the lowest effective tax rates they've had since the 50s. I think we can all kick in a little more.

Look, no one wants nothing but the very best for our soldiers and vets than me (I know there are others, but you get my point). But as long as we can continue our active military missions and provide a quality deterrent, our military budget should be scrutinized hard and cut. For sure, get us the he1l out of Europe. There is no cold war and they can fend for themselves. Besides, given todays's technology, we must be able to find a way to train and coordinate with NATO. I can see a continue presence in Japan, South Korea, and the like though because of that whacko in that area.  As for the VA, I should have remembered how f'd up those medical facilities were during, yes, Bush's time in office. Maybe we shouldn't mess with that program.

Time for everyone, and everything, have the proverbial skin in the game. I am not talking about "austerity", just knock the size of government down first and in exchange I will talk positively about tax increases on people. As it stands now, I see my tax dollars just getting pissed away.

And on that subject, got my annual letter from Dennis Semler re: property assessment and ad valorem tax. I am just so excited about paying for: School District, TTC, TCC, and the library. None of these I use, nor will ever use. How about those that do not use certain government programs, or those who do not have any children, get a break?

[nathanm]

I don't have kids, and don't plan to, yet I still pay for schools. Them's the breaks. (And I'm actually quite happy to pay for schools..it reduces the amount I have to pay for prisons)

As for skin in the game, 2009 was a strange year. Most years about 2/3rds of income earners pay federal income tax. Most of those who don't aren't paying because of the EITC or because their sole source of income is Social Security. Most everyone has at least some skin in the game, even if it's not income tax. Sales tax, excise taxes, whatever. Most everybody pays something.

http://www.cbpp.org/cms/index.cfm?fa=view&id=3505







By the way, I'm in complete agreement regarding the need to reduce the number of troops stationed overseas. A few years ago I was reading a book that pegged the number of overseas military bases at nearly 1,000. That seems like a lot to me. We do need to keep some of our bases in the far east, both due to China's continuing threatening stance toward Taiwan and due to North Korea. Other major strategic bases should probably also be kept, but I have a hard time believing even 200 are really necessary, although in some cases the host country covers the entire cost. (last I checked, our bases on Okinawa fell into this category)

[guido911]

I don't have kids, and don't plan to, yet I still pay for schools. Them's the breaks. (And I'm actually quite happy to pay for schools..it reduces the amount I have to pay for prisons)

We are paying a smile ton now for jails (but causation is another subject altogether). I don't think whatever we are doing in our public schools now has been successful at keeping our jail population down. Also, I know paying for public schools and other government services which I never will use are the breaks. And I know that's part of being in a society, but allow me to b!tch a little today because that tax "bill" came today.

[Teatownclown]

absolutely, nothing was learned. Obuma needs to grow a spine....

[we vs us]

An apt description for the debate itself, by a Phd. + day trader who likes to blog.  I don't necessarily subscribe to everything he says, but this little blurb sums up my thinking pretty well.

And damn, I guess I really AM an optimist.

Watching the making of the debt ceiling sausage gets the ugly award, especially for those unfamililar with the process.  To all appearances the process seems out of control, careening toward a disastrous default on US debt.  Many observers have been increasing their odds of default.

My perspective? Everything is playing out as expected.  Each participant is attempting to maximize rewards for his own constituency.  Each is also maximizing the perceived rewards, proving that any ground was given in a grudging fashion.  While it would be good for the nation as a whole to achieve an early solution, there is no benefit for any individual party to the process.

The result will be a compromise on the eve of July 22nd, currently regarded as the last day possible.  There will be concessions to various parties until a minimal winning coalition is achieved.

Explaining the entire rational is beyond the scope of this weekly survey article, so I'll try to go into more detail in a separate piece.  Briefly put, there is too much at stake, especially for constituencies important to Republicans.  If there is a default, neither party will escape blame.  The deal will get done.

[guido911]

Rand Paul threatening to filibuster.

WASHINGTON -- Sen. Rand Paul (R-Ky.) is planning a Senate filibuster next week in an attempt to force debt ceiling negotiations into the open.

"We've had not one minute of debate about the debt ceiling in any committee," he said in an interview with C-SPAN's "Newsmakers" that aired on Sunday. "We haven't had a budget in two years. We haven't had an appropriations bill in two years. So I'm part of the freshmen group in the Senate that's saying, 'no more.'"

Paul's plan: "Next week, we will filibuster until we talk about the debt ceiling, until we talk about proposals."

He added that a group of senators in the "conservative wing" of the Republican Party will also be presenting a proposal to tie raising the debt limit to passage of a balanced budget amendment.

http://www.huffingtonpost.com/2011/07/03/rand-paul-filibuster-senate-debt_n_889432.html

[nathanm]

The balanced budget amendment is quite ill advised. Feels good, though.

[we vs us]

A good David Brooks column, in its entirety because of pay wall limitations.

The Republicans have changed American politics since they took control of the House of Representatives. They have put spending restraint and debt reduction at the top of the national agenda. They have sparked a discussion on entitlement reform. They have turned a bill to raise the debt limit into an opportunity to put the U.S. on a stable fiscal course.

Republican leaders have also proved to be effective negotiators. They have been tough and inflexible and forced the Democrats to come to them. The Democrats have agreed to tie budget cuts to the debt ceiling bill. They have agreed not to raise tax rates. They have agreed to a roughly 3-to-1 rate of spending cuts to revenue increases, an astonishing concession.

Moreover, many important Democrats are open to a truly large budget deal. President Obama has a strong incentive to reach a deal so he can campaign in 2012 as a moderate. The Senate majority leader, Harry Reid, has talked about supporting a debt reduction measure of $3 trillion or even $4 trillion if the Republicans meet him part way. There are Democrats in the White House and elsewhere who would be willing to accept Medicare cuts if the Republicans would be willing to increase revenues.

If the Republican Party were a normal party, it would take advantage of this amazing moment. It is being offered the deal of the century: trillions of dollars in spending cuts in exchange for a few hundred billion dollars of revenue increases.

A normal Republican Party would seize the opportunity to put a long-term limit on the growth of government. It would seize the opportunity to put the country on a sound fiscal footing. It would seize the opportunity to do these things without putting any real crimp in economic growth.

The party is not being asked to raise marginal tax rates in a way that might pervert incentives. On the contrary, Republicans are merely being asked to close loopholes and eliminate tax expenditures that are themselves distortionary.

This, as I say, is the mother of all no-brainers.

But we can have no confidence that the Republicans will seize this opportunity. That's because the Republican Party may no longer be a normal party. Over the past few years, it has been infected by a faction that is more of a psychological protest than a practical, governing alternative.

The members of this movement do not accept the logic of compromise, no matter how sweet the terms. If you ask them to raise taxes by an inch in order to cut government by a foot, they will say no. If you ask them to raise taxes by an inch to cut government by a yard, they will still say no.

The members of this movement do not accept the legitimacy of scholars and intellectual authorities. A thousand impartial experts may tell them that a default on the debt would have calamitous effects, far worse than raising tax revenues a bit. But the members of this movement refuse to believe it.

The members of this movement have no sense of moral decency. A nation makes a sacred pledge to pay the money back when it borrows money. But the members of this movement talk blandly of default and are willing to stain their nation's honor.

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. They are willing to cut education and research to preserve tax expenditures. Manufacturing employment is cratering even as output rises, but members of this movement somehow believe such problems can be addressed so long as they continue to worship their idol.

Over the past week, Democrats have stopped making concessions. They are coming to the conclusion that if the Republicans are fanatics then they better be fanatics, too.

The struggles of the next few weeks are about what sort of party the G.O.P. is — a normal conservative party or an odd protest movement that has separated itself from normal governance, the normal rules of evidence and the ancient habits of our nation.

If the debt ceiling talks fail, independents voters will see that Democrats were willing to compromise but Republicans were not. If responsible Republicans don't take control, independents will conclude that Republican fanaticism caused this default. They will conclude that Republicans are not fit to govern.

And they will be right.

This article has been revised to reflect the following correction:

Correction: July 5, 2011


An earlier version of this column misstated the amount of revenue increases needed in exchange for spending cuts. It is a few hundred billion, not million.

[Teatownclown]

Rooting for the economy to suck? Are you rooting for America to succeed?