fiscal cliff

[MUfan12]

Well, there's the rub.

Honestly, if everybody put in an extra $100, that would be about 30billion we could use to pay down the debt.

Fine. Lets do it.

But, somehow Washington would frack that up.

30 billion is 0.0018 of the national debt.

The number is too large to tax our way out of. It's the spending.

[Hards Alumni]

30 billion is 0.0018 of the national debt.

The number is too large to tax our way out of. It's the spending.

*Military spending

[🏀]

*Military spending

It's more than military, it's everything.

[akmarq]

Please, Please, Please everyone keep in mind that calculations based on the AMOUNT of debt we need to reduce/eliminate are not a good benchmark.

The number you should be targeting is debt as a percentage of GDP. This is also what policymakers are looking to move. So policies that grow the economy faster than the debt (even if both growth rates are positive) are good policies.

As tempting as it is to do "back of the napkin" accounting calculations to determine how the deficit could be reduced and debt paid down, it ignores the $15.811 trillion dollar elephant in the room. The only way to solve our problem is to stabilize and then *slowly* reduce thd debt/GDP ratio. Any serious contractions in spending or massive expansions in taxation will only recess the economy and make our debt problem worse.

That's not politics. That's economics.

[Hards Alumni]

Please, Please, Please everyone keep in mind that calculations based on the AMOUNT of debt we need to reduce/eliminate are not a good benchmark.

The number you should be targeting is debt as a percentage of GDP. This is also what policymakers are looking to move. So policies that grow the economy faster than the debt (even if both growth rates are positive) are good policies.

As tempting as it is to do "back of the napkin" accounting calculations to determine how the deficit could be reduced and debt paid down, it ignores the $15.811 trillion dollar elephant in the room. The only way to solve our problem is to stabilize and then *slowly* reduce thd debt/GDP ratio. Any serious contractions in spending or massive expansions in taxation will only recess the economy and make our debt problem worse.

That's not politics. That's economics.

+1 well said.

It's more than military, it's everything.

Generally, I'll disagree.  What I hear from a lot of people is that we need to decrease "entitlement" spending.  While that sounds like a great idea, the economical return on investment of some of the programs is significant.  

What needs to happen is for everyone to pay their fair share.  Interpret that as you want, but our effective tax rate is extremely low.

I envision this topic being locked in a few minutes since I'm sure it is sure to degrade.

[🏀]

Please, Please, Please everyone keep in mind that calculations based on the AMOUNT of debt we need to reduce/eliminate are not a good benchmark.

The number you should be targeting is debt as a percentage of GDP. This is also what policymakers are looking to move. So policies that grow the economy faster than the debt (even if both growth rates are positive) are good policies.

As tempting as it is to do "back of the napkin" accounting calculations to determine how the deficit could be reduced and debt paid down, it ignores the $15.811 trillion dollar elephant in the room. The only way to solve our problem is to stabilize and then *slowly* reduce thd debt/GDP ratio. Any serious contractions in spending or massive expansions in taxation will only recess the economy and make our debt problem worse.

That's not politics. That's economics.

+1

Awesome post. Get this man to Washington?

[Lennys Tap]

Well, there's the rub.

Honestly, if everybody put in an extra $100, that would be about 30billion we could use to pay down the debt.

Fine. Lets do it.

But, somehow Washington would frack that up.

Pay down the debt? Are you kidding? If there's one thing we know for sure about Washington it's once they've got your dough they'll spend it. Hell, as long as they can get a majority to raise the debt ceiling every year they don't even need your money - they'll spend the money your kids and grand kids haven't even made yet. Buy today's votes with money stolen from tomorrow's voters - like all Ponzi schemes it works until it collapses.

[Lennys Tap]

Please, Please, Please everyone keep in mind that calculations based on the AMOUNT of debt we need to reduce/eliminate are not a good benchmark.

The number you should be targeting is debt as a percentage of GDP. This is also what policymakers are looking to move. So policies that grow the economy faster than the debt (even if both growth rates are positive) are good policies.

As tempting as it is to do "back of the napkin" accounting calculations to determine how the deficit could be reduced and debt paid down, it ignores the $15.811 trillion dollar elephant in the room. The only way to solve our problem is to stabilize and then *slowly* reduce thd debt/GDP ratio. Any serious contractions in spending or massive expansions in taxation will only recess the economy and make our debt problem worse.

That's not politics. That's economics.

Good post. The "political" calculation is this: when we have periods of stronger than usual growth, politicians project revenues into the future that are unrealistic. So they commit unrealistic amounts of money to government projects - money that's unavailable (without going into debt) when the "boom times" inevitably end.

[Canned Goods n Ammo]

Please, Please, Please everyone keep in mind that calculations based on the AMOUNT of debt we need to reduce/eliminate are not a good benchmark.

The number you should be targeting is debt as a percentage of GDP. This is also what policymakers are looking to move. So policies that grow the economy faster than the debt (even if both growth rates are positive) are good policies.

As tempting as it is to do "back of the napkin" accounting calculations to determine how the deficit could be reduced and debt paid down, it ignores the $15.811 trillion dollar elephant in the room. The only way to solve our problem is to stabilize and then *slowly* reduce thd debt/GDP ratio. Any serious contractions in spending or massive expansions in taxation will only recess the economy and make our debt problem worse.

That's not politics. That's economics.

I am no expert on the national economy, so I'll just assume that you are correct.

My only comment is that every time higher taxes are even mentioned, somebody says "but you'll kill the economy!"

I don't want to kill the economy (nor do I want to pay higher taxes), but at some point we are going to have to make the tough decisions, even if it hurts in the short run.

There are way smarter people than me that can figure out how it all works, but I'm tired of politicians and average citizens plugging their ears every time they hear about a tough economic decision expecting it to just magically go away.

[akmarq]

I am no expert on the national economy, so I'll just assume that you are correct.

My only comment is that every time higher taxes are even mentioned, somebody says "but you'll kill the economy!"

I don't want to kill the economy (nor do I want to pay higher taxes), but at some point we are going to have to make the tough decisions, even if it hurts in the short run.

There are way smarter people than me that can figure out how it all works, but I'm tired of politicians and average citizens plugging their ears every time they hear about a tough economic decision expecting it to just magically go away.

I agree about the taxes 100%. They will certainly have some negative effect on growth, but there is significant empirical evidence showing that tax increases (especially when targeted at higher income groups) have LESS negative impact than spending cuts (especially cuts in programs that transfer wealth to lower income groups).

People can disagree on how much government intervention they want in the market, but to think that cutting programs for the lower income bracket (who spend a larger %age of their income than higher brackets do) isn't going to do some serious economic damage is crazy.

It might seem easy to ask "everyone to pay their fair share" but when you hit a certain point on the income distribution, the person who is consuming 100% of their income is going to make changes in their consumption patterns. If person X has to shell out $50 more/mo. in medical expenses, that $50 is now no longer being spent on food/consumer goods. That means the grocer has $50 less to invest in a new employee. This is how our 2008 recession took hold (after the initial financial crisis).

Higher taxes suck (I don't like them either) but if we're committed to reducing the debt/GDP ratio (I personally don't think we need to right now, but we've pretty much committed to the path at this point) then people need to realize that how we distribute the taxes/spending cuts has a real impact on the economy. Even if asking some %age of the population to pay more isn't "fair," it may well be better for EVERYONE for them to do so. I'd rather have a growing economy and pay more in taxes then have a recessionary economy and pay less in taxes.

[ChicosBailBonds]

Good post. The "political" calculation is this: when we have periods of stronger than usual growth, politicians project revenues into the future that are unrealistic. So they commit unrealistic amounts of money to government projects - money that's unavailable (without going into debt) when the "boom times" inevitably end.

Yup.  Add to that the simple reality that all these yahoos want a "legacy"..they want programs that they authored, buildings they authorized funding for, etc, etc.  It means basically kicking the can again down the road and spending a crapload no one has.  Then, when the piper comes, no one has a clue or any sense of decency on where it all went.  The question now is whether boom times ever come back to the point they had in other parts of our history and at a lengthy tenure?  Or is the new normal now what it is, much like in Europe and elsewhere? 

I know it's worked absolute wonders here in Calif.  /sarc

[madtownwarrior]

Generally want to see LESS spending first then higher taxes, but damn, the AMT patch (which no one is discussing) is really going to screw with a lot of people on 2012 taxes....

at least this has to be fixed... or 30M people may $5K - $6K in additional taxes and the IRS may not be able to accept tax forms until March or later

http://www.politico.com/story/2012/12/ex-irs-chief-no-amt-patch-and-tax-season-will-be-in-chaos-84853.html

[nyg]

Maybe just cut down on the amount of economic aid provided to foreign countries.

In 2012, the U.S. is expected to provide 55 Billion, yes 55 Billion to foreign countries.

Not only would it help the debt, but build new schools, etc.....

[reinko]

Maybe just cut down on the amount of economic aid provided to foreign countries.

In 2012, the U.S. is expected to provide 55 Billion, yes 55 Billion to foreign countries.

Not only would it help the debt, but build new schools, etc.....

Between that and cutting NPR funding we should be in the clear in no time!

[Hards Alumni]

Between that and cutting NPR funding we should be in the clear in no time!

rofl.  nailed it.

As a percentage of GDP, we give jack crap away.

[mu_hilltopper]

Informative page .. http://en.wikipedia.org/wiki/United_States_foreign_aid

[Jay Bee]

There is no hope.

Build a compound for you and yours. That's the only way.

[4everwarriors]

Make enough today to afford Suzy?

[Jay Bee]

Make enough today to afford Suzy?

Decent day, but nothing spectacular. Trying to decide what to do with my largest holding.. DECK. Hate owning any stock at the moment, but had to jump in on it last month at ~$30 with that lovely balance sheet.

Suzy is cheap. Could spend a couple of nights w/her for the price of a crown.

[exercisevanity]

+1 well said.

Generally, I'll disagree.  What I hear from a lot of people is that we need to decrease "entitlement" spending.  While that sounds like a great idea, the economical return on investment of some of the programs is significant.  

What needs to happen is for everyone to pay their fair share.  Interpret that as you want, but our effective tax rate is extremely low.

I envision this topic being locked in a few minutes since I'm sure it is sure to degrade.

The scope and size of military spending is problematic, has been for years. But you are giving way too much credit to the power of entitlement spending to stimulate the economy. That kind of a statement should have some backing.

Here's a graph that helps break down entitlement vs military spending. Feel free to debate whether SS is an entitlement:



I mostly agree with the arguments regarding concurrent stimulus expenditures and GDP growth. Except politicians don't know when to shut the gasket, and the most recent example of significant stimulus spending (American Recovery and Reinvestment Act of 2009) certainly did not assist GDP to the extent it added to the federal debt, which is now $16.34 Trillion:

Current    Debt Held by the Public    Intragovernmental Holdings    Total Public Debt Outstanding
12/27/2012   11,546,343,682,876.98   4,791,899,708,870.10           16,338,243,391,747.08

[MU82]

Between that and cutting NPR funding we should be in the clear in no time!

I know you're kidding, reinko, but this is one of the problems with the entire situation. Every possible "solution" is shrugged at, derided or ignored because it won't do "enough" to solve the problem.

Why make millionaires pay higher taxes? That will only produce a fraction of what we need to actually reduce the national debt long-term.

Why change the way cost-of-living increases to Social Security are calculated? That will only produce a fraction of what we need.

Why reduce corporate welfare by eliminating certain deductions? That will only produce a fraction of what we need.

Why reduce the maximum for home-interest deduction from $1 million to $500k? That will only produce a fraction of what we need.

And so on and so on and so on. Every special interest can argue that causing them "pain" won't really solve anything. Those lobbies are powerful and our elected officials aren't famous for their strong backbones.

[Hards Alumni]

I know you're kidding, reinko, but this is one of the problems with the entire situation. Every possible "solution" is shrugged at, derided or ignored because it won't do "enough" to solve the problem.

Why make millionaires pay higher taxes? That will only produce a fraction of what we need to actually reduce the national debt long-term.

Why change the way cost-of-living increases to Social Security are calculated? That will only produce a fraction of what we need.

Why reduce corporate welfare by eliminating certain deductions? That will only produce a fraction of what we need.

Why reduce the maximum for home-interest deduction from $1 million to $500k? That will only produce a fraction of what we need.

And so on and so on and so on. Every special interest can argue that causing them "pain" won't really solve anything. Those lobbies are powerful and our elected officials aren't famous for their strong backbones.

Term limits
Kick lobbyists out

Would help.  The problem is that everyone seems to want to find ONE way to fix the problem.  The only real solution is to adopt many solutions over a period of time.

[exercisevanity]

I  think this is a great read. It's short, and I have found it to be extremely convincing, regardless of one's political persuasion:

http://www.ocregister.com/opinion/percent-379256-government-spending.html

"You cannot simultaneously enjoy American-sized taxes and European-sized government. One or the other has got to go."

[Tugg Speedman]

You all realize that the fiscal cliff was created by a law signed by Obama (and passed by Boehner's House).  It was part of the deal to stop the government shutdown in August 2011.  

They created this animal called the "super-committee" that was suppose to come up with a long-term budget deal and the fiscal cliff was created to make the idea of no deal so distasteful that the surely make a deal.  They could not deal so we have the cliff.

How did this happen?  It happened when Obama signed the law creating it!

The cliff is a combination of tax increases and spending cuts is projected to slow the economy by 4%.  Since the economy is growing less than 2%, the next recession starts Tuedsay when we go over the cliff.  (FYI- Ben Bernanke invented the phrase fiscal cliff.)

Now let me speak the truth even though you won't like it ... This country is more divided than at anytime since the end of the civil war.  We have very different views on the role of government. No agreement will be reached because that is what the American Public wants.

The 1930s Satirist H.L. Mencken once said the American public gets the government it deserves and it should be served up to them good and hard.  This past election saw the highest percentage of incumbents reelected in American History.

We have this mess because it is what we want.  And we are about to get it good and hard.

[Lennys Tap]

Term limits
Kick lobbyists out

Republicans had term limits in their "Contract with America"- did nothing.

Obama ran on throwing out the lobbyists - did nothing.

Welcome to Politics 101.