Will the US default?

[Riceball]

Simple question really, do you think the Executive and the Legislature will be able to agree on a plan to cut the US budget deficit in enough time to get the debt ceiling raised?

If you will, humour me with some discussion thats non-partisan...if thats possible...

[Sigz]

Wait, which question are we answering?

Will the US default?

do you think the Executive and the Legislature will be able to agree on a plan to cut the US budget deficit in enough time to get the debt ceiling raised?

[Riceball]

One kind of precipitates the other, the 'publicans won't raise the debt ceiling without a plan to cut the deficit; and so if that doesn't happen it is 90% likely the US will default on its loans (90% is a completely arbitraty number btw).

I suppose if I was going to be direct, the question would be:

Will shit hit the fan on August 2?

[Scheavo]

I honestly don't know how to answer. Is it partisan to discuss the partisan nature of our government? Because that's why I can't answer it. If our media was more journalistic, it may be possible to know just how much what we're seeing unfold in the media is theatrics or not. Both parties could be at a serious impasse, or just playing chicken with each other, or just playing it for political gain (both parties get to show off to their base).

[Super Dude]

I honestly don't know how to answer. Is it partisan to discuss the partisan nature of our government? Because that's why I can't answer it. If our media was more journalistic, it may be possible to know just how much what we're seeing unfold in the media is theatrics or not. Both parties could be at a serious impasse, or just playing chicken with each other, or just playing it for political gain (both parties get to show off to their base).

That's an interesting point, I never considered that before.

Anyway, I'm hoping we can get through this, and eliminate some tax breaks to boot.

[Riceball]

I suppose what I was getting at with the partisan thing was to stop it turning into a slanging match.

I've gotta agree with that point on showing off to their bases, it seems both parties are trying to take an ideological approach to the negotiations, with the Republicans saying "no new taxes" while the Democrats say "we aren't cutting welfare". Problem with that scenario is that the other side can use that to say, "well, we are trying to make our way through the issue, but the other party doesn't want to play ball". Like you said, its a massive game of chicken right now, hopefully it can be resolved fairly quickly.

If it doesn't get resolved, the implications are pretty huge. I mean, in asset pricing US treasuries are basically considered the "risk free" rate that all other asset prices are based upon; if the price of US bonds was to rise it would push all asset prices up, leading to deleveraging and the potential for a second global credit crunch, which is certainly amongst the worst things that could happen to the fragile global economy at the moment - just behind asteroid or supervolcano.

[Sigz]

One kind of precipitates the other, the 'publicans won't raise the debt ceiling without a plan to cut the deficit; and so if that doesn't happen it is 90% likely the US will default on its loans (90% is a completely arbitraty number btw).

I suppose if I was going to be direct, the question would be:

Will shit hit the fan on August 2?

No, I just meant in the poll; a yes on one means a no on the other. 

[Super Dude]

I suppose what I was getting at with the partisan thing was to stop it turning into a slanging match.

I've gotta agree with that point on showing off to their bases, it seems both parties are trying to take an ideological approach to the negotiations, with the Republicans saying "no new taxes" while the Democrats say "we aren't cutting welfare". Problem with that scenario is that the other side can use that to say, "well, we are trying to make our way through the issue, but the other party doesn't want to play ball". Like you said, its a massive game of chicken right now, hopefully it can be resolved fairly quickly.

If it doesn't get resolved, the implications are pretty huge. I mean, in asset pricing US treasuries are basically considered the "risk free" rate that all other asset prices are based upon; if the price of US bonds was to rise it would push all asset prices up, leading to deleveraging and the potential for a second global credit crunch, which is certainly amongst the worst things that could happen to the fragile global economy at the moment - just behind asteroid or supervolcano.

Actually on that note, what are the consequences of a U.S. default with our fragile economy?  On a national and an international scale?

I have this friend I've been debating with the last week....he thinks we should just cut $3 trillion in spending and continue cutting taxes, and he's trying to convince me the impact of defaulting wouldn't be so bad. (Will post later for lulz)

[rumborak]

Actually on that note, what are the consequences of a U.S. default with our fragile economy?  On a national and an international scale?

From what I understand, if the US defaults, the gov't has to make a decision who to not pay anymore. That could be the army, retirees, or even China (the interest to their loans). If it of course chooses to no longer pay its creditors, then all hell breaks loose.

The thing is, IMHO, the problem needs to be attacked from both sides, i.e. both the spending and the income. Yes, spending needs to be cut, but taxes also need to be increased to come in from the other side.
And while I see both sides being a fault here, I think the GOP is at its worst right now. They overemphasize the impact of tax hikes (Germany for example had a good boom with much higher taxes), and seemingly much rather want to stop supporting old and sick people than not being able to wage war on several countries at a time.

rumborak

[King Postwhore]

The thing is, IMHO, the problem needs to be attacked from both sides, i.e. both the spending and the income. Yes, spending needs to be cut, but taxes also need to be increased to come in from the other side.

rumborak

This is the right answer.

[Dublagent66]

Nah, the shared sacrifice theory is bullshit.  Americans have already made their sacrifice.  Raising taxes isn't the answer.

[Perpetual Change]

Nah, the shared sacrifice theory is bullshit.  Americans have already made their sacrifice.  Raising taxes isn't the answer.

What's the alternative? Wishing the problem away?

[Dublagent66]

Well, if they raise taxes but don't cut spending, then we're right back where we've always been.  The gov't needs to prove that they can make the necessary cuts first.  The gov't bails out the financial institutions because they failed to regulate.  The banks broke their own rules and gave out loans to a bunch of financially irresponsible losers.  Now, the rest of us have bail everybody out?  I don't think so.  The gov't needs to bite the bullet, not the financially responsible tax payer.

[antigoon]

Tax increases or not, we're going to feel the pain of the government biting the bullet either way.

[Super Dude]

On the other end of that, you can't *just* cut spending. It has to be met with tax increases in order to make the cutting of services worth it.

And it's not like we're even threatening the common man's interest here; tax increases just mean eliminating tax breaks for the rich.

[Nigerius Rex]

On the other end of that, you can't *just* cut spending. It has to be met with tax increases in order to make the cutting of services worth it.

And it's not like we're even threatening the common man's interest here; tax increases just mean eliminating tax breaks for the rich.

Tax increases are irrelevant and a lower priority regardless without a gigantic cut to spending.

[Super Dude]

So let's cut our military spending in half. We'll still beat out the next ten countries' budgets combined.

[Dublagent66]

On the other end of that, you can't *just* cut spending. It has to be met with tax increases in order to make the cutting of services worth it.

And it's not like we're even threatening the common man's interest here; tax increases just mean eliminating tax breaks for the rich.

Tax increases are irrelevant and a lower priority regardless without a gigantic cut to spending.

This.  Like I said before, there is plenty of revenue without raising taxes.  The gov't is spending more than they bring in.  You can raise taxes to the nth fucking degree.  If spending cuts aren't made, it's irrelevant.  This is all happening because people are terrible at math.  If you spend more than you make, then you eventually have nothing.  This is basic stuff folks.

[7StringedBeast]

Tax cuts for the rich is kind of a misnomer though.  The tax cuts start for households with income of 250,000 combined.  This kind of income does not make a family rich if they have kids and a mortgage and college to pay for.  It still falls under middle class living.

To me there needs to be another bracket of taxes.  I think its absurd to lump families making 250,000 a year in with single people making millions a year.  I think it's ridiculous that they are considered the same.

[Super Dude]

Tax cuts for the rich is kind of a misnomer though.  The tax cuts start for households with income of 250,000 combined.  This kind of income does not make a family rich if they have kids and a mortgage and college to pay for.  It still falls under middle class living.

To me there needs to be another bracket of taxes.  I think its absurd to lump families making 250,000 a year in with single people making millions a year.  I think it's ridiculous that they are considered the same.

That's true.  Lump that in with the new things I've learned today.

On the other end of that, you can't *just* cut spending. It has to be met with tax increases in order to make the cutting of services worth it.

And it's not like we're even threatening the common man's interest here; tax increases just mean eliminating tax breaks for the rich.

Tax increases are irrelevant and a lower priority regardless without a gigantic cut to spending.

This.  Like I said before, there is plenty of revenue without raising taxes.  The gov't is spending more than they bring in.  You can raise taxes to the nth fucking degree.  If spending cuts aren't made, it's irrelevant.  This is all happening because people are terrible at math.  If you spend more than you make, then you eventually have nothing.  This is basic stuff folks.

Okay sure I'll grant you that, but I'd like to remind everyone once again that tax rates for every bracket haven't been this low since 1952, so obviously there is what to raise and still maintain rates within reasonable limits.

[Dublagent66]

True, but the tax base has grown much bigger since then.  So, the impact is a lot greater now than it would've been back then when you have 9% unemployment.  We don't need more taxes.  We need more tax payers.  The gov't needs to make cuts and also allow for private businesses to create jobs.  Getting unemployment down to 4 or 5% would do wonders compared to raising taxes.

[Super Dude]

What good are more tax payers if we keep on lowering the rates?  It means the same amount of revenue spread across more people.

[ReaPsTA]

What good are more tax payers if we keep on lowering the rates?  It means the same amount of revenue spread across more people.

I find it interesting that the laffer curve basically doesn't exist for anyone with an economic opinion that falls left-of-center.

[Super Dude]

Whatever you may say, the Laffer curve like anything else in economics is a theoretical principle, and lately the global economic system based on theories of "free trade" has been flagging....

Edit: Hmm, this is interesting:

https://blogs.ajc.com/jay-bookman-blog/2010/09/14/the-laffer-curve-debunked-part-one/

https://www.time.com/time/magazine/article/0,9171,1692027,00.html

[Scheavo]

Well, if they raise taxes but don't cut spending, then we're right back where we've always been.  The gov't needs to prove that they can make the necessary cuts first.  The gov't bails out the financial institutions because they failed to regulate.  The banks broke their own rules and gave out loans to a bunch of financially irresponsible losers.  Now, the rest of us have bail everybody out?  I don't think so.  The gov't needs to bite the bullet, not the financially responsible tax payer.

The social welfare programs haven't increased significantly in comparison to our GDP since Bill Clinton was in office and we had a surplus in our budget. If you want to start talking about why we have this debt, from a purely historical stance, it was cutting taxes for the rich, and not funding massive military involvements. If you look at the problem from the ledger book, ya, our social welfare programs are a debt, but their cost is not significant enough alone to cause our country to have a debt problem.

You want more jobs in the market place, but giving companies more money doesn't mean they're going to invest and expand. Some will, but a more proven way to get companies hiring is to give them demand for their products, and you do that by employing out of work people in infrastructure work. This would cause money in the immediate, but it would result in a better economy, and that means more money to pay off the debt.

To me there needs to be another bracket of taxes.  I think its absurd to lump families making 250,000 a year in with single people making millions a year.  I think it's ridiculous that they are considered the same.

I definitely agree with this, but I also have a hard time accepting $250,000+ as middle class... maybe in comparison to the ultra rich, but not in comparison to the massive amount of people who make less than that.

[Super Dude]

Well, if they raise taxes but don't cut spending, then we're right back where we've always been.  The gov't needs to prove that they can make the necessary cuts first.  The gov't bails out the financial institutions because they failed to regulate.  The banks broke their own rules and gave out loans to a bunch of financially irresponsible losers.  Now, the rest of us have bail everybody out?  I don't think so.  The gov't needs to bite the bullet, not the financially responsible tax payer.

The social welfare programs haven't increased significantly in comparison to our GDP since Bill Clinton was in office and we had a surplus in our budget. If you want to start talking about why we have this debt, from a purely historical stance, it was cutting taxes for the rich, and not funding massive military involvements. If you look at the problem from the ledger book, ya, our social welfare programs are a debt, but their cost is not significant enough alone to cause our country to have a debt problem.

You want more jobs in the market place, but giving companies more money doesn't mean they're going to invest and expand. Some will, but a more proven way to get companies hiring is to give them demand for their products, and you do that by employing out of work people in infrastructure work. This would cause money in the immediate, but it would result in a better economy, and that means more money to pay off the debt.

To me there needs to be another bracket of taxes.  I think its absurd to lump families making 250,000 a year in with single people making millions a year.  I think it's ridiculous that they are considered the same.

I definitely agree with this, but I also have a hard time accepting $250,000+ as middle class... maybe in comparison to the ultra rich, but not in comparison to the massive amount of people who make less than that.

Did you mean this as in we don't pay for our military involvements or that it doesn't factor in?  Because I thought $700 billion a year was a lot.

[MasterShakezula]

700 bill a year? 

Is that at all necessary to defend a country?

[Super Dude]

Probably not.  And now for a visual aid:



A statistic I like to quote often is that our military budget per year is bigger than that of the next 43 countries on the list combined.

[MasterShakezula]

How was this even allowed to happen? 

And when did it shift towards this?

[Super Dude]

Something called the Cold War...

Although frankly right now I'm reading this article advocating partial isolationism from 1997, and that budget was closer to $400 billion.

[MasterShakezula]

Something called the Cold War...

Although frankly right now I'm reading this article advocating partial isolationism from 1997, and that budget was closer to $400 billion.

Wow, what paranoia and xenophobia can do to one's wallet.

I've heard that Russia post-USSR has far more nuclear weaponry than they ever did during the Cold War.  Which if course is kind of useless to them or anyone, due to mutually assured destruction, but anyways is this true?

Also, in regards to isolationsim, I'd definitely be for the US wiping its influence/current attempts at influence off the rest of the world.  I bet there would be a great deal less distaste towards the nation if its leaders weren't so seemingly deadset on pushing their modern equivalent to imperialism.

[Super Dude]

Something called the Cold War...

Although frankly right now I'm reading this article advocating partial isolationism from 1997, and that budget was closer to $400 billion.

Wow, what paranoia and xenophobia can do to one's wallet.

I've heard that Russia post-USSR has far more nuclear weaponry than they ever did during the Cold War.  Which if course is kind of useless to them or anyone, due to mutually assured destruction, but anyways is this true?

Also, in regards to isolationsim, I'd definitely be for the US wiping its influence/current attempts at influence off the rest of the world.  I bet there would be a great deal less distaste towards the nation if its leaders weren't so seemingly deadset on pushing their modern equivalent to imperialism.

To that first bit I don't know numbers, but it's been 20 years so I'd expect their arsenal has grown same as ours.

As to that second bit, I don't know enough to say but we are not imperialist.  We're hawkish but we're not imperialist; there is no trace of European continental-style realism in our foreign policy agenda at any point in history.  And isolationism won't solve our problems; perhaps we could do to not be as involved in world affairs as we are, but even then I'm not sure.  It's not something that has an easy answer.

What does have an easy answer though is that we could be just as involved in world affairs with a significantly scaled down military budget.  Our military failures since Vietnam have been policy failures, not due to an inadequate military or insufficient funding.

Well, it's also due to our inability to fight unconventional wars, but again that can't be solved by just throwing more money at the military establishment.

[MasterShakezula]

 I see we, and most people agree that the military budget is far too high

However, I would like to know as to why a dramatic reduce of all foreign interaction would have a negative effect on us, and what the negative effect would be.

I, for one, believe that we'd be better off with a self-contained as possible economy, as little reliance on others for resources, and by not meddling with other's affairs/investing our interests in foreign nations, and instead, making the absolute best with the abundent natural resources, people included, that are within our own borders.

[Super Dude]

I see we, and most people agree that the military budget is far too high

However, I would like to know as to why a dramatic reduce of all foreign interaction would have a negative effect on us, and what the negative effect would be.

I, for one, believe that we'd be better off with a self-contained as possible economy, as little reliance on others for resources, and by not meddling with other's affairs/investing our interests in foreign nations, and instead, making the absolute best with the abundent natural resources, people included, that are within our own borders.

Well that one I'll leave up to the economists to tell you why that would end in disaster.  As for the non-economic stuff, every country engages in foreign interaction of some sort.  The countries who are part of the UN and NATO interact on the world stage to bring humanitarian aid, the G8 is a group who discuss the direction of the world economy with the U.S. as one of the integral members (and France and Canada), and if you think there's nil progress on the fight against global warming in this world climate, imagine if the U.S. and other nations opted for isolationism, even partially.

[rumborak]

What good are more tax payers if we keep on lowering the rates?  It means the same amount of revenue spread across more people.

I find it interesting that the laffer curve basically doesn't exist for anyone with an economic opinion that falls left-of-center.

The Laffer curve is based on a thought experiment, one that maps the multi-dimensionality of the taxes (income tax, propert tax, etc. etc.) down to one single number, and the complexity of economic and human thought into yet another number. It's a gimmick, nothing more, and can't ever be used to inform economic choices. Many times a tax increase will even result in an economic increase (just like regulations often do), something the oversimplistic Laffer curve can't explain at all.

But let's even assume a nice slope as assumed by the Laffer curve. Isn't the angle of the slope the single most important thing? That is, if you could raise gov't revenue by 10% with marginal loss in economic activity, wouldn't that be acceptable if you can be assured that you're raising the country out of debt?

rumborak