Newt, The Debt Limit, and Taxes - Or: Are We Going to Destroy Ourselves?

[ReijiTabibito]

If the Republicans are paying any attention to what guys like The Economist and Brooks are saying, then they're going to have to realize that continuing to stonewall is not in their best interest.  Asuras, you made the point that if there is no deal, then the US government would have to stop paying someone.  Two of the groups you mentioned are the military and senior citizens, both groups that have long been voter bases for the Republican party.  Now, call me crazy, but if this doesn't go through, and someone has to stop being paid, even for a couple of months, then that someone is going to demand to know who is responsible for this, and undoubtedly the truth that the GOP was unwilling to negotiate, despite the Dems trying their hardest, will come out.

And how do you think whoever got shafted is going to respond?  By voting, by voting out of power the people who were responsible for their misery.  This is not the time for the Republicans to be pulling off this sort of crap.  I can understand the psychology of wanting to make it seem like Obama has accomplished nothing over his term, and that such a thing would make it easier for them to put their candidate in office, but as I said, this is not the time for that.  This is the time for people to put their goddamn differences aside, stop worrying about political influence and capital, and start doing their damn job.

Because, as far as I can see, Republicans have two choices, and its a question of who they want to suffer.  If they let the bill go on by, yes, they can't claim that Obama did nothing during his career, he will probably win the upcoming election next year, and the GOP will have to go another four years without a person in the White House, and potentially lose a lot of seats in Congress over this whole deal.

If they don't let the bill go on by, and people suffer from a result of it, then no doubt the truth of their unwillingess to compromise (despite being given an amazing concession) will come out, and you can take it to the bank that Obama will win next year, and the Dems will surge into Congress on the premise that Brooks leveled - that the GOP is no longer a group that can truly govern, because they've lost touch with reality and reason.

So, who does the GOP want to suffer?  Themselves?  Or themselves and the American people?

One can only pray that they have enough common sense for the former and not the latter.

[gaggedLouise]

Reading this thread and the news reports makes one think of the Kreuger Crash, the archetypal bonds and businesses collapse, following on the heels of the murder or suicide (which one is still a matter of debate) of the "matchstick king" one of the richest tycoons of his age; the panic that ensued when it turned out some of his companies' issued papers were fake and others just worthless spread into all sides of business life. The idea that any major political party would want to deliberately provoke that kind of collapse (and quite possibly a bigger one) is amazing.

[Vekseid]

Raising the taxes on the wealthy will only make the percentage of the tax revenue they pay even larger. Unless you add more people to the tax rolls, the number of tax payers doesn't change.

No, their burden can go down if the median income increases. That's the reason their burden was lower in the past, after all.

  That was reading that it might be legal for the President to completely bypass the Congress to fund a 'neccessary' program or to raise the debt ceiling without Congress's approval.

They already authorized the program. The only thing the debt limit is is a law saying that the treasury can't go into debt past a certain point to fund such measures. Its constitutionality is questionable.

Reading this thread and the news reports makes one think of the Kreuger Crash, the archetypal bonds and businesses collapse, following on the heels of the murder or suicide (which one is still a matter of debate) of the "matchstick king" one of the richest tycoons of his age; the panic that ensued when it turned out some of his companies' issued papers were fake and others just worthless spread into all sides of business life. The idea that any major political party would want to deliberately provoke that kind of collapse (and quite possibly a bigger one) is amazing.

The question is, will that collapse be enough to shock Americans into action. Part of this country's problem is there is so much wealth that people are stressed, but not despondent. I'm afraid that we might not get anywhere until that changes, for a lot of needless suffering.

[Asuras]

So, who does the GOP want to suffer?  Themselves?  Or themselves and the American people?

One can only pray that they have enough common sense for the former and not the latter.

One can indeed pray, and apparently you, me (although I'm an athiest) and The Economist are praying on that.

But I remember 2008, and before the Tea Party even existed, their ilk voted down a bill that would have saved trillions of dollars in the financial system and prevented a stock market crash, and now there are more of them in Congress. And they really might do it again.

Reading this thread and the news reports makes one think of the Kreuger Crash, the archetypal bonds and businesses collapse, following on the heels of the murder or suicide (which one is still a matter of debate) ofthe "matchstick king" one of the richest tycoons of his age. The idea that any major political party would want to deliberately provoke that kind of collapse (and quite possibly a bigger one) is amazing.

I don't think it's deliberate honestly. I think the Republicans are beholden to a very vocal and, frankly, psychotic portion of their voters and those voters don't understand what the debt ceiling is.

I mean, there are polls showing that 47% of Americans don't want to raise the debt ceiling but I don't think those people know what that means. There is no reason on God's green earth not to raise the goddamn debt ceiling. A lot of that 47% will lose their jobs if we don't.

[ReijiTabibito]

I don't think it's deliberate honestly. I think the Republicans are beholden to a very vocal and, frankly, psychotic portion of their voters and those voters don't understand what the debt ceiling is.

Hey, now, let's watch what we say.  Calling those people psychotic is an insult to psychotic people.  Because even someone suffering from psychosis can have moments of rationality and lucidity.

[Oniya]

Hey, now, let's watch what we say.  Calling those people psychotic is an insult to psychotic people.  Because even someone suffering from psychosis can have moments of rationality and lucidity.

I think a more appropriate term would be sociopathic, assuming they aren't just plain ignorant.  Because, if they know what the consequences of their actions are, and they are still trying to go through with it to further their own personal ends, they have shown that they have absolutely no sense of empathy.



*mandatory disclaimer:  I am not a psychologist, nor do I play one on TV.  This is not intended to be a medical diagnosis, or anything more than a frustrated attempt to compare people who would rather see their country's economy implode than cooperate with 'the other side' to people like Ted Bundy.  If you feel I owe Mr. Bundy an apology, I'll break out the Ouija board.

[RubySlippers]

I'm sick of this bullshit in Congress. Okay they want to play the president has to get a pair, invoke the 14th amendment authority to raise the debt limit 90 days as an emergency power with a nice legal defense for this ready for court. Its a later amendment it should amend any language in the core document regarding funding. He has a case like this:

1. The 14th amendment grants the executive office of the nation the duty to pay off general debts unless the Congress in ordering the program or agency directs funding from a tax or special fee or limits it this comes from general revenues.

2. The 14th amendment as its an amendment passed later overrides the core document in the funding and operations of any government agency or program to be done jointly with Congress with the day to day operations the office of the executive brance and the Treasury both working together.

3. I'm ready to fight this out in court, my legal team is ready so BRING IT until the courts decide this matter I will assume this authority is valid under my executive order.

Then see what happens we have a pansy in office we need a Truman someone to say I head the executive branch, the buck stops at my desk and I will do what I have to for the best interest of the nation and you (Congress) are in the way of that.

Just because no one has done this doesn't mean its unconstitutional all the wordling in the 14th amendment, section 4 clearly gives this statutory constitutional power on par with any expressed power earlier in the document, and should take precedent being a AMENDMENT. It doesn't say it overrides the original powers but it doesn't have to do that.

[Zakharra]

No, their burden can go down if the median income increases. That's the reason their burden was lower in the past, after all.

How does that make sense?  If the only tax increase in on the wealthy, then the percentage they pay goes up. They'll be paying an even larger share of the income tax than ever before. Their burdon would only go down if new tax payers were added to the rolls. IE, more people actually paying taxes.  Just making the wealthiest pay more will not make the wealthiest burdon go down.

[Oniya]

If the median income goes up, then more people will come out of the poverty level.  If more people come out out of the poverty level, that means there are more people earning taxable income.  The more people that are earning taxable income, the more people have to pay taxes on that income.

[Revolverman]

Wouldn't that just mean more tax money for government, rather then lowered tax burden on anyone?

[Zakharra]

If the median income goes up, then more people will come out of the poverty level.  If more people come out out of the poverty level, that means there are more people earning taxable income.  The more people that are earning taxable income, the more people have to pay taxes on that income.

How does that raise people out of poverty? If the wealthy are paying more, that does not mean the poor are getting jobs.  More taxes doesn't mean more tax payers.

Wouldn't that just mean more tax money for government, rather then lowered tax burden on anyone?

*nod* As I see it, all it means is the wealthy end up paying even more of the tax burden. The 1% and 10% most wealthy now end up paying an even larger share of the income tax  than before.

[Zakharra]

  I have a question. If the debt ceiling isn't raised and we 'default', why are they saying that social security checks would stop? I thought Soc Sec money was in a fund by itself and not in the general fund.  If the checks do stop, I guess thaty means that the Soc Sec lock box/trust fund doesn't exist and all of the monet that comes in for Soc Sec is immediately spent on other things.

[Oniya]

How does that raise people out of poverty? If the wealthy are paying more, that does not mean the poor are getting jobs.  More taxes doesn't mean more tax payers.

The median income going up has nothing to do with the wealthy paying more, and everything to do with the low-to-middle incomes earning more.  The median of a group is a measure of the central tendency.  It's not the most common income (that would be the modal income), or the sum of everybody's income divided by the number of people (that would be the mean income).  It's what you get when you line up all of your data in increasing order and look at the very middle number.  If you have only a few high numbers, and a lot of low numbers, the median is going to be lower than the average or mean.

IF a data set changes, and the median goes up, it's because you have fewer people below your starting median value.  In the case of incomes, that would be more people earning more.  As more people can contribute in taxes, the overall burden, percentage-wise, of the wealthy goes down. 

[Vekseid]

  I have a question. If the debt ceiling isn't raised and we 'default', why are they saying that social security checks would stop? I thought Soc Sec money was in a fund by itself and not in the general fund.  If the checks do stop, I guess thaty means that the Soc Sec lock box/trust fund doesn't exist and all of the monet that comes in for Soc Sec is immediately spent on other things.

Social security is supposed to be considered actual debt and not mere appropriation so it more clearly falls under the 14th amendment provision. Roughly three trillion of the debt is owed to the social security fund.

Thing is social security + interest + pensions account for some 75% of our revenue. At a minimum, either half of defense (including the wars) or half of medicare doesn't get paid, even if everything else doesn't get cut. Nearly the entire budget is insurance + interest + army.

How does that make sense?  If the only tax increase in on the wealthy, then the percentage they pay goes up. They'll be paying an even larger share of the income tax than ever before. Their burdon would only go down if new tax payers were added to the rolls. IE, more people actually paying taxes.  Just making the wealthiest pay more will not make the wealthiest burdon go down.

A lot of economics 'doesn't make sense' at first glance. There are many game theory (the study of rational agents in competition) traps that groups of people can get into, and ideally, laws where they exist should guide us out of these traps, and not into them. The current liquidity crisis is one such trap, and if we remain in it, America will simply cease. It's not a question of what your opinion is. America, as a nation, simply will not continue this way. You can beg and bleat and claim that that it's wrong to raise taxes, but it is synonymous with the fall of America. Go look up why the South didn't have any money in the Civil War. It's hilarious that the slaveowners who drove that war guaranteed its own failure by refusing to pay for it.

It worked great in the short term. In the end, they lost everything.

Anyway. Just because you take in a billion dollars, does not mean you have to pay it to yourself. You can, alternately, take everything that comes in over the top tier and immediately reinvest it. On top of actually getting wealthier, in real terms, faster, it means that all the people who benefited from your investment are also getting wealthier, faster. We don't call the era of 70-90% taxes the long boom for nothing.

[Zakharra]

The median income going up has nothing to do with the wealthy paying more, and everything to do with the low-to-middle incomes earning more.  The median of a group is a measure of the central tendency.  It's not the most common income (that would be the modal income), or the sum of everybody's income divided by the number of people (that would be the mean income).  It's what you get when you line up all of your data in increasing order and look at the very middle number.  If you have only a few high numbers, and a lot of low numbers, the median is going to be lower than the average or mean.

IF a data set changes, and the median goes up, it's because you have fewer people below your starting median value.  In the case of incomes, that would be more people earning more.  As more people can contribute in taxes, the overall burden, percentage-wise, of the wealthy goes down.

Which has nothing to do with this question I asked about  raising taxes on the wealthy. By all means, tax more people, but -just- raising the taxes on the wealthty, as some  here have suggested will do absolutely nothing towards easying the tax burdon.  Because right now, the wealthy are paying a huge portion of the income tax burden. raising their taxes just increases the amount of that burden.

[Zakharra]

Social security is supposed to be considered actual debt and not mere appropriation so it more clearly falls under the 14th amendment provision. Roughly three trillion of the debt is owed to the social security fund.

Thing is social security + interest + pensions account for some 75% of our revenue. At a minimum, either half of defense (including the wars) or half of medicare doesn't get paid, even if everything else doesn't get cut. Nearly the entire budget is insurance + interest + army.

Or parts of other programs are cut. It doesn't automatically have to be sliced out of the defense budget.

Anyway. Just because you take in a billion dollars, does not mean you have to pay it to yourself. You can, alternately, take everything that comes in over the top tier and immediately reinvest it. On top of actually getting wealthier, in real terms, faster, it means that all the people who benefited from your investment are also getting wealthier, faster. We don't call the era of 70-90% taxes the long boom for nothing.

But they end up with less money anyways since it's taken from them in taxes. Any gain would be minumal at best.  If I made alot of money and had 70-90% of it taken away in taxes, that would motivate me to do one of three things. Either find every single tax loophole I could to lower my tax rate, move my business oversees to avoid US tax law or just stop making as much.

A question then.  What would the money reinvested in?  With the current Legislative and Executive branches, I cannot see them doing anything intelligent with if. Nor do I see them reigning in any spending. What I can see them doing is spending even more money since more is coming in.

[Oniya]

Raising the taxes on the wealthy will only make the percentage of the tax revenue they pay even larger. Unless you add more people to the tax rolls, the number of tax payers doesn't change.

No, their burden can go down if the median income increases. That's the reason their burden was lower in the past, after all.

How does that make sense?  If the only tax increase in on the wealthy, then the percentage they pay goes up. They'll be paying an even larger share of the income tax than ever before. Their burdon would only go down if new tax payers were added to the rolls. IE, more people actually paying taxes.  Just making the wealthiest pay more will not make the wealthiest burdon go down.

If the median income goes up, then more people will come out of the poverty level.  If more people come out out of the poverty level, that means there are more people earning taxable income.  The more people that are earning taxable income, the more people have to pay taxes on that income.

How does that raise people out of poverty? If the wealthy are paying more, that does not mean the poor are getting jobs.  More taxes doesn't mean more tax payers.

*nod* As I see it, all it means is the wealthy end up paying even more of the tax burden. The 1% and 10% most wealthy now end up paying an even larger share of the income tax  than before.

The median income going up has nothing to do with the wealthy paying more, and everything to do with the low-to-middle incomes earning more.  The median of a group is a measure of the central tendency.  It's not the most common income (that would be the modal income), or the sum of everybody's income divided by the number of people (that would be the mean income).  It's what you get when you line up all of your data in increasing order and look at the very middle number.  If you have only a few high numbers, and a lot of low numbers, the median is going to be lower than the average or mean.

IF a data set changes, and the median goes up, it's because you have fewer people below your starting median value.  In the case of incomes, that would be more people earning more.  As more people can contribute in taxes, the overall burden, percentage-wise, of the wealthy goes down. 

Which has nothing to do with this question I asked about  raising taxes on the wealthy. By all means, tax more people, but -just- raising the taxes on the wealthty, as some  here have suggested will do absolutely nothing towards easying the tax burdon.  Because right now, the wealthy are paying a huge portion of the income tax burden. raising their taxes just increases the amount of that burden.

This is the context that I was responding in and to.  I expanded on Vekseid's comment that if the median income were to go up, that it would lower the tax burden on the rich.  You quoted my post and asked how that raised people out of poverty and I explained how the median income would be a consequence of people being raised out of poverty.

[Vekseid]

Or parts of other programs are cut. It doesn't automatically have to be sliced out of the defense budget.

Err, I meant if everything else was cut. Everything else is a paltry sum. So yes, defense has to be cut, or revenue has to be raised. A part of the problem is we can no longer 'put off' interest when this happens.

But they end up with less money anyways since it's taken from them in taxes.

Hint: Money isn't wealth. Money is not meant to be hoarded. Money is meant to be exchanged for goods, services, and investments. When money is being hoarded, as it is now, the result is a liquidity crisis - interest rates remain low, unemployment remains high, the rich get richer because even though the rest of the country is not earning any more, they are producing more for the rentier class.

Any gain would be minumal at best.

A brief glance at history shows that you are wrong. Libertarians cite the Long Depression as their ideal society. The Long Depression gave us robber barons, oil monopolies, company towns and scrip.

The Long Boom, which Keynsians cite
- Gave us the computer
- Gave us the Internet
- Landed a man on the moon
- Saw the establishment of the Middle Class
- Saw the greatest rise of standard of living in world history

  If I made alot of money and had 70-90% of it taken away in taxes, that would motivate me to do one of three things. Either find every single tax loophole I could to lower my tax rate,

I've pointed out the perfect, legally accepted loophole each and every time we've had this discussion. And each and every time, you have ignored it.

move my business oversees to avoid US tax law or just stop making as much.

Then good riddance to bad rubbish. Someone more respectable will take your place.

Name one brilliant inventor that started with billions.

The people with money are not this nation's best and brightest. The conservative movement, as a whole, has in fact been about denigrating this nation's best and brightest. Those who sacrifice of themselves to do great things for this nation and this world. Especially in the military. They happily cut armor for troops and veteran's benefits, hamper their ability to vote all the while going on a warpath.

There is nothing honorable about that. It's deplorable, disgusting. I find the fact that people on the right, even on these forums, even tolerate that shit with their silence is disgusting. How much more of this before we get a Pol Pot or Great Leap Forward in America? An actual war on the 'intellectual class'? Do you seriously think that that is a good thing, and if not, why tolerate it?

A question then.  What would the money reinvested in?  With the current Legislative and Executive branches, I cannot see them doing anything intelligent with if. Nor do I see them reigning in any spending. What I can see them doing is spending even more money since more is coming in.

In Keynesian practice, the idea is yes, pay down the debt after the economy recovers. Take a look at the big ticket items
- Universal Healthcare. Every insurance is just another form of tax. This actually saves the nation as a whole about $400 billion per year. Not doing it is crazy.
- Reducing reliance on fossil fuels. These are, largely, initial investment expenses. You invest directly in various startups and nuclear power stations. I would prefer keeping nuclear power production out of private hands and in an easily audited local public level, though, to prevent another e.g. Fukushima.
- Rebuilt ailing infrastructure. Roads, bridges, etc. Again, these are mostly one-time expenses.
- I would be happy to see a reinvigorated space program with a real budget more comparable or even exceeding the military's. At least it would be something to be truly proud of, rather than spending $700 billion per year and gloating about how efficiently we can kill brown people.

And the simple solution to making sure that they do in fact pay down the debt when it is done is to stop electing liars who claim to be conservative.

[Asuras]

When money is being hoarded, as it is now, the result is a liquidity crisis - interest rates remain low

A quibble...

When people hoard money, interest rates are high, because the people hoarding money won't lend money unless they get a lot of interest for it. That's generally the case.

We have low interest rates right now because of a very strange situation - banks are rolling in it because the Fed gave it to them, but they aren't lending it because A) higher lending standards, B) a general suspicion of lending aggressively, C) the poor shape of private and corporate credit, D) the banks are still paying off the hangover from 2008 and they need to build up cash before they have the base to start lending again, and E) real concern about future instability that makes loans doubtful.

So we have low interest rates for anyone who can get it, but people aren't lending. Still. And that's why we still don't have jobs.

[Oniya]

Not to mention the fact that many people have ended up with credit ratings that look more like batting averages.  Even when the economy was good, a credit rating like that would be considered a bad risk.

[Vekseid]

A quibble...

When people hoard money, interest rates are high, because the people hoarding money won't lend money unless they get a lot of interest for it. That's generally the case.

We have low interest rates right now because of a very strange situation - banks are rolling in it because the Fed gave it to them, but they aren't lending it because A) higher lending standards, B) a general suspicion of lending aggressively, C) the poor shape of private and corporate credit, D) the banks are still paying off the hangover from 2008 and they need to build up cash before they have the base to start lending again, and E) real concern about future instability that makes loans doubtful.

So we have low interest rates for anyone who can get it, but people aren't lending. Still. And that's why we still don't have jobs.

That is hardly the entire picture. A big part of why interest rates are so low is because people are already too indebted and aren't asking for more loans in the first place.

[Asuras]

Oh, and now Moody's, one of the big three credit agencies, has put the US under review for a ratings downgrade

[gaggedLouise]

Oh, and now Moody's, one of the big three credit agencies, has put the US under review for a ratings downgrade

Junk rating is the new black.

[Revolverman]

Side supply really fucked us good, didn't it?

[Asuras]

Side supply really fucked us good, didn't it?

First, it's supply-side...

Second....no, we really can pay this off. We just had the president offer a $4 trillion plan to get the deficit under control that would do it and the only reason we're facing a downgrade is because Congress is so intransigent.