10 ms·

White House, congressional leaders reach debt deal

45 points by sidwyn 15y ago

redthrowaway 15y ago
He is looking significantly grayer than he did a month ago. It'll be interesting to see what happens in 2013 when the positions are reversed and the Bush tax cuts will expire without agreement in both houses.
- Vivtek 15y ago
  Grayer and really sleep-deprived (I know that look; I see it in mirrors). Positions won't be reversed. Obama really thinks bipartisanship works.
- bluedanieru 15y ago
  Won't it just be the same as last time, i.e. they will be extended? Why should it be any different?
  - redthrowaway 15y ago
    I suspect this sorry affair has hurt Obama's power and credibility within his own party. They would be in a much better position to decide how the US will balance its budget had Obama simply declared the debt ceiling unconstitutional, as Bill Clinton advised him to. Now, they've ceded legitimacy to the Tea Partiers and will have to acknowledge them (and their demands) in future negotiations. To the Democratic senators and congressmen who have been around long enough to know what a bad idea that is, this deal comes off as a betrayal, one made worse by the president's flat refusal to consider the constitutional option. Even if Obama wanted the Senate to capitulate on the Bush tax cuts, he could well face a revolt. The Senate will hold absolute power on that one; they need simply do nothing to see them expire. It was pretty clear that the Tea Party wing of the GOP was willing to see the US default if it meant no increase in revenue and steep cuts to entitlements; I wouldn't be surprised to see Reid et al stick to a "keep the tax breaks for middle income Americans and close loopholes and subsidies for corporations" line, then blame the Republicans for the raise in taxes on the middle class when they don't accept his proposal. After that, it's simply a matter of what a tax break will look like. Democrats have quite clearly stated their willingness to cut taxes for "working Americans" (ugh), so the Republicans would have to argue why they think corporate subsidies and tax breaks for the rich should be enacted when they will further worsen the deficit. If you're Reid et al, that's a much nicer position to argue from than if you accept Obama's near dogmatic insistence on compromise, or, as many Democrats see it, giving everything away.
    - bluedanieru 15y ago
      That requires a great deal more self-awareness than I think the Democratic leadership is capable of. Rather, I think the Republicans will get whatever they want, minus some token concession. There's not a great deal of analysis coming from me on that (that sort of thing has gotten too depressing), just a cynical look at the last 30 years and an expectation of the same for the next 30. That said, it's probably good news. If the Tea Party drives America into irrelevance it will be better for everyone in the long run. A monopole world is a terrible idea.
Synthetase 15y ago
It's depressing that some of America's most important fiscal matters must now be negotiated at the point of a gun. The dearth of start ups focused on the public sector seems somewhat surprising to me. It seems that Silicon Valley should have a role to play in easing Washington's dysfunction that we are not playing.
- chopsueyar 15y ago
  govWorks? http://en.wikipedia.org/wiki/GovWorks http://en.wikipedia.org/wiki/GovWorks http://www.amazon.com/gp/product/B001TH2UC4/ref=as_li_ss_tl?ie=UTF8&tag=littdidd-20&linkCode=as2&camp=217145&creative=399373&creativeASIN=B001TH2UC4 http://www.amazon.com/gp/product/B001TH2UC4/ref=as_li_ss_tl?...
- dave_sullivan 15y ago
  I dunno, blood out of a turnip? Even if there's a need ( and there absolutely is ), the gov has no money. Doesn't sound like a business I'd want to get into.
  - pdebruic 15y ago
    Its not that there's no money. Its that there's no cost effective way for small organizations to negotiate the contract discovery, bidding, and award process
    - dave_sullivan 15y ago
      That's fair, saying there's no money was an exaggeration. Maybe no new money for new companies would have been more accurate, not to mention the issues you mentioned (which were dead on).
- ddw 15y ago
  Code for America is a good project. I know that here in Philadelphia they are trying to make the city government more efficient/productive for citizens.
ebaysucks 15y ago
"One might think that the recent drama over the debt ceiling involved one side wanting to increase or maintain spending with the other side wanting to drastically cut spending, but that is far from the truth. In spite of the rhetoric being thrown around, the real debate is over how much government spending will increase. No plan under serious consideration cuts spending in the way you and I think about it. Instead, the cuts being discussed are illusory and are not cuts from current amounts being spent, but cuts in prospective spending increases. This is akin to a family saving $100,000 in expenses by deciding not to buy a Lamborghini and instead getting a fully loaded Mercedes when really their budget dictates that they need to stick with their perfectly serviceable Honda." Quote from http://www.ronpaul.com/2011-07-31/ron-paul-freeze-the-budget-and-stop-plundering-the-american-people/ http://www.ronpaul.com/2011-07-31/ron-paul-freeze-the-budget...
- ddw 15y ago
  Please, no more family analogies. This metaphorical family can't increase their income by taxing better off families and most families don't have such a debilitating, unnecessary monthly payment like numerous wars to pay off.
  - webXL 15y ago
    True, but there are real families that incease their income by robbing better off families, and there are many families who use all sorts of justifications to avoid paying for things, including all of their taxes, so they can afford other things. Just because a family can't pass a law to sanction that behavior, doesn't mean the behavior isn't comparable to the government's.
    - ddw 15y ago
      > True, but there are real families that incease their income by robbing better off families If you consider taxation theft, then yes.
      - webXL 15y ago
steins 15y ago
I'm sick of hearing about deficit reduction. We need actual debt reduction instead.
- sliverstorm 15y ago
  You can't get to debt reduction until you get through deficit reduction...
protomyth 15y ago
My problem with this whole incident is the crappy reporting like this statement from the article "Without an increase in the debt limit, the federal government will not be able to pay all its bills next month. President Barack Obama recently indicated he can't guarantee Social Security checks will be mailed out on time." The key word in the first sentence is "all" and the second sentence is not exactly true. The US Gov would not of actually had to default, but would have had to cut spending in other areas. The modern press cannot actually claim to informing the electorate of anything but hyperbole and repeated, unexamined words of politicians.
Jarred 15y ago
"The deal includes no tax increases" This might be a good thing, it could force the government to be creative with their budgeting (and maybe even produce better results)
- jeffreymcmanus 15y ago
  I guess so, to the extent that laying off cops and teachers is "creative"
  - InclinedPlane 15y ago
    Only a tiny fraction of the federal budget goes to cops or teachers.
    - jeffreymcmanus 15y ago
      Education is a significant part of the discretionary budget (the part that can be cut).
      - InclinedPlane 15y ago
        There is no part of the budget that can't be cut except perhaps for interest payments on the debt. If we imagine that it's impossible to cut entitlement spending then we might as well go home right now and declare that the US has had a good run, because the math on that spending does not add up.
        jeffreymcmanus 15y ago
        Debt service (a large and growing part of the budget) can't be cut, period. Existing entitlements can't really be cut, the best you can hope for in a practical sense is giving a different deal to younger people, which doesn't change the budget outlook immediately. You're right that the math does not add up. It doesn't add up because we insist on living in a fantasyland where revenues are off the table.
- 15y ago
drivebyacct2 15y ago
A "compromise" with no tax increases when "Only 34% [of Americans] preferred a debt reduction plan based solely on spending reductions." And what percentage of that 34% is enjoying a higher quality of life than 10 years ago AND makes under $250K a year? I have to wonder. (yes, even knowing the [perceived] political alignment of HN and risk I'm taking with my vital karma.)
- deleted 15y ago
  [deleted]
- sliverstorm 15y ago
  If you're trying to imply that those 34% must be the wealthy, remember that the vast majority of wealth in America is held by something like 1% of the population, not 34%.
  - drivebyacct2 15y ago
    Heh, no, quite the contrary. I'm at a loss as to why the 34% is as high as it is. My point was that I'm sure the 34% is full of people that make significantly less and yet pay a higher tax rate than those they're idealistically defending (meanwhile enjoying unemployment and having their benefits put at risk due to "compromise" tactics and the in-fighting)
mberning 15y ago
You may or may not agree with a progressive tax system, but I wonder how on earth so many people have been convinced that a regressive tax system is good for the country. It's patently absurd that politicians are fighting tooth and nail to preserve tax havens and loopholes that allow the filthy rich to pay a 15-20% income tax whilst the rest of the 'middle class' is paying upwards of 30. I was thinking the other day that people just don't understand how oppresive our current system of taxation is. We had a civil rights movement in the past, it's about time for a 'fiscal rights' movement.
- Cushman 15y ago
  Easy answer: Most people do not have an accurate idea of who has money. http://steadfastfinances.com/blog/2010/10/09/behavioral-economics-real-vs-perceived-wealth-distribution/ http://steadfastfinances.com/blog/2010/10/09/behavioral-econ... What's shocking about that chart is that the difference between what liberals and conservatives think the wealth spread should be is dwarfed several times over by the difference between the average of what they both want and what it actually is. We should be able to come together on bipartisan tax increases for the wealthiest quintile— but people just don't know the facts.
  - ataggart 15y ago
    It's not clear to me why, if someone has a vastly incorrect notion about the actual state of the world, we should put much stock in their opinion of how the world ought to be. The best you could hope for is to infer some directionality. If I think the temperature of a room is 15C, and I say I think it ought to be 10C, but the actual temperature is 25C, then one should probably not infer anything beyond that I want the room cooler.
    - Cushman 15y ago
      How is that relevant to my comment? The point is that Americans are voting against their self interest, not because of values, but because of ignorance.
- Tsagadai 15y ago
tedkimble 15y ago
Can we flag this already? The last place I want to hear commenters praise supply-side economics is HN.
btilly 15y ago
Ironically the size of this deal is only about half of what S&P said that they need to see to avoid a credit downgrade for the USA from AAA to AA. Such a credit downgrade is likely to cause our interest rates to arise. A back of the envelope calculation suggests that the increased interest costs could cost us in the neighborhood of $2 trillion over the next decade. (See https://plus.google.com/u/0/114613808538621741268/posts/b7uwPS2H7g7 https://plus.google.com/u/0/114613808538621741268/posts/b7uw... for a line of reasoning suggesting that it could cost us that much.) So the end result over the next decade is that we cut government by $2 trillion, raise the debt ceiling by $2 trillion, and pay $2 trillion more in interest. Thus leaving our actual deficit about the same, but causing our government to deliver $2 trillion less. I hope the tea party is proud. Unfortunately the general public doesn't understand the numbers well enough to see how stupid this whole exercise was.
- ars 15y ago
  I'm not sure that math is quite so simple. Interest rates for an entity as large as the US government are not decided by ratings. They are decided by supply and demand. Since there are no other AAA rated markets as large, people will have no choice but to buy US debt. That demand will keep interest rates low.
  - jeffreymcmanus 15y ago
    Supply and demand for bonds is heavily influenced by ratings, and investors always have choices. There are plenty of stories out there of large institutional investors who have already reduced their asset allocations on treasury bonds because of this dangerous brinksmanship on the part of the Republicans.
  - btilly 15y ago
    Take another look at the graph. Historically US debt traded at a substantially lower interest rate than other AAA debt. In fact we even hit a negative interest rate. People paid to loan us money! (They were willing to do it because markets were incredibly volatile, and buying treasuries was cheaper than putting large amounts of money in a warehouse, paying for a guard, and risking theft. I'm not joking.) With the USA downgraded to AA and widespread awareness that stupid politics can result in us not paying, it is hard to conceive of a way that our interest rate will not rise. Don't get me wrong. We'll still have a large and liquid debt market. But we won't enjoy the absurdly low interest rates that we have gotten used to.
cletus 15y ago
Let's say you earned $200,000 a year. You live a lifestyle that costs you $350,000 a year and currently owe $1.5 million. The interest payments on that are probably $30,000 a year (15% of your income). Your solution? Borrow more? What bank would lend you money? Multiply those numbers by a million and you have the current situation of the US government. Non-discretionary spending is spiraling out of control. I had this discussion at dinner last week where someone suggested it was crazy not to raise taxes. I disagreed. My argument is basically this: 1. People on low incomes currently pay little, no or even negative tax (factoring in government benefits); 2. Such a system creates a disincentive to work with the marginal rate of tax. If you earn $10,000 and get $2,000 from the government but by $20,000 you are paying $2,000 in tax with no benefits, the marginal rate of tax is actually 40%; 3. The problem isn't the top rates of tax, it's all the exemptions and the complexity of the tax system. So how about instead of populist pleas of taxing the rich we simply make everyone pay their fair share? What about 25 cents in every dollar for every dollar you earn each year above $20,000 (and nothing below)? Congress seems beholden to special interests and pork barrel politics. In the 90s Congress tried to surrender their power to the executive branch by passing the line item veto measure. In previous years they were unable to close military bases and had to establish the Base Realignment and Closure Commission. Will it take a similar commission for Congress to distance themselves from similarly hard decisions? The longer this goes on, the harder it's going to get. What I see happening in the coming years: 1. Retirement age being raised to 70 or even higher; 2. Federal sales tax similar to the consumption tax every other OECD nation has. State sales taxes are too complex. Interstate sales tax exemptions are fighting a losing battle to continue to exist; and 3. The US adopting a more isolationist foreign policy, including a continued decline in the US military that is already well underway (compare the size of the US armed forces today to what they were 20-25 years ago).
- gfaremil 15y ago
  Comparing personal budget with US budget is a gross oversimplification. First, US can (it is already doing via QE) monetarazie all the debt. And one comedian said: US can just start a little bigger war to get us out of the. Also don't forget that 4/5 of all that "government" spending (that is medicare, SS and defense) is actually just tunneling money to other parts of economy (defense contractors) and poor people. Also we have disturbing trend which will, I believe, start making differences: the rich are getting richer and poor are getting poorer. If that trend continues, we will see some Trocky wannabes popping around. What I see happening in the coming years: 1. One more banking crisis: this time it starts from China. They say all depressions have two legs: the second is leg is longer. 2. Thanks for this new banking crisis, we will finally reconstruct the banking sector and make it more efficient. There will be no more 4 banks on each intersection in downtown SF.
ars 15y ago
Just a reminder to people: Do not downvote people based on your or their political beliefs. Downvote worthless comments. Comments that you disagree with are not worthless. If you agree with the comment vote it up, otherwise leave it alone.

45 points by sidwyn 15y ago

He is looking significantly grayer than he did a month ago. It'll be interesting to see what happens in 2013 when the positions are reversed and the Bush tax cuts will expire without agreement in both houses.

Vivtek 15y ago
Grayer and really sleep-deprived (I know that look; I see it in mirrors). Positions won't be reversed. Obama really thinks bipartisanship works.
bluedanieru 15y ago
Won't it just be the same as last time, i.e. they will be extended? Why should it be any different?
- redthrowaway 15y ago
  I suspect this sorry affair has hurt Obama's power and credibility within his own party. They would be in a much better position to decide how the US will balance its budget had Obama simply declared the debt ceiling unconstitutional, as Bill Clinton advised him to. Now, they've ceded legitimacy to the Tea Partiers and will have to acknowledge them (and their demands) in future negotiations. To the Democratic senators and congressmen who have been around long enough to know what a bad idea that is, this deal comes off as a betrayal, one made worse by the president's flat refusal to consider the constitutional option. Even if Obama wanted the Senate to capitulate on the Bush tax cuts, he could well face a revolt. The Senate will hold absolute power on that one; they need simply do nothing to see them expire. It was pretty clear that the Tea Party wing of the GOP was willing to see the US default if it meant no increase in revenue and steep cuts to entitlements; I wouldn't be surprised to see Reid et al stick to a "keep the tax breaks for middle income Americans and close loopholes and subsidies for corporations" line, then blame the Republicans for the raise in taxes on the middle class when they don't accept his proposal. After that, it's simply a matter of what a tax break will look like. Democrats have quite clearly stated their willingness to cut taxes for "working Americans" (ugh), so the Republicans would have to argue why they think corporate subsidies and tax breaks for the rich should be enacted when they will further worsen the deficit. If you're Reid et al, that's a much nicer position to argue from than if you accept Obama's near dogmatic insistence on compromise, or, as many Democrats see it, giving everything away.
  - bluedanieru 15y ago
    That requires a great deal more self-awareness than I think the Democratic leadership is capable of. Rather, I think the Republicans will get whatever they want, minus some token concession. There's not a great deal of analysis coming from me on that (that sort of thing has gotten too depressing), just a cynical look at the last 30 years and an expectation of the same for the next 30. That said, it's probably good news. If the Tea Party drives America into irrelevance it will be better for everyone in the long run. A monopole world is a terrible idea.

Synthetase 15y ago

It's depressing that some of America's most important fiscal matters must now be negotiated at the point of a gun. The dearth of start ups focused on the public sector seems somewhat surprising to me. It seems that Silicon Valley should have a role to play in easing Washington's dysfunction that we are not playing.

chopsueyar 15y ago
govWorks? http://en.wikipedia.org/wiki/GovWorks http://en.wikipedia.org/wiki/GovWorks http://www.amazon.com/gp/product/B001TH2UC4/ref=as_li_ss_tl?ie=UTF8&tag=littdidd-20&linkCode=as2&camp=217145&creative=399373&creativeASIN=B001TH2UC4 http://www.amazon.com/gp/product/B001TH2UC4/ref=as_li_ss_tl?...
dave_sullivan 15y ago
I dunno, blood out of a turnip? Even if there's a need ( and there absolutely is ), the gov has no money. Doesn't sound like a business I'd want to get into.
- pdebruic 15y ago
  Its not that there's no money. Its that there's no cost effective way for small organizations to negotiate the contract discovery, bidding, and award process
  - dave_sullivan 15y ago
    That's fair, saying there's no money was an exaggeration. Maybe no new money for new companies would have been more accurate, not to mention the issues you mentioned (which were dead on).
ddw 15y ago
Code for America is a good project. I know that here in Philadelphia they are trying to make the city government more efficient/productive for citizens.

ebaysucks 15y ago

"One might think that the recent drama over the debt ceiling involved one side wanting to increase or maintain spending with the other side wanting to drastically cut spending, but that is far from the truth. In spite of the rhetoric being thrown around, the real debate is over how much government spending will increase. No plan under serious consideration cuts spending in the way you and I think about it. Instead, the cuts being discussed are illusory and are not cuts from current amounts being spent, but cuts in prospective spending increases. This is akin to a family saving $100,000 in expenses by deciding not to buy a Lamborghini and instead getting a fully loaded Mercedes when really their budget dictates that they need to stick with their perfectly serviceable Honda." Quote from http://www.ronpaul.com/2011-07-31/ron-paul-freeze-the-budget-and-stop-plundering-the-american-people/ http://www.ronpaul.com/2011-07-31/ron-paul-freeze-the-budget...

ddw 15y ago
Please, no more family analogies. This metaphorical family can't increase their income by taxing better off families and most families don't have such a debilitating, unnecessary monthly payment like numerous wars to pay off.
- webXL 15y ago
  True, but there are real families that incease their income by robbing better off families, and there are many families who use all sorts of justifications to avoid paying for things, including all of their taxes, so they can afford other things. Just because a family can't pass a law to sanction that behavior, doesn't mean the behavior isn't comparable to the government's.
  - ddw 15y ago
    > True, but there are real families that incease their income by robbing better off families If you consider taxation theft, then yes.
    - webXL 15y ago

steins 15y ago

I'm sick of hearing about deficit reduction. We need actual debt reduction instead.

sliverstorm 15y ago
You can't get to debt reduction until you get through deficit reduction...

protomyth 15y ago

My problem with this whole incident is the crappy reporting like this statement from the article "Without an increase in the debt limit, the federal government will not be able to pay all its bills next month. President Barack Obama recently indicated he can't guarantee Social Security checks will be mailed out on time." The key word in the first sentence is "all" and the second sentence is not exactly true. The US Gov would not of actually had to default, but would have had to cut spending in other areas. The modern press cannot actually claim to informing the electorate of anything but hyperbole and repeated, unexamined words of politicians.

Jarred 15y ago

"The deal includes no tax increases" This might be a good thing, it could force the government to be creative with their budgeting (and maybe even produce better results)

jeffreymcmanus 15y ago
I guess so, to the extent that laying off cops and teachers is "creative"
- InclinedPlane 15y ago
  Only a tiny fraction of the federal budget goes to cops or teachers.
  - jeffreymcmanus 15y ago
    Education is a significant part of the discretionary budget (the part that can be cut).
    - InclinedPlane 15y ago
      There is no part of the budget that can't be cut except perhaps for interest payments on the debt. If we imagine that it's impossible to cut entitlement spending then we might as well go home right now and declare that the US has had a good run, because the math on that spending does not add up.
      - jeffreymcmanus 15y ago
        Debt service (a large and growing part of the budget) can't be cut, period. Existing entitlements can't really be cut, the best you can hope for in a practical sense is giving a different deal to younger people, which doesn't change the budget outlook immediately. You're right that the math does not add up. It doesn't add up because we insist on living in a fantasyland where revenues are off the table.
15y ago

drivebyacct2 15y ago

A "compromise" with no tax increases when "Only 34% [of Americans] preferred a debt reduction plan based solely on spending reductions." And what percentage of that 34% is enjoying a higher quality of life than 10 years ago AND makes under $250K a year? I have to wonder. (yes, even knowing the [perceived] political alignment of HN and risk I'm taking with my vital karma.)

deleted 15y ago
[deleted]
sliverstorm 15y ago
If you're trying to imply that those 34% must be the wealthy, remember that the vast majority of wealth in America is held by something like 1% of the population, not 34%.
- drivebyacct2 15y ago
  Heh, no, quite the contrary. I'm at a loss as to why the 34% is as high as it is. My point was that I'm sure the 34% is full of people that make significantly less and yet pay a higher tax rate than those they're idealistically defending (meanwhile enjoying unemployment and having their benefits put at risk due to "compromise" tactics and the in-fighting)

mberning 15y ago

You may or may not agree with a progressive tax system, but I wonder how on earth so many people have been convinced that a regressive tax system is good for the country. It's patently absurd that politicians are fighting tooth and nail to preserve tax havens and loopholes that allow the filthy rich to pay a 15-20% income tax whilst the rest of the 'middle class' is paying upwards of 30. I was thinking the other day that people just don't understand how oppresive our current system of taxation is. We had a civil rights movement in the past, it's about time for a 'fiscal rights' movement.

Cushman 15y ago
Easy answer: Most people do not have an accurate idea of who has money. http://steadfastfinances.com/blog/2010/10/09/behavioral-economics-real-vs-perceived-wealth-distribution/ http://steadfastfinances.com/blog/2010/10/09/behavioral-econ... What's shocking about that chart is that the difference between what liberals and conservatives think the wealth spread should be is dwarfed several times over by the difference between the average of what they both want and what it actually is. We should be able to come together on bipartisan tax increases for the wealthiest quintile— but people just don't know the facts.
- ataggart 15y ago
  It's not clear to me why, if someone has a vastly incorrect notion about the actual state of the world, we should put much stock in their opinion of how the world ought to be. The best you could hope for is to infer some directionality. If I think the temperature of a room is 15C, and I say I think it ought to be 10C, but the actual temperature is 25C, then one should probably not infer anything beyond that I want the room cooler.
  - Cushman 15y ago
    How is that relevant to my comment? The point is that Americans are voting against their self interest, not because of values, but because of ignorance.
Tsagadai 15y ago

tedkimble 15y ago

Can we flag this already? The last place I want to hear commenters praise supply-side economics is HN.

btilly 15y ago

Ironically the size of this deal is only about half of what S&P said that they need to see to avoid a credit downgrade for the USA from AAA to AA. Such a credit downgrade is likely to cause our interest rates to arise. A back of the envelope calculation suggests that the increased interest costs could cost us in the neighborhood of $2 trillion over the next decade. (See https://plus.google.com/u/0/114613808538621741268/posts/b7uwPS2H7g7 https://plus.google.com/u/0/114613808538621741268/posts/b7uw... for a line of reasoning suggesting that it could cost us that much.) So the end result over the next decade is that we cut government by $2 trillion, raise the debt ceiling by $2 trillion, and pay $2 trillion more in interest. Thus leaving our actual deficit about the same, but causing our government to deliver $2 trillion less. I hope the tea party is proud. Unfortunately the general public doesn't understand the numbers well enough to see how stupid this whole exercise was.

ars 15y ago
I'm not sure that math is quite so simple. Interest rates for an entity as large as the US government are not decided by ratings. They are decided by supply and demand. Since there are no other AAA rated markets as large, people will have no choice but to buy US debt. That demand will keep interest rates low.
- jeffreymcmanus 15y ago
  Supply and demand for bonds is heavily influenced by ratings, and investors always have choices. There are plenty of stories out there of large institutional investors who have already reduced their asset allocations on treasury bonds because of this dangerous brinksmanship on the part of the Republicans.
- btilly 15y ago
  Take another look at the graph. Historically US debt traded at a substantially lower interest rate than other AAA debt. In fact we even hit a negative interest rate. People paid to loan us money! (They were willing to do it because markets were incredibly volatile, and buying treasuries was cheaper than putting large amounts of money in a warehouse, paying for a guard, and risking theft. I'm not joking.) With the USA downgraded to AA and widespread awareness that stupid politics can result in us not paying, it is hard to conceive of a way that our interest rate will not rise. Don't get me wrong. We'll still have a large and liquid debt market. But we won't enjoy the absurdly low interest rates that we have gotten used to.

cletus 15y ago

Let's say you earned $200,000 a year. You live a lifestyle that costs you $350,000 a year and currently owe $1.5 million. The interest payments on that are probably $30,000 a year (15% of your income). Your solution? Borrow more? What bank would lend you money? Multiply those numbers by a million and you have the current situation of the US government. Non-discretionary spending is spiraling out of control. I had this discussion at dinner last week where someone suggested it was crazy not to raise taxes. I disagreed. My argument is basically this: 1. People on low incomes currently pay little, no or even negative tax (factoring in government benefits); 2. Such a system creates a disincentive to work with the marginal rate of tax. If you earn $10,000 and get $2,000 from the government but by $20,000 you are paying $2,000 in tax with no benefits, the marginal rate of tax is actually 40%; 3. The problem isn't the top rates of tax, it's all the exemptions and the complexity of the tax system. So how about instead of populist pleas of taxing the rich we simply make everyone pay their fair share? What about 25 cents in every dollar for every dollar you earn each year above $20,000 (and nothing below)? Congress seems beholden to special interests and pork barrel politics. In the 90s Congress tried to surrender their power to the executive branch by passing the line item veto measure. In previous years they were unable to close military bases and had to establish the Base Realignment and Closure Commission. Will it take a similar commission for Congress to distance themselves from similarly hard decisions? The longer this goes on, the harder it's going to get. What I see happening in the coming years: 1. Retirement age being raised to 70 or even higher; 2. Federal sales tax similar to the consumption tax every other OECD nation has. State sales taxes are too complex. Interstate sales tax exemptions are fighting a losing battle to continue to exist; and 3. The US adopting a more isolationist foreign policy, including a continued decline in the US military that is already well underway (compare the size of the US armed forces today to what they were 20-25 years ago).

gfaremil 15y ago
Comparing personal budget with US budget is a gross oversimplification. First, US can (it is already doing via QE) monetarazie all the debt. And one comedian said: US can just start a little bigger war to get us out of the. Also don't forget that 4/5 of all that "government" spending (that is medicare, SS and defense) is actually just tunneling money to other parts of economy (defense contractors) and poor people. Also we have disturbing trend which will, I believe, start making differences: the rich are getting richer and poor are getting poorer. If that trend continues, we will see some Trocky wannabes popping around. What I see happening in the coming years: 1. One more banking crisis: this time it starts from China. They say all depressions have two legs: the second is leg is longer. 2. Thanks for this new banking crisis, we will finally reconstruct the banking sector and make it more efficient. There will be no more 4 banks on each intersection in downtown SF.

ars 15y ago

Just a reminder to people: Do not downvote people based on your or their political beliefs. Downvote worthless comments. Comments that you disagree with are not worthless. If you agree with the comment vote it up, otherwise leave it alone.