Sequester "Catch 22"

The President is fond of saying to Republicans you can't cut your way to prosperity I would just like to remind him and the Democrats you can't spend your way out of debt either since they seem dam determined to try.
 
Hey, here's an idea: why don't people buy their own damn smart phones.
You want more technological innovation? Cut regulations and taxes that reduce incentives to do exactly that. Get gov't out of the way of business. These are people who can't sell whiskey and run whores and make a profit.
 
Hey, here's an idea: why don't people buy their own damn smart phones.
You want more technological innovation? Cut regulations and taxes that reduce incentives to do exactly that. Get gov't out of the way of business. These are people who can't sell whiskey and run whores and make a profit.

Just to clarify, I wasn't actually suggesting that as policy, just using it as an economic example. There are a lot of programs that spend money in the name of stimulus and there are a lot of tax deductions done in the same name:

Deduction for charity
Deduction for IRA/401Ks
Deduction for Mortgage Interest
Deduction for State and Local Taxes
Deduction for R&D

and a litany of others. There are also spending policies aimed at stimulating the economy:

Road & Bridge Repair
Work Training programs
Head Start
Food Stamps

and many many more.

Poll after poll finds that no clear majority of people agree on where money should be cut from. That is every program out there has a plurality of supporters behind it.

All I'm saying is fundamentally this isn't such an easy problem that can be solved by simply vowing to cut spending. Or rather the Vow is easy, the action is not. The sequestration only takes out 85 billion dollars.... its okay, but a lot more needs to be done.
 
The President is fond of saying to Republicans you can't cut your way to prosperity I would just like to remind him and the Democrats you can't spend your way out of debt either since they seem dam determined to try.

You can cut your way out of debt. You also CAN tax your way out of debt. Neither solution is good when its the only thing you do. Some tax deductions need to go, some spending needs to be removed. Furthermore, the tax structure itself could use an over haul, and probably not a 100% revenue neutral one. However, it might only need to increase tax revenue in aggregate by 1 or 2 percent, so its not so onerous. We need to stop giving people and incentive to do stupid things with their money (such as buying a house they can't afford) because of a tax break. We need to stop incentivizing not taking responsibility, such as subsidizing the mortgage industry so that they make loans to poor income people simply b/c we think its "fair" that everyone gets a house (a terrible financial investment, by the way, the poor would be better off in the a liquid investment like the stock market). We need to stop incentivizing people to not take jobs that pay less than what they used to make (unemployment insurance reduced, and then also give people temporary salary compensation when they take a lower paying job).
 
Yeah Obama got a big increase in revenue/ But not enough so now he wants more.
What is the Democratic plan to reduce spending? Ohyeah, they have none. We gotta keep spending to avoid bankruptcy.

Hi, I'm new here. I understand that the issues concerning how to best deal with the debt are a hot button issue. If we had an ideal world, I think the best solution would be to have legislative targets for budget cuts based on economic performance. For example, it would have been better for the economy if we had committed to reduce spending (or increase revenue) by a certain percentage once unemployment falls below X% (fill in your number here, I'd personally say about 6.5%). This would have the effect of telling the world were serious about controlling our deficit, but at the same time it would not have but our economy in further jeopardy while we were still trying to recover from a general global economic malaise.

Unfortunately, we're not in *my* ideal world (I have no doubt, some people would disagree with my perspective of ideal). So the issue is being dealt with today. If we can drop out the rhetoric I think we're more likely to come up with reasonable solutions. As a general principal, in the short term, tax cuts or spending increase do stimulate the economy whereas, tax increases and spending cuts have an adverse effect on the economy. It is illogical to suggest that tax cuts help the economy and spending increases don't or vice versa, from a budget stand point they do the same thing. To prove this is relatively easy:

If you were making government policy and you wanted to stimulate technological growth and provide better resources to our people, you might very well consider trying to get more smart phones in the hands of the public. You could do this in one of two ways: 1) You could allow a $50 deduction on your taxes for any smart phone you bought, or 2) You could hand out a $50 coupon to people to use towards the purchase of a smart phone.

In one case you're implementing policy via a tax break and in the other your implementing policy via a spending increase. The net effect on the economy will be exactly the same. The net effect on the gov't budget will be exactly the same.

This isn't to say that all tax breaks and all spending increase have an equal effect at stimulating the economy. Also, much of the effect is temporary in either case. In the example above, initially this might cause more smart phones to be bought and get a great number of them into the hands of the population, but eventually the manufacturers of smart phones will increase the price by $50 and pocket the stimulus money.

The real way to solve the budget crisis is to review every single tax deduction, and every single spending program and figure out which ones are the best candidates to reduce or illuminate. Statistically I don't know what the breakdown would be, but it certainly wouldn't be all of one or the other.

First, welcome.

Second you have to figure a way to get the dems to pass a budget. The reason they prefer to operate on continuing resolutions is there is no way to reset the baseline, because it is just continuing the previous budget. So basically what we are operating on is the 2009 budgets with all the automatic increases built in. So just realize there are real reasons the dems are doing what they are and it has nothing to do with the best interest of the country.
 
First, welcome.

Second you have to figure a way to get the dems to pass a budget. The reason they prefer to operate on continuing resolutions is there is no way to reset the baseline, because it is just continuing the previous budget. So basically what we are operating on is the 2009 budgets with all the automatic increases built in. So just realize there are real reasons the dems are doing what they are and it has nothing to do with the best interest of the country.

Hi, I think you have a valid point here, but with some caveats. I believe, and I could be wrong here, that the House is responsible for proposing budgets. I also think the republicans have filibustered the proposals in the senate (I maybe wrong on this too). Regardless of the two points above your point about automatic increases that are built into legislated spending is well taken. These programs, though, are not strictly Democrat in nature. The medicate part D was never paid for and costs more and more money each year. No Child left behind has this issue too. I'm not placing blame on one party or the other, what I'm saying is that the solution to this problem happens, when both parties sit down and stop arguing over which is better tax increase or spending cuts. That isn't a real argument, as they net out to the same thing. We have a much better chance of doing things efficiently and successfully when we look at all tax deductions and all spends and select from the whole pool which needs to go. I don't care who pushes the grand solution, but BOTH parties need to stop making it a war over how we cut the budge and instead argue over where we cut.
 
First, welcome.

Second you have to figure a way to get the dems to pass a budget. The reason they prefer to operate on continuing resolutions is there is no way to reset the baseline, because it is just continuing the previous budget. So basically what we are operating on is the 2009 budgets with all the automatic increases built in. So just realize there are real reasons the dems are doing what they are and it has nothing to do with the best interest of the country.

Hi, I think you have a valid point here, but with some caveats. I believe, and I could be wrong here, that the House is responsible for proposing budgets. I also think the republicans have filibustered the proposals in the senate (I maybe wrong on this too). Regardless of the two points above your point about automatic increases that are built into legislated spending is well taken. These programs, though, are not strictly Democrat in nature. The medicate part D was never paid for and costs more and more money each year. No Child left behind has this issue too. I'm not placing blame on one party or the other, what I'm saying is that the solution to this problem happens, when both parties sit down and stop arguing over which is better tax increase or spending cuts. That isn't a real argument, as they net out to the same thing. We have a much better chance of doing things efficiently and successfully when we look at all tax deductions and all spends and select from the whole pool which needs to go. I don't care who pushes the grand solution, but BOTH parties need to stop making it a war over how we cut the budge and instead argue over where we cut.

Only bills raising revenue are required to originate in the house. Congress has to start doing business the way they were intended to in order to get the results you're asking for. I don't see that happening, even with the threat of the senate losing their pay if they don't pass a budget. The two houses of congress are supposed to pass budget bills, then the two are supposed to got to a reconciliation committee to fix the differences and then sent back to both houses for another vote. This has not happened in 4 years even though the house has passed a budget every year. So tell me, who is doing the obstruction when the senate refuses to pass a bill to go to reconciliation?
 
Only bills raising revenue are required to originate in the house. Congress has to start doing business the way they were intended to in order to get the results you're asking for. I don't see that happening, even with the threat of the senate losing their pay if they don't pass a budget. The two houses of congress are supposed to pass budget bills, then the two are supposed to got to a reconciliation committee to fix the differences and then sent back to both houses for another vote. This has not happened in 4 years even though the house has passed a budget every year. So tell me, who is doing the obstruction when the senate refuses to pass a bill to go to reconciliation?

Thank you OKTexas, I wasn't totally sure on what the rules were, but what you're saying make sense to me.

In regards to the senate there is apparently a procedural issue here. A simple majority is required to pass a budget, but it requires 60 votes to make it take effect.

I wanted to post a link to an economist article that documents what I'm saying, but I need to write 11 more posts before I can include a link. If you do a google search for "Why the Senate hasn't passed a budget " and "The Economist" I suspect you'll find the article. It was date Feb 15th, 2012.

However, I wasn't really accusing the House Republicans of failing the pass a budget or am I blaming them for the current impass. They are voting in accordance with how their constituents want them to vote. My issue is that I think the level of debate needs to be raised in the country as a whole. The issue is framed in terms of "Spending Increasers" versus "Tax Decreasers". This isn't a particularly useful fight. First off, from a budget stand point it make no difference. Second, from an economic productivity stand point it makes no difference. What really matters is what specific tax deductions do you remove. What specific programs that we spend money on now do you remove or downsize. The debate in public needs to talk about real things and representatives need to take stands on specific programs.

Is protecting the "death tax" more important than continuing Medicare part D? Are programs like Head Start more important than the Mortgage Interest Deduction? if you start putting all these things on a scale it we might start to be able to come up with real answers.

I Appologize if I end up double posting - it seems like my origianl reply didn't make it in.
 
Sequester is about reduced spending, not tax increases, if the dems would stay on point there would be no problem. Instead the dems want increased revenue for promised future cuts, which have never materialized after past promises so the republicans aren't buying their BS.
The sequester was part of a budget deficit deal whose purpose was reducing the deficit. Both spending cuts and revenue increases reduce deficits.

No the sequester was put in place to try and force both sides to make a deal to keep the sequester cuts from happening it was not part of a budget deficit deal. Yes spending cuts and revenue increases the new Democrat term for raising taxes which is fooling no one by the way will reduce deficits the thing is Obama got his tax increases not once but twice this year when the Social Security tax went back to 6.2% and in the fiscal cliff deal when he got his tax increase on the rich. Now he wants another tax increase three tax increases in two months with minimal spending cuts is not my idea of a balanced approach.

Can you prove any tax increase caused by the Democrats? Having tax cuts expire is not increasing taxes and the return to previous tax rates are less on the wealthy than what they were before the tax cuts. Who is responsible for the legislation requiring the tax rates to return to previous levels?

Now, why are closing tax loopholes considered a tax increase? Why can't they examine a loophole and consider if it's wise on their own merits?
 
Can you prove any tax increase caused by the Democrats? Having tax cuts expire is not increasing taxes and the return to previous tax rates are less on the wealthy than what they were before the tax cuts. Who is responsible for the legislation requiring the tax rates to return to previous levels?

Now, why are closing tax loopholes considered a tax increase? Why can't they examine a loophole and consider if it's wise on their own merits?

I think they should be considered tax increases, but its not a bad thing. We need to stop applying labels to stuff to make them seem more palitable. For example: "Tax Loophole" is a loaded term. A mortgage interest deduction is a "Tax Loophole". So is the deduction for state taxes. Loophole implies that there was a mistaken "hole" in the tax system. These aren't mistakes. These deductions (I'm not going to call them loop holes) were intended to stimulate parts of the economy (or, if you are more cycnical, they were pushed in by lobbiests on behalf of interested parties). Either way, removing the ones that have limited effect on our economy is a good thing. But IT IS a tax increase. The govenment will be increasing the revenue side of the equation.
 
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The sequester comes directly from the BS Pub debt ceiling crisis, a new low in obtuseness and a disaster for the US and world economies. Little known fact with our pathetic media...
 
The sequester comes directly from the BS Pub debt ceiling crisis, a new low in obtuseness and a disaster for the US and world economies. Little known fact with our pathetic media...

Hi Franco,

Are you suggesting that refusal to lift the debt ceiling is a BS crisis? I agree completely that not lifting the debt ceiling is irresponsible and obviously has no impact on the amount of debt we have (well, actually it has a little impact we will have more interest to pay). Running out on your bills without paying is never a good idea when you have debts (as the US currently has). The fact that it can be held hostage by the House is exactly what does make it a crisis.

However, on the broader issue of our national debt, where the choice of action is more meaningful, I had suggested this earlier:

I think the best solution would be to have legislative targets for budget cuts based on economic performance. For example, it would have been better for the economy if we had committed to reduce spending (or increase revenue) by a certain percentage once unemployment falls below X% (fill in your number here, I'd personally say about 6.5%). This would have the effect of telling the world were serious about controlling our deficit, but at the same time it would not have but our economy in further jeopardy while we were still trying to recover from a general global economic malaise.


It's not entirely clear if or when our debt will have an impact on our borrowing costs, but its certainly a possibility. Even if we think that possibility is slight, say 1% chance of it happening, given the way that costs tend to spiral upward, and give our level of debt to GDP, it might make sense to make some type of pledge at least to address it. I'm not sure I would qualify this as a completely made up crisis.
 
The loopholes Obama is talking about are in regard to the bloated rich.

Hi Franco,

Can you be more specific? I would tend to refer to these mostly as deductions, unless you are refering to the way Carried Interest is taxed. In which case, I still wouldn't call that a loop hole, but I would say the IRS and congress is mis-classifing ordinary income. Keep in mind that even amoung the top 1% Carried interest affects only a small percentage.

Bloated Rich is sort of an antaganistic phrase. The term Rich, is really hard to pin down. Are you talking about the top 10%, 20%, 1%? Even within the top 1% you have quite a bit of diversity.
 
First, welcome.

Second you have to figure a way to get the dems to pass a budget. The reason they prefer to operate on continuing resolutions is there is no way to reset the baseline, because it is just continuing the previous budget. So basically what we are operating on is the 2009 budgets with all the automatic increases built in. So just realize there are real reasons the dems are doing what they are and it has nothing to do with the best interest of the country.

Hi, I think you have a valid point here, but with some caveats. I believe, and I could be wrong here, that the House is responsible for proposing budgets. I also think the republicans have filibustered the proposals in the senate (I maybe wrong on this too). Regardless of the two points above your point about automatic increases that are built into legislated spending is well taken. These programs, though, are not strictly Democrat in nature. The medicate part D was never paid for and costs more and more money each year. No Child left behind has this issue too. I'm not placing blame on one party or the other, what I'm saying is that the solution to this problem happens, when both parties sit down and stop arguing over which is better tax increase or spending cuts. That isn't a real argument, as they net out to the same thing. We have a much better chance of doing things efficiently and successfully when we look at all tax deductions and all spends and select from the whole pool which needs to go. I don't care who pushes the grand solution, but BOTH parties need to stop making it a war over how we cut the budge and instead argue over where we cut.

Repped up for this post, which is the closest thing I've seen so far to what we really need. There are hundreds of programs that need refined and streamlined.

Cutting out unecessary subsidies, cutting out redundancy, cutting out things that either have a zero or negative effect could save us tons of money.

Cutting tax breaks that are geared towards those that can easily afford to pay their fair share and implementing a stimulus program that creates permanent jobs will increase revenue.

Long term, all of the above.
 
Can you prove any tax increase caused by the Democrats? Having tax cuts expire is not increasing taxes and the return to previous tax rates are less on the wealthy than what they were before the tax cuts. Who is responsible for the legislation requiring the tax rates to return to previous levels?

Now, why are closing tax loopholes considered a tax increase? Why can't they examine a loophole and consider if it's wise on their own merits?

I think they should be considered tax increases, but its not a bad thing. We need to stop applying labels to stuff to make them seem more palitable. For example: "Tax Loophole" is a loaded term. A mortgage interest deduction is a "Tax Loophole". So is the deduction for state taxes. Loophole implies that there was a mistaken "hole" in the tax system. These aren't mistakes. These deductions (I'm not going to call them loop holes) were intended to stimulate parts of the economy (or, if you are more cycnical, they were pushed in by lobbiests on behalf of interested parties). Either way, removing the ones that have limited effect on our economy is a good thing. But IT IS a tax increase. The govenment will be increasing the revenue side of the equation.

The Bush tax cuts were passed by the reconciliation process and that means they have to expire, if they aren't revenue neutral, so Obama didn't raise the taxes. The fact is, the present tax laws have less taxes than before. The Republicans cut the taxes in a manner that caused them to raise back to the original levels. The Republicans had the option to work out a permanent tax rate and didn't do it. Since the Republicans voted for a law that reset the taxes, they raised the taxes by passing the tax cuts.
 
Repped up for this post, which is the closest thing I've seen so far to what we really need. There are hundreds of programs that need refined and streamlined.

Cutting out unecessary subsidies, cutting out redundancy, cutting out things that either have a zero or negative effect could save us tons of money.

Cutting tax breaks that are geared towards those that can easily afford to pay their fair share and implementing a stimulus program that creates permanent jobs will increase revenue.

Long term, all of the above.

Hi, um, Grandma,

I've been trying to think of things we can do that would make things better. Obviously, there are a lot of hard choices, but I think there are at least something that can get reasonable support (although I will be interested in hearing any objections):

1) Raise age by 2 or 3 years for social security, however, exclude certain professions from having to wait. If you are a coal miner, factory worker, lumber jack, or any other job that relies primarily on physical labor, then I can't see making you work into your late 60s.

2) Perhaps restructure the military budget. Right now a huge amount goes to human resources. It would be great to expand the R&D part of the military (so many of the great technology we have comes from the military -- the internet is just the latest). Not sure if this would need to be a revenue neutral move or if it has to be revenue positive. Some consideration should be made toward the future value of the R&D.

3) Perhaps its time to move to year round schooling. A common complaint is that teacher salaries are high relative to the amount of time they work. Its not their fault that the school year is not a full years work, they need to make enough money to manage their expense and have a life. Perhaps we can increase pay a little in exchange for a full year schedule. The net effect is it would be cheaper to educate our children.

4) This one is, admittedly, generic, we need a way to bring down the administrative costs of health care. Its not entirely clear the best way to achieve this. Its possible, republicans are correct that competition would be best at bring down the cost, but I have my doubts about this b/c people can't or won't do comparison shopping when they need emergency work done. Inherently, I think trying to actuarialize the problem would be most effective, but that requires us to have a single giant mandatory insurance program and there doesn't appear to be consensus around that solution.

5) Dividend taxes should be completely changed. Right now dividends are taxed at 45% (15% personal and 35% corporate when compounded together makes 45% or about 53% if you are in a high tax state like me). The result is that corporations keep a lot of money offshore and just allow their EPS to rise (thus lifting the stock price and keeping investors happy). I propose that the tax law be changed. Corporations should pay no tax on their side when they send out dividends and that they are taxed as ordinary income on the personal side. I believe this is one of those cases where a general lower rate will yield more tax revenue b/c companies will start to pay dividends at a greater rate then before. Also, this helps lower income people, b/c their investments will return them more (see next point for more on this)

6) Remove incentives to buy homes (possibly provide some help with renting). A home is a horrible, horrible investment for anyone who doesn't have a decent amount of capital. Its completely illiquid. If you are ever in trouble, in a best case, you can tap a home equity loan, which means accessing your money costs you substantial cash. In a worst case scenario, all too common an occurrence, you can lose a good deal of your original investment. Unless you have a lot of reserve capital you have no business buying a home with a mortgage. This means that for the most part, people should be using standard stock market offerings (ETF, Index Funds) to put away cash and not a home. We need to remove the tax deduction for mortgages (and yes, this hurts me personally, but we need to do it).

I'll post more as I think of additional ideas. But this was already lengthy.
 
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The Bush tax cuts were passed by the reconciliation process and that means they have to expire, if they aren't revenue neutral, so Obama didn't raise the taxes. The fact is, the present tax laws have less taxes than before. The Republicans cut the taxes in a manner that caused them to raise back to the original levels. The Republicans had the option to work out a permanent tax rate and didn't do it. Since the Republicans voted for a law that reset the taxes, they raised the taxes by passing the tax cuts.

My bad. I misread your original post. You DID say expiring. I was thinking more in general. It is true that letting tax cuts that are marked as temporary expire is NOT the same as raising taxes. Allowing those tax breaks to expire would fix most, but not all of the budget deficit. However, the question is do people want to trade some spending cuts for keeping some of those tax cuts. Also, should we possibly rework the whole tax code and get rid of many deductions in general (which is what I thought you were originally aluding too).

Apologies for misreading your original post.
 
The Bush tax cuts were passed by the reconciliation process and that means they have to expire, if they aren't revenue neutral, so Obama didn't raise the taxes. The fact is, the present tax laws have less taxes than before. The Republicans cut the taxes in a manner that caused them to raise back to the original levels. The Republicans had the option to work out a permanent tax rate and didn't do it. Since the Republicans voted for a law that reset the taxes, they raised the taxes by passing the tax cuts.

My bad. I misread your original post. You DID say expiring. I was thinking more in general. It is true that letting tax cuts that are marked as temporary expire is NOT the same as raising taxes. Allowing those tax breaks to expire would fix most, but not all of the budget deficit. However, the question is do people want to trade some spending cuts for keeping some of those tax cuts. Also, should we possibly rework the whole tax code and get rid of many deductions in general (which is what I thought you were originally aluding too).

Apologies for misreading your original post.

No problem.

I think we should always examine government spending and taxes, because times change, but I think it's stupid to push for austerity measures during bad economic times. It's always good to be more efficient, but what I object to is jumping on the bandwagon for spending cuts and not the bandwagon to fix this economy. I think some of our subsidies and tax breaks for farms and energy need to be examined and I don't believe some millionaires should be paid to not grow crops on their vast acreages of land. I don't like the idea of paying oil refineries to blend ethanol and calling it an ethanol subsidy. I think we should have bought sugar products to increase our ethanol production and reduced our dependence on foreign oil. I'd rather trade with sugar cane farmers in South and Central America. They could send us unprocessed sugar, which is high in nutrition to make ethanol and animal feed. Sugar beets is another option, so why pay millionaires not to grow on their land.

The government could fix things like how many jobs does our trade imbalance lose and what effect does it have on our GDP. By my calculations our GDP would be at least 5 percent higher if imports were maintained at the recession lows. We should have started a fair trade policy during that period and be on our way to balanced trade and repatronizing jobs.

The problem with the way they are handling the deficit is they don't address the cause, which is loss of revenue. The fact that the economy and the government was functioning before the Republicans screwed it up, proves the government can work properly and that's totally contrary to the Republican way of life. The government is their enemy and they work to starve it of revenue. That's what creates the deficit.
 
Only bills raising revenue are required to originate in the house. Congress has to start doing business the way they were intended to in order to get the results you're asking for. I don't see that happening, even with the threat of the senate losing their pay if they don't pass a budget. The two houses of congress are supposed to pass budget bills, then the two are supposed to got to a reconciliation committee to fix the differences and then sent back to both houses for another vote. This has not happened in 4 years even though the house has passed a budget every year. So tell me, who is doing the obstruction when the senate refuses to pass a bill to go to reconciliation?

Thank you OKTexas, I wasn't totally sure on what the rules were, but what you're saying make sense to me.

In regards to the senate there is apparently a procedural issue here. A simple majority is required to pass a budget, but it requires 60 votes to make it take effect.

I wanted to post a link to an economist article that documents what I'm saying, but I need to write 11 more posts before I can include a link. If you do a google search for "Why the Senate hasn't passed a budget " and "The Economist" I suspect you'll find the article. It was date Feb 15th, 2012.

However, I wasn't really accusing the House Republicans of failing the pass a budget or am I blaming them for the current impass. They are voting in accordance with how their constituents want them to vote. My issue is that I think the level of debate needs to be raised in the country as a whole. The issue is framed in terms of "Spending Increasers" versus "Tax Decreasers". This isn't a particularly useful fight. First off, from a budget stand point it make no difference. Second, from an economic productivity stand point it makes no difference. What really matters is what specific tax deductions do you remove. What specific programs that we spend money on now do you remove or downsize. The debate in public needs to talk about real things and representatives need to take stands on specific programs.

Is protecting the "death tax" more important than continuing Medicare part D? Are programs like Head Start more important than the Mortgage Interest Deduction? if you start putting all these things on a scale it we might start to be able to come up with real answers.

I Appologize if I end up double posting - it seems like my origianl reply didn't make it in.

Raising debate in the country as a whole is a real challenge, you could ask people on the street what the sequester is, or how long we've been operating without a budget and 9 out of 10 will give you a deer in the headlights look. Unfortunately the vast majority of Americans have no idea what's going on in Washington on a day to day basis and they could care less until something hits them up side their wallet. Americans have become complacent and see government in very abstract terms unless the have to interact with it on some level. You will find the people on this board some of the better educated and unfortunately, in some cases, the most hyper-partisan in the country. If you look past the partisanship, you can learn allot.
 

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