Sequester Part II, The Tea Party Strikes Back

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

Postby KnightExemplar » Fri Jan 04, 2013 3:28 pm UTC

Zamfir wrote: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.


Thanks for your analysis. Although, the primary point was that whether or not we increase our debt... we are dependent on the trajectory of future interest rates to some degree. Around 4 trillion is going to roll over this year, meaning that even if our deficit were zero, a rising interest rate means we are going to pay more interest on our debt. Just because the interest rate is right now under inflation doesn't mean that we should keep piling on debt. Especially because interest rates being so low is a result of current fiscal policy (ie: Quantitative Easing), which probably can't be funded forever.

Eventually, we gotta face rising taxes or cutting of government programs, or both. And the current compromise doesn't really address either issue very much.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby JudeMorrigan » Fri Jan 04, 2013 4:00 pm UTC

KnightExemplar wrote:Eventually, we gotta face rising taxes or cutting of government programs, or both. And the current compromise doesn't really address either issue very much.

This, imo, is a case where it's something of a shame that it's so hard for Congress to make longer-term budgetary decisions with any real teeth. The thing is, it actually is very reasonable to think that this is not a particularly good time to be slashing spending. But it's equally true that there are very real long-term issues with the federal budget. It's a whole lot easier for us to say that we'll spend in the lean times and say we'll save when things are really turned around with us being in the lean times than it is to actually start saving in the those better days.

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

Postby faranim » Fri Jan 04, 2013 4:12 pm UTC

And I thought Obama was finally going to grow a pair and veto something...

I think letting the automatic tax hikes and spending cuts occur would have been better for the country. Then again, I don't understand how so many Congressmen got re-elected, when the Congress approval rating was already 20% (or less) prior to the November election.

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

Postby sardia » Fri Jan 04, 2013 11:28 pm UTC

KnightExemplar wrote:
Thanks for your analysis. Although, the primary point was that whether or not we increase our debt... we are dependent on the trajectory of future interest rates to some degree. Around 4 trillion is going to roll over this year, meaning that even if our deficit were zero, a rising interest rate means we are going to pay more interest on our debt. Just because the interest rate is right now under inflation doesn't mean that we should keep piling on debt. Especially because interest rates being so low is a result of current fiscal policy (ie: Quantitative Easing), which probably can't be funded forever.

Eventually, we gotta face rising taxes or cutting of government programs, or both. And the current compromise doesn't really address either issue very much.

It addresses a few things, some small, some big. It ends the farce that was the AMT, and it gives us a baseline for our revenues for the next decade, instead of constantly recalculating every 2 years. If I told you that I'm losing money this year, but next year I would be profitable. You'd think I was in good shape. But when the new year comes around, I choose not to take the extra money. That's the farce that the AMT was, it made our future debt look easier to pay off, but then it would be changed so that it collects almost nothing. Same with the Bush tax cuts. This deal ends all that, so that at least the public has a better idea of our fiscal standing.

faranim wrote:And I thought Obama was finally going to grow a pair and veto something...

I think letting the automatic tax hikes and spending cuts occur would have been better for the country. Then again, I don't understand how so many Congressmen got re-elected, when the Congress approval rating was already 20% (or less) prior to the November election.

In any other decade, I'd say Obama had a good deal, along with the republicans. However, until the Tea Party fades into history books, this was a terrible idea. Now he's gonna fight spending cuts for the debt ceiling and he's already used up his leverage over them. I dunno, what sequestration will do now, maybe nothing? Is there still an automatic cuts to everything?

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

Postby Malice » Sat Jan 05, 2013 2:21 am UTC

sardia wrote:
KnightExemplar wrote:
Thanks for your analysis. Although, the primary point was that whether or not we increase our debt... we are dependent on the trajectory of future interest rates to some degree. Around 4 trillion is going to roll over this year, meaning that even if our deficit were zero, a rising interest rate means we are going to pay more interest on our debt. Just because the interest rate is right now under inflation doesn't mean that we should keep piling on debt. Especially because interest rates being so low is a result of current fiscal policy (ie: Quantitative Easing), which probably can't be funded forever.

Eventually, we gotta face rising taxes or cutting of government programs, or both. And the current compromise doesn't really address either issue very much.

It addresses a few things, some small, some big. It ends the farce that was the AMT, and it gives us a baseline for our revenues for the next decade, instead of constantly recalculating every 2 years. If I told you that I'm losing money this year, but next year I would be profitable. You'd think I was in good shape. But when the new year comes around, I choose not to take the extra money. That's the farce that the AMT was, it made our future debt look easier to pay off, but then it would be changed so that it collects almost nothing. Same with the Bush tax cuts. This deal ends all that, so that at least the public has a better idea of our fiscal standing.

faranim wrote:And I thought Obama was finally going to grow a pair and veto something...

I think letting the automatic tax hikes and spending cuts occur would have been better for the country. Then again, I don't understand how so many Congressmen got re-elected, when the Congress approval rating was already 20% (or less) prior to the November election.

In any other decade, I'd say Obama had a good deal, along with the republicans. However, until the Tea Party fades into history books, this was a terrible idea. Now he's gonna fight spending cuts for the debt ceiling and he's already used up his leverage over them. I dunno, what sequestration will do now, maybe nothing? Is there still an automatic cuts to everything?


The automatic sequestration cuts were postponed for two months. They'll be part of Obama's leverage during the debt ceiling negotiations, along with whatever willingness he has to simply ignore the debt ceiling (or use the trillion dollar coin gambit).
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Sat Jan 05, 2013 4:20 pm UTC

JudeMorrigan wrote:
KnightExemplar wrote:Eventually, we gotta face rising taxes or cutting of government programs, or both. And the current compromise doesn't really address either issue very much.

This, imo, is a case where it's something of a shame that it's so hard for Congress to make longer-term budgetary decisions with any real teeth. The thing is, it actually is very reasonable to think that this is not a particularly good time to be slashing spending. But it's equally true that there are very real long-term issues with the federal budget. It's a whole lot easier for us to say that we'll spend in the lean times and say we'll save when things are really turned around with us being in the lean times than it is to actually start saving in the those better days.


Exactly. It's a minor win for dems in the bickering over tax rates and what not, but in terms of actually getting shit fixed...not so much. The two month punt is the definition of a bandaid fix. Nothing has really been changed in the long term with regards to the deficit itself.

faranim wrote:And I thought Obama was finally going to grow a pair and veto something...

I think letting the automatic tax hikes and spending cuts occur would have been better for the country. Then again, I don't understand how so many Congressmen got re-elected, when the Congress approval rating was already 20% (or less) prior to the November election.


It...could have been in the long term if it had resulted in them actually fixing stuff. I'm not sure that was in the cards, though. The reaction as the cliff approached was not "come to an agreement", but "blame the other party". I think it's clear that making a nasty penalty is not all that great at making them consider the long term issues.

As for why approval rates are so low, but they keep getting elected...most americans hate congress as a group, but consider their particular congressman a good guy. Speaks to the power of campaigning, I suppose. Also, many folks are disappointed in both options.

sardia wrote: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.


It's not a better position, per se, but it HAS to be a hard position. If they roll over again on additional taxes and/or raise the debt ceiling, they sort of lose all credibility(which, frankly, was already weak) as budget cutters. Therefore, we've got Obama on one side, expressing a willingness to go over the cliff, and repubs on the other side, who now feel backed into a corner, and are really unable to concede much to make a deal. This result does not make me feel better, I'm afraid. It makes me predict us missing that deadline, probably by more than this one(though passing additional temporary measures may happen), which contributes to a weak economy due to uncertainty.

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

Postby sardia » Sat Jan 05, 2013 7:52 pm UTC

You seem to share the opinion of the noncompromisers. Why is raising additional revenue a bad way to help solve the budget? Isn't that very lack of deal making one of the reasons we got into this crisis? Even if you don't like taxes on principle, what's more important to you, solving the budget crisis now or cutting spending to match your ideals even though you don't have the votes?

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

Postby KnightExemplar » Sat Jan 05, 2013 9:07 pm UTC

Considering that the two wars in Afghanistan and Iraq were "funded" by Tax Cuts, I think it is fair to say we need to increase Revenue to just fund the wars that we borrowed so much money for.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Sun Jan 06, 2013 12:11 am UTC

sardia wrote:You seem to share the opinion of the noncompromisers. Why is raising additional revenue a bad way to help solve the budget? Isn't that very lack of deal making one of the reasons we got into this crisis? Even if you don't like taxes on principle, what's more important to you, solving the budget crisis now or cutting spending to match your ideals even though you don't have the votes?


Funded? The GAO established that this bill increased spending by more than the additional expected revenue. How does that solve the budget?

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

Postby Silknor » Sun Jan 06, 2013 1:39 am UTC

Tyndmyr wrote:
Funded? The GAO established that this bill increased spending by more than the additional expected revenue. How does that solve the budget?


The only budget problem to solve right now is that the fiscal cliff was too much austerity, too fast. In time we'll have to bring the deficit down, but not yet.

And what baseline are you using to say that it increased both spending and revenue? One in which sequestration happens but all the Bush Tax Cuts were extended? Because that was never going to happen. That's about as realistic as a baseline in which sequestration was canceled and all the Bush Tax Cuts expired.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby sardia » Sun Jan 06, 2013 5:33 am UTC

Tyndmyr wrote:
Funded? The GAO established that this bill increased spending by more than the additional expected revenue. How does that solve the budget?

Why does it sound like you're answering someone else's response?

You make it sound like the republicans wanted to end the Bush tax cuts, which they badly wanted extended. How does cutting taxes help if we're trying to cut our spending? The republican solution was to cut all taxes, cut spending, and then blame the budget shortfalls on the poor.

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

Postby Tyndmyr » Sun Jan 06, 2013 1:44 pm UTC

How is the response wrong? You're assuming that this bill helps the budget issue.

My point was, since the additional added spending from this bill outstrips the added revenue, no progress whatsoever was made on the deficit. Therefore, it does not help solve the budget crisis at all. In fact, it actually makes it worse.

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

Postby sardia » Sun Jan 06, 2013 8:53 pm UTC

Tyndmyr wrote:How is the response wrong? You're assuming that this bill helps the budget issue.

My point was, since the additional added spending from this bill outstrips the added revenue, no progress whatsoever was made on the deficit. Therefore, it does not help solve the budget crisis at all. In fact, it actually makes it worse.

This bill helps depending on what fantasy land we're living in. If you believed that the AMT would ever not be updated, or the Bush tax cuts removed, then this bill makes it worse. If you didn't think those two would ever happen, then this bill definitely slows the rate of descent compared to other deals. Every plausible scenario increased the total national debt, only the wildest dreamers could believe a deal would reduce our debt. It be like if the GOP went insane in the opposite direction, and demanded increased taxation AND spending cuts on the 90% of Americans, while the Democrats demanded more taxes and spending cuts on the wealthy.

Saying the Republicans didn't get any of what they wanted is deceptive, since they got some of what they wanted, it just didn't help the deficit at all. Rather, it made it worse because the GOP got something that happened to cost the nation money. You're earlier metaphor implied that the Bush tax rates were the baseline, and then you flipflopped by citing the GAO which assumed the Clinton Era tax rates as the baseline. Make up your mind John Kerry.

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

Postby jseah » Mon Jan 07, 2013 1:58 am UTC

Doesn't it depend on whether the GOP wants lower spending more than they want tax cuts? They could have been willing to trade letting tax rise for lower spending or were not even arguing for tax cuts in the first place (but accepted it anyway when it happened).
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Mon Jan 07, 2013 4:01 am UTC

sardia wrote:
Tyndmyr wrote:How is the response wrong? You're assuming that this bill helps the budget issue.

My point was, since the additional added spending from this bill outstrips the added revenue, no progress whatsoever was made on the deficit. Therefore, it does not help solve the budget crisis at all. In fact, it actually makes it worse.

This bill helps depending on what fantasy land we're living in. If you believed that the AMT would ever not be updated, or the Bush tax cuts removed, then this bill makes it worse. If you didn't think those two would ever happen, then this bill definitely slows the rate of descent compared to other deals. Every plausible scenario increased the total national debt, only the wildest dreamers could believe a deal would reduce our debt. It be like if the GOP went insane in the opposite direction, and demanded increased taxation AND spending cuts on the 90% of Americans, while the Democrats demanded more taxes and spending cuts on the wealthy.

Saying the Republicans didn't get any of what they wanted is deceptive, since they got some of what they wanted, it just didn't help the deficit at all. Rather, it made it worse because the GOP got something that happened to cost the nation money. You're earlier metaphor implied that the Bush tax rates were the baseline, and then you flipflopped by citing the GAO which assumed the Clinton Era tax rates as the baseline. Make up your mind John Kerry.


Fantasy land? No, we're baselining this off straight keeping all the bush tax cuts. IE, the status quo before the bill. Nobody ever brought up clinton tax rates. You can get ludicrous numbers by comparing with them, but that's irrelevant. Additionally, the CBO ran both sets of numbers, so your assumption seems...premature.

I'm guessing nobody here's read it yet, because it's 157 pages. Well, it's expected to get us an average of an additional 62b in revenue yearly(over the next ten years, with the greatest gains towards the end of it, naturally).

While I don't have a total estimate of spending overall, having not yet slogged through the entire thing, we currently an extension of unemployment benefits that is not otherwise offset, for $30b over the next year. We have an end to the federal payment freeze, a new farm supplement(and the last one expired back in sept, so it's not a mere continuation)...all told, I'm seeing about 322b in additional spending thus far, and that's over the next FIVE years, because all of those sections have shorter durations.

Therefore, on a per-year basis, we're adding more spending provisions than we are revenue for a net loss.

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

Postby sardia » Mon Jan 07, 2013 10:49 am UTC

I hardly think that $60 billion a year in additional spending is the main cause of our national debt.
http://www.cbo.gov/publication/43835
I skimmed it really quick, but they made no mention of the farm bill, or unemployment in the summary; it's probably buried in the full report. Say your 300$ billion in additional spending over 5 years is true. Are you claiming that the net value of marginal change in the highest bracket is worth less than 300$ billion over 5 years?

I don't see how the GOP is gonna put a dent in the deficit. They don't want additional taxes, but they still want stuff from the government. So we're stuck arguing over pennies from the domestic budget while the big 3 drivers of our debt keep spiraling out of control.

I'm not looking forward to the debt ceiling, Obama doesn't have any leverage other than "don't threaten the country, it makes you look bad". So we're back to economic chicken, again.

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

Postby Tyndmyr » Mon Jan 07, 2013 11:44 am UTC

sardia wrote:I hardly think that $60 billion a year in additional spending is the main cause of our national debt.
http://www.cbo.gov/publication/43835
I skimmed it really quick, but they made no mention of the farm bill, or unemployment in the summary; it's probably buried in the full report. Say your 300$ billion in additional spending over 5 years is true. Are you claiming that the net value of marginal change in the highest bracket is worth less than 300$ billion over 5 years?


I'm not, the GAO is. Look over all the reporting, if you doubt this...estimates are pretty consistent in the value of the expected revenue.

Main cause? No. But if it's negative, it's negative, and should not be framed as a "solution".

I don't see how the GOP is gonna put a dent in the deficit. They don't want additional taxes, but they still want stuff from the government. So we're stuck arguing over pennies from the domestic budget while the big 3 drivers of our debt keep spiraling out of control.

I'm not looking forward to the debt ceiling, Obama doesn't have any leverage other than "don't threaten the country, it makes you look bad". So we're back to economic chicken, again.


Granted, they certainly talk a better game than they actually do. But any penny pinching is better than none. If we at least ended up with a bit of negative, it would at least delay the giant mess that's gonna hit in two months.

And yeah, it's gonna be another round of economic chicken. Merely playing that game at all is a negative effect on the economy. If they fail to reach a long term deal in a timely manner(which seems wildly unlikely with only two months to go), it means a continuation of uncertainty and worry at minimum. Hopefully nobody will be so foolish as to actually risk default, but I would not be at all surprised to see negative growth for the first quarter. How bad it is mostly depends on how bad they bungle things...but I'm not very confident atm.

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

Postby jseah » Mon Jan 07, 2013 2:46 pm UTC

sardia wrote:I don't see how the GOP is gonna put a dent in the deficit. They don't want additional taxes, but they still want stuff from the government. So we're stuck arguing over pennies from the domestic budget while the big 3 drivers of our debt keep spiraling out of control.

Could someone summarize the GOP position for me? I was under the impression they want to cut welfare, healthcare, farm subsidies; but clearly I am wrong.

EDIT: clearly my google-fu is failing me. Do the Republicans even have a united campaigning platform? I cannot seem to find an "official" republican website.

EDIT2: nvm, found it.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby sardia » Mon Jan 07, 2013 9:28 pm UTC

Oh, you're looking at the GAO, I was looking at the CBO. I can only find the GAO estimated prediction from the Fall of 2012, link please.

I disagree with penny pinching as a solution since not all pennies are alike. A dollar spent on medicare/medicaid/social security has different effect on our future than a dollar spent on R&D, education, or other investments. Defense is a mixed bag, but somehow, I don't see the GOP demanding x$ billions in cuts from defense. So instead, the GOP will ask for cuts to medicaid and domestic budget, while the Democrats yell at the attack on the poor. Then the GOP backs off on medicaid while the domestic budget gets gutted, yet again. I suppose the GOP will try to cut SS and medicare as well, but they're probably hesitant from the debacle with Ryan's plan.

Btw, is penny pinching a good attribute if it is combined with tax cutting ? You're defeating the purpose of penny pinching if you're pushing tax rates that cost 10x more than the programs you're cutting.

JS: The current policy positions are low taxes, low government, but a strong military. They, in principle, would remove social security and medicare, but they want to keep their jobs so they try to keep it quiet. If the rest of the country believed in it, it wouldn't be bad fiscally. You'd have low revenue, but you wouldn't have any expenditures besides the military and natural disasters. But if you tried doing it now, you get this weird situation where the path of least resistance is to cut taxes, but keep expenditures high. You probably know all of this, and there's variations on this as well.

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

Postby mosc » Mon Jan 07, 2013 10:30 pm UTC

jseah wrote:Could someone summarize the GOP position for me? I was under the impression they want to cut welfare, healthcare, farm subsidies; but clearly I am wrong.

GOP generally wants to reduce expenditures on individuals (retirement, health care, civil services, etc) and increase expenditures on corporate incentives (subsidies), military, and natural resource development. This isn't entirely the rule and it is not what I would describe as a libertarian position but it seems to fit. Social Security is not favored by most republican policy makers. General changes to Social Security are designed to gradually reduce it towards eventual elimination. Although both parties are increasingly tied to corporate money, the GOP's main financial supporters tend to be companies that have pressures on the profit side of their business more than the growth side of their business. They favor a more capitalist approach to government money in the economy as opposed to a more socialist one.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Wnderer » Tue Jan 08, 2013 2:00 am UTC

There's been some talk about minting a trillion-dollar platinum coin and using it to back the debt.
http://krugman.blogs.nytimes.com/2013/0 ... &seid=auto

Now a GOP rep introduced a bill to ban the trillion-dollar platinum coin.
http://walden.house.gov/s2012/greg-wald ... pand-debt/

Who says Americans can't have a serious debate about the deficit.

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

Postby jseah » Tue Jan 08, 2013 2:07 am UTC

Do they not realize that a trillion dollar coin is basically a trillion dollar QE?
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Tue Jan 08, 2013 2:16 am UTC

jseah wrote:
sardia wrote:I don't see how the GOP is gonna put a dent in the deficit. They don't want additional taxes, but they still want stuff from the government. So we're stuck arguing over pennies from the domestic budget while the big 3 drivers of our debt keep spiraling out of control.

Could someone summarize the GOP position for me? I was under the impression they want to cut welfare, healthcare, farm subsidies; but clearly I am wrong.

EDIT: clearly my google-fu is failing me. Do the Republicans even have a united campaigning platform? I cannot seem to find an "official" republican website.

EDIT2: nvm, found it.


Well, they seem to be emphasizing no additional taxes, coupled with cut spending.

Conversely, the democrats seem to be after the opposite. Additional taxes, avoid cutting spending. At least, these are the two sides as verbalized. Sometimes, practice varies from what they say they want. Naturally, both sides have certain issues they consider more important to fund than others.

I would be ok with something of a combination plan, if it really did fix the deficit. It's really pretty impractical to fix the deficit by either alone, as the deficit is just quite large. A combination approach is much more likely to be practical.

sardia wrote:Btw, is penny pinching a good attribute if it is combined with tax cutting ? You're defeating the purpose of penny pinching if you're pushing tax rates that cost 10x more than the programs you're cutting.


Depends how it's done. Tax cuts aren't particularly useful for fixing the deficit, usually...but not all cuts are created equal. For instance, the estate tax is a particularly expensive tax for the IRS to collect. Last I checked, roughly half the money taken in by it went into merely collecting it, but those numbers were probably dated. So, as a tax, it's kind of inefficient.

One might well propose making taxes more efficient(ie, generally less dodge-able or less complex) instead of simply axing them, but either way, it's clear that it really depends on which taxes you're talking about and your precise plan.

In the case of the boost to payroll taxes, those are slightly regressive(since they're capped at the first 110k of income, was it?). Raising them, while it does provide additional revenue, does directly reduce disposable income, so it's not great for the economy. This true for most taxes, of course, but a 0% tax rate is unlikely. A balance has got to be found. Raising the rates enough to kill the deficit, for instance, would probably plunge us back into recession. I wouldn't consider that worthwhile...

Of course, default is very obviously not a good plan either. Very likely, one of the worst possible plans. And now, since we've got a scenario where in two months, Obama will be expecting additional taxes, and does not seem keen on negotiating...the dems don't seem particularly inclined to avoid that unless they get additional taxation. Republicans simply can't afford to buckle again. They're being castigated by their party for what is seen as a defeat, and repeating the same would risk a lot for them. The vast majority of republican congressmen won their last election fairly handily(55%+ of the vote), so their major risk is losing the support of their base.

The platinum coin gambit seems suspiciously like printing your way out of debt.

It looks damned ugly.

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

Postby yurell » Tue Jan 08, 2013 2:23 am UTC

I don't think anyone in power would be stupid enough to actually mint such a coin, as it would probably be the single most efficient way to kill your economy.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby CorruptUser » Tue Jan 08, 2013 2:27 am UTC

Yes and no. Since the US debt is measured in dollars, hyperinflation renders the debt absolutely meaningless. Who cares if the debt is 16 trillion when the average salary is 50 trillion?

In reality, the US has only 3 ways of dealing with the debt. The 1st way is to print it all away, via hyperinflation. The 2nd is to reneg on it at least partially, which would still lead to hyperinflation and other problems. The 3rd way is to magically fix the economy to the point where the US can get another $1T/yr in taxes, which is not going to happen short of someone discovering how to turn atmospheric heat into electricity.

There is simply no way the US can raise an additional trillion in taxes due to deadweight losses, as every dollar raised in tax shrinks the rest of the economy by more than a dollar. Sure, every dollar spent improves the economy by more than a dollar, and we can argue all day about how to spend properly so that the spent dollar does more benefit than the loss from the taxed dollar, but a trillion dollars?
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby sardia » Tue Jan 08, 2013 2:32 am UTC

jseah wrote:Do they not realize that a trillion dollar coin is basically a trillion dollar QE?

It depends on how they make their sales pitch. If it's just a temporary bill that the Treasury issues and then buys back, then nothing happens except Obama gets more time on the debt ceiling. If Obama declared that the national debt has been reduced by 1$ trillion, that's a whole another problem. Why did you mention QE?
Btw, this probably won't happen considering the President chose not to legally challenge the constitutionality of the debt ceiling. He probably won't go challenge congress via a legal loophole such as this, though the fact that people are discussing it in the first place shows just how dire times are.

Tymyndor: I haven't heard many republicans argue that certain taxes are bad because it's inefficient at gathering wealth. If that were true, they'd push for ways to get the estate tax reconfigured, not just lower the tax rate, which makes it even less efficient.
I don't think the Democrats want higher taxes, they want a more progressive tax system, even if it gets less revenue. Now the Republicans, they do have the simplistic no more additional taxes viewpoint, though it breaks down when you see how they treat payroll taxes vs income taxes.
Ah, the simplify the tax code argument, while it has benefits, why are we lowering the tax rate to make it revenue neutral? I get lowering it a bit, but aren't we trying to fill the deficit, not make it the same? It's like they don't even want domestic spending programs, because every dollar missing from revenue means another dollar cut from spending.

I take issue with your evidence of GOP support. If I redistrict your state into 80% GOP and 20% Democrat, your republican candidate is gonna win in a landslide. I'd say they have less support since they lost seats in the House, and they lost seats in the Senate, when they should have gained. A better bastion of GOP support would have been at the state and gubernatorial level.

As for the debt ceiling resolution, I see Obama caving, but trying to minimize the cuts. Unless Obama starts with 500$ billion in military cuts, I don't think he'll come out a winner, though it resulting in both sides losing is likely.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby yurell » Tue Jan 08, 2013 2:33 am UTC

CorruptUser wrote:Yes and no. Since the US debt is measured in dollars, hyperinflation renders the debt absolutely meaningless. Who cares if the debt is 16 trillion when the average salary is 50 trillion?


Hyperinflation does more than remove your debt, though — it makes your dollar worthless compared with that of other countries, and the US isn't the most self-sufficient nation on the planet.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tirian » Tue Jan 08, 2013 2:34 am UTC

Tyndmyr wrote:Obama will be expecting additional taxes, and does not seem keen on negotiating.


The president got 100% rolled on the last debt ceiling negotiation, and that's because Congressional Republicans managed to framed the debate as "You want to protect the full faith and credit of the United States, so what's in it for us?" I'll be sorry to see us lose our perfect streak as a borrower, but if half the country is so eager to bargain against it then maybe we don't deserve nice things any more.

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

Postby Tyndmyr » Tue Jan 08, 2013 2:36 am UTC

yurell wrote:I don't think anyone in power would be stupid enough to actually mint such a coin, as it would probably be the single most efficient way to kill your economy.


It might be marginally better than default, as that'd also be pretty lethal to our economy. Still...both options are pretty horrific. IIRC, the initial proposal called for minting two coins worth a trillion dollars each.

M0 is less than a trillion dollars, so tripling that would be rather drastic. Still, as it'd be sitting in a vault as opposed to general circulation, I don't know if the effect would be quite the same as most M0 currency. Still, even if it's M1, it's rather more than a doubling, still easily enough to generate hyperinflation.

It's not unlike previous measures such as Zimbabwe's decision to print a new note at a previously unheard of denomination...and that eventually led to abandoning their currency entirely. That's worrying, to say the least. It'd take a rather impressive level of stupid to print these coins, legal or not.

sardia wrote:Tymyndor: I haven't heard many republicans argue that certain taxes are bad because it's inefficient at gathering wealth. If that were true, they'd push for ways to get the estate tax reconfigured, not just lower the tax rate, which makes it even less efficient.


Apologies for being unclear...that was my opinion, not that of the republicans. I agree that their particular approach to it made it even less efficient. Given the small total overall gains from the tax and the low efficiency rate, I think I'd be satisfied with dropping it entirely...but I do not consider the halfway measure to be necessarily half as good, and it seems they do.

CorruptUser wrote:Yes and no. Since the US debt is measured in dollars, hyperinflation renders the debt absolutely meaningless. Who cares if the debt is 16 trillion when the average salary is 50 trillion?


It also renders savings meaningless, means loans will cease to be a thing and, if bad enough, will utterly invalidate the currency, causing people to move to another or, if desperate, to barter. It kills the debt, sure, but it's like using a shotgun to kill the mosquito on your arm.

CorruptUser wrote:In reality, the US has only 3 ways of dealing with the debt. The 1st way is to print it all away, via hyperinflation. The 2nd is to reneg on it at least partially, which would still lead to hyperinflation and other problems. The 3rd way is to magically fix the economy to the point where the US can get another $1T/yr in taxes, which is not going to happen short of someone discovering how to turn atmospheric heat into electricity.


Well, there's also a reduction in government spending as a 4th option. It also has tradeoffs, mind you, but at least it is possible(probably most possible combined with a degree of taxation).

There's also yet another possibility, which is to raise the debt limit again. Yes, yes, I know this also comes with downsides, but it's happened what, like seventy times before? It might well happen again.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby CorruptUser » Tue Jan 08, 2013 2:39 am UTC

yurell wrote:
CorruptUser wrote:Yes and no. Since the US debt is measured in dollars, hyperinflation renders the debt absolutely meaningless. Who cares if the debt is 16 trillion when the average salary is 50 trillion?


Hyperinflation does more than remove your debt, though — it makes your dollar worthless compared with that of other countries, and the US isn't the most self-sufficient nation on the planet.


Except the US does have huge amounts of farmland that, if used properly, can still produce wealth. That means not overvaluing houses in order to turn productive farmland into suburbs. Plus, all the timber, the fisheries, the minerals, the manufacturing, the education (one of the more overlooked 'exports' being foreign students learning in the US), the culture (movies, music, TV), and so forth. Even if dollars became worthless, businesses would still be able to export and there would still be an economy. One that couldn't import much of use, but still. The US's yearly mutli-hundred-billion dollar trade deficits means that the dollar has been overvalued for decades now.

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

Postby Tyndmyr » Tue Jan 08, 2013 2:48 am UTC

CorruptUser wrote:
yurell wrote:
CorruptUser wrote:Yes and no. Since the US debt is measured in dollars, hyperinflation renders the debt absolutely meaningless. Who cares if the debt is 16 trillion when the average salary is 50 trillion?


Hyperinflation does more than remove your debt, though — it makes your dollar worthless compared with that of other countries, and the US isn't the most self-sufficient nation on the planet.


Except the US does have huge amounts of farmland that, if used properly, can still produce wealth. That means not overvaluing houses in order to turn productive farmland into suburbs. Plus, all the timber, the fisheries, the minerals, the manufacturing, the education (one of the more overlooked 'exports' being foreign students learning in the US), the culture (movies, music, TV), and so forth. Even if dollars became worthless, businesses would still be able to export and there would still be an economy. One that couldn't import much of use, but still. The US's yearly mutli-hundred-billion dollar trade deficits means that the dollar has been overvalued for decades now.


We have real assets, yes, but if the currency tanks, then it will be foolish to trade those real assets for dollars, which is pretty horrible for trade.

People might still export for say, pounds or what have you, if pounds still have value(realistically, the dollar tanking is going to affect a LOT of other currencies), but that does people here relatively little good other than the exporter. Lots of things are not export businesses and can't be converted over to one more rapidly than they'd go bankrupt, so the economy still goes down the drain.

Incidentally, having some measure of real goods is probably the best way to navigate such a currency collapse(not that I think it's terribly likely yet). No need to go full-on goldbug, but land, houses, etc tend to retain value if you can avoid having to sell until post recovery.

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

Postby jseah » Tue Jan 08, 2013 3:18 am UTC

sardia wrote:
jseah wrote:Do they not realize that a trillion dollar coin is basically a trillion dollar QE?

It depends on how they make their sales pitch. If it's just a temporary bill that the Treasury issues and then buys back, then nothing happens except Obama gets more time on the debt ceiling. If Obama declared that the national debt has been reduced by 1$ trillion, that's a whole another problem. Why did you mention QE?

QE is treasury printing money to buy debt. This trillion dollar coin... is the same?

Ok, I oversimplify things (QE is short term debt, this would be negating long term debt), but the effect of massive inflation would be identical.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby LaserGuy » Tue Jan 08, 2013 4:42 am UTC

Tyndmyr wrote:
CorruptUser wrote:In reality, the US has only 3 ways of dealing with the debt. The 1st way is to print it all away, via hyperinflation. The 2nd is to reneg on it at least partially, which would still lead to hyperinflation and other problems. The 3rd way is to magically fix the economy to the point where the US can get another $1T/yr in taxes, which is not going to happen short of someone discovering how to turn atmospheric heat into electricity.


Well, there's also a reduction in government spending as a 4th option. It also has tradeoffs, mind you, but at least it is possible(probably most possible combined with a degree of taxation).

There's also yet another possibility, which is to raise the debt limit again. Yes, yes, I know this also comes with downsides, but it's happened what, like seventy times before? It might well happen again.


Well, in the short term certainly, the debt ceiling will get raised. It's only a crisis because the Republicans have manufactured it to be a crisis to get leverage over the administration, and it's just a question of what concessions (if any) they'll be able to extract in exchange for doing it. Addressing the debt in the long term, not so easy. Either cutting spending or increasing taxes enough to wipe out the deficit is probably enough to throw the economy back into recession--at least, if you tried to do it all at once. The debt as a percent of GDP is not so large compared to other countries and is still well below historic highs. If the deficit can be reduced gradually to zero over a medium term--10-15 years, say--then economic growth will take care of the debt.

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

Postby sardia » Tue Jan 08, 2013 4:53 am UTC

LaserGuy wrote:
Tyndmyr wrote:
CorruptUser wrote:In reality, the US has only 3 ways of dealing with the debt. The 1st way is to print it all away, via hyperinflation. The 2nd is to reneg on it at least partially, which would still lead to hyperinflation and other problems. The 3rd way is to magically fix the economy to the point where the US can get another $1T/yr in taxes, which is not going to happen short of someone discovering how to turn atmospheric heat into electricity.


Well, there's also a reduction in government spending as a 4th option. It also has tradeoffs, mind you, but at least it is possible(probably most possible combined with a degree of taxation).

There's also yet another possibility, which is to raise the debt limit again. Yes, yes, I know this also comes with downsides, but it's happened what, like seventy times before? It might well happen again.


Well, in the short term certainly, the debt ceiling will get raised. It's only a crisis because the Republicans have manufactured it to be a crisis to get leverage over the administration, and it's just a question of what concessions (if any) they'll be able to extract in exchange for doing it. Addressing the debt in the long term, not so easy. Either cutting spending or increasing taxes enough to wipe out the deficit is probably enough to throw the economy back into recession--at least, if you tried to do it all at once. The debt as a percent of GDP is not so large compared to other countries and is still well below historic highs. If the deficit can be reduced gradually to zero over a medium term--10-15 years, say--then economic growth will take care of the debt.

This skips over the painful and important steps of balancing the budget. The cheerleaders for our budget consists of defense, medicare/medicaid, social security, and domestic spending, except domestic spending has no hardcore defenders. During the last debt ceiling, did we manage any curtailing of the first 3? I know The Affordable Care Act helps with new taxes and reduced expenditures, but that's The Affordable Care Act. Did we really only cut from the discretionary spending from the debt ceiling debate?

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

Postby Malice » Tue Jan 08, 2013 7:32 am UTC

sardia wrote:
LaserGuy wrote:
Tyndmyr wrote:
CorruptUser wrote:In reality, the US has only 3 ways of dealing with the debt. The 1st way is to print it all away, via hyperinflation. The 2nd is to reneg on it at least partially, which would still lead to hyperinflation and other problems. The 3rd way is to magically fix the economy to the point where the US can get another $1T/yr in taxes, which is not going to happen short of someone discovering how to turn atmospheric heat into electricity.


Well, there's also a reduction in government spending as a 4th option. It also has tradeoffs, mind you, but at least it is possible(probably most possible combined with a degree of taxation).

There's also yet another possibility, which is to raise the debt limit again. Yes, yes, I know this also comes with downsides, but it's happened what, like seventy times before? It might well happen again.


Well, in the short term certainly, the debt ceiling will get raised. It's only a crisis because the Republicans have manufactured it to be a crisis to get leverage over the administration, and it's just a question of what concessions (if any) they'll be able to extract in exchange for doing it. Addressing the debt in the long term, not so easy. Either cutting spending or increasing taxes enough to wipe out the deficit is probably enough to throw the economy back into recession--at least, if you tried to do it all at once. The debt as a percent of GDP is not so large compared to other countries and is still well below historic highs. If the deficit can be reduced gradually to zero over a medium term--10-15 years, say--then economic growth will take care of the debt.

This skips over the painful and important steps of balancing the budget. The cheerleaders for our budget consists of defense, medicare/medicaid, social security, and domestic spending, except domestic spending has no hardcore defenders. During the last debt ceiling, did we manage any curtailing of the first 3? I know The Affordable Care Act helps with new taxes and reduced expenditures, but that's The Affordable Care Act. Did we really only cut from the discretionary spending from the debt ceiling debate?


We don't really need to cut those things--at least, not for our current problems. The deficit exists because of the depressed economy. Fix the economy and you'll fix the deficit, and fix both of those things and you'll grow your way out of debt.

And any cuts now are only going to increase the drag on the economy, which hurts us in the short term and the long term. The idea that we need to bear painful cuts now is an illusion.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Zamfir » Tue Jan 08, 2013 8:01 am UTC

Fix the economy and you'll fix the deficit, and fix both of those things and you'll grow your way out of debt.

'fixing the economy' is not a trivial task... it's doubtful that anyway really knows for sure how that could be accomplished.

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

Postby Silknor » Tue Jan 08, 2013 8:20 am UTC

sardia wrote:This skips over the painful and important steps of balancing the budget. The cheerleaders for our budget consists of defense, medicare/medicaid, social security, and domestic spending, except domestic spending has no hardcore defenders. During the last debt ceiling, did we manage any curtailing of the first 3? I know The Affordable Care Act helps with new taxes and reduced expenditures, but that's The Affordable Care Act. Did we really only cut from the discretionary spending from the debt ceiling debate?


Discretionary spending includes defense.

The Budget Control Act had two sets of cuts.

The first set was about 900 billion* in cuts to discretionary spending. Roughly half was to defense spending.

The second was was the (now-delayed) sequestration. That was split 50/50 between defense spending and domestic spending. The domestic cuts were mostly to discrtionary spending, but about 30% was entitlements, largely Medicare payments to health care providers and insurers.

*1 trillion in some sources, budget window and baselines make a difference. See here for an overview of the BCA.

jseah wrote:QE is treasury printing money to buy debt. This trillion dollar coin... is the same?

Ok, I oversimplify things (QE is short term debt, this would be negating long term debt), but the effect of massive inflation would be identical.


So since QE didn't cause massive inflation (at all), you're arguing that the platinum coin option wouldn't either, correct?
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby jseah » Tue Jan 08, 2013 8:45 am UTC

Silknor wrote:
jseah wrote:QE is treasury printing money to buy debt. This trillion dollar coin... is the same?

Ok, I oversimplify things (QE is short term debt, this would be negating long term debt), but the effect of massive inflation would be identical.


So since QE didn't cause massive inflation (at all), you're arguing that the platinum coin option wouldn't either, correct?

Some people argue that the inflation just hasn't happened yet. Something about all the money swimming overseas and giving the other countries inflation.
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Re: Fiscal Cliff Ends, For Now, Debt Ceiling in 2 Months

Postby Tyndmyr » Tue Jan 08, 2013 1:35 pm UTC

jseah wrote:
Silknor wrote:
jseah wrote:QE is treasury printing money to buy debt. This trillion dollar coin... is the same?

Ok, I oversimplify things (QE is short term debt, this would be negating long term debt), but the effect of massive inflation would be identical.


So since QE didn't cause massive inflation (at all), you're arguing that the platinum coin option wouldn't either, correct?

Some people argue that the inflation just hasn't happened yet. Something about all the money swimming overseas and giving the other countries inflation.


Well, most of this QE happened at fairly high money supplies. Inflating M0 is going to be a little more direct than inflating M3. Since M0 is vastly smaller, we can expect a much smaller amount to have a much larger effect.

Easing access to loan money is a lot less inflationary than printing money, even if it does look similar from certain perspectives.

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

Postby Wnderer » Tue Jan 08, 2013 3:44 pm UTC

My guess is that the trillion dollar coin trick would burst the bond bubble. Right now government borrowing is cheap because interest rates on bonds are so low. Some people believe irrationally low. A 'trick' might finally scare people out of bonds and the cost of government borrowing would go up. The government would lose out in the long run.


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