The Debt Reduction "Supercommittee"

[cwjerome]

So the Congress is trying to get a deal worked out before the deadline... and of course the bickering continues as we get closer to the drop dead date.

Budget Panel Worries about the Automatic Trigger

These people should take a look at Italy as incentive to reach an agreement that keeps us from falling off the financial cliff. Sure, we have a larger more dynamic economy, more fluid capital markets, and a smaller social safety net to pay for, but a downgrade can happen in the blink of an eye and the resulting calamity that would ensue might be out of anyone's control.

Some thoughts on generating more revenue. Tax increases are probably useful. The Reps on the panel want to eliminate deductions on the wealthiest to generate revenue but want the highest tax rates to drop to 28% in 2013. The Dems want the rates to go up to 40% as expected. Why not compromise and just keep it the same 35% it is now? Save the ideological battle for next year... strong pragmaticism is needed as the deadline nears. Don't pick a situation like this to die on principle. Be a leader, not a martyr.

How much honest thought and objective research goes into revenue calculations? What if by raising a particular tax you gain $20 billion over one year. What if by tweaking a couple regs/laws/whatever in a particular area you can stimulate economic activity that would generate $50 billion in revenue instead? What if by lowering a particular tax you actually increase revenue a little bit? The idea is that maybe there are multiple approaches... and incorporating both tax hikes, tax decreases, AND economic law/reg changes in strategic areas might produce better results. Everything should be on the table.

What about cuts? The government must trim fat, even if it's only temporary in some areas. So a lot of things that might be nice don't happen in the next couple years. That's sacrifice. We can't afford nice... as long as people aren't getting hurt and bad results don't cost more than the savings, then prepare to make do with less. Yes, this means defense takes a sizable hit, along with politically-hard-to-touch social programs. No whining. Let's get creative, find other ways, give up a little, push through, and maybe even realize we're just fine in certain situations with fewer resources.

Instead of taking sides and continuing the senseless overly partisan battles, trying to milk every mistake the other side does and blow up your own side's successes, why not take this opportunity to just give all that up and start fresh. Nobody is saying you have to give up your cherished convictions, only that you tone it down and prioritize based on the current situation. Be a citizen, someone who can put aside some of their differences and do what needs to be done for the good of the country in a time of economic need. People came together for a little bit after 9/11... maybe it can happen again, for a little bit, if we try hard enough. Trust me, you won't die.

 

[fskimospy]

Italy's problems come from owning debt in a currency they don't issue. There are many countries with sovereign currency that have both larger debts and larger deficits who have bond prices that are much lower. In fact, the US has some of the lowest bond prices in the history of our nation.

I would be a wonderfully happy person if we could get people to stop comparing the US to various European countries when our issues are nothing alike.

Cutting spending right now is a terrible idea, we should be aggressively ramping up spending in as many areas as possible in the short term while looking at long term medical service reform.

 

[EagleKeeper]

Who is going to cover the spending increase. Sign up for another credit card?

The US has shown to the world that we can not control our budget

 

[fskimospy]

Who is going to cover the spending increase. Sign up for another credit card?

The US has shown to the world that we can not control our budget

Actually, reality shows the exact opposite. We can cover the spending increase easily, in fact more easily than at almost any point in the entirety of US history. Same goes for what we've 'shown the world'. US bond rates are at historic lows.

 

[drebo]

The government can raise taxes when they prove they can go a minute without raising spending, too.

Cut spending, and I'd be happy to continue paying too-high taxes. Cut spending even more, and I might even consider agreeing to pay slightly more taxes.

Also, stop fucking over the middle class. Removing the mortgage interest deduction penalizes the middle class more than anything. If you're going to do that, you have to lower the income tax rate on the middle class substantially.

 

[mshan]

"Who is going to cover the spending increase. Sign up for another credit card?"

Ben Bernake and The Fed!


It only kicks the can down the road till this generation's bond vigilantes come after us, but EU / Italy dont' have that option, at least not yet...


Obama sees the writing on the wall, and that is why he was seeking grand bargain with Boehner. Sadly, Congress won't agree till there is a gun against their head, like Italy and EU currently have:

Germany: http://www.testosteronepit.com/home/2011/11/7/germany-at-its-rubicon.html

PIIGS: http://www.bbc.co.uk/news/business-15693340

Japan: http://www.zerohedge.com/contributed/how-long-can-japan-play-endgame

Government deficits are on collision course with a tiny savings rate, trade deficits, and an aging population. Funding the debt internally is becoming more difficult, and the BOJ will have to maintain the printing press. There is much talk about selling to foreigners, but they're unlikely to develop an appetite for low yielding, low-rated bonds of a country whose indebtedness is almost twice as bad as that of Europe's punching bag du jour, Italy. And Japan can't afford higher yields.

Efforts are underway to defer the crisis. Unlike Italy where foreign bondholders would pay for a default, Japan can't allow itself to default. A steep price will nevertheless be exacted from the Japanese people. It will come in form of higher taxes on income and consumption (in the works), higher costs (happening), and lower wages (continuing). Entitlements will be whittled down. Some will disappear. Meanwhile, companies will be subsidized or get bailed out (happening). But these measures will only kick the can down the road, though kicking a can on the road is precisely what you don't do in Japan.

Now, for all those who want to short JGBs: It has been a trail of tears. Central banks can do whatever they want to, and when it comes to bonds with limited trading volume, they can out-print even the most fervent shorts"

 

[fskimospy]

Ben Bernake and The Fed!

It only kicks the can down the road till this generation's bond vigilantes come after us, but EU / Italy dont' have that option, at least not yet.

LOL bond vigilantes. They are always waiting for just the right time to strike... and that right time never comes. For a good time, go google bond vigilante predictions and see how many times people have said that it was happening... only to be wrong over and over again.

US bond rates will not increase until the economy improves, and when they do go up then it will have nothing to do with 'bond vigilantes'.

EDIT: As I've said before, I sincerely wish people would stop trying to compare countries with sovereign currency and countries without it. It's silliness.

 

[Jaskalas]

Instead of taking sides and continuing the senseless overly partisan battles, trying to milk every mistake the other side does and blow up your own side's successes, why not take this opportunity to just give all that up and start fresh. Nobody is saying you have to give up your cherished convictions, only that you tone it down and prioritize based on the current situation. Be a citizen, someone who can put aside some of their differences and do what needs to be done for the good of the country in a time of economic need. People came together for a little bit after 9/11... maybe it can happen again, for a little bit, if we try hard enough. Trust me, you won't die.

There's no need to come together, it's a folly notion. The federal government should be kept in gridlock and left to meltdown on its own. The states can then assert their god given rights and start making actual progress in this nation.

Both sides are only mutually exclusive under centralized planning. In the libertarian system there is room for both sides to get everything they want. We have enough states for everyone, it's past time we used them.

 

[fskimospy]

There's no need to come together, it's a folly notion. The federal government should be kept in gridlock and left to meltdown on its own. The states can then assert their god given rights and start making actual progress in this nation.

Both sides are only mutually exclusive under centralized planning. In the libertarian system there is room for both sides to get everything they want. We have enough states for everyone, it's past time we used them.

Except of course for the fact that basically no one in America except for the extreme right wing fringe wants anything even remotely like what you just asked for. Maybe this country isn't the right place for you, as it seems you want things very different than most everyone else.

 

[Acanthus]

No empire in the entire history of empires have cut their budgets to prosperity.

You have to raise taxes. It will happen. It is just a matter of when, who, and how much?

 

[Spikesoldier]

Italy's problems come from owning debt in a currency they don't issue. There are many countries with sovereign currency that have both larger debts and larger deficits who have bond prices that are much lower. In fact, the US has some of the lowest bond prices in the history of our nation.

I would be a wonderfully happy person if we could get people to stop comparing the US to various European countries when our issues are nothing alike.

Cutting spending right now is a terrible idea, we should be aggressively ramping up spending in as many areas as possible in the short term while looking at long term medical service reform.

sounds like they should have done something different when they knew they couldnt fire up the printing press every ten years.

wonder if spending less might have worked if they knew they couldnt balance the budget by printing more money anymore. oh well, too late now, italy.

 

[Jaskalas]

Except of course for the fact that basically no one in America except for the extreme right wing fringe wants anything even remotely like what you just asked for. Maybe this country isn't the right place for you, as it seems you want things very different than most everyone else.

If you think people in this country choose centralized planning over liberty, then you don't know shit about our founding.

You also conveniently gloss over the reason states exist in the first place, and why conservatives fight for state's rights.

 

[cwjerome]

Italy's problems come from owning debt in a currency they don't issue. There are many countries with sovereign currency that have both larger debts and larger deficits who have bond prices that are much lower. In fact, the US has some of the lowest bond prices in the history of our nation.

I would be a wonderfully happy person if we could get people to stop comparing the US to various European countries when our issues are nothing alike.

Don't take things to an extreme. I listed 3 ways we are NOT Italy, and of course there's the fact that we can print our own money, which remains the global gold standard because we've never missed a debt payment.

But those advantages can be undermined if the supercommittee fails to offer a deal by the deadline, or if Congress rejects whatever deal it creates. Wea are already on one credit agencys watch list... others could follow. Investors are confused and jittery, and since emotion and perception rather than facts often drive markets, that's a dangerous combination. Look at when Congress came perilously close to defaulting on the debt in August, how markets plunged. Make that X 10 if things don't turn around.

I'm just saying now is not the time for petty squabbling... and a lot of it IS petty. We need to get in the economic clear. It's nice you apparently haven't much worry, but I tend to think your cavalier attitude is political born and not based on the realities of the situation.

 

[fskimospy]

Don't take things to an extreme. I listed 3 ways we are NOT Italy, and of course there's the fact that we can print our own money, which remains the global gold standard because we've never missed a debt payment.

But those advantages can be undermined if the supercommittee fails to offer a deal by the deadline, or if Congress rejects whatever deal it creates. Wea are already on one credit agencys watch list... others could follow. Investors are confused and jittery, and since emotion and perception rather than facts often drive markets, that's a dangerous combination. Look at when Congress came perilously close to defaulting on the debt in August, how markets plunged. Make that X 10 if things don't turn around.

I'm just saying now is not the time for petty squabbling... and a lot of it IS petty. We need to get in the economic clear. It's nice you apparently haven't much worry, but I tend to think your cavalier attitude is political born and not based on the realities of the situation.

People on this board always think that everyone else's motives are based out of wanting their political football team to win. I can't possibly understand how you could think that was my opinion though, as neither US political party is advocating what I am.

 

[fskimospy]

If you think people in this country choose centralized planning over liberty, then you don't know shit about our founding.

You also conveniently gloss over the reason states exist in the first place, and why conservatives fight for state's rights.

I don't even know what you're trying to argue now. If you believe the American public supports what you wrote, then please show some evidence to support it.

 

[Darwin333]

Don't take things to an extreme. I listed 3 ways we are NOT Italy, and of course there's the fact that we can print our own money, which remains the global gold standard because we've never missed a debt payment.

But those advantages can be undermined if the supercommittee fails to offer a deal by the deadline, or if Congress rejects whatever deal it creates. Wea are already on one credit agencys watch list... others could follow. Investors are confused and jittery, and since emotion and perception rather than facts often drive markets, that's a dangerous combination. Look at when Congress came perilously close to defaulting on the debt in August, how markets plunged. Make that X 10 if things don't turn around.

I'm just saying now is not the time for petty squabbling... and a lot of it IS petty. We need to get in the economic clear. It's nice you apparently haven't much worry, but I tend to think your cavalier attitude is political born and not based on the realities of the situation.

The problem is its a catch 22.

If you reduce the deficit you will hurt the economy in the short term. Politicians live for the short term because that is what gets them elected. If you don't reduce the deficit you hurt the economy more but it is in the long term. Politicians don't give half a fuck about the long term because they won't be seeking reelection then and if they are (such as Congress or the Senate) no one remembers what they did a decade ago.

So..... we aren't going to significantly cut the deficit anytime soon. We will hit the wall eventually and when we do its going to be a world of suck. Its called the law of exponents not the idea or even theory and we are already on the bad side of the curve, expect our debt to continue to shoot the moon.

 

[fskimospy]

The problem is its a catch 22.

If you reduce the deficit you will hurt the economy in the short term. Politicians live for the short term because that is what gets them elected. If you don't reduce the deficit you hurt the economy more but it is in the long term. Politicians don't give half a fuck about the long term because they won't be seeking reelection then and if they are (such as Congress or the Senate) no one remembers what they did a decade ago.

So..... we aren't going to significantly cut the deficit anytime soon. We will hit the wall eventually and when we do its going to be a world of suck. Its called the law of exponents not the idea or even theory and we are already on the bad side of the curve, expect our debt to continue to shoot the moon.

Short term austerity measures don't work anyway, so you should be glad we aren't implementing them. Seriously, they are counter productive.

 

[the DRIZZLE]

Italy's problems come from owning debt in a currency they don't issue. There are many countries with sovereign currency that have both larger debts and larger deficits who have bond prices that are much lower. In fact, the US has some of the lowest bond prices in the history of our nation.

I would be a wonderfully happy person if we could get people to stop comparing the US to various European countries when our issues are nothing alike.

Cutting spending right now is a terrible idea, we should be aggressively ramping up spending in as many areas as possible in the short term while looking at long term medical service reform.

You always post that we can inflate our way out our date as if that makes any difference in the long run. The market will price that risk into our interest rate the same as it would default risk. The US is a bit of special case because of it's status as a reserve currency and the shier size and liquidity of our debt markets but we can't escape reality for ever.

 

[Schadenfroh]

No empire in the entire history of empires have cut their budgets to prosperity.

You have to raise taxes. It will happen. It is just a matter of when, who, and how much?

Even if we proscribe the top 1%, it will not be enough, we have to increase taxes and cut spending.

 

[fskimospy]

You always post that we can inflate our way out our date as if that makes any difference in the long run. The market will price that risk into our interest rate the same as it would default risk. The US is a bit of special case because of it's status as a reserve currency and the shier size and liquidity of our debt markets but we can't escape reality for ever.

I don't always post that we can inflate our way out of debt, simply that it gives us great flexibility in how we repay our debts. How many times do I need to remind everyone that US bond rates are some of the lowest in history?

 

[Anarchist420]

The sad thing is that the budget could be balanced in like 6 years if all we did was cut corporate welfare and welfare for the wealthy. 100B per year cut in MC (cut 2/3 of medicare part D by taking away patents, doing price negotiating for Part D drugs, allowing imported drugs, and taking the wealthiest 1/6 off medicare) and capping SS checks at 1.7k per month per person for 3 years (that would save close to 100B each year). Direct corporate subsidies are at least another 125B. Then we pay at least 275B per year to the MIC for wars that are completely destructive. That's $600B/year right there that we could cut and only the wealthy and big corporations would be affected.

Raising taxes on the wealthy to Clinton levels only gives $140B/year and that's totally amoral anyway so fuck it.

 

[fskimospy]

The sad thing is that the budget could be balanced in like 6 years if all we did was cut corporate welfare and welfare for the wealthy. 100B per year cut in MC (cut 2/3 of medicare part D by taking away patents, doing price negotiating for Part D drugs, allowing imported drugs, and taking the wealthiest 1/6 off medicare) and capping SS checks at 1.7k per month per person for 3 years (that would save close to 100B each year). Direct corporate subsidies are at least another 125B. Then we pay at least 275B per year to the MIC for wars that are completely destructive. That's $600B/year right there that we could cut and only the wealthy and big corporations would be affected.

Raising taxes on the wealthy to Clinton levels only gives $140B/year and that's totally amoral anyway so fuck it.

Don't you think that like 1/4 of the US population is going to be murdered by the government anyway? That should really take care of a lot of medicare payments.

 

[mshan]

Simpson and Bowles were interviewed on Bloomber and said issues are:

1) health care cost inflation

2) defense spending

3) closing tax loopholes to lower rates and broaden base (someone else said still need to increase tax rates on top 2%, though Fern said tax rate increases would need to apply to more than top 2%)

 

[cwjerome]

People on this board always think that everyone else's motives are based out of wanting their political football team to win. I can't possibly understand how you could think that was my opinion though, as neither US political party is advocating what I am.

I'll take your word on that. But you keep mentioning US bond rates as if that creates a shield of invincibility. I'm not sure you realize how fast things can change, especially in this volatile time. It is a shield that helps us deflect and stall, but we need to do more to ensure rates stay low and take steps to improve our standing in the eyes of the markets and the world. If more larger countries falter, it will have a very negative effect on us, so we should be positioning ourselves to be the rock. They way I look at it, if other major economies slide we can either drop the ball and go down with them or be in a position to somewhat "catch" the global economy and once again assert our economic might.

The only way to keep the ship afloat is to maintain the world's confidence. I do not think going on a spending binge to "stimulate" the economy in this crucial time of uncertainty will do that. And if we default on any debt, expect the worst. We need to demonstrate fiscal responsibility, please the markets, and get past this mess. This over-reliance on Keynesian spending is partly what got the world to this point.

 

[fskimospy]

I'll take your word on that. But you keep mentioning US bond rates as if that creates a shield of invincibility. I'm not sure you realize how fast things can change, especially in this volatile time. It is a shield that helps us deflect and stall, but we need to do more to ensure rates stay low and take steps to improve our standing in the eyes of the markets and the world. If more larger countries falter, it will have a very negative effect on us, so we should be positioning ourselves to be the rock. They way I look at it, if other major economies slide we can either drop the ball and go down with them or be in a position to somewhat "catch" the global economy and once again assert our economic might.

The only way to keep the ship afloat is to maintain the world's confidence. I do not think going on a spending binge to "stimulate" the economy in this crucial time of uncertainty will do that. And if we default on any debt, expect the worst. We need to demonstrate fiscal responsibility, please the markets, and get past this mess. This over-reliance on Keynesian spending is partly what got the world to this point.

You realize that almost nowhere in the world actually tried Keynesian spending, right? (including the US) We are pleasing the markets just fine, there is greater demand for US debt than at almost any time in history. Paul Krugman is totally right when he labels what you describe the 'confidence fairy'. It's this mythical idea that if we cut spending enough or implement enough austerity that people will somehow regain confidence in markets and the economy will work itself out. There is basically zero empirical evidence for this idea, either current or historical.

The world is experiencing growth issues more than anything else, and cutting spending will only inhibit growth further. It's the opposite of what we should be doing.