US gubmint shutdown + default + subprime sequel?

[Louis VI the Fat]

Hmm...that bastion of global stability and sanity, China, does not hold the world ransom with silly wars and global financial meltdowns, do they?


* doesn't even bother to read the agreement anymore, looks up Beijng's telephone number instead *

[ICantSpellDawg]

China holds a little over one trillion of U.S federal debt. Not even 10% of the total. I'm not sure why everyone is so crazy about it.

[Centurion1]

China holds a little over one trillion of U.S federal debt. Not even 10% of the total. I'm not sure why everyone is so crazy about it.

Media hype regarding the evil Chinese holding america by the nuts. 1 trillion is quite a bit though lets be honest and it could screw up up if they came knocking.

[Beskar]

Taxes should be as simple as humanly possible, both for the individual to understand and the state to enforce.

Agreed.

[Lemur]

Less taxes = Less income = greater deficient = ??? = More money and out of debt!

There is such a thing as the Laffer Curve, which demonstrates that too-high taxation drives people into tax avoiding behaviors, lowering the overall take. So in some situations, lowering taxes really does increase revenues. However, some people take this as a fundamental truth, that lower taxes will always produce more money, a thought so illogical and self-evidently false that it's kinda hard to argue with.

Historically, we're at very low levels of taxation right now. So arguing that further tax cuts will yield more revenue has more to do with posturing and dogma than anything empirical. The Bush tax cuts, which heavily favored high-income earners and investment revenue, failed to yield a significant gain in revenues, which would indicate that the U.S. was already at or below the optimal point on the curve.

[ICantSpellDawg]

There is such a thing as the Laffer Curve, which demonstrates that too-high taxation drives people into tax avoiding behaviors, lowering the overall take. So in some situations, lowering taxes really does increase revenues. However, some people take this as a fundamental truth, that lower taxes will always produce more money, a thought so illogical and self-evidently false that it's kinda hard to argue with.

Historically, we're at very low levels of taxation right now. So arguing that further tax cuts will yield more revenue has more to do with posturing and dogma than anything empirical. The Bush tax cuts, which heavily favored high-income earners and investment revenue, failed to yield a significant gain in revenues, which would indicate that the U.S. was already at or below the optimal point on the curve.

We are only at historically low tax levels for the wealthy. General taxes for the middle class are higher than they have ever been if you look at the last 200 years. Tax rates for the poor and wealthy are at historic lows.

[Centurion1]

Less taxes = Less income = greater deficient = ??? = More money and out of debt!



Agreed.

That would be where basic economics come into play.

[Xiahou]

Less taxes = Less income = greater deficient = ??? = More money and out of debt!

I said "we should eliminate deductions and lower rates accordingly". Read it again, think about it for awhile, then respond.

[Tellos Athenaios]

Media hype regarding the evil Chinese holding america by the nuts. 1 trillion is quite a bit though lets be honest and it could screw up up if they came knocking.

More specifically, the issue is not China but the fact that there is so much debt that it can seriously mess up your exchange rates. That in turn makes it hard to finance if the markets decide to appreciate the USA on less favourable terms, or if someone decides to go an play with a $1tn lever of course.

[PanzerJaeger]

There is such a thing as the Laffer Curve, which demonstrates that too-high taxation drives people into tax avoiding behaviors, lowering the overall take. So in some situations, lowering taxes really does increase revenues. However, some people take this as a fundamental truth, that lower taxes will always produce more money, a thought so illogical and self-evidently false that it's kinda hard to argue with.

Historically, we're at very low levels of taxation right now. So arguing that further tax cuts will yield more revenue has more to do with posturing and dogma than anything empirical. The Bush tax cuts, which heavily favored high-income earners and investment revenue, failed to yield a significant gain in revenues, which would indicate that the U.S. was already at or below the optimal point on the curve.

Not exactly true. Or, at least, not confirmed.

There was an anticipated dip in revenues directly after the cuts (made much worse by the 9/11 recession), but they shot up dramatically during the latter half of the Bush presidency and exceeded those of the Clinton years until the financial collapse, which, of course, had nothing to do with rates. Revenues are also anticipated to grow dramatically (inflation adjusted) within the next decade based on the Bush rates if and when the economy rebounds. This would indicate that there was still room on the curve for beneficial revenue growth when Bush made his cuts.

[jirisys]

Not exactly true. Or, at least, not confirmed.

There was an anticipated dip in revenues directly after the cuts (made much worse by the 9/11 recession), but they shot up dramatically during the latter half of the Bush presidency and exceeded those of the Clinton years until the financial collapse, which, of course, had nothing to do with rates. Revenues are also anticipated to grow dramatically (inflation adjusted) within the next decade based on the Bush rates if and when the economy rebounds. This would indicate that there was still room on the curve for beneficial revenue growth when Bush made his cuts.

I'm sorry, were you wrong?

~Jirisys ()

[PanzerJaeger]

I'm sorry, were you wrong?

~Jirisys ()

I'm not sure that graph is making the point you think it is.

The budget deficit relates to spending, while tax rates impact revenues. Even if revenues are very high, higher spending will result in a deficit, which is what occurred during the Bush years.

Even in your graph, you can clearly see the jump in revenues effecting the deficit after the the tax cuts - which is clearer in this one.

[Centurion1]

I'm sorry, were you wrong?

~Jirisys ()

Jsiriys blocked me for asking if he was a troll so he can't read this but here are a few points.

Is that a projections graph? Are you bringing into this mere speculation? And then for even greater joy are you bringing in speculation without even the source from which this graph sprung?

Not to mention that budget deficit as a percentage of GDP is not what is being discussed here. The issue being discussed is the governments tax revenue over time when faced with tax cuts.

All you are saying is that the government is spending more money over time, more than they bring in. SMH

I'm sorry is everything you just posted nonsensical?

[Major Robert Dump]

Well now that the country has been saved all those wealthy corporations can finally start creating some jobs with all that extra money they have!!!!!

PS. I find it funny that the medicare cuts come from providers not beneficiaries. So the amount of care to the elderly remaines the same, the government just re-imburses providers less which means in return they raise prices for everyone else to compensate. Classic Washington bait-and-switch.

PSS. I'm adding this because it's funny and this is the closest thread I can find. Electric company wants to raise rates by @$6 per month per household in order to recuperate millions in investments they have recently made. I don't hink they understand the meaning of the word investment.http://www.newsok.com/article/3589753

[drone]

Even in your graph, you can clearly see the jump in revenues effecting the deficit after the the tax cuts - which is clearer in this one.

I'm willing to wager that these extra revenues are capital gains taxes brought in by the housing bubble and have little to do with "benefits" from the Bush tax cuts. Just as the ~2000 hump in revenues is attributed to capital gains from the tech bubble.

[jirisys]

Jsiriys blocked me for asking if he was a troll so he can't read this

Oh my, do you just really ask me that? Well my little centaur, IIRC, you once said I blocked you because you disagreed with me, now because you dared to insult me with such obscene and uncalled for question. Think of the Children!
Make up your mind will ye.

I posted the graph because I thought it was pretty, and I didn't care to make a point, I just wanted to see all you politically correct people try to destroy an unexistent point.

So I just posted it, put up a question which no one answered, and now I'm off to do naughty things with my hands and some moisturizer. My coital relationships are doing so well right now.

So analize the graph yourselves, I don't even care really.

Now I'm off. On my magic pedophiliac mustache carpet!

~Jirisys ()

[PanzerJaeger]

I'm willing to wager that these extra revenues are capital gains taxes brought in by the housing bubble and have little to do with "benefits" from the Bush tax cuts. Just as the ~2000 hump in revenues is attributed to capital gains from the tech bubble.

Capital gains certainly played a part, but a large portion of the revenue gain was from corporate income taxes, which had little to do with housing and plays into the supply side argument. Of course, the impact of tax rates - positive and negative - play a distant second fiddle to the greater trajectory of the economy.

***

So the deal is done. Who won? Or... more accurately, who lost the least?

Let's be sure to attach the word "tentative" to the debt ceiling deal that members of Congress will begin debating Monday — and then will accept or reject. Given official Washington's tendency throughout this process to take one step forward and two steps back, none of us should be shocked to see still more clumsy footwork.

But for now, let's pretend that the accord announced Sunday night will hold together and become law. If so, we will be pleased to forget for a while the fear about a potential debt default. This deal settles that threat for now, and also makes a down payment on reducing future deficits. Both good.

Perhaps most important for the long run, the American people emerge from this process much more aware that the enormity of their government's borrowing — another day, another $4 billion — threatens the future prosperity of their children and their nation.

If you've followed the twists and turns of recent weeks, you know the genealogy of this plan: It's descended from the bill that House Speaker John Boehner eked through his chamber Friday.

In many ways, the architecture of this deal reflects Republican designs. Think back to early 2011 and the earliest discussions of a need to acknowledge the nation's stratospheric increase in debt by raising the legal limit on that borrowing. Democrats wanted a "clean" hike in the debt ceiling, nothing attached.

Instead, President Barack Obama and Democratic legislative leaders now have agreed to linking that hike to companion trillions of dollars in future deficit reductions. The Democratic demand for tax increases, once evidently non-negotiable, has been pushed to a later debate. Democrats also ceded their previous insistence that a debt ceiling settlement now take the whole ugly topic out of play until after the 2012 election. Not going to happen. The two-phase process that the president described Sunday night follows different protocols than Boehner's framework but has much the same net effect: The debt debate will remain front and center well into the 2012 election cycle. We had supported the Boehner bill for just this reason. A two-phase process keeps the pressure on pols of both major parties. As they ask voters for support, they cannot hide from the dizzying escalation of this nation's debt.

We wish we could guarantee that the enforcement mechanisms built into this deal really would force a bicameral committee, and then the full Congress, to agree on much more dramatic deficit reductions several months from now. That discussion could turn to possible revenue increases, and almost certainly will focus on entitlement programs. That has to be. Without reform, those programs will implode. Come the actual time to cut them, though, many members of Congress will be looking for escape hatches.

Nor is there assurance that the nation's stellar credit rating, which suppresses the cost of borrowing all these trillions, will survive this deal intact. Ratings agencies may decide that Washington just doesn't have the moxie to drop the national debt to an affordable level. On Friday, Moody's Investors Service expressed disappointment over the "limited magnitude" of the emerging deal's spending cuts: "Reductions of the magnitude now being proposed, if adopted, would likely lead Moody's to adopt a negative outlook on the AAA rating," the agency warned.

One other, probably beneficial impact: The long to-and-fro of this process will deprive both parties of attack lines they had been practicing for the 2012 campaign season. Democrats had planned to exploit the proposal from Republican U.S. Rep. Paul Ryan of Wisconsin to reshape Medicare. Republicans often dismiss this line of attack as "Medi-scare," and accuse Democrats of "playing the Granny card." But how can Democrats accuse Republicans of wanting to trim Medicare when their own president proposed cuts to Medicare during the debt ceiling negotiations? Similarly, Republicans will have a hard time saying Democrats alone wanted to raise taxes now that we all know Boehner at one point agreed in principle to hundreds of billions in revenue hikes.

Reforming entitlements, raising revenues — those tactics and many more will come into play if this nation is to unwind its debt. Remember, that debt would continue to grow even if this deal does pass as negotiated.

The so-called "supercommittee" of Congress that would be tasked with the second phase of deficit reductions at least would have ideas it could plagiarize. The president never acted on the December recommendations of his bipartisan fiscal commission. Similarly, bipartisan proposals from the Senate's Gang of Six and from the recent congressional talks chaired by Vice President Joe Biden await action.

No, official Washington has no shortage of ideas. What it lacks is enough spine to make the difficult choices that would extract the U.S. from its dance with the debt devil.

If the deal announced Sunday night is a first step in that crucial rescue, terrific. But, at best, it's only one step in a very long journey.

[jirisys]

I'd imagine the republicans, you can't shoot this kidnapper but you have to save the hostage (the country), so you try not to get daisied as much, but make em not kill the hostage.

~Jirisys ()

[Centurion1]

Oh my, do you just really ask me that? Well my little centaur, IIRC, you once said I blocked you because you disagreed with me, now because you dared to insult me with such obscene and uncalled for question. Think of the Children!
Make up your mind will ye.

I posted the graph because I thought it was pretty, and I didn't care to make a point, I just wanted to see all you politically correct people try to destroy an unexistent point.

So I just posted it, put up a question which no one answered, and now I'm off to do naughty things with my hands and some moisturizer. My coital relationships are doing so well right now.

So analize the graph yourselves, I don't even care really.

Now I'm off. On my magic pedophiliac mustache carpet!

~Jirisys ()

UMMMMMM,

A. You said welcome to my ignore list. as a result you cannot see posts I make regarding you.

B. Don't post worthless things if you "know" they are meaningless.

C. Your question was directed towards saying PJ was incorrect with the usage of your graph as proof on why. This is the only way what you posted can be construed.

D. Now I am wondering if you understand English. What precisely does pedophilia have to do with you blocking me. In fact what precisely is the connection between pedophiles and trolls?

E. I "analized" (awkward spelling when you talk about pedophiles, dirt things, moisturizer, and your hands) the graph and told you what it really meant and why it was worthless.

F. Where exactly is this obscene and uncalled for question?

G. I am running out of letters so this is my last point. Did you realize you posted a worthless and meaningless graph and to backtrack you are now playing off as not caring? There is a question; please inform if you find it "obscene and uncalled for."

PS I am not a centaur i'm just gonna chalk this up yet again to poor spelling I suppose.

[Ironside]

Not exactly true. Or, at least, not confirmed.

There was an anticipated dip in revenues directly after the cuts (made much worse by the 9/11 recession), but they shot up dramatically during the latter half of the Bush presidency and exceeded those of the Clinton years until the financial collapse, which, of course, had nothing to do with rates. Revenues are also anticipated to grow dramatically (inflation adjusted) within the next decade based on the Bush rates if and when the economy rebounds. This would indicate that there was still room on the curve for beneficial revenue growth when Bush made his cuts.

Very questionable. Based on the nice 2007 budget and of the estimated tax loss, those tax cuts would've needed to cause a yearly growth of 0,57% by itself to starting to pay itself off this year, a decade later (that is, it would still take about a decade until the state gained anything on these tax cuts= 2020).

This is the US PPP GDP growth over the years. And I'm not seeing that extra 0,6% there. Rather the opposite.

[Furunculus]

There is such a thing as the Laffer Curve, which demonstrates that too-high taxation drives people into tax avoiding behaviors, lowering the overall take. So in some situations, lowering taxes really does increase revenues. However, some people take this as a fundamental truth, that lower taxes will always produce more money, a thought so illogical and self-evidently false that it's kinda hard to argue with.

Historically, we're at very low levels of taxation right now. So arguing that further tax cuts will yield more revenue has more to do with posturing and dogma than anything empirical. The Bush tax cuts, which heavily favored high-income earners and investment revenue, failed to yield a significant gain in revenues, which would indicate that the U.S. was already at or below the optimal point on the curve.

not forgetting its close association with supply side economics:

http://en.wikipedia.org/wiki/Laffer_...side_economics

taxation at a level over 40% has been shown to have a serious impact on long-term growth potential.

http://ime.bg/uploads/OptimalSizeOfGovernment.pdf

[Fisherking]

not forgetting its close association with supply side economics:

http://en.wikipedia.org/wiki/Laffer_...side_economics

taxation at a level over 40% has been shown to have a serious impact on long-term growth potential.

http://ime.bg/uploads/OptimalSizeOfGovernment.pdf

And this part tell us that government trying to spend us out of problems doesn’t work either:

An empirical analysis of the data from 23 OECD countries (Gwartney et al.20) shows
a strong negative relationship between both (a) the size of government and GDP
growth and (b) increases in government expenditures and GDP growth. A 10
percentage point increase in government expenditures as a share of GDP is
associated with approximately a one percentage point decline in the growth rate of
real GDP. An analysis of a larger data set of 60 countries reinforces the conclusions
reached by analyzing the OECD countries. After adjustment for cross-country
differences in the security of property rights, inflation, education, and investment,
higher levels of government spending as a percentage of GDP exert a strong
negative impact on GDP growth.

[Vladimir]

Spending out of a recession doesn't help but it makes a nice band-aid while the economy heals.

[Lemur]

Spending out of a recession doesn't help but it makes a nice band-aid while the economy heals.

Um, government spending is supposed to be a "band-aid while the economy heals." That's the whole concept. Government spending doesn't create long-term wealth; everybody knows that, or ought to. But when demand dries up, the only entity that can temporarily soften the blow is the guvmint.

Per ejemplo, the last jobs report was dismal. Not because the private sector didn't grow -- it did -- but because all of the states and counties are slashing their payroll as stimulus funds go bye-bye. This suggests that now is not the greatest of all possible times to dig into fiscal austerity.

I've said it before and I'll say it again: America has a short-term growth problem and a long-term debt problem. There's no reason why we can't address both in turn. Going gonzo in debt right now strikes me as counterproductive. Of course, if now is the only time we can address debt, then we'll do what we gotta do. I guess the combination of a recession and a Dem administration makes this the time to do it? Hmm.

I read somewhere that Germany has a sixteen-year plan to deal with restructuring its debt and deficits. Knowing the krauts, I expect they'll pull it off flawlessly. Calling for a balanced budget right now, on the other hand, strikes me as calling for another recession.

Cutting spending endangers the recovery. Significantly raising taxes endangers the recovery. Most economists would say that this is the time when you take a deep breath and deal with deficits until the economy is back on track. We'll see how this plays out, however Maybe our economy can handle constriction in the federal state and county guvmint budgets. Maybe. If so, then release the doves and put John Philip Sousa on the gramaphone.

[Centurion1]

Um, government spending is supposed to be a "band-aid while the economy heals." That's the whole concept. Government spending doesn't create long-term wealth; everybody knows that, or ought to. But when demand dries up, the only entity that can temporarily soften the blow is the guvmint.

Per ejemplo, the last jobs report was dismal. Not because the private sector didn't grow -- it did -- but because all of the states and counties are slashing their payroll as stimulus funds go bye-bye. This suggests that now is not the greatest of all possible times to dig into fiscal austerity.

I've said it before and I'll say it again: America has a short-term growth problem and a long-term debt problem. There's no reason why we can't address both in turn. Going gonzo in debt right now strikes me as counterproductive. Of course, if now is the only time we can address debt, then we'll do what we gotta do. I guess the combination of a recession and a Dem administration makes this the time to do it? Hmm.

I read somewhere that Germany has a sixteen-year plan to deal with restructuring its debt and deficits. Knowing the krauts, I expect they'll pull it off flawlessly. Calling for a balanced budget right now, on the other hand, strikes me as calling for another recession.

Cutting spending endangers the recovery. Significantly raising taxes endangers the recovery. Most economists would say that this is the time when you take a deep breath and deal with deficits until the economy is back on track. We'll see how this plays out, however Maybe our economy can handle constriction in the federal state and county guvmint budgets. Maybe. If so, then release the doves and put John Philip Sousa on the gramaphone.

This is if you believe in a Keynesian economic policy which the USA has subscribed to for decades. This does not make it right.

Government spending is like band aid infected with AIDS

[Xiahou]

Um, government spending is supposed to be a "band-aid while the economy heals." That's the whole concept. Government spending doesn't create long-term wealth; everybody knows that, or ought to. But when demand dries up, the only entity that can temporarily soften the blow is the guvmint.

Do you think that still applies if all the additional government spending is borrowed money? Think about it- deficit spending means the government must sell bonds to spend the money. To sell bonds, someone has to be buying bonds. Buying treasury bonds ties up money that could otherwise have been invested elsewhere in the economy.

If the additional spending was coming from a government "rainy day" fund, I think what you say would be correct. But all the borrowing is bound to have a crowding out effect on private investments.

[Subotan]

Because a significant number of them live in a fantasy world where tax hikes in a stagnant economy are a good idea.

The logic behind that is that lower taxes compel firms to invest and take on more workers. This is not strictly accurate. Although it allows firms to take on more workers, it does not compel firms to take on more workers. The reason that unemployment is so high and growth is so low at the minute is because firms in the States were able to lay off huge amounts of workforce whilst experiencing huge productivity gains by forcing the remaining workers to work harder better faster stronger for fewer and longer. These productivity gains have allowed firms to stay in the black as demand has plummeted; indeed, many firms are now sitting on lots of liquidity which they could choose to expand their business with.

But they haven't! This is because demand has not yet expanded enough to compel firms to expand supply to meet that increased demand. Low taxes aren't doing enough to keep demand up (And, as an aside, all the gains in living standards tha Americans should have from lower taxes are offset by pricier healthcare than the rest of the world). Whilst tax hikes might at first glance seem to reduce demand yet further, this is not necessarily the case. The marginal propensity to consume of the super-rich is low; if you're poor and you get a tenner, you're more likely to go out and spend it immediately than a rich person is. Likewise, taking a tenner off a poor person is more likely to affect their consumption than it is the rich person. By taxing the rich (who, as has been said, are often sitting on piles of cash as well as having done very well over the past decade), in order to redistribute to the poor (E.g. studies have shown that food stamps and unemployment benefit are the single most effective means of increasing wealth in the economy, per $ spent by the government) demand can be increased, and the deficit can be brought down.

[Lemur]

Government spending is like band aid infected with AIDS

Vivid!

[D]eficit spending means the government must sell bonds to spend the money. To sell bonds, someone has to be buying bonds. Buying treasury bonds ties up money that could otherwise have been invested elsewhere in the economy.

Sure, this is something economists have been arguing about for decades. Remember when it looked like we'd be buying back all of them government bonds in the '90s? There was a lot of panic about what effect not having government debt would do. Seems so naive and quaint at this reserve.

Absolutely, government debt gobbles up some investment capital. What effect does this have? Who knows? People buy bonds for stability, so I would imagine that a lot of that money would pour into other "safety" investments. Commodities would probably shoot up, as would muni bonds.

If I had to choose between deficit spending intended to prop up the economy vs. doing nothing (or worse, a 44% unplanned constriction in fed funds), I'd pick the deficit. For now. Long-term it's unsustainable, of course, but nobody in their right mind is arguing that we should continue deficit spending indefinitely. Short term problem: growth. Long-term problem: debt.

[Subotan]

This is if you believe in a Keynesian economic policy which the USA has subscribed to for decades. This does not make it right.

whaaaaaattt

[Centurion1]

whaaaaaattt

Through the 1950s, moderate degrees of government demand leading industrial development, and use of fiscal and monetary counter-cyclical policies continued, and reached a peak in the "go go" 1960s, where it seemed to many Keynesians that prosperity was now permanent. In 1971, Republican US President Richard Nixon even proclaimed "we are all Keynesians now".[18] However, with the oil shock of 1973, and the economic problems of the 1970s, modern liberal economics began to fall out of favor. During this time, many economies experienced high and rising unemployment, coupled with high and rising inflation, contradicting the Phillips curve's prediction. This stagflation meant that the simultaneous application of expansionary (anti-recession) and contractionary (anti-inflation) policies appeared to be necessary, a clear impossibility. This dilemma led to the end of the Keynesian near-consensus of the 1960s, and the rise throughout the 1970s of ideas based upon more classical analysis, including monetarism, supply-side economics[18] and new classical economics. At the same time, Keynesians began during the period to reorganize their thinking (some becoming associated with New Keynesian economics); one strategy, utilized also as a critique of the notably high unemployment and potentially disappointing GNP growth rates associated with the latter two theories by the mid-1980s, was to emphasize low unemployment and maximal economic growth at the cost of somewhat higher inflation (its consequences kept in check by indexing and other methods, and its overall rate kept lower and steadier by such potential policies as Martin Weitzman's share economy).[19]

There was a lack of consensus among macroeconomists in the 1980s. However, the advent of New Keynesian economics in the 1990s, modified and provided microeconomic foundations for the neo-Keynesian theories. These modified models now dominate mainstream economics.

FDR also obviously followed to a form of Keynesian economics as well. I never said any of the people using it were necessarily purists nor that it was an unbroken chain of proponents of the theories of Mr. Keynes but at least some form of Keynesian policy was used. There was a break in the 80's when it fell out of favor following the economic failures of the 1970's and altered theories came to prominence in the 1990's till now which I believe would alone constitute the term "decades"

so yeah....... pretty easy stuff to find out on your own so that you don't have to be corrected trying to correct me.