Tick, tick. August 2nd is the Debt Limit Armageddon. Or Not.

@realjohnboy,

Not sure I see the relationship between "Cut, Cap and Bal." which I might agree with and the Walker suggestion. What "revenue surcharges" are being considered? $100B in cuts would appear to be miniscule to address a $14T shortfall...meaning the tax increases would have to be huge in order to begin paying down that debt. That certainly doesn't sound like something the Republicans would even entertain. I'd be happier if the deal was automatic triggers to find "revenue surcharges" that equal $100B and the rest be recovered thru cuts.

1 Reply

@realjohnboy,

I was thinking of playing chicken - with somebody else's cars, but running with sissors ain't bad.

0 Replies

@slkshock7,

I can't really answer your question, slkshock. Walker is keeping a very low profile. The Cut thing relates to symbolic gestures the parties could agree to right now and the Cap involves things in next year's budget that would tie the deficit to a % of GDP. The Bal part is the big thing politicians do well: kick the ball down the field. A balanced budget amendment would take years to ratify. A promise now of an automatic braking mechanism - via unspecified spending cuts or tax increases - works well for them.
I am increasingly confident that the debt ceiling crisis will be adverted through something along the Cut, Cap and Bal that the Repubs threw in and the Walker involvement.
July 15th.

(And welcome to this thread, slkshock, a fellow resident of Virginia).

1 Reply

@realjohnboy,

Thanks, Johnboy,
Been around for quite some time...just don't have a lot of time to talk on this board.

My problem with "unspecified spending cuts or tax increases" is I don't think Congress has the "cojones" to ever specify them. If it goes down like that we'll surely successfully pass this current crisis only to find ourselves in a very similar crisis within the year. If only vague promises come out when the axe is hanging over our heads, what makes you think that Congress will actually do something concrete after the axe disappears?

1 Reply

@slkshock7,

I share your faith in Congress. I'm fairly sure if they lift the debt ceiling, they will be bumping the new ceiling within half a year, and crying for more. On the other hand, I am going to admit I'm not able to anticipate the results of not raising it. Speaking of a general default which seems at least possibility, I have never loaned money to anyone who ever, ever defaulted on me before. Not even once.

1 Reply

@roger,

I don't believe the US will default on loans anymore than you or I would if we suddenly discovered that we couldn't pay our bills. No...we would first sell off our goods, cut back on expenditures, take a second job, etc. Default would be avoided at all costs. The US will never default on our bills...it's another example of crying wolf...nothing more.

I personally think a little forced restraint on Govt is a good thing. One place to start would be to cut back on Congressional staff and perks. According to Source Watch, each Representative is given between $701K - $1.6M for staff, mail and office expenses. Each Senator gets between $2.3 - 3.8M. If we take the lowest estimate that's $305M each year for the House and $23M for the Senate....$328M. Over ten years, you've just about got as much potential revenue by cutting back Congressional staff and perks as Obama promises to get from corporate jet taxes. Heck, that would also have the pleasant advantage of lessening the bloviating on the Hill (Congressmen, rather than their staff, might actually be busy with more important things...like law making) and who knows, they might be forced to create bills that a person could actually read.

I'm sorry...nobody will be able to convince me that we can't find the money in our bloated government to avoid default. I suppose we will eventually find ourselves figuring out how to cut back entitlements as well, but that's good too. Certainly better than Obama's current plan which seems to be to bury our heads in the sand and hope the problem goes away.

0 Replies

I was trying to read between the lines of the articles on-line today on the shifting stances today on the debt ceiling debate by the Dems and Repubs. I think both sides realize that the economic and political consequences of a default could be brutal. The Dems are still insisting that there must be tax increases in addition to spending cuts. Obama probably scored some points with his repeated references to corporate jets.
The Republicans said they would never agree to any tax increases.
There was, I think, some movement today that could make both sides look like they are doing the right thing.
The employee side of social security taxes, which was reduced from 6.2% to 4.2% would be extended for another year. For a family earning $50K, that would put $1K in their take home pay and would not provide any benefit to people earning over the cap. Good for the economy in the short term but at a cost of $120Bn over one year which, of course, would drain the SSAE trust fund by the same amount.
Offsetting that would be eliminating tax loopholes such as the corporate jet accelerated depreciation thing, which is estimated to cost $3Bn over 10 years, ethanol subsidies ($4Bn), oil company breaks ($8Bn, but I may be totally wrong about that), auto speedways ($40Mn), horse racing ($126Mn).*
We really could clean up some of the onerous loopholes and Congress could promise to study which ones are doable after, say, the next election.
(* Obama may have mentioned the Hedge Fund managers. I finally figured that one out. Say that C.I. hires me to advise him on his investments. We do well. He makes a bundle of money on which he is taxed at the capital gain rate of 15%. I charge him, say, 1% of his gains for my wisdom. I pay tax on that at the same 15% rather then at the 35% rate I would pay if it were ordinary income).

1 Reply

@realjohnboy,

But that raises a few more questions.

On the employee's social security contributions - does that reduce their benefit when they retire, or do we just stea erm, tax someone else.

So far as the ethanol subsidy being eliminated, I thought that was a done deal. I don't know; maybe it only passed the Senate. I also recall they eliminated the import tariff on the stuff, which appeals to my free market side though it's hard to see how it's going to increase any kind of revenues. It's hard to have a pure philosophy.

On the corporate jet accelerated depreciation thing, I hadn't even heard of it, but it sounds like a good thing to scrap. While we're at it, lets get rid of accelerated depreciation on SUVs and other light truck unless the business need can be clearly demonstrated. Why give a tax advantage to a bunch of gas guzzling behemoths like those?

In a way, I resent the tax exempt interest payments on homes, but I suppose it's not exactly a subsidy for buyers as those without such expense get a quite liberal standard deduction that factors that in. I recall that Rangol in Australia mentions they don't get either std deduction or interest expense on houses.

1 Reply

@roger,

Hi, Roger...
Social security benefits are based on a complex calculation of your EARNINGS over a lifetime of work; not by how much you paid into the system. So the payroll tax holiday will not affect anyone's future benefits but will reduce funds in the coffers of the system.
The Senate did approve cuts in ethanol support but the House has not voted on that.
I am confused at how the government loses $3Bn a year by allowing corporations to depreciate jets over 5 vs 7 years. I would think that it would even out over time.
The better example Obama could have chosen would have been the yacht tax. If you park a boat in your yard in Farmington, New Mexico, and if it has a bedroom and a bathroom and you sleep there for 14 nights a year, you can deduct 100% of the interest.

2 Replies

@realjohnboy,

Both parties are playing brinksmanship and I feel the evne the appearance of balking at the date will be appreciated by all Americans who have stock and bond portfolios and the foreign partners will get their first taste of our petulance that states "**** you".
I want ALL incumbents to be wshed out of office if they are part of the problem and we pass that debt ceiling "Sell by" date.

GOPs are "certain" that nothing will happen. DO ypou want them to play Russian Roulette without any knowledge of how economic appearances matter ? These guys are all marching into untested waters.

Cutting out loopholes that are targeted to the plutocrats is actually a "Tax increase".
Cojones is admitting that this is fact.

1 Reply

@farmerman,

farmerman wrote:

Both parties are playing brinksmanship... These guys are all marching into untested waters.

Absolutely true, f'man, and I think that Eric Cantor of the GOP leadership tried to step back a bit today, after taking a tough line last week. But numerous other senators don't seem to be willing to back off hard line stances.
I am hopeful that something can be worked out tomorrow and next week. But...
Portugal may follow Greece into collapse. China is in much deeper trouble then some of us realized and the U.S. may be the next shoe to drop.
Not a good scenario.

0 Replies

@realjohnboy,

I've had the same thought on depreciation. I guess it's the time value of money, but when you consider the declining balance method used by MACRS system, it doesn't make that much difference.

I do recall a period in which new assets carried a bonus "depreciation" of about 40% in the year acquired, in addition to the normal depreciation. It did spur some equipment purchases, though a percentage of them were surely only accelerated the replacement strategy by about a year

0 Replies

Quote:

Boehner acknowledges risk
July 08, 2011 4:50 PM

There are an alarming number of congressional Republicans who believe undermining the full faith and credit of the United States is acceptable, and voluntary national default wouldn’t be such a bad thing.

Their leader, House Speaker John Boehner (R-Ohio), disagrees with them.

Quote:
“While some think we can go past August 2nd, I frankly think it puts us in an awful lot of jeopardy, and puts our economy in jeopardy, risking even more jobs,” Boehner told reporters at his weekly Capitol briefing.

His statement comes as a quiet rebuke to members of his own party who’ve argued that smacking against the ceiling — or even defaulting briefly on the debt — poses no great risk to the economy.

It also raises the question of why Republicans have refused to raise the borrowing limit without extracting major concessions from Democrats on federal spending. Boehner says he and White House negotiators aren’t narrowing their differences on a comprehensive debt bill very quickly.

As much as I’m glad to see Boehner acknowledge reality, and take some satisfaction in seeing the House GOP’s own leader shoot down irresponsible rhetoric from his own caucus, it’s that last point that stands out for me.

The Speaker, as of this morning, believes failing to raise the debt limit puts the nation, to use his words, “in jeopardy.” He conceded that failure would also make unemployment worse.

What Boehner left unsaid, however, is that he’s proven himself willing to pursue his hostage strategy anyway. In other words, the Speaker knows full well that failing to raise the debt ceiling would put Americans in danger, but he’s choosing to create this risk on purpose anyway. Give Boehner what he and his fellow Republicans demand, or he’ll deliberately “put us in an awful lot of jeopardy.”

Why this isn’t a national scandal is still a mystery to me. For all the talk about what will or won’t get cut, how this will or won’t affect the economy, whether the agreement will be large or enormous, the strategy itself is often lost in the shuffle. John Boehner and his party are threatening to crash the economy on purpose unless Democrats meet their demands. The Treasury, the Fed, economists, Wall Street, and business leaders have all pleaded with GOP leaders not to do this, but Republicans ignored them all.

There is no precedent for this, and it shouldn’t be treated as somehow normal. Indeed, it’s often hard to believe policymakers who claim to be patriots would deliberately put us all at risk this way.

And yet, here we are.

http://www.washingtonmonthly.com/political-animal/2011_07/boehner_acknowledges_risk030758.php

Cycloptichorn

1 Reply

@Cycloptichorn,

If there is truly a scandal here it involves (1) the Democrat president and (past) Congress which deliberately failed to produce a budget for the current fiscal year in a failed attempt to avoid the issue in the last election; and (2) the Democrat President and Senate which have required the actions you criticize on the part of the House Republicans to make obviously needed cuts in Federal expenditures.

It takes two to create a deadlock. Many Democrats appear credulous enough to believe the self-serving and deceitful rhetoric of their politicians that this is all the work of the Republicans. They could have their budget ceiling extention today if they were willing to make the needed cuts in expenditures.

1 Reply

@georgeob1,

Quote:

If there is truly a scandal here it involves (1) the Democrat president and (past) Congress which deliberately failed to produce a budget for the current fiscal year in a failed attempt to avoid the issue in the last election

The current argument has nothing to do with last year's budget at all, so yeah; you're totally wrong, and just trying to change the subject to something that you feel more comfortable arguing about.

I will note that the Dems attempted to pass CR's last december - and the Republicans blocked them. Continuing resolutions have been used by both parties in the past. You can disagree with the Dems' choice to do so, but to say that they didn't attempt to pass a spending bill is false.

Quote:

and (2) the Democrat President and Senate which have required the actions you criticize on the part of the House Republicans to make obviously needed cuts in Federal expenditures.

To put it simply: bullshit. And incredibly ignorant of history to say such a thing.

The major reason our deficit exists, is because a Republican president and Congress passed two unnecessary and unhelpful tax cuts for the rich, while pushing an expensive and unnecessary war, all while failing in their duty to oversee the financial markets.

You say these cuts are 'obviously needed.' They are not obviously needed, for 2 reasons:

1, if we let taxes revert to the levels they are expected to, revenues rise tremendously and half our budget problem disappears quickly, and

2, frankly, we have no debt crisis whatsoever, and we're in the middle of a recession. Massive cuts in spending will lead to further contraction in our economy and will worsen our financial situation, not improve it.

This whole thing has been ginned up - and quite dishonorably used - by your party as an excuse to attack programs that you've hated for years. You support them acting as hostage takers, as terrorists. It's ******* dishonorable and you should be ashamed of yourself, because the truth is that you know this and just don't care.

Cycloptichorn

0 Replies

A thought also has ocurred to me: the last two times Republicans have entered into high-profile negotiations with Obama, it was quite clear that he got the best of them. Last december, he managed to trade extensions of the Bush tax cuts for a great deal of assistance for the unemployed, and other things Republicans didn't want to see happen; and early this Spring, managed to make Boehner look like a fool for promising '100 billion' in cuts, and getting practically nothing.

So; do people really think that this is because Obama is a terrible negotiator?

Think the Republicans are going to win this round?

Cycloptichorn

0 Replies

Reading the media reports is making me so goddam angry that I'm ready to dedicate myself full time to instituting term limits in congress. These people (all of them) are seriously pissing me off.

2 Replies

@JPB,

Not sure if term limits would help here. Most of the silliness seems to be originating from Tea-Party rookies, who would be well inside any term limits. The feudal lords of long standing are merely catching up and dampening, which is a good-ish thing.

1 Reply

@Thomas,

It would remove some of the political maneuvering and posturing that comes from career politicians who are looking more towards their next campaign than serving the public. This particular member of the public is not feeling particularly served by current system of government. I've had a long disgust with the two party system that we're stuck under. I'm even more disgusted by career politicians.

0 Replies

@realjohnboy,

realjohnboy wrote:

It has been all over the media that the Dems and Repubs are at loggerheads over raising our debt ceiling. If that doesn't happen, the country will default on its obligations and the economy of the U.S. and the world will collapse. We have talked about this for some time on A2K in various threads. I thought I would try to consolidate the discussion.

The solution is simple. First cut Medicare and Social Security. Next, increase taxation on the those with gross incomes greater than $200,000/year.
Both sides have to give so we can get on with our business.

1 Reply

Tick, tick. August 2nd is the Debt Limit Armageddon. Or Not.

Related Topics

Quick Links

My Account

able2know