I thought this commentary was pretty interesting and on point. It does seem that the Liberals that fought the Bush tax cuts tooth and nail have capitulated and become their most ardent supporters.
Even if it means that the Federal government's spending will need to be squeezed down to live within the lower revenues. I mean taxing the $400K+ crowd (1%) at higher rates doesn't do much compared to taxing all of us (99%) at higher rates.
The upcoming spending cuts and national debt ceiling discussions are certain to be very lively. Especially as the Democrats wrestle with how to "feed the beast" on a constrained budget.
CNN America Lives in Shadow of George W. Bush
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Maybe there is a Gresham's Law of policy, to the effect that bad policy drives out good policy.
--Hiram
So keeping taxes lower on 99% of the citizens is bad policy in your opinion?
What's bad is to fix tax policy. The economy thrived during the Clinton era, and collapsed during the Bush era. Yet it's Bush era policies we are stuck with, not Clinton era policies. And there doesn't seem to be any good reason or understanding as to why that's the case.
--Hiram
A question I have been asking elsewhere and might as well throw out here because it's close to topic:
Is the debt ceiling statute constitutional? If the president allows America to default on it's debt, would he be violating the constitution?
--Hiram
Since the tax law is not fixed, we really aren't stuck with anything.
The current politicians, Democrats and Republicans simply seem to agree that lower taxes are more important than higher government spending right now.
Well I should say maybe ??? Now that they have set revenues, we will see if they choose to adjust spending to be in line, or if they choose to keep mortgaging our children's future?
Sounds like the jury is hung...
WP Debt Ceiling Constitutionality
CNN Money Constitutionality
Presumably if America defaults on their debt, the markets will be in turmoil also. So there is little to choose from one way or another. And the law is pretty clear; if we borrow the money we are liable for the debt.
--Hiram
Here is the Wall Street Journal on the subject:
"We'll support efforts to cut spending and reform entitlements, but the political result will be far worse if Republicans start this fight only to cave in the end. You can't take a hostage you aren't prepared to shoot. Do the two GOP leaders have a better strategy today than they did in 2011, and do they have the backbench support to execute it?"
Who or what is the hostage the Wall Street Journal is willing to shoot here? The American economy?
Look at this way. If you instruct your banker to not honor checks above a certain amount, what happens when you write such a check, cash it, and the bank honors it? Are you not liable for the check? Do you get to keep the cash?
--Hiram
I think of it more like a company that is operating against its credit limit. They keep paying the bills they are legally obligated to pay and stop/slow paying the ones they can.
In this case the US Gov't could continue to redeem bonds to the investors, medicare and social security trust funds. While laying off a whole bunch of Federal workers and stopping a bunch of Federal projects. Think of it as the sequestor on steroids.
I think of it more like a company that is operating against its credit limit. They keep paying the bills they are legally obligated to pay and stop/slow paying the ones they can.
Do companies get a lot of bills they aren't obligated to pay? Do they make a practice of paying them anyway? If I send a bill to Target, will they pay it?
Sure the federal government can default on it's obligations. But that doesn't relieve them of them. It can't go bankrupt and have it's debts discharged. In the private sector, a company that stops paying it's debts risk involuntary bankruptcy.
--Hiram
Actually business do have a lot of potential expenses that they choose to avoid when times are tight.
That is why they shutter stores and factories, layoff people, reduce production rates, stock less inventory, etc.
I wonder how much of the Federal budget could be chopped in such a manner. Maybe they could get rid of a few departments, a lot of jobs and a few office buildings. Maybe sell off some of that Federal land.
Great timing
Obama Must Engage Congress
"The coming deadlines will be the next flashpoints in our ongoing fight to bring fiscal sanity to Washington. It may be necessary to partially shut down the government in order to secure the long-term fiscal well being of our country, rather than plod along the path of Greece, Italy and Spain. President Obama needs to take note of this reality and put forward a plan to avoid it immediately."
CNN Hard Lines
Actually business do have a lot of potential expenses that they choose to avoid when times are tight.
Why don't they get sued?
It's important to understand about the debt ceiling is that the money has already been spent. The question is whether the federal government is going to make the payments. Of course the federal government does have the choice not to spend the money, but that's a choice they have rejected.
--Hiram
Apparently $1.2 Trillion is "discretionary".
Pie Chart
But the defense budget falls within the discretionary category. And there is no discretion at all to cut expenditures that have already been made.
If Congress wants to reduce the budget, one choice they have is to cut spending. Once choice they do not have is stop payment on expenditures they have already made.
--Hiram
I would happily accept that course of action and have urged it on my representatives in Congress. That is, pass a Continuing Resolution for the federal debt payments, Social Security and Medicare, military operations and current contractual obligations ONLY. Then wait for a budget from Obama that reduces the deficit (somewhere approaching zero, over ten years) and refuse to raise the debt limit until he does. Yes, we might have a partial government shutdown, but whose fault would that be?
J. Ewing
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