The Debt Reduction "Supercommittee"

[zsdersw]

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.

"People in this country" choose centrally planned and administered entitlements, as their immense popularity and "third rail" political status demonstrates.

It's very unfortunate, but it is also very true.

 

[cwjerome]

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.

Nowhere is the world has tried Keynesian spending. So what you're saying is, there's no empirical evidence for this idea, either current or historical?

Yet you label Krugman, the Keynesian god, as totally right. Sketchy. Just because there hasn't been a massive increase in interest rates -yet- doesn't mean spending our way into prosperity works. It seems to me the Fed has been frantically doing everything it can to keep those rates artificially low, like keeping the Fed rate near zero (what happens when you can't take it any lower) and printing more money (what happens when you can't print more without igniting inflation?) This is the guy who says the economy is sucking because the stimulus wasn't enough?

This isn't about Krugman, the bottom line is the US needs to avoid a default. It will not do that by spending and printing. I am not saying these things because I shy from centralized planning or I believe government spending comes as a RESULT of economic growth and not vice versa, I am saying them because there are serious economic issues threatening to incapacitate our economic partners mainly because of debt, and if they suffer, we will to. The issue is debt.

I realize our debt isn't as bad, and we are in a slightly different position, but this is not the time to be running it up even more while major economic powers around the world are struggling mightily over debt issues. We should be seeking to minimize default, not aggressively court it.

 

[fskimospy]

Nowhere is the world has tried Keynesian spending. So what you're saying is, there's no empirical evidence for this idea, either current or historical?

No, I'm saying that almost nowhere has tried it in the current crisis, particularly not where people commonly think of it being used. One place that has however is China, btw. It was highly effective.

Yet you label Krugman, the Keynesian god, as totally right. Sketchy. Just because there hasn't been a massive increase in interest rates -yet- doesn't mean spending our way into prosperity works. It seems to me the Fed has been frantically doing everything it can to keep those rates artificially low, like keeping the Fed rate near zero (what happens when you can't take it any lower) and printing more money (what happens when you can't print more without igniting inflation?) This is the guy who says the economy is sucking because the stimulus wasn't enough?

This isn't about Krugman, the bottom line is the US needs to avoid a default. It will not do that by spending and printing. I am not saying these things because I shy from centralized planning or I believe government spending comes as a RESULT of economic growth and not vice versa, I am saying them because there are serious economic issues threatening to incapacitate our economic partners mainly because of debt, and if they suffer, we will to. The issue is debt.

I realize our debt isn't as bad, and we are in a slightly different position, but this is not the time to be running it up even more while major economic powers around the world are struggling mightily over debt issues. We should be seeking to minimize default, not aggressively court it.

I do not believe the US is even remotely at risk of default either actual, or de facto. If we are ever to be at risk of that it will be due to rising medical expenditures in the future, not stimulus spending now.

 

[Darwin333]

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

Long term debt growth at a year over year rate that is much greater than your year over year economic growth doesn't work either. See the law of exponents for proof.

 

[Darwin333]

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.

Out of curiosity, do you understand why cutting spending would inhibit further growth (not actually accurate but pretty close)?

 

[fskimospy]

Out of curiosity, do you understand why cutting spending would inhibit further growth (not actually accurate but pretty close)?

Yes I understand why cutting spending would inhibit growth, why do you ask?

EDIT: As to your other post, I don't understand your point. Of course that's true, but no one is advocating that.

 

[Darwin333]

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.

I disagree with eskimospy on this issue but I also disagree with you.

Lets start with other countries failing or faltering, that is a HUGE part of why our bonds are so cheap right now. We might suck but we suck a hell of a lot less than Europe. What other safe haven do you know of that you can chuck a few billion bucks into? Lots of people/entities with huge sums of money are actually losing a rather small portion of the money they invest in US bonds BUT that loss is very defined and manageable. If I thought that I could potentially lose 25% of my money I would be extremely happy with a 1% or less loss. Hell, a major US company (and i mean seriously MAJOR) just went bankrupt betting on bonds in Europe.

Secondly, we will never "default" on our debt unless the bond market goes all Greek on us which would basically force our hand. Otherwise we can print our own money so we can always service our debt. Eventually you could find yourself in a game with the bond market who is trying to price in that inflation, raising your rates, forcing you to print more money, and so on. The problem with that is the bond guys are the best of the best in the investment world. They understand how that games ends better than we do so what exactly will they do, I have no clue.

The problem with long term deficit spending is that it can never be removed without causing a drop in GDP (simple math). It would require significant economic growth over a relative long period of time to even think about phasing our debt growth down to GDP growth without causing an uproar. "Its the economy stupid" is very accurate and what might be good for us over 10 years damn sure ain't good for Obama (or whoever) in next years election. Same thing with the next guy, and so on.

If you chart our debt growth versus GDP growth the debt end has gone damn near vertical (damned law of exponents) and ANY fix to that will cause short term economic pain. Not fixing it causes exponentially more pain at some point in the future but as I said, politicians don't care about anything past the next election cycle.

To heap some more "we be fucked" into the pile, you can not possibly fix the deficit issue without touching the "3rd rail" stuff. I would be impressed if we had 1/10th of the votes required to do that but I have absolutely zero faith that we will have enough to actually cut them in a significant way before we hit the wall. We could raise revenue but it would be more symbolic than anything, we can't even cut 10% of our current deficit with increased taxes on the wealthy and increasing taxes on everyone else isn't politically feasible.

So as I said, we be fucked. I am sitting back and enjoying the ride, you should think about doing the same.

 

[Darwin333]

Yes I understand why cutting spending would inhibit growth, why do you ask?

EDIT: As to your other post, I don't understand your point. Of course that's true, but no one is advocating that.

No one is advocating it? It has already happened for, oh I don't know, 4 or 5 decades or so (I lost count). Seems to me that it has already been advocated AND implemented.

Sure you can pull up a year or two that our debt didn't grow faster than GDP but average it out and get back to me. Then chart it in excel and tell me what our future debt growth looks like. OR you can explain to me how they will get the public to go along with economic contraction when they start drawing down the deficit spending (at some point in the future).

And I don't see anyone advocating an actual plan that gets our rate of debt growth below our rate of economic growth. Please correct me if I am wrong but I would appreciate if you would include your opinion on how likely it is to actually be implemented.

 

[cwjerome]

I disagree with eskimospy on this issue but I also disagree with you.

Lets start with other countries failing or faltering, that is a HUGE part of why our bonds are so cheap right now. We might suck but we suck a hell of a lot less than Europe. What other safe haven do you know of that you can chuck a few billion bucks into? Lots of people/entities with huge sums of money are actually losing a rather small portion of the money they invest in US bonds BUT that loss is very defined and manageable. If I thought that I could potentially lose 25% of my money I would be extremely happy with a 1% or less loss. Hell, a major US company (and i mean seriously MAJOR) just went bankrupt betting on bonds in Europe.

Secondly, we will never "default" on our debt unless the bond market goes all Greek on us which would basically force our hand. Otherwise we can print our own money so we can always service our debt. Eventually you could find yourself in a game with the bond market who is trying to price in that inflation, raising your rates, forcing you to print more money, and so on. The problem with that is the bond guys are the best of the best in the investment world. They understand how that games ends better than we do so what exactly will they do, I have no clue.

The problem with long term deficit spending is that it can never be removed without causing a drop in GDP (simple math). It would require significant economic growth over a relative long period of time to even think about phasing our debt growth down to GDP growth without causing an uproar. "Its the economy stupid" is very accurate and what might be good for us over 10 years damn sure ain't good for Obama (or whoever) in next years election. Same thing with the next guy, and so on.

If you chart our debt growth versus GDP growth the debt end has gone damn near vertical (damned law of exponents) and ANY fix to that will cause short term economic pain. Not fixing it causes exponentially more pain at some point in the future but as I said, politicians don't care about anything past the next election cycle.

To heap some more "we be fucked" into the pile, you can not possibly fix the deficit issue without touching the "3rd rail" stuff. I would be impressed if we had 1/10th of the votes required to do that but I have absolutely zero faith that we will have enough to actually cut them in a significant way before we hit the wall. We could raise revenue but it would be more symbolic than anything, we can't even cut 10% of our current deficit with increased taxes on the wealthy and increasing taxes on everyone else isn't politically feasible.

So as I said, we be fucked. I am sitting back and enjoying the ride, you should think about doing the same.

Some good points. You are probably right about the default thing and you do seem to understand the overall impact of the coming reckoning. I suppose, as I stated in the OP, my main concern is honest discourse and compromise if necessary in the short term in relation to the committee and the deadline. We have a chance to try and get some budget issues somewhat on the right path and hopefully mitigate some of the oncoming hardships to a degree, but the time is now. I'd just like some of those major players involved to seek "truth" and impartially accept basic facts rather than disturb this important conversation with trifling political antics.

 

[fskimospy]

No one is advocating it? It has already happened for, oh I don't know, 4 or 5 decades or so (I lost count). Seems to me that it has already been advocated AND implemented.

Sure you can pull up a year or two that our debt didn't grow faster than GDP but average it out and get back to me. Then chart it in excel and tell me what our future debt growth looks like. OR you can explain to me how they will get the public to go along with economic contraction when they start drawing down the deficit spending (at some point in the future).

And I don't see anyone advocating an actual plan that gets our rate of debt growth below our rate of economic growth. Please correct me if I am wrong but I would appreciate if you would include your opinion on how likely it is to actually be implemented.

US debt to GDP ratios dropped sharply until the early 80's under Reagan. They increased under him, and then dipped again during the 90's. It's not 'a year or two', if you are counting the 'past 5 decades' then our debt to GDP ratio has been in decline for about half of that time.

A return to normal economic growth would do wonders to eliminating our deficit. Spending on social safety net programs like unemployment, food stamps, etc, etc have all increased hugely in the past few years, and they would return to more normal levels if employment stabilizes. Combining that with actual growth and you've got a good start on it. Furthermore, our actual drivers of debt going forward aren't programs that need to be cut, it is the rate of increase that needs to be slowed. (see: medicare) Mitigating or solving our unsustainable health care inflation would solve a huge portion of our future debt problems as well, without a single 'cut'.

 

[the DRIZZLE]

US debt to GDP ratios dropped sharply until the early 80's under Reagan. They increased under him, and then dipped again during the 90's. It's not 'a year or two', if you are counting the 'past 5 decades' then our debt to GDP ratio has been in decline for about half of that time.

A return to normal economic growth would do wonders to eliminating our deficit. Spending on social safety net programs like unemployment, food stamps, etc, etc have all increased hugely in the past few years, and they would return to more normal levels if employment stabilizes. Combining that with actual growth and you've got a good start on it. Furthermore, our actual drivers of debt going forward aren't programs that need to be cut, it is the rate of increase that needs to be slowed. (see: medicare) Mitigating or solving our unsustainable health care inflation would solve a huge portion of our future debt problems as well, without a single 'cut'.

Medicare is certainly the biggest single part of the problem, but you are glossing over huge challenges. We need fundamental reform in the tax code and many other areas not just to increase revenues but to to achieve the economic growth you mentioned. All reform is generally painful for someone, otherwise it would have happened already.

 

[Jhhnn]

US debt to GDP ratios dropped sharply until the early 80's under Reagan. They increased under him, and then dipped again during the 90's. It's not 'a year or two', if you are counting the 'past 5 decades' then our debt to GDP ratio has been in decline for about half of that time.

A return to normal economic growth would do wonders to eliminating our deficit. Spending on social safety net programs like unemployment, food stamps, etc, etc have all increased hugely in the past few years, and they would return to more normal levels if employment stabilizes. Combining that with actual growth and you've got a good start on it. Furthermore, our actual drivers of debt going forward aren't programs that need to be cut, it is the rate of increase that needs to be slowed. (see: medicare) Mitigating or solving our unsustainable health care inflation would solve a huge portion of our future debt problems as well, without a single 'cut'.

A return to *1980 distribution of income* would do wonders to eliminating our deficit. Spending on social safety net programs like unemployment, food stamps, etc, etc have all increased hugely in the past few years, and they would return to more normal levels if *income inequality were reduced*. That's with the same amount of money in the system.

Which relates directly to the other reason that federal deficits are structural- the balance of payments deficit. When $500B flows out of the country on an annual basis, govt has to put that much new money into circulation in order to maintain domestic liquidity, prevent deflation.

In many respects, federal deficits are cover for lopsided income distribution in the sense that money that would otherwise be hoarded is invested in treasuries & returned to circulation by govt spending. That's particularly true when demand in the general economy is low, like today.

 

[the DRIZZLE]

A return to *1980 distribution of income* would do wonders to eliminating our deficit. Spending on social safety net programs like unemployment, food stamps, etc, etc have all increased hugely in the past few years, and they would return to more normal levels if *income inequality were reduced*. That's with the same amount of money in the system.

Which relates directly to the other reason that federal deficits are structural- the balance of payments deficit. When $500B flows out of the country on an annual basis, govt has to put that much new money into circulation in order to maintain domestic liquidity, prevent deflation.

In many respects, federal deficits are cover for lopsided income distribution in the sense that money that would otherwise be hoarded is invested in treasuries & returned to circulation by govt spending. That's particularly true when demand in the general economy is low, like today.

Spending on unemployment and food stamps is not a significant component of the deficit.

edit: To put some numbers on it, reducing Federal spending on food stamps and unemployment to 2005 levels would save about $120 Billion a year.

 

[EagleKeeper]

It took the credit rating downgrade to force Congress to do something the first time.

Maybe the start of an automatic cut will then trigger some actual progress.

First round of cuts will start to eliminate fat :thumbsup: and the resulting screams will create a pressure wave that forces action.

 

[fskimospy]

Spending on unemployment and food stamps is not a significant component of the deficit.

edit: To put some numbers on it, reducing Federal spending on food stamps and unemployment to 2005 levels would save about $120 Billion a year.

So that's 10% of the deficit right there. Then you add in increased Medicaid spending due to people falling into poverty, decreased tax receipts due to people not paying taxes because they aren't working, increased numbers of people qualifying for other antipoverty programs, etc, etc, you start realizing that this all adds up to a huge proportion of the deficit.

 

[Acanthus]

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

This is true. I don't think anyone is advocating continuing our path of wanton appropriations for everything under the sun.

I would want tariffs on all imports from 3rd world nations, elimination of capital gains, count all income as income and tax appropriately, remove social security income cap, float retirement age on average life expectancy minus 18 years, lock social security funds to keep everyone's hands off of it, close as many foreign bases as it takes to cut $250B from the military budget while keep personnel and equipment/vehicle purchases the same.

This would return the US to jobs growth and dramatically increase revenue at the same time, while fixing budgetary problems with SS. We could use our military to defend our freedom instead of putting boots on the ground in every nation on earth.

 

[theeedude]

Let it go to sequestration. Republicans will then want to restore the defense cuts, at which point the Democrats can demand that they find revenue to pay for that. Republicans will have to either raise taxes or look like hypocrites on cutting deficits. Either will piss off the tea party crowd.

 

[cwjerome]

Let it go to sequestration. Republicans will then want to restore the defense cuts, at which point the Democrats can demand that they find revenue to pay for that. Republicans will have to either raise taxes or look like hypocrites on cutting deficits. Either will piss off the tea party crowd.

Yeah, that's exactly the kind of attitude I created this thread about... partisan pissing contest, not really caring about effects other than trying to hurt the other side. That it comes from you is no surprise, your political maturity is always questionable.

 

[Patranus]

The federal government needs to cut 16 trillion over the next 10 years to balance the budget and the Democrats cannot even cut 4 trillion over 10 years.

The Democrats fail once again.

 

[cwjerome]

The federal government needs to cut 16 trillion over the next 10 years to balance the budget and the Democrats cannot even cut 4 trillion over 10 years.

The Democrats fail once again.

 

[QuantumPion]

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?

You know that the Roman empire fell because it taxed its productive provinces into oblivion while wasting all the tax money on palaces and shit, right?

 

[theeedude]

Yeah, that's exactly the kind of attitude I created this thread about... partisan pissing contest, not really caring about effects other than trying to hurt the other side. That it comes from you is no surprise, your political maturity is always questionable.

It's about making a partisan pissing contest backfire on the Republicans who started it over the debt ceiling.

 

[cwjerome]

It's about making a partisan pissing contest backfire on the Republicans who started it over the debt ceiling.

Round and round... we get what we deserve I guess.

 

[theeedude]

Round and round... we get what we deserve I guess.

Karma's a b!tch.

 

[Patranus]

Think of it this way.

The Democrats want the budget balanced with cuts and tax increases.
With 16 trillion over 10 years needed, they should have at least 8 trillion worth of cuts.
If they have at least 8 trillion worth of cuts then finding 4 trillion worth of cuts for this deadline should be a cake walk.

We are talking about fixing 1/4 of the problem and the Democrats cannot even figure out how to resolve 1/4 of the problem without resorting to more taxes.

Despicable.