No Deficit Reform = We Are Toast

[theaustinescorts]

At the very moment when it would be easiest to begin raising taxes and cutting spending [both being necessary] it is clear that what's going to happen instead is that taxes will be lowered and spending will be increased.

If you take the hundreds of billions of dollars in lost revenue by extending the Bush cuts another three years and divide them by the number of unemployed who'll now have their benefits extended again, how much is each unemployed person costing us in lost revenue?

Our generation of politicians are without any ability whatsoever to meet any of the otherwise mundane challenges we face. What should be simple little compromises to remedy problems are always rejected, causing disasterous outcomes.

Apparently even a crisis will not bring them to act.

ps - please no ideology that tax cuts are will spur growth because no economist believes that private sector spending is more stimulative than government spending.

[SoSideGuy]

The following graph says all you need to know about how manufactured the "crisis" is around the deficit.

http://blogs.reuters.com/felix-salmo...day-u-s-taxes/

Taxes are at an all time low as a percentage of GDP and are particularly so for the wealthy. Social Security has almost nothing to do with the deficit, which is mostly due to Medicare/Medicaid. What we have is all out class war on behalf of the rich with working people getting their asses kicked. In any sane universe the extra tax cuts for the wealthy would expire.

[theaustinescorts]

Warren Buffet is fond of pointing out that his secretary pays a higher tax rate then he does.

I actually agree with those who demand lower taxes in this country, but this cause like all others must take a backseat to deficit reduction.

In times past there would have been a compromise, and taxes would have been increased somewhat in exchange for decreased spending...

...but instead we got exactly the opposite.

This will continue until we can no longer sell our debt to anyone.
When that happens the DOW will plunge by 80% and everyone's retirement savings will be wiped out. Interest rates will skyrocket, and half of taxes collected will be demanded by our creditors for debt service. The military budget will be slashed, and our troops brought home as our rivals move in to fill in the vacuums we leave behind.

There will be a REAL depression like 1930-1940, and no "stimulus" will be available. There will be no solution. None.

Can it be that the Russians and the Chinese have defeated us?
We outlasted their communist leaders, but their successors have proved to be better capitalists then we are. We have defeated ourselves just as their communist tyrants defeated themselves.

Our way of doing things, which has gone on without reform for decades, will give way to a new order with new power centers. Our principles of freedom and civil rights will be discredited also, and that's a shame.

[austin_guy08]

A serious question here because I'm curious. Just how much of my money do you think the government is entitled to? Do you agree with the Democrats that the estate tax should go up to 55% on estates worth $1 million or more?

[theaustinescorts]

To avoid total disaster spending needs to slashed and taxes need to be increased. Both must happen. It won't do anyone any good to hold onto a little bit more of their income if they have no income any longer because we're in a depression from which it's impossible to ever emerge.

For God's sake we're borrowing 40% of all Federal monies spent and IT ALL MUST BE PAID BACK.

Economists such as Jim Galbraith in Austin who claim that the debt need never be repaid are living in a dream.

The fact that this agreement even happened has shaken the world credit markets to the core and they're now afraid that we will have no choice but to default...

You will however never hear this in the media...the same media that told us that Enron and Worldcom were the best companies on the planet, that "brick and mortor" companies were a thing of the past, and that derivatives and hedge funds were the most progressive, innovative sectors of the economy.

When the credit market collapse it will come as a total surprise to the press, but it's now in the making and is unavoidable.

By now the public might be aware that the media, and that includes magazines and newspapers not just Fox News, knows absolutely nothing of importance about anything. Everything they publish is a distortion.

[saj1000]

Live fast, die young, and leave a good looking corpse. Why should people save money for a retirement when the whole system will be defunct?

[machina70]

Originally Posted by austin_guy08

A serious question here because I'm curious. Just how much of my money do you think the government is entitled to? Do you agree with the Democrats that the estate tax should go up to 55% on estates worth $1 million or more?

Anyone worried about estate taxes on large estates is someone who's not in good standing with the current estate holder. There are so many easy ways around the estate tax. But they require the current estate holder to actually want you to get their holdings.


But here's the bottom line. Taxes are for poor people. The "high" taxes on the rich is a myth(with the exception of movie stars, sports stars, and some executives).
Taxes are easy to manipulate as long as you're not drawing your income purely as a salary.(there are very few pure salaries above 400k, most people in the upper class make money off a variety of sources and have many tax options)
The rich are generally rich for a reason.

[theaustinescorts]

Were the tax rates in the '90s really so bad?

All this fuss about extending the Bush tax cuts treats the rates that applied before Bush as an outrage, but at the time few were complaining because everyone was getting rich.

Before Bush and his tax cuts, massive spending and deficits, we were on a stronger footing with much lower debt and unemployment. The Bush tax cuts contributed greatly to the present disaster. In fact everything Bush did was a disaster. He ran the government the same way he ran all those failed businesses his father's friends gave him, like a trust-fund brat running up daddy's credit card.

What was needed after Bush is the kind of President Obama promised to be...was isn't.

[davidsmith0123]

AustinEscorts, let's at least get the facts right. Tax cuts are stimulative. Perhaps you should read Romer and Romer's American Economic Review paper from earlier this year. You know, Christine Romer, well respected academic economist and very recently highly placed in the Obama administration.

A serious debate on this matter would separate short term stimulus implications and implications for long term growth. High government spending levels probably provide some short term stimulus, although reasonable economists debate the size of the so-called multipliers. The relative merits of high government spending for encouraging long term growth are subject to much more debate.

A serious discussion could also involve just how much of GDP we want to devote to government spending on goods and services, and how much we want to devote to government transfer payments. Then we can go to the step of deciding how we will pay for it.

Paying for government spending with taxes or debt can be a bit of a red herring. The deficit is like buying goods on credit cards -- as long as the total debt is not too high, the deficit increases the debt, and we pay somewhat higher taxes every year to cover interest on the bigger debt. The alternative is to pay a lot higher taxes in one year and not run a deficit. This is largely a matter of timing -- we (or our children) pay either way, now or later. There are often good arguments for raising taxes just a little over many years rather than a lot in one year.

Of course, if the debt becomes unsustainably large, then we have a whole different problem. My understanding is that the forecasted future debt levels under some scenarios regarding future tax collections, social security benefit payments, and especially Medicare benefit payouts, are unsustainable. This is a serious problem, and the president's deficit (should be debt) reduction commission released ideas recently that met with disapproval from both sides of the aisle.

Leaving aside issues of sustainability, an important debate is the political struggle to determine who pays for this government spending. I'm guessing from your posts that whatever is the level of spending, you want "the rich" to pay more for the spending we all desire.

***

On a lighter note, I would like someone else to pay for at least some of my spending, and since I cannot extract taxes I am taking donations. For the common good and all. I promise my spending will be stimulative -- I have in mind a couple of very stimulating ladies!

[theaustinescorts]

The debt is unsustainable NOW. 40% of all Federal spending is now borrowed, and the credit markets will no longer tolerate this.
The markets are looking for signs of a willingness or ability to pay future commitments, and they are not finding it. This administration and congress is utterly indifferent to whether there is any ability to honor these commitments or not - they are continuing to act for short-term political advantage.

Returning to the tax rates of the 1990s is a necessary [and painless] first step, and there will need to be even more taxes raised AND DEEP SPENDING CUTS to resolve this problem.

Doing so will hinder growth, but there is no alternative. I repeat: There is No Alternative. We are in the same condition as Ireland and Greece, but there is no one to bail us out. The British have a similar level of debt as ourselves, but they are addressing theirs will tax increases and spending cuts we are unwilling to do!

Our choices are to hinder growth with more taxes and less spending in order to decrease borrowing, OR to continue to borrow until the credit markets collapse and we wake up with a depression. There will be no escape from this depression either as we will not be able to borrow anything to combat it. There will be no recovery - ever.

When this depression strikes it will be totally unforseen by the politicians, economists, and media.

It will strike just as unforseeably as all the other financial crisies which have happened lately - the mortgage meltdown, the banking crisis, the dot-bomb crisis, etc. All these sudden crisies occurred without any warning from economists or the media. But they were known to industry insiders. Funny how they always keep what they know to themselves.

As far as tax cuts being stimulative I'm sure there's a mountain of "scholarly" writing seeking to claim such, as the field of macroeconomics is mostly political BS. It is not real science, but pseudo-science. However I think it's clear that government spending feeds directly into the economy to increase aggregate demand. Keeping amounts otherwise taxed in the hands of citizens divides those funds between spending, savings and investment. Given that there's no direct growth advantage to cutting taxes, doing so must be evaluated in terms of it's other consequences - in this case the effects of increasing debt.

Overall, the debt-fighting measures which must be undertaken will slow growth because monies otherwise going into demand will be payed out to creditors.

That's what happens when you borrow more than you should. Some times you can't borrow any more just when you need to the most.

The ultimate issue here is of course our loss of manufacturing and colossal trade deficits. This is the heart of the matter and explains why we have to borrow in the first place to make up for the wealth we would otherwise have, but have no longer because we've given away our sources of wealth - TRADE!!!

btw - even with the dollar at pathetically low values trade balances are still in huge deficit every month without any prospect of reversal. The low dollar helps only a little.

[satchel22]

make
Marina do outcalls and i'm sure we can fight this debt together.

[theaustinescorts]

Marina and her ample breasts are doing everything they can right now without the further burden of the entire national debt and it's consequences weighing further upon her.

Again it bears [and not "bares" as in Marina's breasts] repeating...the reason why we have this problem is that we're not generating the wealth we used to because of imbalanced trade, and therefore we've been borrowing so we can continue spending to mask this loss of product. This is related to the mortgage crisis as well as the reason why people were given loans they couldn't afford was to keep home ownership levels from falling due to declining wages. It was a political band-aid that backfired economically when greedy bankers used mortgages as security for otherwise worthless bonds.

Our economists have totally failed us. No persistence of trade imbalance will cause them to yield from their free-trade dogma, and thereby allow us to learn by their embarrassment that they were wrong about it all along. Free-trade theory is supposed to result in INCREASED POSITIVE trade balances, not an unending reversal of such.

Now at just the time when we need to borrow more it's important that we not do so, for if we do a total disaster will ensue from which we can never emerge.

What economist or news source will warn us of this? None.

It will strike suddenly.


ps - For those of you who assume that economic recovery will always happen, what was the GNP in 1941? Was it even as much as 1929 when the depression began? I think by 1932 GNP had fallen by at least 30% from 1929, and I don't think it ever regained until war mobilization forced it too....

[gnadfly]

The deficit is kinda like illegal immigration. Before we grant 'amnesty' we need to secure the borders to ensure millions don't come over to the reward of citizenship. Before we raise taxes, the govt needs to demonstrate fiscal responsibility. The 'compromise' basically is more govt spending. If you can't find a job in two years and your unemployment runs out, you need to either move or find another line of work.

Simply raising taxes is going to lead to more govt spending and keep the economy in the dumps.

How's that change working for you, hostage?

[DRorchia]

gnadfly brings up a good point. I don't think there's many Americans who would be against a tax raise (or as TAE puts it, a return to 1990's tax levels) if there were some kind of checks and balances that the people had to make sure that Congress wouldn't just blow their wad again as soon as we have a balanced budget. The American people have seen this cycle repeated too many times and quite frankly have become cynical. This is the real reason why so many Americans are against a tax increase. It's not that we don't want to do our part, it's not that we don't recognize that the only way out of this mess is to take more money in than we spend. However without some kind of guarantee that the government won't put us right back in the same mess again, most Americans simply don't want to throw good money after bad......as the saying goes. Today's representatives for the large part have shown that they will do what serves their interests alone, not that of the people they've been sworn to represent. So the REAL fix needs to be a fundamental change of the system.
1. Mandatory term limits for Senators and Congressmen
2. An immediate end to lifetime benefits to Congressmen and Senators for serving only one term
3. Complete overhaul of Social Security, Welfare and Medicaid systems
4. A voting process similar to what cities currently have when they want to pay for big ticket items. In other words, before Congress can spend money on big ticket items, the people get a say. We do it now when cities want to pay for things, the people vote whether or not they want to approve the bonds. The same thing should be happening on the Federal level so that the people can control or have a say in Congressional spending.
Once these issues have been addressed, I'm sure most Americans won't mind doing their part by tolerating a tax increase.

[rCoder]

Originally Posted by DTorchia

1. Mandatory term limits for Senators and Congressmen

Just prohibit all incumbents from running for office while they are in office.

Originally Posted by DTorchia

2. An immediate end to lifetime benefits to Congressmen and Senators for serving only one term

+1

Originally Posted by DTorchia

3. Complete overhaul of Social Security, Welfare and Medicaid systems

Privatize.

Originally Posted by DTorchia

4. A voting process similar to what cities currently have when they want to pay for big ticket items. In other words, before Congress can spend money on big ticket items, the people get a say. We do it now when cities want to pay for things, the people vote whether or not they want to approve the bonds. The same thing should be happening on the Federal level so that the people can control or have a say in Congressional spending.
Once these issues have been addressed, I'm sure most Americans won't mind doing their part by tolerating a tax increase.

Better yet, terminate all unconstitutional programs. Then each individual can decide what projects they want to fund by how much they invest/donate.