The media is all in a frenzy about how Paul Ryan's budget is going to reduces spending by 6 trillion or something over the next decade.

But as we all know, these are only projections (which never...never come to pass.) The only thing that matters is the spending for NEXT year.

Here is Paul Ryan's budget for 2012

Here is Obama's budget 2012

Skip to the important part (the Appendix I)

On the first page it has Revenues and Outlays. Besides the hilarity of all this budget discipline appearing down the road and not now (the diet starts on Monday). I see that in Ryan's budget, outlays would be 3.559 trillion, and in Obama's budget, outlays would be 3.729 trillion.

So this savior of the economy and our financial future wants to spend $170 billion (less than 5% of spending) less than the alleged most socialist president in US history? And these are our two choices? They are drowning in red ink, and the difference between our choices is 5%? Republicans are singing praises and Democrats are gnashing teeth over this non-difference?

Does anyone really have any hope that the feds will ever get out of this debt?

EDIT: It looks like Ryan's fiscally disciplined budget will cut spending from last year by a WHOPPING $90 billion. Why, that's over 6% of last years deficit! Even Ryans projections show big increases in Federal spending. What a budget hawk!

a vote to not increase the debt ceiling, without corresponding decreases in spending and/or increases in income, is a vote for the gov't to default.

No, the choice not to pay creditors (and instead pay social security, military, FDA, and so on) is default. Not increasing the debt limit is not default.

If the debt ceiling is not raised, Congress can still pay interest obligations. It will simply have less money to pay for the rest of the stuff it wants. Now, Congress might CHOOSE to not pay interest obligations, and therefore CHOOSE default. But not increasing the debt ceiling does not equal default.

Responsible grown-ups, in life, or in gov't don't do that

Congress is responsible?

Doctor Fate wrote:Congratulations. Based on your argumentation, there is no way for the Government to increase its revenues.

No, I'm arguing that it's not as simple as you think. There are ways, but they are not so clear cut, and may have unintended consequences.

Spending cuts need not kill jobs. For example, if we reduce the subsidies for college loans, how many jobs get killed?

Well, if you reduce the subsidies, there are two possible effects:

1) fewer people go to college, reducing the demand for employment at colleges, costing jobs
2) as many go, but they end up with higher debts. when they leave college, they have less disposable income as a result, and so are creating less demand for goods and services, costing jobs

(1) is partly true. Fewer will go to college, at least at the university level. That won't cost jobs--except maybe the odd counselor or food server. [/quote]So no-one else works at universities? And those jobs, as much as you may consider them beneath your ken, are still jobs, right?

(2) Most leave with absurd debts as it is. People don't plan for college, don't consider the costs and impacts before they go, and the government is responsible for that? Rubbish.

I'm not blaming the government for it. I'm suggesting that if the government reduces loan subsidies, so increasing the amount people borrow, that this could have an impact. Your argument was that it would not. Why change the goalposts to ignore my point?
at you know he means). [/quote]

I see you don't read Standard and Poors or know what it means.

I do know what S&P is, and what they do. They give the USA a rating of AAA, with an outlook that is negative. The main reason for this is the risk of not agreeing a budget. Still, I'm not sure what that has to do with the multiplier effect of government employment, which is what I was referring to in my reply. Are you arguing orthogonally to what you were before?

Edit - by the way, when S&P released their latest rating, their press release included the following paragraph:

Standard and Poors wrote:tandard & Poor's takes no position on the mix of spending and revenue
measures the Congress and the Administration might conclude are appropriate.
But for any plan to be credible, we believe that it would need to secure
support from a cross-section of leaders in both political parties.

So do they back up your argument that tax increases are the wrong way to do it? Nope, they take a neutral stance. Score one for reading!

Their baseline projections have a deficit decreasing from 11% this year to 6% in 2013. That's a good trend, don't you think? Not ideal, but heading in the right direction without causing a major shock.

The risks they identify are that the politicians don't work together. When it comes to that, I refer back to my first post on the thread - both sides are as bad as each other. Vince highlights that the argument is about $170Bn out of a deficit of nearly $1Tn which will have a marginal effect on the end result in terms of finances, but is clearly about a load of people taking entrenched positions and setting up red lines around bits of policy. You only want to point at one Party, but they are both at it.

theodorelogan wrote:

a vote to not increase the debt ceiling, without corresponding decreases in spending and/or increases in income, is a vote for the gov't to default.

No, the choice not to pay creditors (and instead pay social security, military, FDA, and so on) is default. Not increasing the debt limit is not default.

If the debt ceiling is not raised, Congress can still pay interest obligations. It will simply have less money to pay for the rest of the stuff it wants. Now, Congress might CHOOSE to not pay interest obligations, and therefore CHOOSE default. But not increasing the debt ceiling does not equal default.

This is a dangerous misunderstanding. If the gov't doesn't pay your social security and it has a legal obligation to do so, then you become a creditor. If you have a contract with the gov't and it doesn't pay you as it says in your contract, then you become a creditor. If you keep paying your interest and default on your other obligations, you're still in default. People sue, courts get involved, except that the judges will all have to recuse themselves because they'll be creditors too. Even what we call "discretionary" money are spent via contracts, which have to be honored. Default Is default.

Ah, I see Vince is back. Hi dude! Nice to see you back, arguing your special brand of libertarian genius. At least you mean it, unlike the Republicans here who hate government so much that they are willing to use it!

By the way, Vince, the S&P rating (and other ratings) of the USA suggest that a default is not likely. If that were the case, you'd not be one of the few AAA-rated nations on earth.

Portugal is more likely to default, but its debts are very different. Firstly they are on shorter-term bonds, meaning that they keep coming up for renewal, so Portugal has to either pay them back every 18 months, or re-borrow. Secondly, the interest rates are higher, adding to the deficit strains and making it harder to raise the money to repay the loans.

The USA does need to rein it its deficits, but will find it hard to do so even if it tries more than it is, because of the inter-relation between the deficit and the state of the economy. Get the economy to recover first, then deal with the deficit. The other way around risks doing more long term damage to the wider economy and still leaving the US with debt.

And what George says is quite true - it's not just defaults to the financial sector creditors that the USA has to worry about. Any default would cause increased risk.

Are these the same ratings agencies that were so dead on about the housing bubble and the collapse of 2008?

You keep buying those US bonds Dan (after all, they're rated AAA by S&P!). I'll keep buying gold.

And again, no, not paying social security and not paying bondholders are not remotely the same thing. Imagine the difference in the effect of the US governments ability to borrow if congress passed a law ending social security versus ending bond repayment.

The difference is however moot, since both of them WILL be repudiated

Same agencies, different kinds of ratings. Of course, they were being hoodwinked by the banks who created the dodgy investments, and even if they had suspicions were having to compete with each other to please the client. S&P don't need to keep the government happy.

I prefer UK bonds. Gold is probably peaking soon, so I'll steer well clear.

S&P don't need to keep the government happy.

Every large enough business needs to keep the government happy.

They are not that big, and could easily move abroad.

steve

And, the answer is to simply raise rates? First, that is a political impossibility.

Good lord. If there is anything the public is willing to accept its higher tax rates on people with over $250,000 incomes. (Shall I link you to the polls?) It may be the only thing that is politically possible, right now. They won't accept medicare cuts, or social security cuts or even cuts to military spending. But they don't mind Donald Trump paying more in taxes.

By the way, I agree with you about simplifying the tax code Steve. It would increase revenues, and probably put accountants out of business, but every time you would try some vested interest hollars don't they? The code became complex mostly because corporate lobbyists strained to make changes to their specific advantage. and the politiicans responded.

If the US defaulted, in any way on any of its debt obligations it would result in a sudden devaluing of the US dollar against all currencies. Probably in the range of 20% And because its use as a reserve currency would come to a fairly sudden end, to be replaced by a UN trade currency, the devaluation would be permanent.
What would that mean? Suddenly massively more expensive oil and gas,(then even now) and hugely increased prices for most things. There are entire sectors where the US no longer manufactures a significant share of production consumed in the US so for a long while there would be no domestic beneift in those sectors. Inflation would be rampant and the economy would tank. Again.
Over a generation, increased domestic production of some goods would heal the economy but it would take a long time, and the average standard of living would take a huge dump.
On the plus side, I'd be able to shop in Buffalo with CDN dollars worth $1.30 US. (Of course since I'd have to endure being in Buffalo, there would be pain as well.)
Theo I don't know why you want to accelerate the deline of your nation with precipitous actions...
Raising the debt ceiling provides time to avoid a crash. You may be right that it will never be seriously addressed. But I doubt that. Eventually a consensus on both raising taxes and cutting spending will be arrived at, and if the economy manages to continue growing in the meantime a light will shine so very faintly at the end of the tunnel.
Defaulting would be collapsing the tunnel.

Theo I don't know why you want to accelerate the deline of your nation with precipitous actions...

Not sure how drastically cutting spending would accelerate the decline.

Go ahead and raise taxes on the wealthy, and watch the acceleration of jobs, capital, and wealthy people leaving the US.

BTW these posts should not be taken to mean that I don't support immediate repudiation of federal debt (which I clearly do). Just to point out the hypocrisy of the GOP, which has the ability to stop deficit spending now. I find it a bit strange that people in this thread are suggesting that ending deficit spending immediately would be a negative for US debt

Where will the wealthy go?

What's more, is it really the case that the wealthy are responsible for job creation and enterprise? Most new businesses when started are started by people in middle-income groups. Key to creating demand for goods and services is the disposable income of the majority of people, not that of the rich.

It's always touching to see how the middle class right have so much concern for the wellbeing of the rich. Believe me, it's not reciprocated.

Maybe the middle class right know that tax increases intended to hit the rich hit them instead (by design perhaps?)

Or that 50% marginal rates on the wealthy (that most of them won't pay anyway) become the justification for 45% marginal rates on them.

It was just this "get the wealthy" attitude that ushered in the middle class killing income tax.

'killing'? Hyperbole much, Vince?