Consequences of a US default

[heironymouspasparagus]

Already got him.

[we vs us]

I've replaced Gaspar's post with the image of five mysterious black helicopters.  Let's see if he can tell the difference!

The funnier part is  . . . . .






. . . . .this president will not present anything solid.

[carltonplace]

Gaspar, what is the Republican end game here? I don't understand what they want to accomplish other than to repeat the no tax mantra over and over again at ever increasing volumes.

Instead of a plan they are presenting a balanced budget amendment that they know will fail, its designed to fail, its designed to make a statement.

We have a real problem and the real sollution is cut spending and increase revenues. Repeating your dogma over and over again is not a sollution.

[TulsaMoon]

The two parties are deeply polarized, but the American people are not. That's why we're witnessing a market breakdown in our politics. A rising tide of voters might describe themselves as fiscally conservative but socially liberal, but because of the disproportionate influence of special interests like the religious right and public-sector unions, the two parties cannot meet this market demand. They are polarized and paralyzed—incapable of reasoning together to solve long-term problems, absent a crisis.

This was quoted off the Daily Beast. An article by John Avlon about the rise of third parties. It was to good of a quote to just let pass by.

[Hoss]

The two parties are deeply polarized, but the American people are not. That's why we're witnessing a market breakdown in our politics. A rising tide of voters might describe themselves as fiscally conservative but socially liberal, but because of the disproportionate influence of special interests like the religious right and public-sector unions, the two parties cannot meet this market demand. They are polarized and paralyzed—incapable of reasoning together to solve long-term problems, absent a crisis.

My early vote for post of the week.

[Gaspar]

Gaspar, what is the Republican end game here? I don't understand what they want to accomplish other than to repeat the no tax mantra over and over again at ever increasing volumes.

Instead of a plan they are presenting a balanced budget amendment that they know will fail, its designed to fail, its designed to make a statement.

We have a real problem and the real sollution is cut spending and increase revenues. Repeating your dogma over and over again is not a sollution.

Why would a balanced budget amendment fail.  Sure it failed back when Clinton refused to sign it several times, but ultimately it was signed and Clinton was celebrated because of it.  I think we need a return to the policies that led to those surpluses.  Yes, you are right he will never sign anything that outlines a reduction in spending, because that is not what he wants.  He wants more money so that he can continue to increase spending.

I also think it would be wise to force the president to present something. . .anything. . .just show that he actually has a role in this.  His tax and spend mantra is the tune that is leading the dance.  The economy responds to his music, and so far he's been marching the band straight to hell without even giving any details of the layers of taxation he wishes to add.  He is Jello.

[Conan71]

Well, he loaned billions of dollars to the American auto industry, and they are, only a couple of years later not only solvent but all almost totally free of government funding/ownership.  That saved a ton of jobs right there.  He's repeatedly tried to reduce payroll taxes but the GOP has vetoed each one of his bills.  ARRA had about $300B in it for infrastructure upgrades, keeping construction people in work.  He's put packages for green infrastructure, small business lending, rural entrepreneurship, manufacturing, minority and women owned business, and R&D out there. 

What sort of incentive are you envisioning?  Because giving out further tax cuts across the board is flat ridiculous (though that wouldn't stop Obama from doing it, if the Republicans would let him.) 

Other than the loans to GM and Shysler, there's nothing new or novel that hasn't been done by previous presidents in his approach.  Wait, even Shysler has gotten a loan before.

To further the point:  from 2002 to 2007 alone black-owned businesses increased by 61% across America.  Open a federal bid package from any point in the last 30 some years and you will see preference for minority, women-owned, or disabled vet business written all over them.  Rural entrepreneurship is manifested in terms of the usual farm subsidy programs but with a different wrapper (think bio-fuels).

Why doesn't it appear to be working for President Obama when approaches like that seem to have worked in the past?

[Conan71]

Gaspar, what is the Republican end game here? I don't understand what they want to accomplish other than to repeat the no tax mantra over and over again at ever increasing volumes.

Instead of a plan they are presenting a balanced budget amendment that they know will fail, its designed to fail, its designed to make a statement.

We have a real problem and the real sollution is cut spending and increase revenues. Repeating your dogma over and over again is not a sollution.

The "NO TAX!" mantra is reminding me of a child holding his breath until he turns blue.



It wouldn't piss me off near as much if Boehner and the rest of the GOP weren't feeding their own personal interests out of the treasury while they keep refusing to discuss tax increases.  Everyone needs to contribute something to getting revenue and spending under control.  Once we've got a balance, then fine, start lowering tax rates again.

What ever happened to Gramm-Rudman and other "balanced budget" bills.  Why not a Contstitutional balanced budget amendment so we can keep Congress and the president in check?

[nathanm]

Why would a balanced budget amendment fail.  Sure it failed back when Clinton refused to sign it several times, but ultimately it was signed and Clinton was celebrated because of it. 

Uh what? The Constitution has never before required the federal government to never run a deficit. And the "several times" Clinton refused to allow a balanced budget amendment was actually zero times. The one time Congress tried to pass it, the proposal failed in the Senate.

Conan, I agree with your general sentiment. No economic good comes from government running a surplus, aside from the never-before-seen instance of runaway inflation not being controllable by the Fed manipulating the money supply itself. It could actually happen what with the Fed's balance sheet so gigantic right now forestalling their ability to raise rates by normal means, but it's exceedingly unlikely.

I only disagree in that I don't think now is the best time to be slashing the government's budget. It will only lead to a worsening of our present situation. I do think we need to shift our spending from blowing smile up and bailing out banks into things that most help stimulate demand and set binding deficit reduction goals that will automatically take effect when the economy improves.

Conan, nothing seems to be working because we're in an economic situation we haven't been in literally since the Great Depression. The main reasons we're not yet seeing Depression level economic dislocation are the FDIC, Unemployment Insurance, and the novel methods used by both Paulson and Geithner to keep (most of) the big banks afloat.

And I learned something very interesting over the weekend. The Fed has apparently been propping up the Euro and many Eurozone banks for the past several months.

[carltonplace]

Why would a balanced budget amendment fail.  Sure it failed back when Clinton refused to sign it several times, but ultimately it was signed and Clinton was celebrated because of it.  I think we need a return to the policies that led to those surpluses.  Yes, you are right he will never sign anything that outlines a reduction in spending, because that is not what he wants.  He wants more money so that he can continue to increase spending.

I also think it would be wise to force the president to present something. . .anything. . .just show that he actually has a role in this.  His tax and spend mantra is the tune that is leading the dance.  The economy responds to his music, and so far he's been marching the band straight to hell without even giving any details of the layers of taxation he wishes to add.  He is Jello.

The republicans are changing the debate. The current debate should be: How can we raise the debt limit AND reduce the deficit. The answer to the debate is to decrease spending drastically and increase revenues intelligently.

Should we change the tax code? Sure, but can we get that done now? probably not
Should we manage a ballanced budget? Probably so, but does it need to be a mandate written into the constitution? I don't think so.

The president has stated implicitly that we need to cut spending...do you think he is lying?

[Gaspar]

The "NO TAX!" mantra is reminding me of a child holding his breath until he turns blue.



It wouldn't piss me off near as much if Boehner and the rest of the GOP weren't feeding their own personal interests out of the treasury while they keep refusing to discuss tax increases.  Everyone needs to contribute something to getting revenue and spending under control.  Once we've got a balance, then fine, start lowering tax rates again.

What ever happened to Gramm-Rudman and other "balanced budget" bills.  Why not a Contstitutional balanced budget amendment so we can keep Congress and the president in check?

49 out of 50 states have a balanced budget requirement (you can guess who the one without is).  So I agree. . .Why would it be a bad idea for our federal government to live within such a budget requirement?

Also, Conan, our revenue situation is fragile, and it gives us a choice that could result in disaster or triumph. The wisest decision would be to call on past experience and established economic performance models based on history rather than theory.

At this point in the fiscal year, we've managed to acquire a $971 billion deficit.  That's more than an entire year's worth of federal DEFICIT spending before President Obama. The CBO estimates that the cumulative deficit over the next decade will be about $11 trillion.   If our economy continues to grow at the current 2.25% of GDP, rather than the 3% that Obama predicts, our cumulative deficit will be closer to $13.7 trillion.  So basically $2 Trillion in cuts (in increased spending) over 10 years will do nothing for us.

Now. . . If we were to grow that economy by 5% this year rather than 2.25%, we would have $734 billion in economic growth.  Our government historically takes about 18% of GDP so that gives us $131 billion in tax revenues.  Over 10 years with compounding, that's  $1.72 Trillion. We've spurred growth like this before through policy changes.  There is no reason to believe we cannot do it again.

Now on the other side of the spectrum we have the NON-Private Sector Growth "framework" the president has hinted at.  This would include eliminating some deductions for businesses and the wealthy and eliminating those pesky Bush tax cuts.  This would return $30 billion a year, or $300 billion over 10 years.  If we get really hardassed and pull the tax cuts for corporate jet owners that's going to give us an extra $3 billion, so we would have a return of $303 Billion over 10 years as compared to $1.72 Trillion.

So, the question would be, how do we get the economy to add an additional 2.75% growth?

1. Incentivize business by lowering taxes
2. Increase depreciation on capital goods
3. Decrease energy costs (fastest direct influence on industry)
4. Relax regulation on lending

The problem with the above is that they work directly against the policies that the administration has put forth over the last three years.  So, that makes the challenge for this president to raise taxes enough to overcome the growth of the deficit without any provisions to increase revenue.  Even at his imagined 3% growth, this would mean either slashing entitlements in the budget or decimating business through tax hikes and creating a very temporary spike in revenue followed by a decline in GDP.  

I would sure hate to be in his seat.

[carltonplace]

I get their "no tax" stance; they are republicans.

But really...they can't even capitulate to close egregious loopholes. That is where they part ways with most Americans and look intransigent.

[Conan71]

At this point in the fiscal year, we've managed to acquire a $971 billion deficit.  That's more than an entire year's worth of federal spending before President Obama. The CBO estimates that the cumulative deficit over the next decade will be about $11 trillion.   If our economy continues to grow at the current 2.25% of GDP, rather than the 3% that Obama predicts, our cumulative deficit will be closer to $13.7 trillion.  So basically $2 Trillion in cuts (in increased spending) over 10 years will do nothing for us.

You've got me confused.  We've had a federal budget of > $1 trillion since 1987.

[Red Arrow]

You've got me confused.  We've had a federal budget of > $1 trillion since 1987.

I thought we were presently operating without a budget.  It's difficult to bust a budget if you don't have one.

[Gaspar]

You've got me confused.  We've had a federal budget of > $1 trillion since 1987.

Deficit spending!