Debt Deal Reached 844
Global markets are on the rise in response to a deal between President Obama and congressional Republicans on the debt. The deal would cut more than $2 trillion from federal spending over a decade. However, most economists think this isn't enough and does not remove the threat that the nation's AAA credit rating could be downgraded.
Could Someone Help Me Out With This? (Score:5, Interesting)
I don't spend more money than I take in. I see commercials for people like that who have credit card debt because they couldn't do some simple balancing and see that they were spending more than they made. Why on Earth are we still implementing tax cuts and deficit spending?! Have we given up any hope of ever getting out of the red as a country?
This is very basic math
Re:Could Someone Help Me Out With This? (Score:5, Funny)
Why on Earth are we still implementing tax cuts and deficit spending?!
Because the ones that financed the campaign of the current (and past, for many years) government said so. That's the problem with using math, ab absurdum proofs always go wrong in politics.
The deficit creates money. (Score:3)
It's that simple.
Look up Fractional Reserve Banking. Money (credit) is borrowed into existence. When you take a loan out, your bank creates money and gives it to you. They didn't have the money before the loan was made.
Re:Could Someone Help Me Out With This? (Score:5, Informative)
This is very basic math ... so basic that when you're taught how to balance a checkbook in high school, they don't even teach it in Math class. It's a general life skill and our country is failing at life in general.
Yes, but when using your checkbook you take the value of the currency as a given. A state has (limited) control over the value of it's currency (by limiting or expanding the available sum of printed money), thereby it also has (again, limited) control over the value of it's own dept. Now you might say that playing with the value of the currency can have complex consequences, and that would be true. Still, macro economics work differently than micro economics.
Then Why Are We Seeing the Same Negative Effects? (Score:5, Interesting)
Yes, but when using your checkbook you take the value of the currency as a given. A state has (limited) control over the value of it's currency (by limiting or expanding the available sum of printed money), thereby it also has (again, limited) control over the value of it's own dept. Now you might say that playing with the value of the currency can have complex consequences, and that would be true. Still, macro economics work differently than micro economics.
I completely agree that the analogy is not perfect (never is). What I'm asking is why, if people like Cheney said that "Reagan proved deficits don't matter" [washingtonpost.com] then why are we seeing negative effects? Suddenly we're concerned about our AAA rating? Why should we care? Deficits don't matter, right? If you're saying that a checkbook deficit and national deficit are two completely different things then why are we seeing a threat of losing our credit rating and other money problems that are associated with drowning yourself in debt on a personal level?
Re:Then Why Are We Seeing the Same Negative Effect (Score:5, Interesting)
The potential downgrade has little to do with the amount of debt owed - rather, it is a reflection of the rating agencies' assessment of how likely we are to repay our bonds. Originally, simply raising the debt ceiling would have been sufficient to satisfy the rating agencies. However, now that Republicans have made clear that raising the debt ceiling is an opportunity to extract concessions with the nation's credit rating on the line, some of the rating agencies wanted to see that Congress was capable of reaching agreements without blowing up the world economy.
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The potential downgrade has little to do with the amount of debt owed - rather, it is a reflection of the rating agencies' assessment of how likely we are to repay our bonds.
Please reread what you wrote: The amount of debt you owe has little to do ... with the likelihood that you can repay that debt...?
So, to keep the analogy the same as the current US situation: if I take on so much credit card debt, that I need to get new credit cards just to keep paying the interest on the old credit cards, it will (supposedly) have little effect on my credit rating, because it (supposedly) does not affect my ability to repay the principal.
This is your assertion, now please support it
Re:Then Why Are We Seeing the Same Negative Effect (Score:5, Insightful)
Let me help you get this straight: no rating agency was seriuosly suggesting downgrading the U.S. credit rating UNTIL Republicans threatened not to raise the debt ceiling. They were a long way from worrying about whether we would have enough revenue to pay interest, even with the great recession.
That's because there is a big difference between being in a lot of debt (federal deficit) while having a job you won't lose (taxes), and starting to tell your bank you won't be making your next credit card payment not because you don't have the lower interest credit line (HELOC) to offload the debt to, but because you simply refuse to. Once you start acting irrationally (teabagger) then you become a less reliable debt issuer (borrower).
Is that clear enough now?
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Please reread what you wrote: The amount of debt you owe has little to do ... with the likelihood that you can repay that debt...?
Afaict the majority of the US debt is denominated in US dollars and the US government can create US dollars out of thin air either directly or by ordering the fed to print them and hand them over. So really the only way for the US to default on their debt is if they "choose" to do so (in this case by refusing to raise a self-imposed "debt limit").
Re:Then Why Are We Seeing the Same Negative Effect (Score:5, Informative)
Adding on to what skids just said, Ezra Klein did a pretty good job of summarizing S&P's movement over the past year, so I'll let him do the work: [washingtonpost.com]
In short, our debt/GDP ratio is not what's driving the potential downgrade; rather, it's the concern that we won't be able to make the decisions necessary to eventually get our debt/GDP ratio stable. As I said, the amount the US owes has little to do with our credit rating (note: not "nothing," but "little"), since we are financially able to repay our obligations and any likely new obligations for the foreseeable future.
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As a matter of fact that's just about correct, if I understand it right. I know you're trying to be snarky, but I think in approximation and analogy that's how it works. The issue isn't directly how much US owes compared with its wealth (it would never be the absolute value of the debt, anyway), but whether creditors are willing to keep lending, which of course depends on other interrelated things like the growth of the US economy, the money supply, the rate of inflation, interest rates, and how the play
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Please reread what you wrote: The amount of debt you owe has little to do ... with the likelihood that you can repay that debt...?
Well, depends how you look at it. The amount of debt alone isn't important; it's the amount of debt compared with likely future income. And in the case of the federal government, we'll almost certainly repay that debt, even if it's ultimately done with an inflation tax.
For example, Greece and Portugal and Ireland and Italy would not be such problems if it were not for the Euro
Re:Then Why Are We Seeing the Same Negative Effect (Score:5, Funny)
Mr. Cheney, your breakfast is ready. Now leave the computer alone and get over to the table.
We've got your favorite today, Lucky Charms and fresh-squeezed baby's blood!
You ARE crazy (Score:5, Informative)
Sounds more than a bit far out and almost totally misinformed.
China's military options for collecting on their debts are almost zero. Where will China export the goods it needs to keep its economy going if they start a war with the United States?
Further, China buys US treasuries to keep their currency valuation down so that they can continue to be the low-cost contract manufacturer to the world. Without keeping their currency low, the strength of their economy would push their currency higher, making them uncompetitive as exporters and pretty much derailing the vast majority of their economy.
A derailed economy REALLY scares the Chinese leadership, as their number one focus is maintaining order and putting a couple hundred million people out of work does not help with order.
The US is almost totally in control when it comes to Chinese owned debt. Its denominated in our own currency. Any threat to dump it would probably be met by a US threat to simply void it. They could stop buying it, but it would have a deleterious impact on their currency valuation.
What's missing from the recent coverage over the the debt ceiling dust up is the sentiment of many Republicans that Government is too big and by squeezing it from a revenue side they hope to stop its expansion and try to shrink it. This has been a long-term Republican strategy, but its largely been a failure. It may have slowed some expansion, but generally speaking the net outcome has been to cause deficits to be run up.
I largely think that some tax increase is necessary. I'd personally like to see a tax increase across the board, including low-income earners. I'd eliminate the earned income tax credit that basically allows some 40 percent of the population to pay no taxes -- I don't think a reasonable tax on them would amount to much, but I think it creates a free ride which is a poor tax policy. I think it would also philosophically undermine the "40 percent of Americans pay no taxes" line which is used to refute increasing taxes on the wealthy who can frankly afford to pay them.
More importantly, we need to have a long discussion in this country as to what's vital from the government (roads, infrastructure, safe food and medicine as a start) and what's merely nice if we can afford it.
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Heck a few countries that weren't ex-colonies actually applied (and got) the privilege of pretending to be like an ex-colony...
FWIW, I live in an excolony and in that colony the Brits were probably a lesser evil compared to the rulers they supplanted.
[1] Interesting thing to call it too right?
Re:Could Someone Help Me Out With This? (Score:5, Insightful)
Why on Earth are we still implementing tax cuts and deficit spending?
Well.
*cough*
Let me lay out the situation as best I understand it.
DEMOCRATS: Let's cut some spending (BUT NOT MEDICARE/MEDICAID/SOCIAL SECURITY) and raise taxes on the rich.
REPUBLICANS: Let's cut MORE spending, but leave taxes as is (OR LOWER THEM. THAT'D BE COOL TOO)
TEA PARTY: Cut spending. DON'T TOUCH TAXES UNLESS YOU'RE CUTTING THEM. YOU'RE CUTTING MY GOVERNMENT PROGRAMS THAT I BENEFIT OFF OF? WHAT THE FUCK MATE?
Sane Politician: Wait, didn't you say to cut spending?
TEA PARTY: Yes, but NOT the things we benefit off of.
Sane Politician: Uh.
As for raising the debt ceiling, we're like...the only country that has a debt ceiling that limits how much we can borrow. So that results in craziness every few years.
And yes, this time around the really hellhole was caused by the hardliner Tea Party senators. The normal Republicans wanted to get this shit done sooner, and the Dems were like, "fuckall we'll bend over backwards to get this shit through. Shit, we want to raise taxes, but FUCK taxes so we can get this through NOW." The Tea Party was, essentially, fanatically fighting for an ideology that doesn't really work in the real world.
If you want them to raise taxes, get more Dems in office. They may be just as crooked as the Republicans, but at least they come off as willing to raise taxes.
And no, shut up about the laffer curve. Assuming it works, and IF we're at the right side of the laffer curve, explain to me why the economy went up like a rocket back when tax rates were higher than the shithole of an economy we have now.
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A) End the many wars we are involved in (Iraq, Afghanistan, Libya, "war on drugs", etc.)
B) Close a lot of unneeded military bases in various countries, not only would this save a lot of money, we'd gain the respect of other nations.
C) Work to privatize social security, but those who've paid in need to get the money that was taken from them by force and promised to them. If the government wants to run social security, make it a voluntary program.
D) Sell a lot of t
Re:Could Someone Help Me Out With This? (Score:5, Informative)
I think giving up military bases could be a profitable adventure. I used to live in Kadena AFB in Japan (I was a military brat), and the bases take up like 10-20% of the island we were on IIRC. Lawns are unheard of off base, but yet many of us were housed in small homes with lawns. I'm willing to bet Japanese investors would go crazy over that land (so long as the US military hasn't massively polluted it; that's been known to happen).
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Miltary bases are leased, not owned.
Re:Could Someone Help Me Out With This? (Score:4, Interesting)
C) Work to privatize social security, but those who've paid in need to get the money that was taken from them by force and promised to them. If the government wants to run social security, make it a voluntary program.
No way in hell will that happen and only a fool or a thief would want that to happen. All you'll end up with is an entire generation living "on the streets" and a handful of super-enriched bankers. It was a disaster for Brazil and it would be one for us too.
Not to mention the fact that social security is what opened the door to taxing wages on labor. It is the definition of evil to take that step and then a few generations laters say "well, we're not going to deliver on our promise of a pension but we're still going to take 30% of your check every week." Don't want Social Security? Then figure out a way to run the government without taxing wages.
Re:Could Someone Help Me Out With This? (Score:5, Informative)
Not to mention the fact that social security is what opened the door to taxing wages on labor.
This is just factually incorrect. Income tax first began in 1862 to fund the Civil War; and since the 16th amendment in 1916 it's been a permanent part of the landscape. Social security was enacted in 1935. While SS may have paved the way for direct wage/payroll withholdings, income tax was an established fact well before that point.
It is the definition of evil to take that step and then a few generations laters say "well, we're not going to deliver on our promise of a pension but we're still going to take 30% of your check every week." Don't want Social Security? Then figure out a way to run the government without taxing wages.
First, that's a damned weird definition of evil. Second, 30% of your check isn't collected to guarantee a pension - 4.2% of it is. The rest of it is collected to fund local, state, federal governments and medicare.
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Second, 30% of your check isn't collected to guarantee a pension - 4.2% of it is. The rest of it is collected to fund local, state, federal governments and medicare.
While the previous posted was exaggerating quite a bit, saying it's 4.2% is wrong on a MUCH worse level. FYI, your employer pays 6.2% ON TOP of the 4.2% you see removed from your check. One of the MANY little ways the gov. hides how much tax you REALLY pay.
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Really? Look at any company that gains profits. When they give out a bonus, is it to all the workers, equally, or is it mostly just the top execs that end up with the bonuses? There is your citation. I think it is fair to say that companies are in it for a profit, and any profit they can manage, they will take. Which is why we are in this mess to begin with. Saying you would give that 6.2% right back to your employees would probably make you one of the 0.000001% of businesses that would do that.
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One of the benefits of social security (and I'm in Australia, we have similar country-wide setups) is that if you simply paid the employee all that money instead of enforcing putting it away, the cost of everything would go up to match. That's the market for you.
So by deferring some of it, you're (in theory) helping stifle increases in the price of living whilst also providing capital to use in long-term investments.
The problem isn't social security in its many forms. The problem includes a wider-scale issu
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Unless you know something about investing...
401Ks are a pile of shit and a huge scam, see what happened to them in 2008. This is after years of help advisors telling us that you're an idiot if you don't contribute to your 401K.
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> C) Work to privatize social security, but those who've paid in need to get the money that was taken from them by force and promised to them. If the government wants to run social security, make it a voluntary program
That's more like private security then social security, isn't it? How can you run social security without it being mandatory? That would lead to most employed having no social security, and most unemployed begging to get in.
The whole idea is that in general, worldwide, of a thousand people
Re:Could Someone Help Me Out With This? (Score:5, Insightful)
"Work to privatize social security"
Dear god, no, no and thrice no
social care of those less fortunate souls who cannot afford to live without financial help is the moral responsibility of society as a whole (i.e the government as the body that represents the country) Otherwise the streets would be ovverun with homeless, people.
Would you really let your neighbour die through lack of food or medicines because they have no money and the government has no social security program? If so you;re a heartless bastard,
social care is an obligation, not something that government should abolish responsibility for,
Re:Could Someone Help Me Out With This? (Score:4, Insightful)
Wow, now there's a post it's hard to quantify the amount of wrong in it.
First, the "love thy brother" moral is not Bible specific, it is at the core of almost every secular societal system and almost every religious belief system. It's called basic human decency, and further, even sub-human species demonstrate this behavior as a basic survival trait. Were you a meerkat and took that attitude, you'd freeze to death or be eaten by a hawk, likely before you procreated, not that it would matter because if you did, you'd abandon your offspring. That we've devolved to the point where there is a notable portion of the population as sociopathic as you and who are tolerated is further indication that we've escaped beyond basic evolutionary pressures to the point where maybe we will need an extinction-level event to regain our competitiveness as a species.
Secondly, when people form a charity they want it to be effective and powerful. Whether that charity gives out food, or prevents innocent people from being shot in the head by sociopaths, it will have to exert influence and, yes, occasionally use force. Government is our biggest and most powerful charity. You could equally well say that giving to private charity is society's way of abdicating the maintenance of a functional government, i.e. the duties of citizenship in a representative democracy to actually pay attention and vote. "It's not my fault the government sucks ass, I gave all my money and spare time to the much more worthy cause of Bible camp and fetus-saving."
Re:Could Someone Help Me Out With This? (Score:5, Insightful)
You ignore history.
Society pre-Social Security was LITERALLY Dickensian! Chuck didn't make up the conditions he wrote about.
Relying on charity to SCALE is naive to the point of being not sane.
You're right, and wrong. (Score:3)
I don't like it when people make Social Security a moral imperative. It isn't. It's a practical imperative. Social Security is essentially "living too long" insurance. Everybody pays into it, and when you get old enough, you get paid so that you don't have to keep working to avoid living on the street. This is done in a very, very financially efficient manner. Were you to replace the same program with some private equivalent, much more money would be lost to administration (like advertising), profits,
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Adding to your B) we could also stand to shut down a lot of our other military spending by canceling programs to build more (and new types of) planes, ships, tanks, etc. and by reducing the number of people in the military. If there is a concern about putting large numbers of people out of work, then at least let us do that and then start up civilian programs: The companies that built things could transition to building drones for civilian use, rail infrastructure and trains (at all levels from trolleys to
Re:Could Someone Help Me Out With This? (Score:5, Insightful)
Same individuals who paid into social security for all their working careers? The same social security fund which is actually quite liquid but the politicos keep draining it?
If social security gets cut off, refund all money paid into it plus interest to every taxpayer who isn't drawing from it.
Re:Could Someone Help Me Out With This? (Score:4, Interesting)
As for raising the debt ceiling, we're like...the only country that has a debt ceiling that limits how much we can borrow.
You are absolutely correct. We should do away with the debt ceiling and go back to the way the Framers intended and force Congress to authorize every bond issue. The U.S. Constitution explicitly says that Congress is the only body that has the authority to "borrow money on the credit of the United States". In 1917, Congress wanted to give the Treasury the power to adjust the types of bonds it issued on the basis of changes in the market (and to avoid having to have a record of voting to borrow money that could be used against them in a campaign). In order to do so in a way that could at least give the appearance of passing Constitutional muster, they instituted the debt ceiling. There are two legitimate ways to get rid of the debt ceiling. The first is for Congress to authorize the issuance of every instrument of debt individually. The second is to ammend the Constitution to allow the President to "borrow money on the credit of the United States".
Re:Could Someone Help Me Out With This? (Score:5, Informative)
And the third, sane way is for Congress to authorize borrowing the money to spend at the same time they authorize spending the money.
That's what other people mean when they say other countries don't have a 'debt ceiling'. In other countries, just like the US, the legislature is required to authorized all spending and all borrowing. The legislative branch always creates the budget, and the ability to borrow. There is no government where the chief executive can decide to randomly spend money, and no government when he can randomly borrow money to do so.
However, in other countries, they just do those two things at the same fucking time. As they pass a budget, they authorize the borrowing of money to cover that budget, and hence do not have idiotic votes like this one.
We, however, have insanely decided to pass impossible bills, where we say we are going to spend $X on something, without the ability to do so...and then come along later to make say 'And we we can borrow the money when we need it', making our budget actually possible. No other country is this goddamn stupid.
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The problem with authorizing the borrowing at the same time they authorize the spending is that they don't know how much they will need to borrow. They create a budget and project how much tax revenue they are going to receive, but the government never receives that amount of money. Usually, it receives less, although it is theoretically possible that it coul
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Re:Could Someone Help Me Out With This? (Score:5, Insightful)
There even is a reason for that: currently, the problem is that all those people with lots of money try to accumulate it.
Because the economy is bad and investing it is a sure loser. So better accumulate, just in case.
The result is that there are no investments, no hiring. And the economy stays bad.
If you tax a lot, then there is a) an incentive to have the money spent, b) the government can always build more infrastructure, give allowances to the jobless, which helps the economy. Of course, there is the added benefit that the society becomes more equal, and that the interests of everyone become more aligned, which makes for saner politics.
BTW, the rates you are citing are the marginal rates. It works like that: your first x dollars are not taxed. The next x are taxed at some rate, then the next at a higher rate, and so on until you reach the maximum rate.
Re:Could Someone Help Me Out With This? (Score:4, Insightful)
TEA PARTY: Yes, but NOT the things we benefit off of.
Making that into a Tea Party-only sentiment is a little dishonest.
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You misunderstand it. You need to stop listening to JUST the talking points.
DEMOCRATS: Let's make it appear that we will cut some spending (BUT NOT MEDICARE/MEDICAID/SOCIAL SECURITY) and raise taxes on the rich.
REPUBLICANS: Let's make it appear that we will cut MORE spending, but leave taxes as is (OR LOWER THEM. THAT'D BE COOL TOO)
TEA PARTY: Cut spending. Really. For real. Not in 10 years, so that later Congresses can throw the cuts away. Cut the spending now, and cut it enough that we're not spending
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Well, gov *does* take in ``taxes'' what it spends... just depends on what you consider a ``tax''. For example, by expanding the money supply, inflation can be viewed as a flat tax on everyone. It's not visible, and that's what makes it politically attractive (e.g. politicians would have a hard time saying they want to raise taxes by 10% on *everyone* and *everything*, no exceptions), and yet they do that every time more moneh is printed.
In that light, the recent government stimulus can be viewed as, ``we'll
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Re:Could Someone Help Me Out With This? (Score:4, Insightful)
Sovereign debt is absolutely nothing like private debt, and only a fool would compare the two. Beyond the fact that it is borrowing money (and thus must be repaid) they have virtually nothing in common.
Families have limited assets that they can mortgage and sell to pay off debts. Families have limited incomes and limited options for expanding said income.
Governments do not have these problems. A government can lay taxes and print money. Governments also don't "die." In the long run, a country's "income" (GDP) is always expanding. This means the total debt load is not important, only the ratio of debt to GDP matters. As long as that ratio is kept to a manageable level and your interest rates are low, you can keep on borrowing.
By the way, current interest rates are near zero percent, and if you factor in inflation the real interest rate is negative. It would be stupid not to borrow as much as you can possibly get away with under terms like that. Debt and taxes are not the US' problem. Our real problem is being embroiled in a liquidity trap.
Republicans have fucked this country six ways to Sunday and voters have ordered them to fuck us some more because they don't have a clue about, well, anything.
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Either you have to raise taxes or cut spending.
...OR you "print" more money and hand it to the MIC [wikimedia.org] so they can spend it at todays value, before the rest of the population cottons on that it must be devalued. Don't worry, all that printed cash eventually "filters downs" to weaker hands, forming bubbles here and there like in the housing market. Take a course that explains it with references: one of many [chrismartenson.com] (worth starting at chapter 1 but if your in a hurry)....
Re:Could Someone Help Me Out With This? (Score:5, Insightful)
So if you're trying to balance a budget ...
That's where you went wrong in your analysis. The Republican Party has absolutely no interest in balancing the budget. This has been shown time and time again: For instance, when George W Bush took office with a slight budget surplus if you count Social Security (which you probably shouldn't), he immediately cut taxes to put the budget in a hole.
Based solely on their actions when in power, this is what the Republican Party really believes in:
1. Cutting taxes on the wealthiest Americans. That's why, if you're somebody who makes their living off of investments, you pay a 15% capital gains tax, whereas if you make considerably less by working you pay a 25% income tax and a 12% FICA tax. Thanks to their actions, the tax rates are the lowest they've been since at least the 1940's.
2. Neutering or completely getting rid of any government agency that could serve as a check on corporate power. They would love to live in a world without the EPA, OSHA, MSHA, NLRB, or the SEC.
3. Getting rid of anything that smacks of aid to the poor and downtrodden. Social Security, Medicare, Medicaid, TANF, food stamps, housing assistance, and minimum wages all come under that category.
4. Expanding the 'national security' portion of government as much as possible, preferably with large no-bid contracts for their family, friends and business associates. They like being able to spy on anybody and everybody, starting wars that they don't need to start, and taking over Latin American countries with little or no military forces to speak of.
I'm no supporter of Democrats either, but one of the biggest myths out there is the idea that the Republicans want to balance the budget when it's abundantly clear they have no intention of doing so.
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2. Neutering or completely getting rid of any government agency that could serve as a check on corporate power. They would love to live in a world without the EPA, OSHA, MSHA, NLRB, or the SEC.
In their defense, the NLRB is thoroughly corrupt. I work part time for a major corporation that just had a labor vote. The NLRB changed the rules where, previously, "yes" votes were taken as a percentage of all eligible employees in the company(whether they voted or not). Now, the number of "yes" votes are taken as a percentage of only those who voted. The union still lost the vote, and they are now claiming interference by the corporation because the company publicized the date of the vote throughout t
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1. Cutting taxes on the wealthiest Americans. That's why, if you're somebody who makes their living off of investments, you pay a 15% capital gains tax, whereas if you make considerably less by working you pay a 25% income tax and a 12% FICA tax.
The 15% tax after all of the other taxes you mentioned are taken out. Companies pay salaries which pay those taxes. Whatever is left goes to investors. If they pay lower salaries and lower taxes, there's more for investors. If you had higher taxes on investors, it would just balance out. You can't magically make everybody rich by fiddling around with numbers!
3. Getting rid of anything that smacks of aid to the poor and downtrodden. Social Security, Medicare, Medicaid, TANF, food stamps, housing assistance, and minimum wages all come under that category.
True but conservatives do push for tax exemptions for charity and religious organizations.
Calling Social Security "aid to the poor" is accurate but ver
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Right-wing Christians seem to be more into Old Testament severity. While they will indeed acknowledge Christ's teachings of love and charity, this acknowledgement is conditional whether they will admit or not. The conditions are accepting their moral tenets and politics lock, stock, and peril on pain of hellfire. They have no compassion to waste on anybody they see as damned to hell. The only effort worthy of expending on such people is "bringing them to Christ". Then and only then can do they extend
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If you were a Christian who actually read the bible, you would know that Christ specifically said (beginning @ Matthew 5:17 )
The "law" Christ is talking about
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The history of the debt is punctuated by one major constant. War.
See http://en.wikipedia.org/wiki/File:US_Federal_Debt.png [wikipedia.org]
There are several peaks which coincide with wars followed by peacetime declines.
Revolution
War of 1812.
Civil War
WWI
WWII
Cold War (Regans Spending)
Global War on Terrorism
The Korean and Vietnam wars were overshadowed by the recovery from WWII which was massive.
A minor factor is when we had Central Banks. These helped allow deficit spending war or peace to occur.
These are the times when we di
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These people see running unsustainable deficits as a deliberate long-term strategy to force the state into a financial crisis where it simply cannot avoid radically shrinking. What I have never been able to figure out, though, is how many of these are truly far more radical than they let on, and how many are just stupid. Allow me to explain:
Re:Could Someone Help Me Out With This? (Score:5, Informative)
So if you're trying to balance a budget, how in the hell do you justify spending way more money than you take in?
I'll take a crack at this.
If you evaluated private enterprise budgets the same way you did the federal budget, you'd see that it's quite common for even profitable [note 1] companies to lay out more cash than they take in, by issuing corporate bonds. If you step back and look at the actual financial effect of issuing a bond on a corporation, you'd see that what it does is allow the corporation to spend more cash than its operations can raise. Why would they want to do that? Because restricting their spending to what they take in also restricts their ability to grow.
If you are an engineer, you'll recognize this as an optimization problem. The corporation can always grow more by outlaying more cash, but its supply of cash is limited. So it obtains more cash by issuing securities to be paid out from future, expanded revenues. But there is a point where the interest burden on the debt assumed exceeds the amount of growth generated. That determines the point at which you stop borrowing. If businesses were deterministic (which they aren't), there'd be an equation of corporate value as a function of cash outlay that takes into account the present value of growth against interest costs.
Of course this is a gross simplification, of course, but the financial principle is the same. You manage your cash outlays and borrowing in such a way that (a) you maximize net growth while (b) being able to meet your current obligations.
I don't spend more money than I take in.
Didn't take a student loan, did you? Nor a loan for a house?
The problem with people and credit cards (or bad mortgages) isn't taking on debt per se, but taking on debt to obtain things of no long term value or dubious long term value. Let's take an eighteen year-old who wants to be an engineer. Would it make sense for him to work for ten or fifteen years at a low wage job so he could pay his way through college without borrowing? You'd be a fool to advise that, because the education would add so much to his value as an income generating concern that a loan at reasonable interest rates is a financial no-brainer.
So here's the takeaway lesson: don't worry about borrowing; worry about stupid and pointless spending. It's very easy to prove that the smart money doesn't think that the US has a borrowing problem, by looking at the credit rating of US Treasury securities. Up until now, that has been viewed as the safest possible investment, and ironically if our credit rating drops it will be *because* we aren't willing to borrow money to meet our current expenses, the way any well-run business would.
Of course, there is a psychological link between easy borrowing and stupid spending, but the problem is still stupid spending. Credit is buying money, and credit card interest is stupid spending because the interest rates are high.
note 1 : "profit" and "positive cash flow" are different things altogether, but as individuals our wealth is usually so insignificant that we can conflate them as a first approximation because we aren't that far, in financial terms, from living hand-to-mouth. The situation for a largish business is different. Companies might well borrow money and pay dividends in the same quarter, and it would raise no eyebrows.
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What a vapid response.
The government doesn't have to grow in terms of people employed, buildings built, or services rendered for the growth argument proposed by the GP to work. The government could, in theory at least, use the growth provided by borrowing to enlarge the economy for the benefit of all, for example. One way to do that would be to subsidize private investments of various forms to cause more employment, better infrastructure, an
Re:Could Someone Help Me Out With This? (Score:5, Interesting)
After Reagan's huge tax cut he proceeded to raise taxes almost a dozen times to make up for it and STILL ran the government at such a bloated rate of growth he blew every dime of the economy growth for generations to come. Reagan was an interesting president for sure, and there's lots we can learn from him, but really, there is a lot of revisionist history about what he did in his two terms.
-Rick
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Sorry, but the absolute numbers of debt are meaningless. What counts is debt to GDP, and it was reduced under Clinton.
It makes sense, too: if I am Bill Gates, and debts of 10 000 000€ (because I needed cash, and all my assets are in stocks I did not want to sell right now), then I am perfectly fine. If I am me, with the same debt, well, I might as well declare bankruptcy right now :)
So the point is: as a country you can reduce your debt in two meaningful ways: increase revenue/decrease expenditures OR
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According to http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms [wikipedia.org]
Reagan increased the ratio from 32.5% at the start to his 2 terms to 53.1% at the end of his term. While Clinton reduced the ration from 66.1% down to 56.4%.
Re:Is there any hope? (Score:5, Informative)
This is factually incorrect [zfacts.com], and honestly it's not even hard to check. Why didn't you?
over Reagan's 8 years, Congress approved smaller budgets than he requested on average, and the deviation from what he requested averaged less than half a percent. He raised the debt by $1,860 billion and Congress reduced his budgets by $16 billion. Otherwise he would have raised the debt by $1,876 billion.
Everyone is entitled to their own opinion, but we all have to work from the same set of facts. If your political stance requires that you believe things that are not true, that doesn't necessarily mean that your politics are wrong. But it's a strong indication.
Take some time. Familiarize yourself with the numbers. Decide what you really believe, not what other people have told you. Then resume posting to Slashdot.
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"If you think high taxes on the Rich is apart of the solution, take a look at NY State, they did this and the rich have either left or are in the process of leaving and lowering NY's revenue generation." is factually incorrect.
http://www.npr.org/blogs/money/2011/04/29/135813061/studies-rich-dont-flee-high-tax-states [npr.org]
Re:Could Someone Help Me Out With This? (Score:4, Insightful)
I used to live in the US for about 4 years. I didn't take ANY credit at all (just renting my place and bought used cars). In the end, I got some customer card refused in some shitty store because I didn't have any "credit history".
In other words, the store refused to trust me because I didn't have any debt. I tried to explain that I was paying everything cash, and that this was way better than paying with credit, but alas.
The US as a society is completely screwed in this regard. To be trusted, you need to have had many debts and you need to display your spotless track record of reimbursing this debt. The fact that you have no debt (and never had) is a mark of distrust. How more screwed up can it be?
It's not surprising (to me) that the government is thinking along the same lines.
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I'm part of a growing trend called of people who are getting 100% of debt and going "debt free". Soon I will have no debt (relatively speaking) and will not be using a credit card or buying anything on credit ever again.
Living within your means sucks, but so does paying for years on a purchase that you could have saved up for in a manner of months.
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Soon I will have no debt (relatively speaking) and will not be using a credit card or buying anything on credit ever again.
The only problem with that is I don't get 1% cash back on my cash purchases. (And yes, I'm sure my data is being sold, and no, I don't carry a balance).
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I certainly HAVE spent more than I took in. Not only did I have a car loan, mortgage, and student loan, but I bought a whole shitload of kewl toys. But, at some point, the bills came due. Luckily, I wised up before getting 14 trillion in debt, but I still paid for my excessive spending with years of beans & rice.
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Re: (Score:3)
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One thing the Republican party; and yes I will call them out on this; and their supporters on various blogs and the media won't tell you is this.
There are two sides to the Laffer curve. Raising high taxes decreases revenue. Lowering low taxes decreases revenue. Taxes are already at historically low levels, so it's pretty obvious what we should be doing to increase revenue.
I've never seen a leftist or Democrat of any type, extremist or moderate, deny that the downward slope of the Laffer curve exists.
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Yeah. Except that's not what happens. What happens is that the additional money goes into the pockets of the executives directly, or into their benefit packages, or into the corporate jet fleet, or an additional leased car for the prez, all depending on what level corporation we're talking about. The only "trickle down" we get from big business when tax rates change is when they piss on our heads and try to explain that it's actually rain.
great (Score:5, Insightful)
Debtor says, "I would like to borrow some money."
Creditor says, "And what do you owe now?"
Debtor: "So much I need at least 145 years to pay it back."
Creditor: "Tell me your plan."
Debtor: "I have no plan to pay it back. I will only pay the
interest."
Creditor: "You want your kids, grand kids, and great grand kids to pay it back?"
Debtor: "It will be very painful for me not to get the loan. I can print up some money if I need to."
Creditor: "You have no plan."
Debtor: "I am working on a plan to borrow a little less than usual - 10% less."
Creditor: "You have no plan to balance the budget, you plan only to keep borrowing, you print up money, you dump your debt on 3 future generations and counting, and you want us to believe you have integrity, and are worthy of credit and trust?"
Debtor: "I want what I want when I want it, and I want it right now.
Give me the loan or I will print the money!"
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Ponzi Scheme (Score:5, Interesting)
Can someone explain to me why US Treasuries should be rated AAA in the first place?
Money is paid out to investors out of new investor's money, and the cycle continues. Last time I checked, this is also known as a Ponzi Scheme and it is inevitable that it eventually collapses.
These are the same people who rated junk mortgage bonds as a good investment, so I'm not surprised.
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Re:Ponzi Scheme (Score:4, Insightful)
In a Ponzi scheme, payments are made solely through new investor's money. The government, on the other hand, does have a fairly sizable revenue stream.
Since money is fungible, you can't say that the money to pay back bonds is necessarily paid with the income from the issuance of new bonds and not from revenues. This applies to individuals, too -- if, every month, I put $1000 on a credit card and pay it off every month, it's logically the same as having a perpetual balance on the card. The creditor certainly doesn't think so, though (in only one scenario am I charged interest, and most credit card companies will get upset if you don't pay *anything* back), because in the former scenario, I have revenue backing my credit.
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Seriously.
You are claiming that if I run a Ponzi scheme and I make sure that some of the payments actually come from a revenue stream other than investors money then it actually isn't a Ponzi scheme?
So as long as I invest say 10% of the each investor's investment in something that pays some return , say a savings account at the local bank, and a cent or so of each payment out of that then I'm all legal?
How stupid are these people who don't do that and go to jail?
Your credit card example is pretty much irrel
Re:Ponzi Scheme (Score:4, Interesting)
Can someone explain to me why US Treasuries should be rated AAA in the first place?
Easy
the US never defaulted, that's why
Of course, past performance doesn't correspond to future gains.
It also helps that US bonds can be used as money, and are used as such.
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it defaulted at least twice
- confiscation of gold and devaluation of dollar (40%) in 1 swift move
- 1971 when dollars stopped being redeemable for gold (the us printed too many of them and foreign powers tried to excercise the right to get gold for inflated dollars)
changing the rules during the game to fuck the other team over qualifies as default.
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...not after it pays it's other liabilities it doesn't.
And if it doesn't pay for those, there won't be a US for much longer.
Yet just to clarify (and speculate) (Score:5, Interesting)
An agreement has been reached, but it hasn't been passed by either the house or senate yet. (It's almost certain to pass the senate, as that's where the compromise originated. The house, on the other hand...well, we'll see.)
Yet, in the back of my mind, there was a part of me wondering whether an agreement would ever be reached. The conspiracy theory in me kept saying that there were enough rich fat cats who were paying off key congressmen to sabotage the process and make sure that no agreement was ever reached. Why? Because billions of dollars had been invested in credit-default swaps [go.com] against the United States debt.
Re:Yet just to clarify (and speculate) (Score:4, Insightful)
Of course they'd reach a deal. This is all theater. A bunch of showboating and grandstanding to get your name out there and get people hearing your soundbites while, in the end, accomplishing nothing and buckling. Spend two months saying "we spend too much!" and then agree to some bullshit "we agree to cut our expected spending over the next decade and count it as actually cutting costs" and call it "job done".
Can't drink yourself sober (Score:4, Funny)
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It's called "investing" -- you spend money to make more money than you spent. Whether you go into debt or not is inconsequential, assuming you are successful in your investment.
Strange situation (Score:3, Insightful)
For someone from a country with a better grip on its economy, the whole ordeal seems rather strange:
Economist: Republicans are at fault. (Score:5, Insightful)
According to Lexington at the Economist [economist.com], this whole hoopla was the Republican's fault.
the Republican House has come up with is a non-solution (since the Senate cannot buy it) to a problem entirely of the Republicans' own making. The reason for this crisis is that instead of just raising the debt ceiling in the customary way so that the government can pay the bills Congress has already run up, the Republicans decided to point a pistol at the American economy and threaten to pull the trigger if they did not get the spending cuts they wanted.
Also, I think it was horribly hypocritical of the Republicans to blame "entitlement programs" for the problems and never mentioning the wars and their action of lowering taxes during war time - that's what killed us. All the other reasons like Obama Care are just distractions - especially when you consider that it hasn't even taken effect yet. And why is SS on the table in this context? Bullshit!
Yes eventually Social Security will have to be addressed but to include it in the debt ceiling was ludicrous.
By the way, the debt ceiling allow the government to pay it's current bills and nothing more. Thinking that it allows for increasing government spending just shows how little we Americans truly understand how our government operates - myself included.
Re:Economist: Republicans are at fault. (Score:4, Interesting)
I wonder how many years worth of Social Security the missing money in Iraq would have paid for? I'm writing about the vast quantity of undocumented funds that just vanished and not the documented payments to contractors and mercenarys.
Re:Economist: Republicans are at fault. (Score:4, Informative)
Seriously?
"Dozens" would put us at a minimum two dozen presidents ago. That president fought in the Civil War. Three dozen and the President was born before the Treaty of Paris.
Umm...duh? (Score:5, Interesting)
The deal would cut more than $2 trillion from federal spending over a decade. However, most economists think this isn't enough and does not remove the threat that the nation's AAA credit rating could be downgraded.
Of course it's not going to do anything substantial. You really thought the Republicans were fighting this fight truly to solve and end the debt woes of this country rather than politicking for 2012? Especially when the terms of last 3 Republican presidents accounted for $9.5 trillion of the $14 trillion this country carries? This in no way makes excuses Obama pushing even more debt on pile, but the Republicans hardly have a case for being "fiscally conservative" when Reagan, Bush and Bush Jr piled on 67% of the current debt.
Re:Umm...duh? (Score:5, Insightful)
The best part... (Score:5, Insightful)
The actual funny part is.... You all still think there is a difference between republicans and democrats.
They've kept that thru all of this. It's outstanding. Best scam ever. Wish i'd thought of it.
Keep the population arguing over D/R while we rob them all blind. It's genius!
Oh wait... i live here too.. shit.
Doesn't Cut Existing Spending (Score:5, Informative)
What about the biggest post of all? (Score:3, Insightful)
The US spends more money on its military than all other countries combined. Why not save a bit there, on the biggest budget post of them all? Saving some small posts here and there without even looking at the expenditures that really digs holes in the wallet seems, insane.
Seems military spending is sacred even if countless research has show excessive waste and that US military could get by on half the money without any noticable effect on the defence capabilities.
To an outsider it looks as if the US is on the exact same path as the USSR was some years ago when it overspent all its money on the military complex. Once that happens the US will have the exact same situation that Soviet has had, with states wanting to jump off the sinking ship.
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Easy, DoD costs about $700 a year. The deficit in this last year was about $1.4 trillion. So you won't be balancing squat by merely cutting defense.
And the real issue isn't past debt, it is future debt. The Me Generation of Baby Boomers is retiring to the tune of about 10,000 per day. They are all going to demand their SS and Medicare (or whatever that morphs into). They will suck down more than they ever paid in, but they will never admit it and will demand more. So either those two programs get re-defined
The point of all this. (Score:4, Insightful)
Most misleading summary EVAH (Score:5, Insightful)
About the only thing right about the summary is the spelling.
The deal would cut more than $2 trillion from federal spending over a decade. However, most economists think this isn't enough and does not remove the threat that the nation's AAA credit rating could be downgraded.
This debt crisis is entirely manufactured and artificial, the reason the country's AAA rating could be downgraded is because idiots are playing political games with our credit worthiness, and most economists think that the economy needs stimulus, not immediate cuts in spending. (Oh, and since current Congresses can't bind future Congresses, the $ 2 trillion number is also meaningless.)
Caveat Emptor: (Score:3)
It still has to pass both the house and senate. The house may still be a problem.
Until it does and is signed, "the check is in the mail".
Re:US Credot Agency Reduce US Credit Rating? (Score:5, Informative)
However Jefferson opposed the first bank of the United States which was similar to the Federal Reserve system but yet entirely different because it didn't deal in fiat currency and money creation.
Re:Why does every story about US politics.... (Score:4, Insightful)
...sound like it is a battle between common sense or good ideas, and Republicans?
Well, yes, but it's not that much of a mystery why they do so. The role of the Republicans in US political theater is to be so crazy that the Democrats sound sane by comparison. Then the Democrats make a 'compromise' that consists of about 95% of what the Republicans said they wanted, and 5% of what the Democrat's corporate backers wanted, and 0% of what Americans wanted. Then the Democrats go to the TV cameras and explain that this was the best deal they could make, which the Republicans go to Fox News and cheer about their triumph of will. (What made the recent health care law different was that in that case it was about 75% of what the Democrat's corporate backers wanted, and only 25% of what the Republican corporate backers wanted.)
Any idea that the US government is representing the will of the American people is an illusion.
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> Because the overwhelming majority of news reporters are Democrats,
Past a certain point, only the facts can speak to the heart of the matter. You can only do so much to skew the presentation of those facts if you do your job as a journalist.
Besides, it's not as if there are no dissenting opinions anyways.
Call "the biased liberal media" another element of the crackpot teabager mentality.
The vast majority of US views favor spending more. There's only real question is what to spend it on.
Re:For a revolutionary workers party! (Score:5, Insightful)
Feed the troll.. (Score:4, Interesting)
I know this is a troll, but I fear some people actually think that cold-turkey entitlement cutoff makes sense.
If you yank the support out from under such a large portion of the population who *cannot* realistically find work right now (and even if they can find work with non-living wages), you make a lot of people very desperate. Out of this desperation at best you will have higher crime rate as people resort to whatever means possible to keep themselves fed and sheltered. On the worse end of the scale of possibilities, the internet tough guy lynch mobs for the rich become real. This is why the rich and comfortable should not begrudge welfare and similar things, they are the things pacifying the poor to stave off more risky behavior. Police forces will need more money and those not on welfare would incur higher risk. This is also why the wealthy should be all about tax hikes if the government situation seems sufficiently dire to threaten those programs, it would be far cheaper than the alternative.
Foreign aid is a little less absolute, but similar principles apply. If *no one* helps then violence bred by desperation is likely to threaten our resources, our travelers, whatever these nations can get at to extract resources from wealthy nations. You think no one should 'steal' from one and give to another, but without foreign aid there is a chance the afflicted nation will endeavor to steal with no regard for the welfare of the victims. At that point you'd gain the perspective that calling foreign aid spending 'theft' is really inaccurate. Scaling things back I could see, but I think that foreign aid is a small piece of the pie.
I also agree that our military is overextended and measures must be taken to scale back our presence, but being all or nothing stands to seriously destabilize some places absolutely dependent upon our presence.
Re:If we just cut planned parenthood (Score:4, Interesting)
FTFY
In my opinion, for $1 of my money, they can keep the planned parenthood program. We can evaluate that once we get to the point where that little bit of money begins to matter. We have wars in Iraq, Afghanistan, and other military or paramilitary spending in so many other programs that the $1 for planned parenthood is the least of our concerns for now.
At the bare minimum... at least the entitlement programs like SS, welfare, planned parenthood, and medicaid go into the pockets of the people of the US (except for big pharma which should be addressed) instead of only being vaporized in labor, bombs, and gifts in other parts of the world. Too bad we can't have our military do the big service projects inside of the USA like dam / bridge / road building and maintenance. At least then we could keep our coveted military spending AND we would get some rather direct benefits from it domestically.
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Planned Parenthood has very little to do with abortion. The name itself describes exactly what its prime operative is. It is to help people plan their parenthood. Why? So that they don't raise children improperly, become bankrupt and end up costing tax payers far more than this program would have saved to begin with. You need to turn off the radio and do some research into this.
Re:If we just cut planned parenthood (Score:4, Insightful)
Question - Might that $300 million be an investment that saves the government a lot of money?
You know, in
-Medicaid or unpaid emergency room care for pregnancies, miscarriages, and births
-Medicaid or unpaid care for STDs
-Social Security disability payments for children born with severe birth defects due to lack of proper prenatal care
-GDP shrinkage from family members having to stop working to care for the above children
-Prison housing expenses for extra unwanted children from late teens onward
-Police expenses from extra unwanted children from late teens onward
Also,
That's $1, you moron.