Sequester Part II, The Tea Party Strikes Back

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sardia
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Sequester Part II, The Tea Party Strikes Back

Postby sardia » Wed Jan 02, 2013 4:51 am UTC

http://www.nytimes.com/2013/01/02/us/po ... tml?ref=us
The House just passed what the Senate negotiated at 2am last night, which means the immediacy of the fiscal cliff is over since the President will sign it tomorrow. The essence of the bill is all about revenue, with spending cuts put off for the next congress to decide.

While I could complain about how much wasted tax cuts were left for the republicans, what really irks me is that we got the damn debt ceiling again in 2 months. The GOP is demanding more spending cuts for the debt limit, which means we play fiscal chicken all over again, god damn it. Welcome to the new year, just like last year. What liberals are complaining about is that there's nothing except military cuts left as leverage against republicans, which means the GOP will play hard ball, thus endangering the economy again or forcing democrats to look weak by conceding.

Edit: Since the GOP back down, we have delayed it another 3 months, but the federal stopgap budget will run out in a couple months. So the adventure continues...
Edit 2: http://www.nytimes.com/2013/02/21/us/po ... f=politics
Tea party/GOP refuses to negotiate any further, and embraces sequestration. Can the liberal forces stop the deadly super-weapon, Sequestration?
Last edited by sardia on Thu Feb 21, 2013 2:53 am UTC, edited 3 times in total.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Iulus Cofield » Wed Jan 02, 2013 4:58 am UTC

Military cuts are the most sensible anyway. The DoD budget is huge and we're supposed to be done with costly occupations halfway around the world and there are no foreseeable major conflicts in the future. Historically, periods like this have been when the US has drastically cut military budgets and discharged enlisted personnel.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Thesh » Wed Jan 02, 2013 5:36 am UTC

We shouldn't even be worrying about the deficit right now. If we could get a decent stimulus that is about infrastructure spending instead of tax cuts, we can grow the economy which would reduce the deficit anyway.

Democrats need to do something soon, because the Republicans are probably going to take the senate in 2014 and will likely keep the house.

Here's a good article on why this is the top priority in the first place:

http://www.demos.org/publication/why-wa ... ating-jobs
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Wed Jan 02, 2013 12:54 pm UTC

sardia wrote:http://www.nytimes.com/2013/01/02/us/politics/house-takes-on-fiscal-cliff.html?ref=us
The House just passed what the Senate negotiated at 2am last night, which means the immediacy of the fiscal cliff is over since the President will sign it tomorrow. The essence of the bill is all about revenue, with spending cuts put off for the next congress to decide.

While I could complain about how much wasted tax cuts were left for the republicans, what really irks me is that we got the damn debt ceiling again in 2 months. The GOP is demanding more spending cuts for the debt limit, which means we play fiscal chicken all over again, god damn it. Welcome to the new year, just like last year. What liberals are complaining about is that there's nothing except military cuts left as leverage against republicans, which means the GOP will play hard ball, thus endangering the economy again or forcing democrats to look weak by conceding.


Essentially, all alone, the republicans have been focusing on spending cuts, while the democrats wanted additional taxes on the rich. This isn't the republicans playing hardball, this was the republicans losing. They got none of what they wanted, and the democrats got some of what they wanted.

Of *course* they will continue to right like cats and dogs down the line.

Thesh wrote:We shouldn't even be worrying about the deficit right now. If we could get a decent stimulus that is about infrastructure spending instead of tax cuts, we can grow the economy which would reduce the deficit anyway.


I doubt that very much. Nothing wrong with infrastructure spending in general, but stimulus implies increasing spending at the expense of deficit. That's not good at all. Hell, we'd have been better off with them not riding it so close to the deadline. That had some negative effects. Oh, mostly short term ones, I'll grant, but putting off the debt ceiling for two months means some of the uncertainty continues.

Note that, in your link, where it talks about "spending reductions", sure, the threat of sequestration was obviously bad...but that didn't necessarily mean spending reductions as such(as we see now). Certainly spending was not actually reduced in 2011. Congress spent significantly MORE money than Obama requested(which was, itself, a notable increase over preceding years). Therefore, I must reject the idea that they are overly focused on austerity.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby liveboy21 » Wed Jan 02, 2013 1:31 pm UTC

With regards to the debt ceiling, is there any benefit from the US not honouring its debt? It sounds like an incredibly small upside for an extremely large downside.
Also, isn't there the 14th amendment of the US constitution that says that the US must honour its payments? It sounds like this issue is not an issue at all.
So what's the argument about? Have I failed to understand something here?

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby CorruptUser » Wed Jan 02, 2013 1:35 pm UTC

Spending in general has to compare rate of return to the interest rate on debt, regardless of the deficit. The problem is, as you borrow more, the interest on additional debt rises too, so things most have greater and greater rates of return before they are worth considering.

As for reneging on the debt, the US does NOT have to do that at all. Since the debt is in dollars, any inflation destroys the debt. You could argue that as long as inflation is higher than the interest rate of the debt, we'd be foolish NOT to spend like drunken sailors.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby KnightExemplar » Wed Jan 02, 2013 3:13 pm UTC

I agree in principle, but remember how the debt is structured in the US. Our debt is constantly "rolling over", every few weeks, the US Treasury issues new bonds to pay for our new debt.

If there is a sudden spike in interest rates (ie: the market gets spooked by something and pulls out of US Treasuries), then the US is going to be paying higher interest rates, even if the deficit were completely wiped out. Again, we are constantly rolling over our debt to new interest rates.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Zamfir » Wed Jan 02, 2013 5:01 pm UTC

KE, what's the debt structure of the US? I thought (perhaps entirely mistaken) it was mostly 10 years bonds with a strong dose of longer, 30 years etc., and not much really short stuff. In that case, the US should have quite some reaction time to sudden interest surges.

Even in an enture year, only a minor share of the debt would have to be rolled over. And given the current low rates, there could be quite an upwards swing and rates would still be moderate by historic levels.

That'a different from, for example, southern European countries. Those currently have a lot of debt in shorter durations, and rates that are higher than a few years ago. So swings quickly become problematic for a larger share of the total, and they have to react fast.

EDIt: I somehow can't find really good info, but I might have overestimated the longevity a bit. The us seems to be moving to longer durations, but that's apparently recent policy.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby LaserGuy » Wed Jan 02, 2013 5:39 pm UTC

The Democrats probably would have been better off just letting the tax cuts expire entirely and deal with the aftermath of the fiscal cliff.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby sardia » Wed Jan 02, 2013 5:54 pm UTC

Zamfir wrote:KE, what's the debt structure of the US? I thought (perhaps entirely mistaken) it was mostly 10 years bonds with a strong dose of longer, 30 years etc., and not much really short stuff. In that cast.

You have your choice from 1 month to 30 year treasuries, but the debt is so large, we have auctions that every few weeks so we can roll over to pay for old treasuries that are coming due.

liveboy21 wrote:With regards to the debt ceiling, is there any benefit from the US not honouring its debt? It sounds like an incredibly small upside for an extremely large downside.
Also, isn't there the 14th amendment of the US constitution that says that the US must honour its payments? It sounds like this issue is not an issue at all.
So what's the argument about? Have I failed to understand something here?
It's an artificial threat to the quality of the US's credit in order for Congress to gain leverage over something of their choice. If 1/3 of Congressmen wanted something that they couldn't get normally, they can vote against lifting the debt ceiling (a regular occurrence until the debt stops rising) and threaten the US with defaulting on their debts. This is similar to filibustering, but more obscure and dangerous. If the democrats wanted to, they could threaten to not lift the debt ceiling for Bush's wars unless the republicans cave on gun control. A silly hypothetical example, but plausible. You'd have to be a real dick to do it though, since you're essentially threatening collective suicide unless you get what you want. You'd have to be really passionate and incredibly dickish to do so.

"Essentially, all alone, the republicans have been focusing on spending cuts, while the democrats wanted additional taxes on the rich. This isn't the republicans playing hardball, this was the republicans losing. They got none of what they wanted, and the democrats got some of what they wanted."
While the republicans did look bad, they didn't lose everything, nor was it as bad as Obama's deal over the last debt ceiling. Unless your definition of lose everything is to compromise. You and the republicans of today are so greedy compared to the republicans of the Bush administration. I'll quote the NYtimes,
"Just a few years ago, the tax deal pushed through Congress on Tuesday would have been a Republican fiscal fantasy, a sweeping bill that locks in virtually all of the Bush-era tax cuts, exempts almost all estates from taxation, and enshrines the former president’s credo that dividends and capital gains should be taxed equally and gently. "
My god, the (majority of)democrats agree with what the republicans wanted anyway, therefore the republicans totally lost. If you're gonna be a sore loser, w/e, but what I hate more, is a sore winner.

As for the stimulus thing, it's OT, but
Spoiler:
You're differentiating stimulus spending (deficit spending) but you don't mention how the permanence of the Bush tax cuts will raise our debt just as much as the lack of spending cuts. It's even worse since the taxes that are raised went from 250,000$ limit to $400,000 limit.


"The Democrats probably would have been better off just letting the tax cuts expire entirely and deal with the aftermath of the fiscal cliff."
Yea, I concur. They should have used the fiscal cliff to deal with the debt ceiling and spending cuts. Now we got to trade raising the fiscal cliff by reducing spending on democratic priorities. So lame.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Zamfir » Wed Jan 02, 2013 7:48 pm UTC

You have your choice from 1 month to 30 year treasuries, but the debt is so large, we have auctions that every few weeks so we can roll over to pay for old treasuries that are coming due.

Of course. The question is, what's the current mix of outstanding debt maturities. If the mix skews to longer terms, you need to roll over less every month, and it takes longer before rising interest payments become a significant problem in themselves. Which means more time to react to the changing situation.

If, say, 10% or 20% of the debt ends up getting rolled over at a higher rate, there's not much of a problem. Suppose the jump in rates is 5 percentpoints (a very large jump unless inflation is also rising a lot). Then we're still talking about in increase in fiscal deficit of less than a percent of GDP, essentially within the budgetary uncertainty anyway. A waste, but not a crisis.

For that, the rates would have to stay high for so long that most debt has to be refinanced at such a high rate. Then it becomes hard to cut primary deficit fast enough to compensate for the interest payments. But at a guess, it would take the US a few years of continuing sky-high real rates to get there, it's not going to hit by surprise

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby sardia » Wed Jan 02, 2013 8:18 pm UTC

Zamfir wrote:
You have your choice from 1 month to 30 year treasuries, but the debt is so large, we have auctions that every few weeks so we can roll over to pay for old treasuries that are coming due.

Of course. The question is, what's the current mix of outstanding debt maturities. If the mix skews to longer terms, you need to roll over less every month, and it takes longer before rising interest payments become a significant problem in themselves. Which means more time to react to the changing situation.

If, say, 10% or 20% of the debt ends up getting rolled over at a higher rate, there's not much of a problem. Suppose the jump in rates is 5 percentpoints (a very large jump unless inflation is also rising a lot). Then we're still talking about in increase in fiscal deficit of less than a percent of GDP, essentially within the budgetary uncertainty anyway. A waste, but not a crisis.

For that, the rates would have to stay high for so long that most debt has to be refinanced at such a high rate. Then it becomes hard to cut primary deficit fast enough to compensate for the interest payments. But at a rough guess, it would take the US several years of continuing sky-high real rates to get there, it's not going to hit by surprise

I found tables of the composition of the US debt, but it's remarkably undescriptive.
http://www.treasury.gov/resource-center ... -debt.aspx
Under Table B, it describes the debt in short term, and long term debt, along with foreign vs domestic holders. The debt is $5 trillion in short term, and $10 trillion in long term debt. A quick google tells us that short term is <1 year, and long term is >1 year with regard to debt. So your example would be about 30% of our overall debt rolling over within a few months. Table C describes the debt repayment, but I can't figure it out quickly, so I'll leave it for now.

PS If nobody else noticed, our payroll holiday expired as part of the deal, so the poor got hit by more taxes anyway, just not both Bush tax cuts and payroll. On the bright side, those unemployed leaches(in GOP-speak) can continue to live at the lap of luxury for a few more months.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Heisenberg » Wed Jan 02, 2013 8:44 pm UTC

The Republicans also dragged their feet long enough to win the "cutting taxes" title. If they had voted on Dec. 31st, they may have been vilified by challengers for raising taxes on the rich. But by waiting until the 1st, when taxes had technically gone up on everyone, they can argue that they voted to cut taxes for 99% of Americans.

Total bullshit, but it's what we're going to hear in the next round of political commercials.

I'm still concerned about the sequestration cuts, which were by design so careless as to be a significant threat to the jobs of people who work for or with the government.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Zamfir » Wed Jan 02, 2013 9:27 pm UTC

sardia, I think that's foreign debt, not government debt?

here's the repayment schedule: http://www.treasurydirect.gov/govt/repo ... 12_nov.htm

eyeballing I get something towards 4 trillion for 2013 (1.6 in short term bills and a guessed 60 packages of 30 billionish in due loans).more than I expected, the us financed the first crisis years by surprisingly short term loans I.would have to open excel to make a chart, but it's bed time for me.

With the 2013 deficit itself added, that's quite a lot to borrow, though seemingly still far away from a interest rate spiral on a shorter timescale than years.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby sardia » Wed Jan 02, 2013 9:37 pm UTC

Heisenberg wrote:The Republicans also dragged their feet long enough to win the "cutting taxes" title. If they had voted on Dec. 31st, they may have been vilified by challengers for raising taxes on the rich. But by waiting until the 1st, when taxes had technically gone up on everyone, they can argue that they voted to cut taxes for 99% of Americans.

Total bullshit, but it's what we're going to hear in the next round of political commercials.

I'm still concerned about the sequestration cuts, which were by design so careless as to be a significant threat to the jobs of people who work for or with the government.

From the current and 113th Congress, it appears that republicans are prioritizing spending cuts over any sort of taxation(decrease or increase). The reason I doubt your argument is the bill passed in the House without the majority of Republicans. This makes no sense under your reasoning. I believe the sequestration cuts will be combined with the debt ceiling, but we could see a series of minideals as each crisis comes again and again. So we'll have a small increase in the debt ceiling, then a small amount of spending cuts, and then some other small part of an upcoming crisis will be resolved. It's quite depressing, and this will continue until at least the next election. While I don't expect the current congress to have a change of heart, maybe the public will get so disgusted, the hardcore partisans will be voted out.

Zamfir: I thought so too, but the amount seemed right, about a trillion or so off, but it looked close enough.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby CorruptUser » Wed Jan 02, 2013 9:52 pm UTC

I think a nominal amount could be saved by letting people on food stamps keep a small chunk of it in the form of cash if they don't use the whole amount. Any cashier will tell you about the people buying potato chips and other junk with food stamps. While $130/month is not much for food, you can still eat relatively healthily on $100/month if you don't mind buying potatoes, onions, carrots, rice, and so forth in 10lb bags.

Economically it'd be much better to just give cash instead of stamps entirely, since people tend to make better choices for how much to spend on what than a bureaucrat will. I have to wonder if the food manufacturers have a bit too much influence to politically do that though.

Not really sure where else the government can really save cash without screwing over someone.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby sardia » Wed Jan 02, 2013 10:13 pm UTC

CorruptUser wrote:I think a nominal amount could be saved by letting people on food stamps keep a small chunk of it in the form of cash if they don't use the whole amount. Any cashier will tell you about the people buying potato chips and other junk with food stamps. While $130/month is not much for food, you can still eat relatively healthily on $100/month if you don't mind buying potatoes, onions, carrots, rice, and so forth in 10lb bags.

Economically it'd be much better to just give cash instead of stamps entirely, since people tend to make better choices for how much to spend on what than a bureaucrat will. I have to wonder if the food manufacturers have a bit too much influence to politically do that though.

Not really sure where else the government can really save cash without screwing over someone.

To save a chunk of a change? Agriculture and corporate subsidies. Agriculture alone is worth 80 billion dollars, corporate subsidies amount to a 95 billion dollars a year. To balance our budget and start paying down the debt? Now that's harder. You'd have to raise taxes on everyone, not just the rich, and cut spending at the same time. Just to get you an idea of how much taxes would go up, those Bush tax cuts for the middle class and down? Those cost us 400$ billion over 10 years, and that's on top of the deficit we have to begin with. We'd have to remove the tax cuts from Bush, and then raise taxes on top of that just to staunch the derivative of the rate of loss from increasing. Any further, and we'd be on the role of government in society, and I don't want to get too into that.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Wed Jan 02, 2013 11:50 pm UTC

Heisenberg wrote:The Republicans also dragged their feet long enough to win the "cutting taxes" title. If they had voted on Dec. 31st, they may have been vilified by challengers for raising taxes on the rich. But by waiting until the 1st, when taxes had technically gone up on everyone, they can argue that they voted to cut taxes for 99% of Americans.

Total bullshit, but it's what we're going to hear in the next round of political commercials.

I'm still concerned about the sequestration cuts, which were by design so careless as to be a significant threat to the jobs of people who work for or with the government.


Of course everyone is going to frame it as a success. However, putting it 100% on the republicans is definitely in error. Both sides had a list of stuff they wanted. The democrats got some of the stuff they wanted, the republicans got none of the stuff they wanted. That's an outcome that doesn't exactly show the republicans as being unwilling to negotiate.

Now, while the current bill is...better than no agreement at all, obviously, it's still negative. The increased payroll taxation is going to reduce disposable income, so that's gonna cut into consumer demand. Plus, the punting on spending means some of the uncertainty is still hanging about in some sectors. IE, look for a pretty soft first quarter in 2013. Might even be negative.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby CorruptUser » Wed Jan 02, 2013 11:57 pm UTC

sardia wrote:those Bush tax cuts for the middle class and down? Those cost us 400$ billion over 10 years, and that's on top of the deficit we have to begin with.


While the tax cuts reduced the taxes directly by $400b/yr, it isn't clear exactly how much they contributed to the deficit; people paying less tax meant they spent more which meant more tax revenue for the government. It's the same problem you have when cutting welfare; sure you save X billion a year on welfare, but that's X billion less being spent by people on welfare, which means the government collects less taxes as a result.

TBH, I can never really wrap my head around how debt as a total in the economy allows people to live beyond their means; everything you consume must first be produced. How a closed economy can consume as much as it produces yet still have increasing debt is very fishy to me.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Iulus Cofield » Thu Jan 03, 2013 12:02 am UTC

Tyndmyr wrote:the republicans got none of the stuff they wanted.


?

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby yurell » Thu Jan 03, 2013 12:03 am UTC

Tyndmyr wrote:Of course everyone is going to frame it as a success. However, putting it 100% on the republicans is definitely in error. Both sides had a list of stuff they wanted. The democrats got some of the stuff they wanted, the republicans got none of the stuff they wanted. That's an outcome that doesn't exactly show the republicans as being unwilling to negotiate.


Difference is that the Democrats have constantly been walking into these things with concessions already written on their list, while the Republicans walk in with their list of demands. And when they compromise? The Democrats have to be even looser on their concessions. It's what happens when one side is being centrist and the other side is being extremist.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Thu Jan 03, 2013 12:31 am UTC

Iulus Cofield wrote:
Tyndmyr wrote:the republicans got none of the stuff they wanted.


?

'
They've been pushing for spending reductions. They got zilch of that. Consider the proposal to cut SS a bit via chained CPI(a sub 1% cut). That just died outright.

yurell wrote:
Tyndmyr wrote:Of course everyone is going to frame it as a success. However, putting it 100% on the republicans is definitely in error. Both sides had a list of stuff they wanted. The democrats got some of the stuff they wanted, the republicans got none of the stuff they wanted. That's an outcome that doesn't exactly show the republicans as being unwilling to negotiate.


Difference is that the Democrats have constantly been walking into these things with concessions already written on their list, while the Republicans walk in with their list of demands. And when they compromise? The Democrats have to be even looser on their concessions. It's what happens when one side is being centrist and the other side is being extremist.


Oh? How, exactly, is any of that supported by the republicans not getting any of what they want, while they conceded some of the democrats desires? Does that not defacto-demonstrate that the republicans compromised?

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Iulus Cofield » Thu Jan 03, 2013 12:38 am UTC

Tyndmyr wrote:
Iulus Cofield wrote:
Tyndmyr wrote:the republicans got none of the stuff they wanted.


?

'
They've been pushing for spending reductions. They got zilch of that. Consider the proposal to cut SS a bit via chained CPI(a sub 1% cut). That just died outright.


Well, yeah, but I was under the impression that the Senate Republicans were convinced to push those off onto the next Congress. The House Republicans might be peeved about that, but whatever. The GOP did get the tax increase exemption for earners between $250k-$400k/year, which is a non-trivial concession on the part of the Democrats.

Maybe if the GOP hadn't taken such hardline negotiating tactics and gone on with this "We can't relent unless a doomsday deadline legislation more at home in a Fantastic Four comic than real world politics is about to pass" charade, there could have been time for talking about spending cuts.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Thesh » Thu Jan 03, 2013 12:54 am UTC

Tyndmyr wrote:
Iulus Cofield wrote:
Tyndmyr wrote:the republicans got none of the stuff they wanted.


?

'
They've been pushing for spending reductions. They got zilch of that. Consider the proposal to cut SS a bit via chained CPI(a sub 1% cut). That just died outright


Spending reductions were delayed, meaning the Democrats got a little of what they want but now have nothing to bargain with when they come up in February. It's not going to be a matter of whether or not there are cuts, only a matter of how much.

Tyndmyr wrote:
Thesh wrote:We shouldn't even be worrying about the deficit right now. If we could get a decent stimulus that is about infrastructure spending instead of tax cuts, we can grow the economy which would reduce the deficit anyway.


I doubt that very much. Nothing wrong with infrastructure spending in general, but stimulus implies increasing spending at the expense of deficit. That's not good at all.


Infrastructure spending returns $2 in economic growth for every $1 spent. If we spent $100 billion a year on infrastructure for the last four years, we would have grown the economy by $800 billion dollars, and with 15.8% of GDP going to revenue it would actually be reducing the deficit. However, it would also result in 2-3 million jobs (highway projects create around 27,000 jobs for every $1 billion in spending) which would reduce expenditures as well. It might be better than $2 growth per $1 spent right now as well since investors are not making productive investments because they are risky in a bad economy. There would also be more than 15.8% revenue generated if there is lower unemployment, so net contribution to the debt right now would probably be neutral and over ten years it would have been negative.

It would take over $2 trillion to get our infrastructure where it needs to be, and it would be the best thing for economic growth and the deficit. If we did $200 billion per year for ten years, our economy would be strong in no time and we would probably be looking to cut taxes to avoid a surplus.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Thu Jan 03, 2013 1:10 am UTC

Iulus Cofield wrote:
Tyndmyr wrote:
Iulus Cofield wrote:
Tyndmyr wrote:the republicans got none of the stuff they wanted.


?

'
They've been pushing for spending reductions. They got zilch of that. Consider the proposal to cut SS a bit via chained CPI(a sub 1% cut). That just died outright.


Well, yeah, but I was under the impression that the Senate Republicans were convinced to push those off onto the next Congress. The House Republicans might be peeved about that, but whatever. The GOP did get the tax increase exemption for earners between $250k-$400k/year, which is a non-trivial concession on the part of the Democrats.

Maybe if the GOP hadn't taken such hardline negotiating tactics and gone on with this "We can't relent unless a doomsday deadline legislation more at home in a Fantastic Four comic than real world politics is about to pass" charade, there could have been time for talking about spending cuts.


Ah. I like the way you negotiate. How about you and I negotiate a deal, eh? You give me $1000, and in return, I give you absolutely nothing. Deal?

Thesh wrote:
Tyndmyr wrote:
Iulus Cofield wrote:
Tyndmyr wrote:the republicans got none of the stuff they wanted.


?

'
They've been pushing for spending reductions. They got zilch of that. Consider the proposal to cut SS a bit via chained CPI(a sub 1% cut). That just died outright


Spending reductions were delayed, meaning the Democrats got a little of what they want but now have nothing to bargain with when they come up in February. It's not going to be a matter of whether or not there are cuts, only a matter of how much.


What do you "nothing to bargain with". If you get what you want without giving anything, that's the definition of winning. Agreeing to do another deal later does not change this.

Thesh wrote:
Tyndmyr wrote:
Thesh wrote:We shouldn't even be worrying about the deficit right now. If we could get a decent stimulus that is about infrastructure spending instead of tax cuts, we can grow the economy which would reduce the deficit anyway.


I doubt that very much. Nothing wrong with infrastructure spending in general, but stimulus implies increasing spending at the expense of deficit. That's not good at all.


Infrastructure spending returns $2 in economic growth for every $1 spent. If we spent $100 billion a year on infrastructure for the last four years, we would have grown the economy by $800 billion dollars, and with 15.8% of GDP going to revenue it would actually be reducing the deficit. However, it would also result in 2-3 million jobs (highway projects create around 27,000 jobs for every $1 billion in spending) which would reduce expenditures as well. It might be better than $2 growth per $1 spent right now as well since investors are not making productive investments because they are risky in a bad economy. There would also be more than 15.8% revenue generated if there is lower unemployment, so net contribution to the debt right now would probably be neutral and over ten years it would have been negative.

It would take over $2 trillion to get our infrastructure where it needs to be, and it would be the best thing for economic growth and the deficit. If we did $200 billion per year for ten years, our economy would be strong in no time and we would probably be looking to cut taxes to avoid a surplus.


Infrastructure pays out over very long timescales. Having a solid infrastructure is a good thing, but it is a long term investment(bridges are frequently built with a 50+ year lifespan in mind, for instance), not a short term one. Even if the $2 for $1 assumption is correct(and I contend that it is inherently very, very simplified), you wouldn't even break even until halfway through the infrastructure's useful life. This is pretty terrible as a means to stimulus or fixing a recession, which is inherently short term in nature.

Furthermore, given that compound interest is a bitch, a $2 for $1 investment that doesn't pay for ages, bought with borrowed money, is probably still a pretty sketchy deal. How bad, exactly, depends on the rate of interest.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Thesh » Thu Jan 03, 2013 1:18 am UTC

Tyndmyr wrote:Infrastructure pays out over very long timescales. Having a solid infrastructure is a good thing, but it is a long term investment(bridges are frequently built with a 50+ year lifespan in mind, for instance), not a short term one. Even if the $2 for $1 assumption is correct(and I contend that it is inherently very, very simplified), you wouldn't even break even until halfway through the infrastructure's useful life. This is pretty terrible as a means to stimulus or fixing a recession, which is inherently short term in nature.


Actually, it pays out in short and long term:

http://www.frbsf.org/publications/econo ... 12-35.html
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Iulus Cofield » Thu Jan 03, 2013 1:21 am UTC

Tyndmyr wrote:
Iulus Cofield wrote:
Tyndmyr wrote:
Iulus Cofield wrote:
Tyndmyr wrote:the republicans got none of the stuff they wanted.


?

'
They've been pushing for spending reductions. They got zilch of that. Consider the proposal to cut SS a bit via chained CPI(a sub 1% cut). That just died outright.


Well, yeah, but I was under the impression that the Senate Republicans were convinced to push those off onto the next Congress. The House Republicans might be peeved about that, but whatever. The GOP did get the tax increase exemption for earners between $250k-$400k/year, which is a non-trivial concession on the part of the Democrats.

Maybe if the GOP hadn't taken such hardline negotiating tactics and gone on with this "We can't relent unless a doomsday deadline legislation more at home in a Fantastic Four comic than real world politics is about to pass" charade, there could have been time for talking about spending cuts.


Ah. I like the way you negotiate. How about you and I negotiate a deal, eh? You give me $1000, and in return, I give you absolutely nothing. Deal?


Now you're thinking with elephants.

Obviously I can't agree to such a one sided deal. Given that you are, at this point, only making demands and not offering anything in return, how about we go with this as a starting point? We both give each other nothing, but if neither of us can agree to a deal before the end of the year, we both have to burn a pallet of $100 bills?

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Thu Jan 03, 2013 1:36 am UTC

Well, by definition, they pay out over time, yes. A road starts paying out as soon as construction is completed, and continues until the road is no longer used(minus maint costs, of course). But, at a total payout of 2:1, that's still not great.

Aright, let's assume a stock inflation of 3%, and use that study's estimate of five years until the first real benefits start rolling in, with a total usable lifespan of 50 years.

So, we invest 100k in 1956(date chosen to give us 55 years of known historical inflation data).

Hell, by the time it STARTS paying out, inflation's already eaten almost 10% of the value.

Assuming a linear payout(which is kind, traffic generally increases on a road over it's lifespan), a 2:1 dollar investment will result in you having about half the real value that you started with. So, not necessarily a good bet at all. Now, if interest outstrips inflation, it's possible it could actually be much, much worse.

Use of multiplier effects(especially when poorly known) without context is perhaps the worst thing Keynsian economics is responsible for.

Edit: Clue #1 that the article's data is horribly, horribly bad: The graph doesn't start at zero. Seriously, how does an unexpected economic event have a positive effect before people know about it/it happens? It can't. Therefore, since the graph doesn't start at zero, one of their assumptions, at least, is terribly wrong. For fun, try to find other methodological errors( I know, it's tougher without any raw data).
Last edited by Tyndmyr on Thu Jan 03, 2013 1:54 am UTC, edited 1 time in total.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Thu Jan 03, 2013 1:40 am UTC

Iulus Cofield wrote:
Tyndmyr wrote:
Ah. I like the way you negotiate. How about you and I negotiate a deal, eh? You give me $1000, and in return, I give you absolutely nothing. Deal?


Now you're thinking with elephants.

Obviously I can't agree to such a one sided deal. Given that you are, at this point, only making demands and not offering anything in return, how about we go with this as a starting point? We both give each other nothing, but if neither of us can agree to a deal before the end of the year, we both have to burn a pallet of $100 bills?


Oh? Well, you're an unreasonable bargainer not to agree with that, but because I(playing the democrats here) am so generous and willing to negotiate, I will make you a concession. You give me 500 dollars, and in return, I still give you nothing. See? I'm GIVING you $500. How could you possible say no to that? Obviously, if you don't accept it, you're being obstructionist. Extreme, even. Possibly even, gasp, a republican.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Thesh » Thu Jan 03, 2013 2:10 am UTC

Tyndmyr wrote:Well, by definition, they pay out over time, yes. A road starts paying out as soon as construction is completed, and continues until the road is no longer used(minus maint costs, of course). But, at a total payout of 2:1, that's still not great.

Aright, let's assume a stock inflation of 3%, and use that study's estimate of five years until the first real benefits start rolling in, with a total usable lifespan of 50 years.

So, we invest 100k in 1956(date chosen to give us 55 years of known historical inflation data).

Hell, by the time it STARTS paying out, inflation's already eaten almost 10% of the value.

Assuming a linear payout(which is kind, traffic generally increases on a road over it's lifespan), a 2:1 dollar investment will result in you having about half the real value that you started with. So, not necessarily a good bet at all. Now, if interest outstrips inflation, it's possible it could actually be much, much worse.

Use of multiplier effects(especially when poorly known) without context is perhaps the worst thing Keynsian economics is responsible for.

Edit: Clue #1 that the article's data is horribly, horribly bad: The graph doesn't start at zero. Seriously, how does an unexpected economic event have a positive effect before people know about it/it happens? It can't. Therefore, since the graph doesn't start at zero, one of their assumptions, at least, is terribly wrong. For fun, try to find other methodological errors( I know, it's tougher without any raw data).


I don't think you are understanding how it is supposed to work. Short and mid term GDP growth isn't from the improved infrastructure, it's from the construction itself. Remember:

GDP = Private Consumption + Government Spending + Private Investment + (Exports - Imports)

Using fake numbers as an example, if the government spends $100 billion on private contractors. The businesses then spend a portion of that on materials and equipment which contributes to private investment (let's say 30 billion), and may include imports but is a net gain (let's say 10 billion). The employees hired also consume the extra money they make, resulting in more private consumption (let's say 50 billion). In this case, the direct contribution is $150 billion to the economy not including what the contractor does with their $20 billion in profits. Then you have the employees of the companies that the contractors buys materials from that are hired to meet demand and the employees that retailer's higher due to additional consumption, who spend money and contribute further to private consumption.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Thu Jan 03, 2013 2:20 am UTC

That is not a productive growth. You are not, in fact, getting $2 in production by spending $1. That's not an investment at all, merely the broken window fallacy writ large.

Now, this should not be taken to imply that infrastructure is entirely a broken window fallacy...it isn't. But justifying money spent by the jobs funded is something that inherently applies to ANY spending of money. And construction is not a particularly rapid starting job sector.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Thesh » Thu Jan 03, 2013 2:24 am UTC

Tyndmyr wrote:That is not a productive growth. You are not, in fact, getting $2 in production by spending $1. That's not an investment at all, merely the broken window fallacy writ large.

It's only the broken window fallacy if the improvements are not necessary. In this case, they are.

http://articles.washingtonpost.com/2011 ... -k-skinner
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Thu Jan 03, 2013 2:30 am UTC

Thesh wrote:
Tyndmyr wrote:That is not a productive growth. You are not, in fact, getting $2 in production by spending $1. That's not an investment at all, merely the broken window fallacy writ large.

It's only the broken window fallacy if the improvements are not necessary. In this case, they are.

http://articles.washingtonpost.com/2011 ... -k-skinner


Improvements are only necessary for the productive growth. The bit the folks in the first summary you linked kept harping on(after all, they discounted all military spending as not productive, eh?) The benefits from the construction are not the productive use. So, the case you're making is relying solely on short term growth from people being employed....not the necessity at all. That is common to ALL spending, public and private. Spend a giant pile of money on producing anything, and people will be employed making it. That is not a good case for infrastructure, and it does not mean that infrastructure is particularly good for short term stimulus.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Thesh » Thu Jan 03, 2013 2:54 am UTC

It doesn't matter if it's short term because we are in a temporary depression. The goal is to get out of the depression by making up for reduced private investment and consumption. The temporary construction jobs create permanent jobs in other sectors, and the drop in unemployment rate and increase in consumer spending results in investors being more willing to make new investments which results in long term growth. If our economy was strong, you might have a point, but it isn't.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby sardia » Thu Jan 03, 2013 3:17 am UTC

Tyndmyr wrote:
Iulus Cofield wrote:
Tyndmyr wrote:
Ah. I like the way you negotiate. How about you and I negotiate a deal, eh? You give me $1000, and in return, I give you absolutely nothing. Deal?


Now you're thinking with elephants.

Obviously I can't agree to such a one sided deal. Given that you are, at this point, only making demands and not offering anything in return, how about we go with this as a starting point? We both give each other nothing, but if neither of us can agree to a deal before the end of the year, we both have to burn a pallet of $100 bills?


Oh? Well, you're an unreasonable bargainer not to agree with that, but because I(playing the democrats here) am so generous and willing to negotiate, I will make you a concession. You give me 500 dollars, and in return, I still give you nothing. See? I'm GIVING you $500. How could you possible say no to that? Obviously, if you don't accept it, you're being obstructionist. Extreme, even. Possibly even, gasp, a republican.
Christ, you're metaphor was so bad, I can't even begin to parody it, the only thing that compares would be if I took LSD and wrote on and on about how Jesus was a gun toting hippy secret agent.
Now you're being facetious, if the GOP's priority was spending cuts, then why did we spend all that time haggling over the tax rates? Unless you're trying to argue that the GOP tried but failed to trade raising taxes in exchange for spending cuts, but there weren't many republicans arguing that at all. If the position was only that spending should be cut, you could have just voted no, and let sequestration happened. Bam, spending cuts. Or say you have a bit of rationality, you could have proposed x dollars in tax raises in exchange for x dollars in cuts to spending. If you're resorting to namecalling; as I recall, your corporate masters prefer "job creators".

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Heisenberg » Thu Jan 03, 2013 3:00 pm UTC

sardia wrote:Unless you're trying to argue that the GOP tried but failed to trade raising taxes in exchange for spending cuts,
That's exactly what happened all through December. Obama's initial proposal offered zero spending cuts. Boehner then offered $1 trillion in spending cuts. Obama counteroffered with $200 billion, and then we got this deal, which doesn't result in zero spending cuts, it results in the sequestration being pushed back. The GOP is still holding onto their sequestration cuts, they've just been pushed back to February, when everyone will start arguing again.

So really, while the GOP didn't get the trillion dollar cuts they wanted, they did get to (A) dodge the worst of the fiscal cliff (B) preserve most of the Bush tax cuts, and (C) keep the sequestration hanging over our heads to ensure that if no deal is struck, brutal spending cuts will happen.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Zamfir » Thu Jan 03, 2013 5:22 pm UTC

CorruptUser wrote:

TBH, I can never really wrap my head around how debt as a total in the economy allows people to live beyond their means; everything you consume must first be produced. How a closed economy can consume as much as it produces yet still have increasing debt is very fishy to me.

In one sense, 'increasing debt' just means 'more outstanding loan agreements', which can go together with more and with less prosperity. I can use my savings to buy a house, or get a mortgage while loaning my savings to a pension fund ( who loan it on in turn, even to mortgage lenders). In the second case there is more debt in the world, but not necessarily more or less wealth.

That can be good: it allows people to twerk their loans and debts to specific situations. Can clearly also be bad, as the crisis showed. The increased complexity leaves room for more mistakes and fraud, and mixtures of those two.

If you collapse all the people to a single ' economy as a whole', then all debts cancel to zero, indeed without possibility for increased debt. But it is possible for the 'entire economy' to live beyond its means: by reduction of the existing stock of wealth from the past. When not enough current production is spent on replacement or maintenance, and on expansion to accommodate growth in population and expectations.

In a bubble, these two things go together: through debt-fueled mistakes, people think they are frugal and efficient. By replacing and expanding their wealth with shiny new companies/mines/houses etc. While in hindsight this effort was wasteful. The share of production that went to actually useful investment might turn out to be insuffient for the planned future consumption levels.

That's a scenario how increasing levels of debt can cause a closed economy to live beyond its means. Not by borrowing from the outside, but facilitating delusion.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby sardia » Thu Jan 03, 2013 7:51 pm UTC

Heisenberg wrote:
sardia wrote:Unless you're trying to argue that the GOP tried but failed to trade raising taxes in exchange for spending cuts,
That's exactly what happened all through December. Obama's initial proposal offered zero spending cuts. Boehner then offered $1 trillion in spending cuts. Obama counteroffered with $200 billion, and then we got this deal, which doesn't result in zero spending cuts, it results in the sequestration being pushed back. The GOP is still holding onto their sequestration cuts, they've just been pushed back to February, when everyone will start arguing again.

So really, while the GOP didn't get the trillion dollar cuts they wanted, they did get to (A) dodge the worst of the fiscal cliff (B) preserve most of the Bush tax cuts, and (C) keep the sequestration hanging over our heads to ensure that if no deal is struck, brutal spending cuts will happen.

That's why I said that Tymyndor's metaphor was terrible. "D: We should raise revenue by x$.
R: No, we should cut our spending by x$.
R: Here's how we should proceed...goes into seizures. I was unable to think of a coherent plan, what do you think Senate R?
Senate R and D: Damn, we took too long, let's raise our spending by less than x$.
R: Grumbles...fine, but we're gonna decide how to spend less in 2 months.
Tymyndor: Man, those republicans are a bunch of losers."
There were so many underlying issues that his metaphor papered over, it's insulting. I suppose Tymyndor's argument would make sense that this lost budget battle is potentially part of a trend due to incompetence from the GOP.
http://www.nytimes.com/2013/01/04/us/po ... itics&_r=0
Boenor survives with a comfortable margin despite protests votes over the fiscal cliff.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Fri Jan 04, 2013 2:58 am UTC

sardia wrote:
Heisenberg wrote:
sardia wrote:Unless you're trying to argue that the GOP tried but failed to trade raising taxes in exchange for spending cuts,
That's exactly what happened all through December. Obama's initial proposal offered zero spending cuts. Boehner then offered $1 trillion in spending cuts. Obama counteroffered with $200 billion, and then we got this deal, which doesn't result in zero spending cuts, it results in the sequestration being pushed back. The GOP is still holding onto their sequestration cuts, they've just been pushed back to February, when everyone will start arguing again.

So really, while the GOP didn't get the trillion dollar cuts they wanted, they did get to (A) dodge the worst of the fiscal cliff (B) preserve most of the Bush tax cuts, and (C) keep the sequestration hanging over our heads to ensure that if no deal is struck, brutal spending cuts will happen.

That's why I said that Tymyndor's metaphor was terrible. "D: We should raise revenue by x$.
R: No, we should cut our spending by x$.
R: Here's how we should proceed...goes into seizures. I was unable to think of a coherent plan, what do you think Senate R?
Senate R and D: Damn, we took too long, let's raise our spending by less than x$.
R: Grumbles...fine, but we're gonna decide how to spend less in 2 months.
Tymyndor: Man, those republicans are a bunch of losers."
There were so many underlying issues that his metaphor papered over, it's insulting. I suppose Tymyndor's argument would make sense that this lost budget battle is potentially part of a trend due to incompetence from the GOP.
http://www.nytimes.com/2013/01/04/us/po ... itics&_r=0
Boenor survives with a comfortable margin despite protests votes over the fiscal cliff.


Uh, the republicans made proposals. It's amusing to me how people can go so rapidly from the previous narrative of accusing the republicans of being in lockstep opposition to being so fractious and divided they can't agree. Regardless of disagreement, the republican congress did make proposals upon which they agreed. Sure, the plan B proposal wasn't agreed on, but previous plans were. Hell, this has been going on since 2011.

There were deals in places ages ago...Obama blew them out of the water by suddenly increasing the terms he wanted. Look at the 2011 Cap, Cut and Balance Act. The nasty proposal and counter proposals in place were much the same then as now, and lead us to our current predicament. And again, we're punting the ball just a bit into the future with a compromise that is both crappy AND temporary.

And, in the end, Democrats, especially Obama, verbalized a willingness to go over the fiscal cliff to get what they wanted, emboldened by surveys saying that the public would blame the republicans more. This sort of brinksmanship is NOT conciliatory in nature, and will be terribly harmful if the same approach is taken to the debt ceiling.

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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby sardia » Fri Jan 04, 2013 5:51 am UTC

If it makes you feel better, the GOP will be in a better bargaining position come Feb/march when the debt ceiling debate takes place. They signaled that they are taking a hard line, similar to the previous debt ceiling debate. The past is the past; as I recall, these Bush taxcuts were suppose to be temporary, and ended years ago. I'm not surprised they're taking a harder line. They don't want to look weak, they don't have to deal with automatic taxes, and if nothing happens, they win... sorta.
The initial positions are pretty far apart, which is bad. The Democrats want more revenue if there will be any spending cuts, or just a clean increase in the debt ceiling. The republicans want some version of the last one, dollar for dollar cuts for increase in debt limit, and no revenue of any sort.
"Uh, the republicans made proposals. It's amusing to me how people can go so rapidly from the previous narrative of accusing the republicans of being in lockstep opposition to being so fractious and divided they can't agree. Regardless of disagreement, the republican congress did make proposals upon which they agreed. Sure, the plan B proposal wasn't agreed on, but previous plans were. Hell, this has been going on since 2011."
Those proposals were pretty rough on Democrats. Sequestration was half military and half domestic spending cuts. The republicans proposed making it 100% domestic spending cuts and minimal tax increases. That's just as bad as what you claim Obama did.


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