Harry Reid, who thinks that it would be “foolish” to fulfill his constitutional responsibility and pass a budget (after who knows how many months now), wants to have a show vote to politically embarrass Republican Senators. Well, the House has decided it can do the same thing to the Democrats:
Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, said he had introduced the necessary legislation on Tuesday.”The legislation I filed today will allow the House to reject a clean increase in the debt limit, proving to the American people, the financial markets and the administration that we are serious about tackling our debt and deficit problems,” he said in a statement.
Turnabout is fair play.
Gee, Do really you think the Tea Partiers will be that naive? It will then allow all the consequences of a debt ceiling market meltdown to be linked directly to them. It will be as much an Albatross around the Tea Party candidates necks as the Paul Ryan budget is.
You would think the Tea Party actually wants President Obama to be re-elected. No wonder all the creditable Republican candidates are setting out 2012. They recognize it will be a John Birch/Senator Goldwater repeat…
So, Thomas, perhaps you can explain to us how a failure to increase the debt ceiling will result in a market meltdown? Or perhaps you mean, “I know my
boymessiah Barky is poised to issue a shipload of new junk bonds, if only those mean ol’ RethugliKKKans don’t stop Him”…Gee, the quality of trolls at this site is really falling….
Looks like the new Democratic Congressional Representative from the NY 26th isn’t likely to be voting against raising the debt ceiling.
http://www.huffingtonpost.com/2011/05/24/new-york-election-results_n_866540.html
New York Election Results: Kathy Hochul Projected Winner
As I noted, once the voting public got wise to what the Tea Party really stood for the bubble would start bursting. And a Tea Party vote on not raising the Debt Ceiling that spooks markets will just accelerate their slide downhill as folks see the Tea Party members of Congress as being responsible an interest rates spike on their credit cards, ARM, small business loans, etc. Not to mention the cost of imports like oil.
That is why its no surprise so many of the Republicans are deciding to pass on the 2012 election.
You mean like Senator Kohl Tom?
Please, put down the crack pipe before you burn yourself.
“As I noted, once the voting public got wise to what the Tea Party really stood for…”
Are you seriously trying to use the NY 26th race as an example? The race with the phony “tea party” candidate who is really a Democrat? Designed to siphon off just enough Republican votes to enable the other Democrat to squeeze into office with a plurality of the vote?
Even if such an underhanded and typical Democrat dirty trick works, don’t count on holding that district after 2012.
You troll.
[[[Gee, the quality of trolls at this site is really falling]]]
Hey, the troll notes his own quality is falling. That’s funny. 🙂
What does the Tea Party movement really stand for? Why, those radicals believe that we can’t tax and spend our way to prosperity! They believe that bankrupting our country and spending our children into servitude is a bad idea. How silly is that? They think that politicians should no longer be given a blank check to raise taxes and run up debt in order to buy votes. The BASTARDS!
What’s with Thomas Matula’s obsession about the Tea Party? No matter what the specific topic at hand, his posts always seem to come back to his antipathy toward a loose organization of Americans who are petitioning their government with concerns about runaway government spending, indebtedness, and the prospect of national insolvency. What is Matula’s issue with that?
Define “result in”? If by “result in” you mean “cause”, then that’s impossible, for the same reason why it was impossible to cause a dot-com market meltdown in 2000: when people are speculating without regard to intrinsic value on the theory that “some bigger sucker will pay more for this later”, then the crash is inevitable, it’s just a question of when it gets triggered. And nobody seems to believe that the US can pay back its own debt, just that it’s still safe to hold our bonds for now because you can always cash out when some bigger sucker loans us more money later.
If by “result in” you mean “trigger”, then that’s easy to explain: debt ceiling gets hit, government gets forced to start financing its debt repayments with tax money rather than with more suckers, people start to realize that the supply of suckers is finite, the bubble pops (i.e. interest rates demanded of new treasury debt go up), and we either have to pay up our debt rapidly or start printing money at rates that make QE2 look like a dinghy.
Mr. Cooper, have you ever read Moby Dick?
The Tea Party is the white whale.
(I just had a mental image of Thomas Matula tied to the side off a whale, waving to trolls everywhere, “..c’mon, c’mon…”.)
What is Matula’s issue with that?
“Issue” implies sentience. Judging from its past mindlessness on Sarah Palin and Open Borders, there is little concrete evidence to support that.
I just had a mental image of [[[Thomas Matula]]] tied to the side of a whale, waving to trolls everywhere
Mine was a little different. An early episode of MASH. Frank Burns enters the swamp and Hawkeye reveals a dream he had the previous night. He and his mother are walking along the shore and they come upon a big beached whale, rotting in the sun. Young Hawkeye asks “Mommy, can I touch it?”, and she says “Careful son, the dullness rubs off”.
Brad,
[[[The race with the phony “tea party” candidate who is really a Democrat?]]]
But if the Tea Party is not an organized party, with no central authority to nominate candidates, and is supposed to be bi-partisan as long as candidates which to balance the budget and lower the national debt by cutting spending then what is your basis for claiming he’s a phony?
Evidence please…
Larry J,
[[[Why, those radicals believe that we can’t tax and spend our way to prosperity! They believe that bankrupting our country and spending our children into servitude is a bad idea. ]]]
Sounds good. The problem is that is not what they do once they are elected. Once they get in they focus on the radical right agenda of social issues and returning America to the social values of 100 years ago instead of doing what they said they will. They threaten to shut down the government over giving a few million to planned parenthood and NPR while advocating trillion dollar tax breaks to Wall Street so they may send more jobs overseas. And now they are threatening to raise interest rates for Americans on main street with their debt ceiling rejection vote while their Wall Street buddies plan to make billions shorting the U.S. Dollar.
Sorry, main street has seen through their rhetoric and is on to the Tea Party. Even the robo Republican voters are getting wise.
roystgnr,
[[[and we either have to pay up our debt rapidly or start printing money at rates that make QE2 look like a dinghy.]]]
And who pays? Wall Street? No, they shorted the dollar and treasuries. They are making a bundle off of it.
Its the average American who will pay. Its the average American voter who will see their credit card payments increase drastically, their ARMs rise. The small business who sees their interest rates soar. The average American who trusted their retirement and college savings in government treasuries. The average American will see the price of food and energy soar as the dollar falls in value. They are the ones that will be hurt.
And why? Because a bunch of naive Libertarians believe the U.S. has too much debt?
Really?
The United States only ranks 37th in the world on the ratio of Public Debt to GDP, the only way of comparing different nations. Its below most of the industrial countries of the world and even BELOW the World Average.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html
Germany, which many consider a well run nation financially has nearly 50% more public debt then the U.S.
Such is the fantasy of the Tea Party movement that America is broke when its economy and finances are far stronger then most of the industrial world.
Thomas, your scenario of what will happen when the US actually tries to pay back its creditors without hitting up new creditors sounds pretty apocalyptic. So, given that fact: do you think it’s a good idea to become one of the US’s creditors? And when everyone else realizes it isn’t, where are the new creditors going to come from?
In other words, your scenario is essentially unavoidable, but your plan for fixing it is to try and delay it by making it bigger. This is either unbelievably greedy or stupid, depending on how old you are.
And pets.com isn’t nearly the silliest dot-com stock! I’m sure they’ll do fine!
Repeating, since you missed it the first time: ignoring what things are actually worth because it seems like other people are getting away with ignoring it too is exactly how bubbles blow up.
roystgnr,
I will try to make it simple for you.
Would you consider yourself broke if you have a $90,000 mortage and an income of $100,000 a year, an $20,000 goes to pay expenses?
The danger to the rest of the world investing in U.S. Treasuries is not he U.S. debt or economy, but the crazies in Congress that want to blow things up in the name of ideology or just because they are too naive about economics to understand what they are doing.
lol, WaPo for the lazy:
Nothing in that scattershot agenda that even Spatula mentioned. But Ahab can see the white whale in a glass of water if he must, so…
FYI
Here is a good historical chart of national Debt to GDP
http://en.wikipedia.org/wiki/File:USDebt.png
One not linked to any of the sites naively ranting against the Debt.
Note when the National Debt started taking off…
Let’s see, what happened in the 1980’s and again in the late 1990’s that caused it to rise? Anyone?
Titus,
[[[Tea party activists were miffed; Davis never talked to them or asked for their support.]]]
I see. He didn’t ask the “Tea Party” for permission to run. But then other folks claim that the Tea Party has no centralize leadership to form policy or nominate candidates. SO who was he suppose to ask for permission?
But as a side note, his being in favor of individual rights and against Mexican immigrates sounds like the Tea Party. Exactly where does his platform varies from them?
support != permission
Would you consider yourself broke if you have a $90,000 mortage and an income of $100,000 a year, an $20,000 goes to pay expenses?
You’re making the assumption that the GDP is “your income.”
Using your other numbers, our “income” is $10k.
So, yes. Beyond broke.
Doubling taxes to deal with it is the non-Tea Party plan? Really? Oh, wait. That’s why Reid doesn’t want to present any budget for a second year.
If we aren’t in trouble, then we clearly don’t need to adjust the debt ceiling. Deciding the GDP is “income” is just beyond belief.
Michael Moore is posting here now?
Hell, if those number had the slightest bit of sense, we’d be set.
2011 Budget: Pay $80k towards mortgage, pay expenses.
2012 Budget: Pay off mortgage entirely, pay expenses, put $70,000 towards endowment. Endowment pays a whopping 1%.
2013 & beyond: Expenses + endowment.
It’s a freaking perpetual motion machine.
Al,
So you advocate a 90% tax rate for a year?
OK, if you just want to limit income to taxes on the above, versus ability to pay.
Federal taxes revenues were 2.16 trillion in 2010, that is about 15.4 percent, or 15,000 under the example.
To pay off the 90,000 in the example at treasury rates over 30 years would be about $3,984 a year, or 26.6 percent of income. Good mortgage practice is that your mortgage payment should be 27-30 percent of your annual budget.
Your monthly mortgage payment would be $332 and your monthly income would be $1,250.
So do you still think we are broke?
Perhaps another way to consider the debt ceiling is as a line of revolving credit. As inflation increases you need more working cash. Or you starve your business of capital.
You can’t have it both ways. Either paying back our creditors will “cause a market meltdown”, “interest rate spikes”, and leave tons of ordinary Americans hurt by those nasty Libertarians… or it’s easy, trivial even, just go ahead and lend us some more money because we don’t feel like doing it right this second, but we’re totally good for it eventually, we swear.
But it can’t be both.
I’d pick 25% as the upper limit as to what makes sense for the borrower. The lender’s limits are usually a little higher, both because the government is backing them up, and because they’re the ones that end up with the real property when things go south. (If you’ve made a year or two of payments before they foreclose, they end up way ahead on the deal.)
Regardless, when you’re hovering in that region of debt-to-income you end up with your credit limit increase being denied. And credit limits or line-of-credits you’ve already set up being clipped. “Oh, yes, your card has a $20,000 limit and you have only $50 in charges on it, but we’re still reducing your credit limit to $100 because of your debt-to-income-ratio. Plus we’re reporting to your other creditors that you’re having a cash flow problem.”
Particularly if you’re already admitting “Oh, and I’ll need more increases for each of the next ten years.” I personally wouldn’t be half as concerned if things were stabilized right here – but we aren’t.
And a “90% tax rate” wouldn’t actually begin to gather 90% of GDP. I only brought that up because you were equating GDP and income.
If the money was actually being used as capital, it would at least be nominally sensible. But it isn’t.
roystgnr,
You don’t understand about cash flow and revolving credit do you? The Debt Ceiling is not about paying debtors back, its about having enough operating funds to pay the troops, government workers, etc. When the government is not able to pay its bills, including interest payments, that is when it defaults and you have problems.
Al,
But you are missing the point. If you are current on your bills, never missed a payment and have the option of increasing your income they will increase your limits. And do.
And the U.S. has the best credit in the world, unless the Tea Party ruins it by their lack of macroeconomics 101.
Spending the money you just printed on hookers and blow is not “options for increasing your income.”
If they were managing to follow honest Keynesian macroeconomic policies, we wouldn’t even be having this discussion.
But the President honestly thinks all government spending qualifies. He’s quoted as saying “It’s government spending, so it’s good.” with an expression like “Why are you even questioning me on this?” when someone questioned something like a forestry museum. There have been no follow ups on this.
Keynes vision of “infrastructure” is “Things that have an honest rate of return.” You brought up ‘capital investment’, and that’s mighty similar.
Taking it back to the family metaphor:
The roof, new bathrooms, new kitchens, or a car – all plausibly ‘infrastructure’.
Holding a wedding for 2,000 on the front lawn isn’t. They did manage to paint a single room – just enough to support the claim “Infrastructure!”, but the bulk of the money that’s labeled “infrastructure” was actually spent on raises for the catering staff.
I know my ideas on infrastructure don’t match the left’s. But a trillion dollars of solar cells, solar hot water, wind turbines and desalination plants would still be far better than what we’ve bought.
And the U.S. has the best credit in the world
No. They currently have the top rating, but that’s in jeopardy, not because of the debt ceiling, but because we haven’t shown in recent years that we are willing to repay out debts.
I tried posting yesterday, but had a problem. So I’ll try this again, if we go back to that CIA chart; what Matula is suggesting is that because the US is only 37th worst at debt vs GDP, then we still have room to do more damage. He supports this claim by suggesting that our economy should be adjusted to protect those with excessive credit card debt and ARM mortgage loans. In short, he’s arguing that we should ignore the concerns of those fiscally responsible in order to protect those that are fiscally irresponsible.
UPDATE: The two sides played their game, but did it in the same legislative body.
Round 1) Paul Ryan’s budget plan is rejected 40-57 with 5 Republicans voting with Matula.
Round 2) President Obama’s budget plan is rejected 0-97.
The Democrats don’t seem interested in passing a budget, much less be fiscally responsible.
Thomas, I do indeed understand that we are using exponentially increasing (faster than inflation-adjusted-per-capita – your earlier comment implied that you didn’t know even that basic fact) debt to pay for operating expenses rather than investment. I also understand (and am trying to explain) the implications of that. Try to catch up.
It was nice to be able to pretend that we were just going to carry a huge debt balance without letting it grow out of control. (Nice for the idle rich, at least, who then get subsidized interest rates for investments at the expense of the working rich’s and consumers’ taxes). The trouble with “out of control” is that it’s an unstable process – once it begins (or long after it begins, if you’ve got a dot-com boom and other temporary economic growth hiding it) it feeds upon itself and grows itself. If it can’t be fixed early, it can’t be fixed.
Belarus.
Leland,
[[[[They currently have the top rating, but that’s in jeopardy, not because of the debt ceiling, but because we haven’t shown in recent years that we are willing to repay out debts.]]]
Please provide evidence as to the last time the U.S. default on a loan. Dates and details please?
The only problem with the debt is that you have a bunch of naive Congressional Representatives that want to walk away from the nation’s financial obligations in order to provide an ideology point. Folks whose minds are too small to gasp large numbers and are frighten by them.
Tell me, why do you support Congress walking away from its obligations to pay government employees like the military?
Leland,
[[[Round 1) Paul Ryan’s budget plan is rejected 40-57 with 5 Republicans voting with Matula.]]]
You neglected to mention Hero of the Libertarian Revolution, Rand Paul was among those rejecting it 🙂
roystgnr,
If you recall there was that little financial problem in 2008 that the Bush Administration passed TARP to deal with, while the Federal Reserve under President Bush started pumping money into the system. We are just start to recover from it.
Also if you look at the charts you will see that the surges in increases in the national debt occurred during periods of major tax cuts starting with President Reagan. Anyone not blinded by ideology would therefore quickly see the solution just as a financial advisor would see the problem if you started working less hours while still having a mortgage, car loans and student loans to pay off.
Tell me, why do you support Congress walking away from its obligations to pay government employees like the military?
That’s a completely dishonest argument, Thomas. You should know that it is dishonest. The very last thing that a country does as an independent nation is to fail to pay (or at least feed) its military. Cutting funding for NPR and NASA is not the same as cutting funding for the Army, and you know it.
What’s wrong with going back to government spending levels as they were in the benighted ages of 2005? or how about 1972 spending levels? Sure, the federal government would then only be able to do the things actually laid out in the Constitution such as national defense, and they’d have to let the free market handle things like education and health care.
Imagine that, a free market in the US and a government that stuck to the Constitution from which it draws legitimacy.
There also happen to be revenue increases. That’s “Your income” going up. The reason there are increasing deficits and debt is that spending goes up more.
If I get a second job, but buy two new houses…. Wait, no. That would be a capital item we could actually sell. So, if I get a second job and yet make bold promises about future entitlement payments that involve bad assumptions… I’ve got more money coming in, but a lot more going out.
They’re all defined benefits plans instead of defined contributions plans.
Along with what Ed put up, this too is dishonest:
Please provide evidence as to the last time the U.S. default on a loan.
My statement: we haven’t shown in recent years that we are willing to repay out debts.
Does not mean we defaulted. However, we just helped GM and Chrysler stiff their debtors for the purposes of making a windfall for UAW, and supposedly to also make money for US taxpayers on the backs of those “greedy investors that drove those companies to near bankruptcy” (actually, the companies still went bankrupt, but Democrats keep the pretense that the bailout was/did prevent it). If you don’t think that sent a message to investors, then you haven’t noticed things like this or this.
Leland,
So how do you define “not paying its debts” if the U.S. has always done so?
What the U.S. government did for GM is no different then anyone else who buys a bankrupt property. Its the management of GM that cost their investors their assets, not the U.S. government.
Ed,
You do realize that when the Congress fails to raise the debt ceiling the government runs out of money, which means no paychecks for government employees including the military. So a vote against raising the pay ceiling is by default a vote to not pay the government’s obligations including those to the military and social security. That is how the real world works versus the fantasy one of the Tea Party.
Al,
If you have the income for two houses its fine. But if you buy two houses but choose to reduce your income by choice (i.e. excessive tax cuts) well, there you have the problem. And not raising the debt ceiling when there is money to pay for it is the same as solving it by walking away from your financial obligations.
Thomas, you really haven’t ever looked at the actual revenue data, have you?
And you mentioned a macroecon class? Really? I mean, even the pure Keynes folks are on board with the idea that taxes are a brake on the economy: They shrink the pie. It wasn’t those whacky TEA party whackadoos that prevented Obama from raising taxes along with the stimulus – he had a virtual supermajority.
Spending went up – and set the level for current spending as well – and yet tax cuts are the problem, when we haven’t had any new ones since what, 2005? 2004?
The “controversial” part is the idea that sometimes a tax cut makes the pie bigger, so a smaller percentage of the larger pie actually ends up being more money.
You keep pounding the deficit and debt increases – and I’ll grant that they happened. But please actually look at the revenue data, not the spending data.
The charts studying “Percent of GDP actually collected as revenue over time” are also interesting – and completely counter-intuitive when crossed with the tax tables.
Thomas: I do blame Reagan for much of this (and did in letters to the editor at the time, actually). Your prediction that I wouldn’t, like many of your other contributions to this thread, fails to describe reality.
And yes, GW Bush was worse than Reagan. And although Obama has been worse than GW Bush, I’m not sure that he’s been worse than a 3rd Bush term would have been.
Of course all of the above is oversimplified, since Congresses are (typically, and as a whole) more complicit in budget mistakes than the Presidency is, but even if you look at the legislatures there’s more than enough blame for both parties.
Now, let’s see if you’re “blinded by ideology”: care to recognize a mistake and apologize?
What the U.S. government did for GM is no different then anyone else who buys a bankrupt property.
Can anyone provide evidence that GM was in bankruptcy prior to the US government seizure? Follow this up with evidence of previous bankruptcy in which creditors are the last to receive repayment from sell of bankrupt assets and pensioners are the first.
You do realize that when the Congress fails to raise the debt ceiling the government runs out of money, which means no paychecks for government employees including the military.
Matula thinks that telling a lie often enough makes it true.
Failure to raise debt limit != running out of money.
I don’t have the personal credit problems that Matula seems to have. But if I had a credit card that was maxed out, it doesn’t mean I run out of money. It means I can no longer purchase things with the credit card until I pay off the debt I already owe. Supposedly, I was given that credit because I showed a capability to service it (that means pay for it, for idiots like Matula). If I indeed have that capability, then I should be able to handle my basic obligations (e.g. Food budget, Clothing, Mortgage, Electricity bills, Water/Sewage Bills, Taxes, etc…) and have money left over to pay my debt. However, I probably couldn’t afford to purchase a more expensive health care plan, by a new car with marginal better fuel economy, or visit Ireland to drink a pint of beer.
In Matula’s world, apparently the only money the US government has is borrowed. This is the only rational argument for suggesting failure to establish a higher debt ceiling equates to running out of money. This would be like Matula using his credit card to purchase the basic obligations of food, clothing, housing, taxes, etc. Certainly, that’s not an impossible position for someone to be in. However, who would take financial advice from some fool that put themselves in such a position?