America's Debt: Shame on Them

[Wry Catcher]

America's debt: Shame on them | The Economist

IN THREE weeks, if there is no political deal, the American government will go into default. Not, one must pray, on its sovereign debt. But the country will have to stop paying someone: perhaps pensioners, or government suppliers, or soldiers. That would be damaging enough at a time of economic fragility. And the longer such a default went on, the greater the risk of provoking a genuine bond crisis would become.

There is no good economic reason why this should be happening. America’s net indebtedness is a perfectly affordable 65% of GDP, and throughout the past three years of recession and tepid recovery investors have been more than happy to go on lending to the federal government. The current problems, rather, are political. Under America’s elaborate separation of powers, Congress must authorise any extension of the debt ceiling, which now stands at $14.3 trillion. Back in May the government bumped up against that limit, but various accounting dodges have been used to keep funds flowing. It is now reckoned that these wheezes will be exhausted by August 2nd.

Now, however, the Republicans are pushing things too far. Talks with the administration ground to a halt last month, despite an offer from the Democrats to cut at least $2 trillion and possibly much more out of the budget over the next ten years. Assuming that the recovery continues, that would be enough to get the deficit back to a prudent level. As The Economist went to press, Mr Obama seemed set to restart the talks.

The sticking-point is not on the spending side. It is because the vast majority of Republicans, driven on by the wilder-eyed members of their party and the cacophony of conservative media, are clinging to the position that not a single cent of deficit reduction must come from a higher tax take. This is economically illiterate and disgracefully cynical.

And the closer you look, the more unprincipled the Republicans look. Earlier this year House Republicans produced a report noting that an 85%-15% split between spending cuts and tax rises was the average for successful fiscal consolidations, according to historical evidence. The White House is offering an 83%-17% split (hardly a huge distance) and a promise that none of the revenue increase will come from higher marginal rates, only from eliminating loopholes. If the Republicans were real tax reformers, they would seize this offer.

Both parties have in recent months been guilty of fiscal recklessness. Right now, though, the blame falls clearly on the Republicans. Independent voters should take note.

The article sums up the current situation quite well.

I find it sadly funny that someone would post a counterpoint to The Economist with an editorial from the WSJ, a Murdoch controlled paper.

Thanks for posting this article.

 

[DontBeStupid]

I maxed out a cc in college, asked for a higher limit, was denied, and then I continued to pay off my debt. I never defaulted. I'm just not getting all this trumped up end of the world, armageddon stuff if we don't raise the limit. If anything, it will show that we're serious that we're gonna STOP racking up debt.

Imagine your power bill was being automatically charged to that card. You hit your limit, and didn't have the cash to pay the bill or pay down the card.

You refuse to increase your limit.

How long before your power is turned off?

 

[Modbert]

Isn't it the least bit odd that every other developed country that is faced with similar debt problems are ALL cutting taxes and spending? NOBODY is raising taxes, NOBODY. Must be a buncha fools I guess.

UK slashes spending, raises VAT and taxes banks | Reuters

Germany cuts jobs, raises taxes - thestar.com

Germany to Raise Taxes on Tobacco, Cut Energy Subsidies Less Than Planned - Bloomberg

FT.com / Europe - France unveils

Austria to Cut Deficit to 3.2% of GDP With Taxes - Businessweek

Dutch insurance premium tax increase to 9.7% in 2011

Japan to raise taxes for quake rebuilding, reports say - The Globe and Mail

Japan raises taxes on cigarettes | Local | House of Japan - Japan News Technology Autos Culture Life Style

Indonesia to raise 2011 tobacco excise tax by 5 pct | Reuters

UPDATE 1-Albania to raise taxes on telecoms, banks -PM | Reuters

Spain, Struggling With Weak Economy, Raises Taxes, Attacks Business | Centurean2′s Weblog

Putin Raises Russia

I could go all day really. Point is, saying nobody is raising taxes or has raised taxes is nothing short of ignorance.

 

[Modbert]

And when the next debt ceiling is met VERY shortly...then what?
Right - we raise it again and again and again.
It has to stop. It HAS to stop.
Everyone can agree on one thing - unfunded Social Security, medicare/aid obligations will reach 100% of GDP in our lifetime or our childrens lifetime.
And THEN we can talk default. THEN we will default for sure.

Personally, I am 100% OK with dealing with significant pain in the next 5-10 years if it means this country will reverse it's gross irresponsible spending habits and get our financial house back in order.

or - we can ignore our unsustainable spending (again) and face dire circumstances that everyone knows is coming.

Except a deal is going to be made to lessen the debt. Furthermore, you're okay with dealing with significant pain for the next 5-10 years but are trying to say that everything will be a-okay if we don't raise the debt ceiling. We both know of the consequences if we don't raise the debt ceiling. It will only make it more difficult to pay off our debt in both the short and long term.

I also notice you have no comment about S&P saying they will lower our credit rating to a D.

 

[code1211]

When I get into financial trouble the solution I always turn to is spending more money.

How would you raise the value of your house without spending money on home improvements? It's the same with the economy.

That might be true if the money was spent on improving the House. If the money was spent on something unrealted to improving the house, the value of the house would not increase at all.

If the money spent on shoring up the jobs of union employees across the nation was spent on improving the economy, maybe it would have helped. Sadly it was wasted. This is more akin to stocking up the liquor cabinet and having a big party. It was money spent IN the house, not ON the house.

Now the money's gone, the house is still in a shambles and there is nothing left in the bank to do the work that should have been done with the party money.

Well, at least we had a good time.

 

[LordBrownTrout]

I maxed out a cc in college, asked for a higher limit, was denied, and then I continued to pay off my debt. I never defaulted. I'm just not getting all this trumped up end of the world, armageddon stuff if we don't raise the limit. If anything, it will show that we're serious that we're gonna STOP racking up debt.

Imagine your power bill was being automatically charged to that card. You hit your limit, and didn't have the cash to pay the bill or pay down the card.

You refuse to increase your limit.

How long before your power is turned off?

That exact scenario happened when I was in college. I called the electric company and worked out a deal to where I could pay reduced payments until I could afford the monthly bill. My service was never cut off. The key was that I took initiative and worked with the utility company.

 

[Modbert]

I maxed out a cc in college, asked for a higher limit, was denied, and then I continued to pay off my debt. I never defaulted. I'm just not getting all this trumped up end of the world, armageddon stuff if we don't raise the limit. If anything, it will show that we're serious that we're gonna STOP racking up debt.

S&P said they will lower our credit rating to a D if we do not raise the debt ceiling. Comment on that? And furthermore, do you know the implications if S&P does that?

 

[Modbert]

That exact scenario happened when I was in college. I called the electric company and worked out a deal to where I could pay reduced payments until I could afford the monthly bill. My service was never cut off. The key was that I took initiative and worked with the utility company.

And are you going to rely on hoping that the same thing happens here?

 

[code1211]

The OP is, again, drinking Kool-aid.
The government will not default. That is laughably inaccurate - but as usual simpletons buy into the hysteria.
They will still have 70% of their income coming in without pause.
In reality the left is in horror at the thought of cutting government spending because, like the OP, they are hard wired to believe that government spending solves everything.

The truth is - a refusal to raise the debt ceiling will force the government to take a look at its house of cards that it has been building for 30 years - AND ACTUALLY DO SOMETHING ABOUT IT.

I think revenue is closer to 60% but why quibble. The more important part you left out is that revenue is not a constant steady stream into the government over the course of the year. There are some months when the government brings in less and some months more. If August is a low month, that makes the problem even worse.

The government defaults if it doesn't pay legally obligated bills. Any of them. If we bring in only 60% or less, we will default.

That is not accurate. The Executive Branch will need to make choices to pay some accounts and not others. Who gets paid and who gets stiffed is entirely the at the discretion of the President.

 

[DontBeStupid]

It was money spent IN the house, not ON the house.

Any money spend by the government IN the country is money spent ON the country. That's a big part that many people fail to see.

 

[007]

Only a dishonest liberal political hack can take the trillions wasted by obama and the dems in the last two and half years, and turn it around and say the republicans should be ashamed.

Utter, blatant and total dishonest liberal hackery.

 

[code1211]

The OP is, again, drinking Kool-aid.
The government will not default. That is laughably inaccurate - but as usual simpletons buy into the hysteria.
They will still have 70% of their income coming in without pause.
In reality the left is in horror at the thought of cutting government spending because, like the OP, they are hard wired to believe that government spending solves everything.

The truth is - a refusal to raise the debt ceiling will force the government to take a look at its house of cards that it has been building for 30 years - AND ACTUALLY DO SOMETHING ABOUT IT.

Except the President has already put a offer on the table and has even made discussions about cutting both Social Security and Medicare. Also as The Economist points out, the deal being offered right now is pretty much what the GOP wanted.
Furthermore, you seem to think that having only 70% of their income coming in would be a good thing even for the short term. Any reason you decided to ignore warnings from say S&P that will drop our credit rating to a D if we don't raise the debt ceiling?

Are you saying that the deal being offered includes no tax increases, has a dollar of spending reduction for every dollar of increased debt limit and the Ryan Budget is adopted?

This is the only place that I've heard of this offer.

 

[LordBrownTrout]

I maxed out a cc in college, asked for a higher limit, was denied, and then I continued to pay off my debt. I never defaulted. I'm just not getting all this trumped up end of the world, armageddon stuff if we don't raise the limit. If anything, it will show that we're serious that we're gonna STOP racking up debt.

S&P said they will lower our credit rating to a D if we do not raise the debt ceiling. Comment on that? And furthermore, do you know the implications if S&P does that?

I'm not sure what the implications are. I don't recall that we ever lowered our ceiling.

 

[xsited1]

America's debt: Shame on them | The Economist
...

Good comment:

This standoff has ritualistic qualities. In numerous election cycles, the Republicans try to rein in spending. The Democrats play "they are pushing granny off a cliff in her wheelchair" and turn the blame around. Expect more of the same this time. Meanwhile, the spending keeps going up. The Economist is doing us a disservice not mentioning that the Senate Democrats are in breach of the law by refusing to release a budget for two years, that Obamas February budget was an intentioned joke that not one Democrat even voted for, and that Reagan and the Republicans were hoodwinked in the 80's by a "tax and cuts" deal in which the cuts never came, but the taxes by the Democrats surely did. The article is surely one sided.

Of course, the Republicans have not always tried to reign in spending. Bush-II and Bush-III (a.k.a. Obama) are good examples, but otherwise the comment is spot-on.

 

[Modbert]

Only a dishonest liberal political hack can take the trillions wasted by obama and the dems in the last two and half years, and turn it around and say the republicans should be ashamed.

Utter, blatant and total dishonest liberal hackery.

Just ignore the article why don't you. Gotta get those talking points in, huh Pale?

 

[LordBrownTrout]

That exact scenario happened when I was in college. I called the electric company and worked out a deal to where I could pay reduced payments until I could afford the monthly bill. My service was never cut off. The key was that I took initiative and worked with the utility company.

And are you going to rely on hoping that the same thing happens here?

I'm not relying on anything. We need to be responsible and accountable for our actions. By continually raising the limit and never paying it off is irresponsible.

 

[Modbert]

Are you saying that the deal being offered includes no tax increases, has a dollar of spending reduction for every dollar of increased debt limit and the Ryan Budget is adopted?

This is the only place that I've heard of this offer.

If you bothered to read the article, you would know what I'm talking about. But I guess something that doesn't jive with your opinion is not reader friendly.

 

[Modbert]

I'm not relying on anything. We need to be responsible and accountable for our actions. By continually raising the limit and never paying it off is irresponsible.

And defaulting our debt is going to make it all better? Let me ask you LBT, if you defaulted on 30% of your credit card payments, what would happen to your credit score?

 

[007]

Only a dishonest liberal political hack can take the trillions wasted by obama and the dems in the last two and half years, and turn it around and say the republicans should be ashamed.

Utter, blatant and total dishonest liberal hackery.

Just ignore the article why don't you. Gotta get those talking points in, huh Pale?

I didn't ignore it bert, I read it, and the liberal hackery and spin in it made me sick.

I don't need to read absolute liberal biased garbage to know why we're in the situation we're in. It's due in part to BOTH parties and their spending. However, the spending that has gone on in the last two and half years under your messiah and the libs has made a bad situation ten times worse than it should be.

That's a fact, period, end of story. Shame on EVERYONE, ESPECIALLY obama and the dems for doing what they did TO MAKE IT WORSE.

 

[007]

I'm not relying on anything. We need to be responsible and accountable for our actions. By continually raising the limit and never paying it off is irresponsible.

And defaulting our debt is going to make it all better? Let me ask you LBT, if you defaulted on 30% of your credit card payments, what would happen to your credit score?

What, in your opinion bert, is it going to take to teach Washington a lesson? What is it going to take to get them to spend within their means?

Default sounds good to me.