I agree 100%. I would add that the byzantine ways of the financial markets play an important role too. We don't know were some big player hid debt and once Greece for example can't serve it's debts anymore, there will once again be mistrust and no lending. Boom there go the now much larger banks again, because interbanking lending will freeze up again and people once again will pull their money.
I don't see how we can deal with the debt levels wihtout writing at least some of it off. We can't do that however unless we have a grasp were the debt lies and who holds it and send them into bankruptcy too. But how can we do that if basically every bank and insurance company is so interconnected that we can't let them go under without a global financial disaster.

The Greek debt that Goldman Sachs packaged and sold to mostly European banks was then repackaged by the European banks into Credit Default swaps. Since CDS weren't regulated no one actually knows who ultimately will hold the bag for the Greek debt. In effect Grece is another Lehman brothers, brought about by lax regulation.
This last unknown, is a great reason for most governments to allow the Greeks some latitude.

bbauska
Glad to see that the 10% meets your approval. Unfortunately, the 10% only kicks the problem down the road

Well, the US has been kicking down the road its fiscal deficits since about 1978, and its trade deficits for at least an additional 15 years or more. If you go back to the very earliest contributions i ever made to this board I prophisized that a wall was going to be hit eventually. I was called anti-American... All the financial disaster did was shorten the road by reducing revenues drastically and requiring investment to avoid a depression.

I don't disagree with your 10% approach B, as i said before. Only that perhaps some areas are 0% and some 20%. Add to that raising taxes on the rich and an expanding economy and things could turn around. But, the US system of governing does make this difficult. In a parliamentary democracy a government with a healthy majority can pretty much run things unoppossed for 4 to 5 years. They can take a chance that austerity will start to pay off as they come to the end of the their term and they'll be rewarded at the polls. It has happened elsewhere.
With a shared power system, with constant electoral cycles, austerity is tough to instigate and can be punished by discontented but irrational voters in short order....

ME

Are you saying that 100% of government spending is efficiently returned to government coffers?

No. Just that some does, and creates a multipler effect. Poor people tend to spend whatever you give them almost immediately on goods and services... Rich people or corporations have more options, and often take options that actually don't help the local economy but do help their self interest. (There's nothing wrong with acting in one's self interest on an individual basis. Its application for economic policy and industrial policy isn't likely to produce constantly positive results.)

rickyp wrote:I don't disagree with your 10% approach B, as i said before. Only that perhaps some areas are 0% and some 20%. Add to that raising taxes on the rich and an expanding economy and things could turn around. But, the US system of governing does make this difficult. In a parliamentary democracy a government with a healthy majority can pretty much run things unoppossed for 4 to 5 years. They can take a chance that austerity will start to pay off as they come to the end of the their term and they'll be rewarded at the polls. It has happened elsewhere.
With a shared power system, with constant electoral cycles, austerity is tough to instigate and can be punished by discontented but irrational voters in short order....

This is exaclty why the across the board cuts need to be employed. You have displayed it in a perfect way. You would only have the cuts that appeal to you, and leave the conservatives taking the brunt of cuts. Conservatives would have the cuts that appeal to them, and would leave the left with the brunt of the cuts. This has resulted in nothing getting done since 1978. It cannot be this way anymore. If the sides cannot resolve the problem, then EVERY budget needs some tightening equally. Work it out, or deal with it equally. Sounds about right to me. The 10% would only solve the current deficit problem. It does not pay us out of the debt. You can see why the 15% or 20% moves against the debt problem.

bbauska

This is exaclty why the across the board cuts need to be employed. You have displayed it in a perfect way. You would only have the cuts that appeal to you, and leave the conservatives taking the brunt of cuts.

Not the cuts that appealed to me. Its just that sometimes "stimulus" from social programs is better at delivering immediate benefit to the economy....From a great article on the Swedish recovery in the Washington Post ... By the way, the "socialist Swedes" are actually fiscal conservatives who learned from the debacle in the financial sector. A great example of a nation using Keynesian principles successfully for 20 years... (And a nation that foreswore the Euro, which is also interesting..Independence matters.)

[quote]Fiscal stimulus can be more effective when it is automatic
Sweden didn’t do much in terms of special, one-off efforts to spend money to combat the downturn. There was some extra infrastructure spending and a well-timed cut to income tax rates, but the most basic response to the government was to do what the nation’s social welfare system — lavish by American standards — always does: Provide income, health care and other services to people who are unemployed.
In the United States, the battle over whether to use government spending to cushion the blow of the downturn became a divisive one. Whether to try to stabilize the economy became one more battle in the longer term war over the proper role of government.
And because the $800 billion fiscal stimulus that Congress and the Obama administration enacted in early 2009 consisted mostly of special, one-time programs, it took months for many of them to begin pumping money into the economy, thus kicking in months or even years after the economy had collapsed, and the spending expired without regard to whether the need remained. [/quote
source:
]http://www.washingtonpost.com/business/economy/five-economic-lessons-from-sweden-the-rock-star-of-the-recovery/2011/06/21/AGyuJ3iH_story_1.html

geojanes wrote:My worry is that some of these new tea-partiers may see their constituency differently and believe some of the political rhetoric they are spewing and won't listen to their leadership when it comes time to blink. Scares the crap out of me.

I hope I wasn't prophetic.

geojanes wrote:

geojanes wrote:My worry is that some of these new tea-partiers may see their constituency differently and believe some of the political rhetoric they are spewing and won't listen to their leadership when it comes time to blink. Scares the crap out of me.

I hope I wasn't prophetic.

And, the Democrats are better?

They won't agree to any "real" reform in entitlement and that is why we're going to get downgraded. When one rating agency says $4T is "a good down payment" on what we need to do, and yet Democrats are talking about the end of the world (Pelosi) and other charming phrases, who are the extremists?

Your answer: those who think we should live within our means.

You do know that the $2.7T debt hike the President wants will be the biggest, by far, in American history?

Steve, even with a $4Tn over 10 year plan in place, the US would need to increase the debt limit by $2.7Tn within three years (probably more like two as such cuts will not be immediate).

Inflation means that the last hike will usually be among the largest 'ever' if not actually the largest. Until the next one.

danivon wrote:Steve, even with a $4Tn over 10 year plan in place, the US would need to increase the debt limit by $2.7Tn within three years (probably more like two as such cuts will not be immediate).

Inflation means that the last hike will usually be among the largest 'ever' if not actually the largest. Until the next one.

Sorry, but that is classic liberal thinking. Yes, inflation is a factor. However, presuming the debt ceiling must always go up is to presume government is incapable of living within its means.

However, to put it in perspective: have we undergone 50% inflation over the past couple of years?

If not, I suspect this increase is rather enormous. And, keep in mind that Obama's "planning" will have us at $25T in about 10 years. We cannot afford to simply keep piling on the debt. This chart shows the fine work done over the last ten years:



In December, 2009, the debt ceiling was raised $1.9T. So, that's $100B a month (approximately). Are we really to understand we now need $2.7T over the next 17 months? That's more than $150B a month.

Either we've had massive inflation or we have continued to spend at an accelerated rate while receipts have dipped. Since it's not inflation . . .

Bottom line: the government spends too much money and is not making any effort to curb that.

What i forsee: we'll pass the August 2nd dead line, because the Republicans will be deathly afraid to not stand strong on principle like the Tea Party cooks. The democrats won't go for anything that only buggers them in the a$$ without giving them anything to make them feel good and less dirty about themselves afterwards.
Then on Monday the market crashes and all the at least somewhat sane and adult politicans from both parties will shit their pants and come up with some compromise real fast.
The question is will the scare hurt Republicans more or Democrats in 2012.

Fax:

What i forsee: we'll pass the August 2nd dead line, because the Republicans will be deathly afraid to not stand strong on principle like the Tea Party cooks.

By the way, tea party cooks make petite sandwiches, so I'm guessing you mean kooks.

What principle are the Republicans afraid to stand up for? Assuming that Boehner / Cantor represent the mainstream Republican party (i.e. not "tea party cooks"), it seems to me that they are being principled. They want to cut spending, and they need a deal to pass the House. They couldn't get the white house or senate to cooperate, so they've done what they had to do.

Of all the actors in this drama, (including the Pres, Senate Democrats, House Democrats, tea party members), I think the Republicans in the House, especially Boehner, have been the most reasonable actors so far.

Boehner has been reasonable in the face of opposition from his own party, but he has had to compromise more with his right than anyone else.

McConnell looks more sensible to me, tbh. He got some concessions out of Reid on a plan that would pass the Senate anyway, but makes it a bit more appealing to the House.

By the way, I think Cantor is letting Boehner have enough rope to hang himself.

I think Boehner and Cantor are playing good cop/bad cop at the moment. Basically Cantor plays the hard ass no compromise bad cop and Boehner goes to the other side and says see what I have to deal with. You need to move a little bit or deal with him as the Speaker.

Of all the actors in this drama, (including the Pres, Senate Democrats, House Democrats, tea party members), I think the Republicans in the House, especially Boehner, have been the most reasonable actors so far.

That's a pretty remarkable statement. The only reason this crisis is now playing out is because House Republicans agreed a budget a few months ago (which implied a certain level of borrowing) but are now refusing to allow the necessary borrowing to take place to fund the budget they already agreed. That in itself is wholly unreasonable, as is the fact that despite being offered in effect everything they wanted at the start of the process they're still insisting on ludicrous clauses like a the risible balanced budget amendment, which they know full well can never pass the Senate in a million years. That's not being a reasonable actor, it's shameless brinkmanship.

Sas:

That's a pretty remarkable statement. The only reason this crisis is now playing out is because House Republicans agreed a budget a few months ago (which implied a certain level of borrowing) but are now refusing to allow the necessary borrowing to take place to fund the budget they already agreed. That in itself is wholly unreasonable, as is the fact that despite being offered in effect everything they wanted at the start of the process they're still insisting on ludicrous clauses like a the risible balanced budget amendment, which they know full well can never pass the Senate in a million years. That's not being a reasonable actor, it's shameless brinkmanship.

I agree it is a remarkable statement; it certainly runs counter to the prevailing narrative. I'm fairly mainstream at my core, so I'm not used to that. Here's my reasoning:

The budget that was approved was in Dec., after the election, but before the new House took office. The new members, and some of the returning members, campaigned against spending, so they would be dishonest to their constituents if they did not follow their campaign promises. They are not legally bound to hold to a deal of their predecessors, or we wouldn't be having this conversation. The people's House is elected every 2 years to be responsive to its constituents.

Regarding your second point, I think that you can accuse both sides of passing clauses that the other side won't agree to in a million years. Why do we label one more extreme than the others? Actually, the Democrats have still not passed anything in the Senate. That seems even more unreasonable (and irresponsible) to me. By the way, I'm not endorsing this particular BBA. But I do think that we need some mechanism with teeth to curtain future spending.

I would also add that in the 8 months since the budget deal, the economy has not gotten better in spite of government spending. We have further evidence that Keynesian economics is not working, but our deficits and debts keep growing with no end in sight. We can't just keep kicking the can.

Correct me if I'm wrong, but I wasn't there a last minute budget deal in April that averted a government shutdown ? What the hell was that all about then if the budget had been passed in December ?

Fact is that the Republicans are playing chicken with the entire global economy. This is despite having already extracted concessions that amount to pretty much everything they could ever have wanted. At the start of the process Obama wanted a straight increase in the debt ceiling with no strings, then he wanted a deal which included mostly cuts but also some moderate increase in tax to the wealthy. Now the Dems have been reduced to offering a deal with substantial cuts and no revenue increases whatsoever, not even the closing of tax loopholes. Still no dice. It's wholly irresponsible to behave this way when the stakes are this high.