This Whole Debt Limit Thing

[mhaze]

.....the rest of the world believes that a combination of spending cuts, closing tax loopholes, and raising tax rates has the best chance of balancing the budget without entirely pulling the plug on the poor and elderly......

One simple question for you, Bri. I know that you want to keep the party going...it's been a fun party....

But when will you call it quits? You are basically doing nothing but saying you are on the side of the "looters", the guys that are raiding the value in the currency by printing dollars.

So here's my question. When do YOU call it quits? When the residual value in the currency is 50% of 8/3/2011? 25% 10% 5% 1%?

Let's have a number. Then I'll give you a prediction of when that will happen. No need for a bunch of words, just a percentage from 0-100% will do nicely.

 

[Bri]

One simple question for you, Bri. I know that you want to keep the party going...it's been a fun party....

I'm not sure what party you're referring to, but if you're suggesting that I want to keep spending at the current rate, you are seriously misrepresenting my position.

ETA: mhaze, did you complain about "keeping the party going" as much as you do now when a surplus was turned into a deficit under Bush? Just curious.

-Bri

 

[BeAChooser]

President Ronald Reagan's former budget director, David Stockman, disagrees

Ok.

I'll buy his assertion that Ryan's solution is indeed far too "non-radical". (Although it's worth noting that Obama called it radical.)

I'll agree that it let's things conceivably grow much worse than now. Perhaps beyond fixable.

And it allows time for future leftists to undo any fix that we might get enacted now. And believe me, they will try. Obama and compary are Fabians, after all.

So somehow we have to find a quicker solution to reducing the debt as a percentage of the GDP.

But here's where Stockman gets confused.

On one hand he says we have to massively cut government spending. (I agree. Do you?)

But this alone will not reduce the national debt as a percentage of GDP, unless revenues exceed spending or the GDP grows.

In the past, Stockmen has said the way to force lower spending that is to cut taxes. He called that "starving the beast." I agree with that in principle.

Now, inconsistently, he advocates an increase in taxes. He now apparently thinks we can tax more than we spend, and thus tax our way into a surplus that will significantly lower national debt as a percentage of GDP.

But that's a pipedream.

He underestimates how difficult it is to get government to actually spend less than revenue. He ignores 65+ years of history. Historically, our government has almost always spent more than it took in as revenues: http://static8.businessinsider.com/...345/us-government-spending-versus-revenue.jpg .

He also overlooks the effect of higher taxes on GDP growth. In any given period, what has made all the difference historically is whether there was economic growth or not. The share of the economy that has been seized by the government has gone down at times because of economic growth … not because government spent less than it took in as revenues.

Relying on government to spend less than it takes in as revenue is a pipedream. It rarely has and rarely will … anywhere in the world. It has certainly never done that long enough in the US to measurably shrink the deficit/debt as a percentage of GDP … which is what matters. What has reduced the deficit/debt as a percentage of GDP has been economic growth.

That's why I say that the ONLY way to fix the current economic mess is to cap spending so that government can't keep borrowing and thus increase the debt without bound, and grow our way out of this by encouraging economic growth. And as I proved above, increasing taxes does not grow GDP. Only reducing taxes does that, long term.

If we reduce the deficit and slow the growth of the national debt (by capping and then cutting spending somewhat), and encourage the economy to grow by cutting taxes and reducing needless government regulation of our lives, then over time, rather rapidly, we will see the size of the debt as a percentage of GDP shrink. THAT will get our economic house back in order. And a look at the period from 1995 to 2001, shows how rapidly that could occur:

http://4.bp.blogspot.com/_QxBGECHec...4YsgU/s400/D.+National+Debt+as+percent+of+gdp

But it will never happen with Obama in the Whitehouse. Never. History proves that his type of economic thinking simply does not work. And it may not happen if democrats like Pelosi and Reid control even one house of Congress. So this next election is critical, if you ask me.

 

[BeAChooser]

The CBO disagrees with you, insofar as its relates to increasing GDP growth from what it would otherwise have been and lowering unemployment from what it would otherwise have been.

LOL! You know what they say ... garbage in, garbage out.

And who do you think supplies the ground rules and assumptions with which the CBO does its analysis?

The White house.

Now if you REALLY want to argue that the Stimulus is not a failure, visit me here:

http://www.internationalskeptics.com/forums/showthread.php?t=167653&page=48

 

[BeAChooser]

Well hasn't it? The question was if you think the government doesn't have to accomplish anything?

The rest of your post was fascinating but not germane.

http://www.ostrichheadinsand.com/images/ostrich_head_in_sand.jpg

 

[BeAChooser]

Bush kept the cost of the Iraq and Afghanistan wars off the books, Obama included them in the budget. So Obama is paying the price for being honest.

That doesn't explain this:

http://3.bp.blogspot.com/_gcA0ZuKGk...JFg/U5nVn2pVP_U/s1600/obama-deficit-20101.jpg

 

[Puppycow]

The $5 Trillion Coin
Gimmicks the government could use to resolve the debt-ceiling debacle.

One option is coin seigniorage—aka, the "really-huge-coin workaround." The United States has a statutory limit on the amount of paper money in circulation, but no such limit on coins. The Treasury secretary has the authority to mint certain coins of any denomination, with no need for the value of the metal to equal the value of the coin. (It gets a bit technical.) But the idea is that Secretary Timothy Geithner could order the Mint to make a, say, $5 trillion coin. It could then use the coin to buy back and extinguish debt from the Fed, pushing the country back under the ceiling. Or it could deposit it, and the Fed could counteract the inflation by selling government debt.
. . .
A second workaround is for President Barack Obama to declare the debt ceiling null and order Treasury to start issuing new debt again. It is known as the constitutional option, or the 14th-Amendment option.
. . .
A third possibility is the "overdraft option," proposed by CNBC's John Carney: The Fed could just let Treasury overdraw its checking account. It would work like this. When you deposit a government check, your bank does not submit it to the Treasury for payment. It submits it to the Federal Reserve, where the Treasury keeps its current account. The Fed could allow overdrafts. Or, Chairman Ben Bernanke could sell government bonds and, as required by law, credit the Treasury with the proceeds to keep the government in the black.

These all appear to have a fairly solid legal basis. The question Obama would have to ask himself is how they would play politically. OTOH, how would crashing the economy play politically? If he uses any of these options, he gets sole credit or blame (probably the latter) for whatever happens thereafter. But if he doesn't use these options and the government shuts down, the republicans would at least share the blame for that.

Which is why I don't expect Obama to use any of these more creative options.

 

[BeAChooser]

The GOP can do nothing without the Tea Party, which means their ability to compromise a little with the Democrats is impossible.

Well perhaps the reverse is also true. Democrats don't seem to be able to compromise because of the large block of far left socialists. The current democratic party is not the party of JFK.

 

[lomiller]

One of the things I've wondered about is why Obama never presented a plan that Boehner calls for. Is Reid's plan really Obama's plan? (This is an honest question for me but I don't know if I'm missing something and there are strong political or other reasons for Obama not to do it.)

Obama wanted a straight up vote on the debt limit and to have the deficit dealt with at budget time which is where it belongs. Boehner was the one who insisted there had to be a budget deal in conjunction with the debt limit discussion so it really is up to him to present the proposals.

That said Obama has a longstanding deficit reduction plan in the for of tax increases on people who earn over $250K that Boehner rejected when he first made his demand for a budget deal as part of raising the debt limit.

 

[mhaze]

I'm not sure what party you're referring to, but if you're suggesting that I want to keep spending at the current rate, you are seriously misrepresenting my position.

ETA: mhaze, did you complain about "keeping the party going" as much as you do now when a surplus was turned into a deficit under Bush? Just curious.

-Bri

nope........now let us have your number please.

 

[mhaze]

Well perhaps the reverse is also true. Democrats don't seem to be able to compromise because of the large block of far left socialists. The current democratic party is not the party of JFK.

Or it is just a party of the latest mob that can be swayed by the latest slogan.

 

[Bri]

nope........now let us have your number please.

I see, so you're not concerned with the spending that actually caused the deficit. Got it.

Before I answer your question, answer mine: Have you stopped beating your wife? Yes or no, please. No need for a bunch of words, just "yes" or "no" will do nicely.

Seriously, I don't understand your question. When do I call what quits?

-Bri

 

[JoeTheJuggler]

When do I call what quits?

I'm not sure, but the best I can tell is mhaze and the Tea Party Caucus would like to call the whole federalist system with a relatively strong central government quits and go back to something like the Articles of Confederation. It's consistent with the ideology they profess and it's certainly consistent with their actions that seem bent on the ruin of the federal government.

 

[Mike!]

The $5 Trillion Coin
Gimmicks the government could use to resolve the debt-ceiling debacle.

One option is coin seigniorage—aka, the "really-huge-coin workaround." The United States has a statutory limit on the amount of paper money in circulation, but no such limit on coins. The Treasury secretary has the authority to mint certain coins of any denomination, with no need for the value of the metal to equal the value of the coin. (It gets a bit technical.) But the idea is that Secretary Timothy Geithner could order the Mint to make a, say, $5 trillion coin. It could then use the coin to buy back and extinguish debt from the Fed, pushing the country back under the ceiling. Or it could deposit it, and the Fed could counteract the inflation by selling government debt.

These all appear to have a fairly solid legal basis. The question Obama would have to ask himself is how they would play politically. OTOH, how would crashing the economy play politically? If he uses any of these options, he gets sole credit or blame (probably the latter) for whatever happens thereafter. But if he doesn't use these options and the government shuts down, the republicans would at least share the blame for that.

Which is why I don't expect Obama to use any of these more creative options.

Man, there's a caper movie plot if I ever saw one.
"It's the ultimate one shot heist guys. We're going to break in and steal (dramatic pause) the 'Five Trillion Dollar Coin'!"

 

[BeAChooser]

Originally Posted by BeAChooser
And the biggest fallacy of all in what Obama and your sources claim is the notion that you can reduce the deficit and debt mostly by taxing the rich.

So the "biggest fallacy" with the claims made by Obama and the sources I cited is something that nobody actually claimed?

I suppose that in my exhuberance, I did overstated the position of Obama and your sources a little. I admit that. But to claim that "nobody" is claiming that is equally incorrect. And I hope you are not going to use my exhuberance on a peripheral claim as an excuse to avoid addressing the specific data and logic that I pointed to in the rest of my post, which is the heart of my position.

Now to prove that I'm right that you are wrong about "nobody" claiming that, Robert Reich wrote in April (http://www.skyvalleychronicle.com/F...ared-taxes-for-the-rich-have-plummeted-635614 ) that "The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich." And Obama has certainly tried to reinforce Reich's logic by demonification of the rich in his rhetoric, over and over and over. A good example is his speech on the debt back in April when he railed against the wealthy and essentially blamed the current fiscal troubles on the Bush tax cuts (for the wealthy).

Many economists believe that taxes will likely have to be raised on both the rich and the middle class. And most believe that spending cuts should exceed revenue increases by a ratio of approximately 3 to 1 or more.

Which will fail to achieve anything, for exactly the reasons I noted in my previous post. Raising taxes will hurt the economy and government is very unlikely to ever cut spending below income for any appreciable time. And human nature will find ways to force the total revenue stream to remain in the 14-21% range no matter how high you tax … not rise, like the Obama camp dreams, to the fantasy value of 24%.

Your argument is that we shouldn't consider raising taxes on the rich because of Hauser's Law

That's not my entire argument. I proved above that from 1990 to 1995, when there was talk of taxes going up and taxes went up, revenues did not go up but stayed relatively flat. And not just total revenues. Individual tax revenues. And I proved that from 1995 to 2001, when there was talk of cutting taxes and they cut taxes, revenues did go up as a percentage of GDP. And that happened because the economy grew. And THAT is the way out of this fiscal dilemma. Cut taxes. Grow the economy. And reduce government spending. And very soon the debt as a percentage of GDP will shrink.

Even if Hauser's Law is true (despite the fact that nobody but you actually takes it seriously)

Why would they not take it seriously, given that in 65 years of historical data revenues have never exceeded 21% and have averaged only about 18-19% ... just what Hauser's Law states. It seem to me that if "nobody" believes that it's true, they should be able to show some period of history when it's not true. If they can't, then it makes me think they believe in fairies.

revenues are currently 14.8%

Revenues are currently at 14.8% not because tax rates were reduced but because the economy collapsed when policies promoted by democrats for two decades finally caught up with us and caused a recession and because Obama's Keynesian nonsense has deepened and prolonged it. Revenues are at these lows because we have essentially entered a Obama caused depression.

Now, would you like to actually try and defend the claims of the source that you offered earlier to support your position (http://www.angrybearblog.com/2010/11/hausers-law-is-extremely-misleading.html ) ... which I thoroughly destroyed? Or are you going to run from that?

 

[Dayan81]

Standard & Poor's says we need atleast $4 trillion cut from the debt within ten years, and it must be a bi-partisan deal. Are we any closer to this deal? Is the GOP reading the reports given in Fox News?

 

[mhaze]

I see, so you're not concerned with the spending that actually caused the deficit. ....

Not in the context of a forward oriented action sequence.

.... When do I call what quits?

-Bri

..... to spending in excess of revenue, when this process has devalued the USD to what percentage of, let us say, 2010 value:

75%
50%
25%
10%
5%
or
1%

Let's hear what you have to say. One of these is the result of your action set.

 

[Corsair 115]

LOL! You know what they say ... garbage in, garbage out.

And who do you think supplies the ground rules and assumptions with which the CBO does its analysis?

The White house.

Now if you REALLY want to argue that the Stimulus is not a failure, visit me here:

http://www.internationalskeptics.com/forums/showthread.php?t=167653&page=48

Ah, I see. When the CBO agrees with you, it's a trustworthy source and you'll happily agree with its numbers and analysis. When it disagrees with you, it's to be ignored and disregarded. Got it. (And pretty much what I expected.)

 

[Bri]

I'll buy his assertion that Ryan's solution is indeed far too "non-radical". (Although it's worth noting that Obama called it radical.)

First of all, as you might guess, I don't agree with everything Stockman says, but I also don't see any evidence that he wants something "more radical" than the Ryan plan. He notes the trickery of not making cuts to entitlements right away for strictly political purposes. He also notes that even though the Ryan plan makes extremely deep cuts to social programs, its insistence on not raising any revenues undermines its ability to actually balance the budget in any reasonable amount of time.

I'll agree that it let's things conceivably grow much worse than now. Perhaps beyond fixable.

And it allows time for future leftists to undo any fix that we might get enacted now. And believe me, they will try. Obama and compary are Fabians, after all.

I would certainly hope they would try and succeed. The plan stinks. I see no evidence that Obama is a "Fabian" though.

So somehow we have to find a quicker solution to reducing the debt as a percentage of the GDP.

But here's where Stockman gets confused.

On one hand he says we have to massively cut government spending. (I agree. Do you?)

Yes, I believe that cuts are needed (but not necessarily right away in the current economy). I would certainly agree that the cuts will have to be "massive" although my threshold for "massive" is likely far lower than yours. Just how "massive" is a function of how quickly we want to balance the budget and how much revenue we raise in addition to the cuts.

He now apparently thinks we can tax more than we spend, and thus tax our way into a surplus that will significantly lower national debt as a percentage of GDP.

You seem to keep returning to this straw man (and I suspect there's a reason you keep doing so). I see no evidence that Stockman thinks we can tax more than we currently spend. It appears that he's advocating both spending cuts and increased revenue.

Relying on government to spend less than it takes in as revenue is a pipedream. It rarely has and rarely will … anywhere in the world.

Huh? Isn't that what having a balanced budget means? Spending less than it takes in as revenue is the goal of the whole exercise.

That's why I say that the ONLY way to fix the current economic mess is to cap spending so that government can't keep borrowing and thus increase the debt without bound, and grow our way out of this by encouraging economic growth.

If you're talking about an immediate cap on spending, and if you think that wouldn't immediately tank our economy, you're crazy. If you're talking about a gradual reduction in spending, I can agree with you (although we probably might not agree with how gradual the reduction would be).

And yes, we need to encourage economic growth, although I'm sure we disagree on how to go about doing so. The problem right now doesn't seem to be that taxes are too high or that companies don't have enough cash. The problem seems to be a lack of demand and, yes, economic uncertainty.

And as I proved above, increasing taxes does not grow GDP. Only reducing taxes does that, long term.

No, history doesn't really show that. Having appropriate taxes encourages economic growth and increases GDP, but lower taxes is not always the answer. As an extreme example, I would surmise that having zero taxes would not spur economic growth in the least. So let me ask you, under what conditions would you recommend raising taxes?

Part of the reason we're in the mess we're in is because of the Bush tax breaks at a time when the economy didn't grow as rapidly as was predicted, and nobody thought of putting in an automatic mechanism for reversing the tax breaks when it turned out that the projections were wrong. And then the Republicans "doubled down" and kept insisting on extending them (and continue to do so). So tax breaks are good when the economy is growing (let's return some of that extra money) and tax breaks are good when the economy is shrinking (we don't want to inhibit growth in a bad economy). Again, under what conditions are tax breaks a bad thing?

If we reduce the deficit and slow the growth of the national debt (by capping and then cutting spending somewhat), and encourage the economy to grow by cutting taxes and reducing needless government regulation of our lives, then over time, rather rapidly, we will see the size of the debt as a percentage of GDP shrink.

Except that history doesn't really show that. Reducing regulation contributed to the economic problems we have now. Taxes are the lowest they've been since the 1950's and yet the GDP is growing at an abysmally slow rate. This seems to be (to use your word) a pipedream.

But it will never happen with Obama in the Whitehouse. Never. History proves that his type of economic thinking simply does not work. And it may not happen if democrats like Pelosi and Reid control even one house of Congress.

Sadly, we'll never know if Obama's approach of following the recommendation of nearly all economists will work, because the Republicans will make sure he's blocked at every turn regardless of the consequences if they control either house of Congress.

So this next election is critical, if you ask me.

Totally agree.

-Bri

 

[Bri]

Not in the context of a forward oriented action sequence.

I have absolutely no idea what this means. Do you know of any real-world context in which time moves backwards?

..... to spending in excess of revenue, when this process has devalued the USD to what percentage of, let us say, 2010 value:

75%
50%
25%
10%
5%
or
1%

Let's hear what you have to say. One of these is the result of your action set.

I recommend a gradual decrease in spending along with an increase in revenue until spending no longer exceeds revenue. Your idea of reducing taxes and immediately cutting spending to an amount at or below the (now decreased) revenue is simply nuts.

-Bri