America's Debt: Shame on Them

[Stephanie]

Funny, blame republicans and leave out the fact that you just blew a trillion dollars. That money could have kept us afloat if we went beyond the so called deadline.

When I get into financial trouble the solution I always turn to is spending more money.

yep, how funny is that..

the Economist is not someone I will take seriously.

 

[Toro]

Merkel Pledges Tax Cuts Despite Rising Deficit

Lower incomes taxes would "provide motivation" and encourage economic growth, Ms. Merkel told a conference of her party, the Christian Democratic Union, and its Bavarian sister party, the Christian Social Union.

"It would be wrong not to do what is right and necessary for growth, and so prevent ourselves emerging quickly from this crisis," Ms. Merkel said in her conference speech.​

Germany has raised taxes. (Thanks Modbert!)

Germany cuts jobs, raises taxes - thestar.com

Germany to Raise Taxes on Tobacco, Cut Energy Subsidies Less Than Planned - Bloomberg

Most of the deficit reduction should come from spending cuts IMHO, but there should be tax increases as well, which is what many other countries are doing.

Your articles are dated both from last year

Your question was who is cutting taxes
It appears Germany is

Sorry

So are you suggesting is that we be like Germany, first raise taxes and then promise to cut them some time in the future?

I'm sure there are some countries somewhere that have cut taxes over the past few years. What I was attempting (probably poorly) to convey was that not ALL countries are cutting spending and cutting taxes, as Wiseacre stated. I don't know of any country, in fact, that is attempting to bring its deficit under control solely by spending cuts. Most countries who have fixed their deficits have done so by a combination of spending cuts and tax increases, though the emphasis is heavily on the spending cuts, as it usually should be.

 

[Toro]

Funny, blame republicans and leave out the fact that you just blew a trillion dollars. That money could have kept us afloat if we went beyond the so called deadline.

When I get into financial trouble the solution I always turn to is spending more money.

yep, how funny is that..

the Economist is not someone I will take seriously.

Yeah, the liberal/leftist/communist Economist!

lol

 

[CrusaderFrank]

Funny, blame republicans and leave out the fact that you just blew a trillion dollars. That money could have kept us afloat if we went beyond the so called deadline.

When I get into financial trouble the solution I always turn to is spending more money.

yep, how funny is that..

the Economist is not someone I will take seriously.

Yeah, the liberal/leftist/communist Economist!

lol

How did they not highlight Obama's Annual $1 Trillion Plus Crack ho spending habit as the cause of the problem?

How did they miss that?

 

[Toro]

What is that now? 5 posts in this thread attacking me and yet none explaining why our current debt is bad.

Interesting.

The current level of debt is not bad, but it isn't good either.

The problem has to get addressed eventually, though, otherwise too much of our tax dollars will go to paying interest on the debt, which is a deadweight loss and a drag on the economy.

 

[Toro]

yep, how funny is that..

the Economist is not someone I will take seriously.

Yeah, the liberal/leftist/communist Economist!

lol

How did they not highlight Obama's Annual $1 Trillion Plus Crack ho spending habit as the cause of the problem?

How did they miss that?

Because they're communists who hate America.

Duh!

 

[Toro]

Furthermore, you seem to think that having only 70% of their income coming in would be a good thing even for the short term. Any reason you decided to ignore warnings from say S&P that will drop our credit rating to a D if we don't raise the debt ceiling?

It's an idle threat. The change in credit rating will occur only if the government defaults on Treasury bills.

It's a very real threat because there is a very real threat that the government will not be able to pay its interest and principle obligations.

Cash comes into and out of the Treasury on a lumpy basis. It's not a smooth continuum. For example

Particular August days will be far worse than the monthly totals suggest. For example, on Aug. 3, we project that the government will have about $12 billion in receipts and $32 billion in committed payments, including a $23 billion Social Security payment. And Aug. 15 presents a triple threat: a $19 billion daily deficit, a $29 billion interest payment and a quarterly refunding auction to pay off a maturing $27 billion bond.

Opinion: Real implications of debt debate - Jerome H. Powell - POLITICO.com

So on August 15, we will have an estimated $12 billion of inflows and a $56 billion obligation to pay bondholders. There is a very good chance that bondholders will not get paid on August 15.

We will generate something like $80-$100 billion in the first half of August. The Treasury rolls debt at least twice a week. Since we won't be rolling that debt anymore, much of that revenue will be eaten by paying back bills, notes and bonds before the August 15 balloon payment.

 

[Neotrotsky]

Opinion- Constitutional Nonsense on Debt

"The 14th Amendment...What it perhaps does do — based on one Supreme Court case — is require the Treasury Department to prioritize payment of existing debt to bondholders over other spending in the event the debt ceiling isn’t raised. So if the government finds itself short on cash, it has to keep paying the bondholders and find the necessary savings in some other part of the budget"​

As Michael McConnell, the distinguished director of the Stanford Constitutional Law Center, has put it, “the real effect of Section Four of the Fourteenth Amendment is almost the opposite of what hopeful voices in Washington are saying.”
​

--
"Unemployment Rate Won’t Matter in 2012" - Obama Adviser Plouffe

 

[CrusaderFrank]

Yeah, the liberal/leftist/communist Economist!

lol

How did they not highlight Obama's Annual $1 Trillion Plus Crack ho spending habit as the cause of the problem?

How did they miss that?

Because they're communists who hate America.

Duh!

I read Krugman for the laughs since neither "Calvin and Hobbes" nor "The Far Side" are published any longer.

If the Economists wants to miss stuff out in the trillions column, well, maybe they want the Krugman "Wrong in the Trillions" column chair at Princeton

 

[Neotrotsky]

How did they not highlight Obama's Annual $1 Trillion Plus Crack ho spending habit as the cause of the problem?

How did they miss that?

Because they're communists who hate America.

Duh!

I read Krugman for the laughs since neither "Calvin and Hobbes" nor "The Far Side" are published any longer.

If the Economists wants to miss stuff out in the trillions column, well, maybe they want the Krugman "Wrong in the Trillions" column chair at Princeton

Of course, it has a bias- Most if not all people/magazines/news, do.

Any poster is not going to post something he does not agree with or find
supporting of his beliefs

Opinions are like certain body parts, we all have them

 

[Toro]

What is that now? 5 posts in this thread attacking me and yet none explaining why our current debt is bad.

Interesting.

The current level of debt is not bad, but it isn't good either.

The problem has to get addressed eventually, though, otherwise too much of our tax dollars will go to paying interest on the debt, which is a deadweight loss and a drag on the economy.

Not that bad- just curious
Based on what?

What level would be bad?

Based on our ability to pay and historical precedent. We have had much higher debt levels relative to GDP in the past. Japan, Italy and Belgium have much higher debt levels than the US. Canada had a much higher debt level in the mid 90s than America has now.

I'm not sure what level would be bad. Depends on what you mean by "bad." I view debt incurred during a brutal balance sheet recession to be much better than debt incurred in a growing economy. If this were a healthy economy, I'd be outraged at the level of debt we are incurring. But its not a healthy economy and its a very different type of recession. However, we need to get a plan to right it, even if that plan doesn't kick in for a few years, because we can't keep going like this.

 

[Toro]

How did they not highlight Obama's Annual $1 Trillion Plus Crack ho spending habit as the cause of the problem?

How did they miss that?

Because they're communists who hate America.

Duh!

I read Krugman for the laughs since neither "Calvin and Hobbes" nor "The Far Side" are published any longer.

If the Economists wants to miss stuff out in the trillions column, well, maybe they want the Krugman "Wrong in the Trillions" column chair at Princeton

Yeah, damn lib lamestream media!


<squawk!>

 

[Toro]

Opinion- Constitutional Nonsense on Debt

"The 14th Amendment...What it perhaps does do — based on one Supreme Court case — is require the Treasury Department to prioritize payment of existing debt to bondholders over other spending in the event the debt ceiling isn’t raised. So if the government finds itself short on cash, it has to keep paying the bondholders and find the necessary savings in some other part of the budget"​

As Michael McConnell, the distinguished director of the Stanford Constitutional Law Center, has put it, “the real effect of Section Four of the Fourteenth Amendment is almost the opposite of what hopeful voices in Washington are saying.”
​

--
"Unemployment Rate Won’t Matter in 2012" - Obama Adviser Plouffe

Perhaps the 14th Amendment renders the debt ceiling unconstitutional.

Since my article appeared, I have had the opportunity to do further research on this topic and now feel even more strongly that the Fourteenth Amendment trumps the debt limit. I found strong support for this position in a law review article by George Washington University law professor Michael Abramowicz. Writing in the Tulsa Law Journal (“Beyond Balanced Budgets, Fourteenth Amendment Style,” 33:2, Winter 1997, pp. 561-612), he concludes that any government action “making uncertain whether or not a debt will be honored is unconstitutional.” As Abramowicz explains:

“A debt does not become valid or invalid only at the moment payment is due. A debt’s validity may be assessed at any time, and a debt is valid only if the law provides that it will be honored. Therefore, a requirement that the government not question a debt’s validity does not kick in only once the time comes for the government to make a payment on the debt. Rather, the duty not to question is a continuous one. If as a result of government actions, a debt will not be paid absent future governmental action, that debt is effectively invalid. The high level of generality recognizes that instead of referring to payment of debts, the Clause bans government action at any time that affects the validity of debt instruments…. Moreover, there is no such thing as a valid debt that will nonetheless not be honored; a debt cannot be called “valid” if existing laws will cause default on it. So as soon as Congress passes a statute that will lead to default in the absence of a change of course, the debt is invalid (or at least of questionable validity) and Congress has violated the original meaning of the Public Debt Clause.”​

To my mind, this means that the very existence of the debt limit is unconstitutional because it calls into question the validity of the debt. So would any other provision of law. That is a key reason why Congress created a permanent appropriation for interest payments at the same time that the Fourteenth Amendment was debated. Previously, Congress had to pass annual appropriations for interest.

Debt Limit Options | Capital Gains and Games

 

[Neotrotsky]

Opinion- Constitutional Nonsense on Debt

"The 14th Amendment...What it perhaps does do &#8212; based on one Supreme Court case &#8212; is require the Treasury Department to prioritize payment of existing debt to bondholders over other spending in the event the debt ceiling isn&#8217;t raised. So if the government finds itself short on cash, it has to keep paying the bondholders and find the necessary savings in some other part of the budget"​

As Michael McConnell, the distinguished director of the Stanford Constitutional Law Center, has put it, &#8220;the real effect of Section Four of the Fourteenth Amendment is almost the opposite of what hopeful voices in Washington are saying.&#8221;
​

--
"Unemployment Rate Won&#8217;t Matter in 2012" - Obama Adviser Plouffe

Perhaps the 14th Amendment renders the debt ceiling unconstitutional.

Since my article appeared, I have had the opportunity to do further research on this topic and now feel even more strongly that the Fourteenth Amendment trumps the debt limit. I found strong support for this position in a law review article by George Washington University law professor Michael Abramowicz. Writing in the Tulsa Law Journal (&#8220;Beyond Balanced Budgets, Fourteenth Amendment Style,&#8221; 33:2, Winter 1997, pp. 561-612), he concludes that any government action &#8220;making uncertain whether or not a debt will be honored is unconstitutional.&#8221; As Abramowicz explains:

&#8220;A debt does not become valid or invalid only at the moment payment is due. A debt&#8217;s validity may be assessed at any time, and a debt is valid only if the law provides that it will be honored. Therefore, a requirement that the government not question a debt&#8217;s validity does not kick in only once the time comes for the government to make a payment on the debt. Rather, the duty not to question is a continuous one. If as a result of government actions, a debt will not be paid absent future governmental action, that debt is effectively invalid. The high level of generality recognizes that instead of referring to payment of debts, the Clause bans government action at any time that affects the validity of debt instruments&#8230;. Moreover, there is no such thing as a valid debt that will nonetheless not be honored; a debt cannot be called &#8220;valid&#8221; if existing laws will cause default on it. So as soon as Congress passes a statute that will lead to default in the absence of a change of course, the debt is invalid (or at least of questionable validity) and Congress has violated the original meaning of the Public Debt Clause.&#8221;​

To my mind, this means that the very existence of the debt limit is unconstitutional because it calls into question the validity of the debt. So would any other provision of law. That is a key reason why Congress created a permanent appropriation for interest payments at the same time that the Fourteenth Amendment was debated. Previously, Congress had to pass annual appropriations for interest.

Debt Limit Options | Capital Gains and Games

REUTERS-The US won&#8217;t default, even if the debt ceiling stays

Greg Ip makes a very important point today, which I haven&#8217;t seen made anywhere else*: even if the US debt ceiling isn&#8217;t lifted, that doesn&#8217;t mean the government will default.

In any given month, the government&#8217;s income dwarfs its debt-service obligations, which means that the government could simply pay all interest on Treasury bonds out of its cashflow. Greg hasn&#8217;t run the numbers on principal maturities, but I&#8217;m pretty sure that they too could be covered out of cash receipts&#8212;and when that happened, of course, the total debt outstanding would go down, and we wouldn&#8217;t be bumping up against the ceiling any more.

The point here is that the government has enormous expenditures every month, and debt service constitutes an important yet small part of them. If the debt ceiling weren&#8217;t raised, it stands to reason that just about any other form of government spending would get cut before Tim Geithner dreamed of defaulting on risk-free bonds.

Some of those spending cuts could be implemented almost invisibly. For instance, Social Security runs a surplus for the time being; it invests that money in special non-marketable Treasury securities, which count as Treasury debt. If the Social Security trust fund accepted instead just some kind of promise of a top-up at a later date, that could save billions of dollars right there.

Beyond that, large defense contractors aren&#8217;t going to stop working for the government just because they&#8217;re late in being paid; neither are doctors, hospitals or most of the rest of the healthcare industry.
​

-

"Unemployment Rate Won&#8217;t Matter in 2012" - Obama Adviser Plouffe

 

[Toro]

Debt level at the present?
Are you factoring in the entitlement monster waiting for us down the road soon

No. That's the future. We can go for a few more years as we are, but we will eventually hit a wall.

 

[Toro]

Opinion- Constitutional Nonsense on Debt

"The 14th Amendment...What it perhaps does do &#8212; based on one Supreme Court case &#8212; is require the Treasury Department to prioritize payment of existing debt to bondholders over other spending in the event the debt ceiling isn&#8217;t raised. So if the government finds itself short on cash, it has to keep paying the bondholders and find the necessary savings in some other part of the budget"​

As Michael McConnell, the distinguished director of the Stanford Constitutional Law Center, has put it, &#8220;the real effect of Section Four of the Fourteenth Amendment is almost the opposite of what hopeful voices in Washington are saying.&#8221;
​

--
"Unemployment Rate Won&#8217;t Matter in 2012" - Obama Adviser Plouffe

Perhaps the 14th Amendment renders the debt ceiling unconstitutional.

Since my article appeared, I have had the opportunity to do further research on this topic and now feel even more strongly that the Fourteenth Amendment trumps the debt limit. I found strong support for this position in a law review article by George Washington University law professor Michael Abramowicz. Writing in the Tulsa Law Journal (&#8220;Beyond Balanced Budgets, Fourteenth Amendment Style,&#8221; 33:2, Winter 1997, pp. 561-612), he concludes that any government action &#8220;making uncertain whether or not a debt will be honored is unconstitutional.&#8221; As Abramowicz explains:

&#8220;A debt does not become valid or invalid only at the moment payment is due. A debt&#8217;s validity may be assessed at any time, and a debt is valid only if the law provides that it will be honored. Therefore, a requirement that the government not question a debt&#8217;s validity does not kick in only once the time comes for the government to make a payment on the debt. Rather, the duty not to question is a continuous one. If as a result of government actions, a debt will not be paid absent future governmental action, that debt is effectively invalid. The high level of generality recognizes that instead of referring to payment of debts, the Clause bans government action at any time that affects the validity of debt instruments&#8230;. Moreover, there is no such thing as a valid debt that will nonetheless not be honored; a debt cannot be called &#8220;valid&#8221; if existing laws will cause default on it. So as soon as Congress passes a statute that will lead to default in the absence of a change of course, the debt is invalid (or at least of questionable validity) and Congress has violated the original meaning of the Public Debt Clause.&#8221;​

To my mind, this means that the very existence of the debt limit is unconstitutional because it calls into question the validity of the debt. So would any other provision of law. That is a key reason why Congress created a permanent appropriation for interest payments at the same time that the Fourteenth Amendment was debated. Previously, Congress had to pass annual appropriations for interest.

Debt Limit Options | Capital Gains and Games

REUTERS-The US won&#8217;t default, even if the debt ceiling stays

Greg Ip makes a very important point today, which I haven&#8217;t seen made anywhere else*: even if the US debt ceiling isn&#8217;t lifted, that doesn&#8217;t mean the government will default.

In any given month, the government&#8217;s income dwarfs its debt-service obligations, which means that the government could simply pay all interest on Treasury bonds out of its cashflow. Greg hasn&#8217;t run the numbers on principal maturities, but I&#8217;m pretty sure that they too could be covered out of cash receipts&#8212;and when that happened, of course, the total debt outstanding would go down, and we wouldn&#8217;t be bumping up against the ceiling any more.

The point here is that the government has enormous expenditures every month, and debt service constitutes an important yet small part of them. If the debt ceiling weren&#8217;t raised, it stands to reason that just about any other form of government spending would get cut before Tim Geithner dreamed of defaulting on risk-free bonds.

Some of those spending cuts could be implemented almost invisibly. For instance, Social Security runs a surplus for the time being; it invests that money in special non-marketable Treasury securities, which count as Treasury debt. If the Social Security trust fund accepted instead just some kind of promise of a top-up at a later date, that could save billions of dollars right there.

Beyond that, large defense contractors aren&#8217;t going to stop working for the government just because they&#8217;re late in being paid; neither are doctors, hospitals or most of the rest of the healthcare industry.
​

-

"Unemployment Rate Won&#8217;t Matter in 2012" - Obama Adviser Plouffe

I would argue that while Mr. Solomon is theoretically correct since over the year, interest payments account for ~9% of total spending, cash flow dates are real. There has to be enough cash generated over the first 13 days of August to cover the $56 billion bill payment plus four refundings. Assuming that revenue is constant - which we know isn't true - most of the $80-$100 billion revenues generated during that time will be eaten up by bond obligations, meaning that if we don't default, SS and defense personnel and contractors may not be paid in full during that time. You can probably stiff doctors for awhile - after all, insurance companies do it all the time - but the government will not have much wiggle room to meet its interest and debt obligations.

 

[Neotrotsky]

Debt level at the present?
Are you factoring in the entitlement monster waiting for us down the road soon

No. That's the future. We can go for a few more years as we are, but we will eventually hit a wall.

Well that may be the best answer for some, politically
But, I do no feel that is the best approach for the American people

 

[Toro]

Debt level at the present?
Are you factoring in the entitlement monster waiting for us down the road soon

No. That's the future. We can go for a few more years as we are, but we will eventually hit a wall.

Well that may be the best answer for some, politically
But, I do no feel that is the best approach for the American people

Having lived through this not once, but twice, the best answer is for everyone to screw their heads on properly and do a deal sooner rather than later. The longer we wait, the worse it will be.

 

[Neotrotsky]

Perhaps the 14th Amendment renders the debt ceiling unconstitutional.



Debt Limit Options | Capital Gains and Games

REUTERS-The US won&#8217;t default, even if the debt ceiling stays

Greg Ip makes a very important point today, which I haven&#8217;t seen made anywhere else*: even if the US debt ceiling isn&#8217;t lifted, that doesn&#8217;t mean the government will default.

In any given month, the government&#8217;s income dwarfs its debt-service obligations, which means that the government could simply pay all interest on Treasury bonds out of its cashflow. Greg hasn&#8217;t run the numbers on principal maturities, but I&#8217;m pretty sure that they too could be covered out of cash receipts&#8212;and when that happened, of course, the total debt outstanding would go down, and we wouldn&#8217;t be bumping up against the ceiling any more.

The point here is that the government has enormous expenditures every month, and debt service constitutes an important yet small part of them. If the debt ceiling weren&#8217;t raised, it stands to reason that just about any other form of government spending would get cut before Tim Geithner dreamed of defaulting on risk-free bonds.

Some of those spending cuts could be implemented almost invisibly. For instance, Social Security runs a surplus for the time being; it invests that money in special non-marketable Treasury securities, which count as Treasury debt. If the Social Security trust fund accepted instead just some kind of promise of a top-up at a later date, that could save billions of dollars right there.

Beyond that, large defense contractors aren&#8217;t going to stop working for the government just because they&#8217;re late in being paid; neither are doctors, hospitals or most of the rest of the healthcare industry.
​

-

"Unemployment Rate Won&#8217;t Matter in 2012" - Obama Adviser Plouffe

I would argue that while Mr. Solomon is theoretically correct since over the year, interest payments account for ~9% of total spending, cash flow dates are real. There has to be enough cash generated over the first 13 days of August to cover the $56 billion bill payment plus four refundings. Assuming that revenue is constant - which we know isn't true - most of the $80-$100 billion revenues generated during that time will be eaten up by bond obligations, meaning that if we don't default, SS and defense personnel and contractors may not be paid in full during that time. You can probably stiff doctors for awhile - after all, insurance companies do it all the time - but the government will not have much wiggle room to meet its interest and debt obligations.

If they took it out of the politicians pay then they would have to respond



Right now, it seems the plan that they worked out earlier with Biden is the one that
is going to take place. Smaller in cuts, no taxes, raise the ceiling, it keeps them where they are at now.

If so, good enough for now.
Frankly, really changes are not going to get done until one party has control of the branches. So it looks like this will become an election issue.

Perhaps, this is best to let it up the voter to decide which version they want


--
"Unemployment Rate Won&#8217;t Matter in 2012" - Obama Adviser Plouffe

 

[Foxfyre]

WE cannot balance the budget without both raising taxes and reducing spending, folks.

To attempt to do it without doing some of BOTH would destroy this nation.

When is the last time Congress raised revenues by raising taxes and didn't see that as license to increase spending? That is the fallacy in your statement. A balanced budget that does not include spending cuts only means higher and higher taxes for all of us and huge growth of the misery index. So lets get the spending cuts first and the balanced budget. Then we can carefully ease into increased revenues if that should be necessary. (I suspect I won't be.)