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The Fiscal Cliff....or is it more like the Fiscal Meh?

Discussion in 'Tilted Philosophy, Politics, and Economics' started by rogue49, Dec 2, 2012.

  1. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    Oh, it was certainly significant, but if the recent past is any indication, and if the Tea Party sentiment is still a current in Congress, then Republicans aren't going to move much (if any) further on revenue. They've already given more than they wanted to. Why would they give more? They don't want to tackle the problem via revenue increases and spending cuts. They see this as a spending problem.

    How do you see the debt ceiling going compared to how things unfolded the last time? (Especially in the wake of of tax increases on the wealthy.)

    I agree.

    One would hope.
     
  2. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    I think we'll know better in the next 24 hours.

    There are rumors that Boehner will resign as Speaker tonight.

    There are other rumors that there will be a protest vote against him in the Speaker election tomorrow to deny him a first ballot victory.

    If he survives as Speaker, with a solid core of the old line fiscal conservative, but not Tea Party types, behind him in the House, I think we'll see an opportunity for a debt limit discussion that includes both significant spending cuts and additional revenues from tax reform. Extending the debt limit is of much greater concern to the Wall Street/corporate Republicans than the fiscal cliff. They understand the potential impact, not onlyon the US economy, but the global economy as well. Their interests are on the line with no debt limit deal.

    If Cantor and the Tea Party take the Speakership and put ideology above the economic interests of the country, then all hell breaks loose.
    --- merged: Jan 2, 2013 at 4:45 PM ---
    Daily Kos: A delicious roundup of conservative-on-conservative violence
     
    Last edited by a moderator: Jan 9, 2013
  3. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    It is one crisis after the next. First, President Obama saved us from the "brink", then it was some kinda "Armageddon" he saved us from when they raised the debt limit, he saved the auto industry (some actually think that if not for government, the US would have stopped making cars and trucks), now it is the "cliff" - and for good measure the President flies off to his super-hero lair somewhere in his native land of Hawaii. Next it will be the crisis (yet to be named) related to the debt ceiling. All the while the real problem - spending- never gets addressed!

    It is easy to see who the bigger winners are going to be, clue - look at today's stock market action - all this fuss over about $80 billion per year in alleged additional tax revenues - guaranteed to actually be less than CBO projections. Basically, nothing happened and because there was no real tax reform the super rich will still pay the amount of taxes they are willing to pay and not a penny more. Remember Romney wanting to close loopholes and deductions and the liberal media laughed - at least if they actually addressed a few loopholes and deductions some progress would have been realized. In the mean time, everyone is going to pay more one way or the other and the real crisis has been delayed. I guess that is not bad for government work.
     
  4. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    There is not a credible economist who believes the debt can be significantly reduced through spending cuts alone.

    There is not a credible economist who believes that cutting non-defense defense discretionary spending disproportionately wont have a significant adverse impact on the middle class and working poor.

    There are only Tea Party and other extremist who put anti-government ideology above the economic interests of the country.
     
  5. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    How does that figure? If the government collected $1, they could cut spending to less than $1 and begin a process of significantly reducing the debt. The statement defies logic.

    In addition, I don't know anyone who is not willing to look at revenues through a revision of our tax system. Most reasonable people know the system is broken.

    Again, the logic?? If I give you $100 today and not give you $100 tomorrow my decision not to give you $100 could be considered adverse - but naturally those who benefit from government spending will be adversely impacted if that spending is cut or stops. But be clear on what we are talking about - we do not need to adversley impact current recipients of Medicare for example. We do not need to adversely impact needy families on Medicaid. There is waste and inefficient government spending we can start with the low hanging fruit figuratively speaking.

    Extremists? Perhaps you think we are extreme today - but at some point we have to pay our debts, on way or another. We have more options to address these issues today and do so in a measured manner.
     
  6. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    Spending never gets addressed? That's odd. What are you reading?

    Obama is the only president in recent history who knows how to cut spending.
    --- merged: Jan 2, 2013 at 7:10 PM ---
    It's a matter of degree. Cut spending too much and the economy suffers significantly. In the absence of crippling cuts, without revenue increases, no significant deficit reduction is possible.

    I guess we'll see about that.

    Is Congress talking about efficiency and waste? Is that at issue?

    I'm not sure how government in the U.S. works when it comes to the details. In Canada, we have arms-length government agencies that act as watchdogs and will bring any waste, inefficiency, or even corruption to the attention of parliament despite who's in power. What does Congress have that has pointed out waste or inefficiency? Is this a part of the debate, or are they merely looking at slashing entitlements, etc., on the macro level. The question of efficiency and waste hasn't caught my attention recently. Is anyone talking about this?
     
    Last edited by a moderator: Jan 9, 2013
  7. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    Has the US debt gone down under President Obama? Is the US government spending less money under President Obama? Are we in alternate universes? I are like in some Twilight Zone episode, where like the episode where the people we would consider ugly are actually the good looking people who discriminate against the people we would consider normal??? Have you seen that one. I was watching the Twilight Zone marathon yesterday - if you missed it I am sure they will have another marathon soon.


    A matter of degree? When debt is accrued, it has to be paid. They can actually pay it, or the can print money and pay it - either way the consequences are real.



    So says the guy from Canada, a country without a debt problem (manageable debt is not a problem, efficient use of debt is not a problem). If you folks can live within your means and it is good for you, why isn;t it good for us?
     
  8. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    I was talking about cuts. I don't know where you got confused. But maybe this will help: Who Is The Smallest Government Spender Since Eisenhower? Would You Believe It's Barack Obama? - Forbes

    If you want to talk about the debt or the deficit, then we can talk about those.

    It doesn't have to be paid off; merely managed.

    I owed approximately $30,000 to the provincial government upon graduation. Since then, I've been on track to pay it off in 10 years. I could have lived out of a cardboard box to pay it down faster. I could have lived on the same diet Christian Bale did when he prepared for his emaciated role in The Machinist: an apple and a can of tuna a day. But I didn't. I think the reasons are obvious. Instead I made a few moves that provided job security and a comfortable home for nearly the entire 10 years. (I'm almost there.)

    What did I do? I cut spending (I stopped paying so much for education; I moved in with a nice woman and we split living costs; I now work from home and save on transportation, food, and clothing costs), but I also increased revenue (making books earns far more than selling them).

    Why did I do this? It made sense. I've lived modestly but comfortably, and my debt is under control. This is an oversimplified example because I'm an individual, but the principle is the same: deficit reduction such as that in the U.S. is tackled through reasonable revenue increases and spending cuts. There are reasons for this. One being that the Bush tax cuts have allowed America to run with a much lower tax environment that it was accustomed to. Another is that cuts that go too deep will hobble the economy.

    The same applies to Canada. Yes we have a debt problem. We have a deficit problem too.

    So not only are you wrong, but you also ignored my questions.

    Why is that?
     
    Last edited: Jan 2, 2013
  9. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    Sorry, does not help. I refrain from going through mental gymnastics to make a politician look good. Just look at the numbers.

    [​IMG]


    After Fiscal Cliff Tax Hikes, No Excuses To Avoid Spending Cuts - Investors.com


    I agree. Debt is not inherently bad or negative. Debt can be used very effectively.

    The first step is to solving a debt issue or debt problem one wishes to correct is to first honestly acknowledge the issue or problem. In the US we have not done that. And if the issue or problem is addressed in a timely manner, there are manageable options that are less painful. Ignoring the issue or problem will make matters far worse over time.



    Perhaps we simply disagree on what a "problem" is.

    This has got to be a trick question, right? How does it work that I am wrong and I ignored the questions? Am I answering the wrong questions and my answers to those questions are wrong or am I answering the right questions and you don't realize it and think I am ignoring the questions??? I am confused. Could you tell me which questions I am wrong about and which questions I am ignoring? That might help me explain, why.

    So for example in this response to your question, I have responded but I have not really given an answer. So you could say I am wrong and I am ignoring your question - but I would say I am neither wrong nor am I ignoring your question.
     
  10. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    I am looking at the numbers. Are you? Notice how the top line dips down a couple of times? Notice also how it didn't happen before that since '98? Does that help?

    It doesn't take mental gymnastics to realize that Obama's spending increases are clearly the lowest since before Reagan.

    What are you getting at? I know there is a debt problem. I know there is a deficit problem. You thought I had gone insane when I said Obama is the only president in recent history who seems to know how to cut spending. As far as I know, it's fact. Do you know anyone between Regan and Obama who has cut more than Obama has? Try to answer that question without using the word deficit or debt. It's really simple if you try.

    This is what Obama is doing. He's trying to cobble together a plan for reasonable deficit reduction over periods such as 10 years. What is your idea of a timely manner? One year? Do you want to get into the ramifications of cutting spending too sharply, especially while taxes are still so low and have room to move?

    My view doesn't involve cherry picking. How about yours?

    You don't think Canada has deficit and debt problems? Have you looked at the numbers? If Canada doesn't have a problem, then neither does the U.S. Just because we have a history of being serious about posting surpluses and reducing the debt (thanks to liberals), it doesn't mean there isn't a current problem.

    None of this matters anyway. We're talking about the U.S., but you instead focused on Canada because maybe you didn't want to respond to yet another of my questions.

    Ace, you were wrong about Canada, and you literally ignored my questions. You should know this, you're the one who cut them out of the quote box you used. I assumed you did this consciously. Maybe there was a technical error. Maybe go back and read the questions I'm referring to. They're still in my original post.
     
    Last edited: Jan 3, 2013
  11. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    Forgive me for not adding an issue I alluded to in previous posts in various threads. Reagan and no other US President prior to Obama had the US Federal Reserve engaged in the quantitative easing (QE1, QE2, QE3...) to any degree that it is occurring right now. The US Federal Reserve is virtually printing US dollars to buy US debt (they buy about 80% being issued) - this is creating an artificial market for the debt and is keeping interest rates low. Interest rates can easily double or triple - and if this happens the money needed to service the US debt can double or triple over time. It is a disaster waiting to happen.

    Canada does not have this "problem" - although Canada will feel some pain from the US being irresponsible. I would think all Canadians would want the US to get its house in order.
     
  12. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    Weren't you the one complaining that the government wasn't doing enough to make credit available to small businesses?

    Also, what about the question of spending cuts?

    Again, you're wrong. Canada does quantitative easing as well.

    While this is true, Canadians have their own house to worry about.
     
  13. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    Diversionary.

    the US government has a spending problem. The US government needs to cut spending when revenues are down. Ideally, cuts need to occur now while interest rates are low, in a high interest rate environment much of what is collected by government will be needed to service the debt - the alternative is to devalue the currency. We risk a form of hyper-inflation - this has never been good. Given the dollar being a widely used currency in the world, the world economy is at risk due to US irresponsibility.

    That is like saying I drink wine on holidays compared to the guy who gets stone cold drunk every evening to the point where he can not even make a walk home. We both drink - is that how you compare US QE to Canadian QE?
     
  14. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    How? QE frees up the money supply so banks will lend it out so people will spend it. Isn't that what small businesses want? Or are you just not in the mood to talk about credit problems for small businesses? Or do you not think that consumer spending will help with the debt problem? What is it? How is this diversionary when it's on topic?

    You're preaching to the choir. This comes back to my earlier point: Obama is better at cutting spending than any president in recent history. Pop quiz: When was the last time government spending decreased?

    Also, you (possibly rhetorically) asked me if Obama reduced the debt. Are you mad? This is about reducing the deficit. Obama is trying to work on that through a combination of spending cuts and revenue increases. Republicans think it's possible to achieve this through spending cuts alone. I think they're mad. I'm not alone. They don't seem very good at math. Or economics.

    No it's not. That's absolutely ridiculous. The next time you want to pretend to know what you're talking about regarding Canada, don't.

    Next you'll tell me the U.S. doesn't have a debt problem after all, because, hey, look at Japan.
     
    Last edited: Jan 3, 2013
  15. ralphie250

    ralphie250 Fully Erect Donor

    Location:
    At work..
    So realistically how much is my check going to go down???
     
  16. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    I am not in the banking business and I don't know what they do in their back offices - but in theory a bank can borrow money from the Fed and lend it to the government, then sell the Federal debt back to the Fed and make a no risk profit. Business is not able to take advantage of these historic low interest rates on a large scale basis - given the low rates in theory we should see borrowing and lending activities at historic highs under these conditions - that is not happening because of the activities of the Federal Reserve and the Federal Government dominating these markets.


    Republicans just voted for tax increases. Not all of them, but most did, including the speaker. Only a few, like me, like many Tea Party folks think this was a mistake - we do not control the republican Party.

    Canada does not have a debt problem.

    If you think Canada does have a debt problem, what response do you support? How high do you want Canadian tax rates to be? Do you support Canadian spending cuts, if so, what cuts? Deficit spending during a recession or the result of a recession in my view is a normal short-term government response - not to be confused with a systemic long-term problem.
    --- merged: Jan 4, 2013 at 2:30 PM ---
    Or, how much is a loaf of bread going to increase in costs, along with all other basic needs?
     
    Last edited by a moderator: Jan 11, 2013
  17. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    Well, this is about making money available to those who want it—in other words, those who will use it. I know you're a staunch supply-sider, but the problem right now is demand is weak, and anything anyone can do to tap into pent-up demand should be considered. QE is not meant as a long-term strategy; it's meant as an injection to kick-start economic activity.

    I think anyone serious about managing the deficit in a reasonable and sustainable manner will accept that tax raises are inevitable. And all we're really talking about, if you think about it, isn't "tax increase." It's letting temporary and unnecessary tax cuts expire. How they're let to expire at this time is the issue. It shouldn't be whether or not they should expire at all.

    You know, I suspect one of two things at play here: 1) You haven't really read anything about Canadian economic issues and are making assumptions based merely on the fact that Canada is a smaller economy, or 2) Your perception of what constitutes a problem is skewed towards "crisis = problem; everything else = A-OK."

    I must now assume that you believe that previous to 2008, the U.S. didn't have a debt problem. Is that the case? Because, relative to respective GDP values, Canada's current debt situation is worse that the U.S. debt problem prior to 2008. And Canada's current deficit problem is stacked on top of that.

    Is the American debt problem worse than Canada's? Yes. Is Canada sitting pretty compared to the U.S.? Not exactly. The Japanese debt problem that has been ongoing for years is substantially worse than the current American problem. That doesn't mean America doesn't have a problem.

    A problem is a problem regardless of how it stacks against other problems. Be realistic; don't ignore facts.

    Recent politics in Canada has been frustrating. The Conservatives won much of their power on a platform that promised integrity and accountability, but they have been mired in controversy, some of which relates to misappropriation of funds. Not good.

    Regardless of that, the Minister of Finance has done a passable job weathering the recession. I don't agree with everything, but the Conservatives have used a balance strategy of stimulus spending, spending cuts, etc., to keep the economy going while attempting to minimize the increasing deficit spending. More recently, they have missed forecasts in terms of the deficit, and we're not in as good a position we thought we were. Both government and household debt is increasing, and levels are getting worrisome (though household debt is slowing and will likely come down during the recovery).

    I would support a combination of tax increases and spending cuts to avoid any serious deficit problems. The GST has been decreased more than once. The corporate tax rate has been decreased more than once. I think if reasonable spending cuts aren't enough, then these tax rates have room to move to help offset costs.
     
    Last edited: Jan 4, 2013
  18. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    Businesses create demand. This is not a passive process. No business that I know of, in a competitive environment, can sit back and just take orders waiting for demand from potential customers.

    Until you understand the above, nothing that follows will be understood.


    You have encouraged me to read a bit about the Canadian economy. I have a relative that works in the US for a Canadian bank and I have had discussions with her regarding the financial crisis and that encouraged me to study Canadian banks. Canada cut tax rates, I read a bit about that. During the Healthcare debate, I read a bit about Canadian healthcare. when the price of oil spiked a few years ago, I read a bit about Canadian oil and gas resources. I would bet I know more about the Canadian economy than the average Canadian. But, I give - Canada has a debt problem. O.k. now what.

    Your assumption is wrong. The problem in 2008 was far worse than in 2000 - and I repeatedly stated that President Bush failed in terms of domestic economic policy and failed to control spending (look it up, if you need to). I think our problem is worse in 2012 than it was in 2008. I think our problem in 2016 will be a disaster unless we take some reasonable steps today to control our spending problem.

    Canada is sitting on a massive amount of wealth in the form of natural resources. This condition is not realistically comparable to other nations, including the US.
     
  19. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    But you can't put the cart before the horse. The U.S. is at the risk of a liquidity trap, meaning people are hoarding money. There is also a serious risk of a deflationary spiral.

    There needs to be enough incentive for banks to loan and in turn for people to invest. It's not quite happening as much as it should. This is where QE comes in. It's an incentive that will encourage such activity. If banks have an easier time lending, businesses will have an easier time borrowing. This should encourage further investment and, in theory, will encourage more spending overall. So what we're looking at is increased investment and increased consumption as a result of QE.

    When certain entities don't want to spend money, it's a matter of encouraging them to do so, or perhaps getting others to.

    Granted, Canada is in much better shape than the U.S. and most of Europe, but as you know economies are globalized and so we have our challenges. If you look at the numbers, you will see that though we've weathered the recession quite well compared to others, we currently have many of the problems the U.S. had before the financial crisis. Remember, things weren't quite peachy before 2007.

    I won't deny there is a spending problem. Bush was reckless and Obama was passed the reins at an inopportune time. There are obvious savings that could be made, but many don't want to touch things like defense and security expenditures, which are incredibly high. The other problem is that taxation is too low. There are too many loopholes and the effective tax rates of top earners are too low. Also consider that the tax burden of the average Canadian household is higher than that of the average American household. This is even after reducing the federal sales tax (GST) a couple of times.

    There is nothing that you or anyone can say that is convincing enough if you don't include government revenue increases as a part of the solution to reducing the deficit.

    Without government revenue increases you have two options: 1) ineffective deficit reduction, or 2) crippling the economy.

    This is false. America is sitting on massive amount of wealth in the form of natural resources too, as are other nations. Actually, I think Russia and the U.S. are the top two resource-rich countries in the world.
     
    Last edited: Jan 4, 2013
    • Like Like x 1
  20. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    With the expiration of the temporary payroll tax holiday (restoring the 6.2% rate back from the temporary 4.3% rate) we're all going to take a hit.

    [​IMG]