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Our downgrades aren't about our ability to pay - it's about our willingness to pay. That has gone out the window. As S&P says, the Republican Party is now so

Our downgrades aren't about our ability to pay - it's about our willingness to pay. That has gone out the window. As S&P says, the Republican Party is now so rabidly anti-tax that their new baseline assumes the indefinite extension of the '01 and '03 Bush tax cuts, meaning that we will run structural deficits forever.

lucisferre 15y ago
Hate to just post a +1, me too, but this, it seems, just isn't be said or recognized enough. The US, with one of the lowest tax burdens in the western world (the lowest?) can easily afford to pay down it's debts but without any support for raising taxes in the slightest, not just amongst republicans but from what it seems are a vocal and loud minority (majority?) of Americans, no one can really act surprised by S&P's decision here.
- jerf 15y ago
  It isn't our current debts that have people concerned. It's the combination of current debts and unsustainable future obligations, which are so large that they in fact can't be paid down by just raising taxes. Barring an adjustment in what they are, they grow to the point that they eventually consume 100% of the economy in something like 40 years in conjunction with interest payments, but of course they become completely unsustainable long before then. There's no solution that doesn't involve cuts, and lots of them. That's not a political statement, at least to me it isn't... it's a math statement. We have obligations in excess of what we could possibly pay down even if we hypothesize a 100% tax that somehow magically draws from a perfectly healthy economy while its happening. The only questions are who gets them, how we do them, and when we do them. Failure to do them at all means we choose the default choice of economic collapse, at which point obligations will still not be paid. There's no solution where we simply honor all of our current "obligations". (And I would point out that I can't emphasize this point enough. If we do nothing, the default answer is still that we default on everything when the economy collapses. If you value Medicare, Social Security, and everything else, truly value it and not just valuing it the way politicians do as a vote-buying mechanism, you ought to be leading the charge to turn them into something managable, because the worst case scenario doesn't come from Evil Repulicans, it comes from economic collapse. The "evil Republicans" are the only ones taking actions that may mean that Social Security still exists for anyone in 2050.) Well, there is, technically, which is that some amazing breakthrough in technology suddenly makes us all a lot wealthier very quickly, which is such a long shot it's hardly worth talking about. (And still not worth planning for; should we become radically wealthier we can work out ways to use it when we have it.)
  - jholman 15y ago
    My apologies if this is just rampant ignorance talking (including ignorance of American future obligations), but it appears to me that "The US has future obligations so large that even a magical 100% tax in a magically healthy economy cannot pay for them" is, as they say, an extraordinary claim requiring extraordinary evidence. Or at least some evidence. And even were that proven (or at least were that to be slightly persuasive), there's still substantial arguing yet to be done, to argue that a refusal to raise taxes at all is an action in _favour_ of coping with debt (indeed, allegedly the only such action).
    - Zumzoa 15y ago
      This article http://www.economist.com/node/21524889 http://www.economist.com/node/21524889 covers some of it. "Health spending will rise by 5.8% each year from 2010 to the end of 2020, according to actuaries at the Centres for Medicare and Medicaid Services (CMS). In 2020 health care will account for one-fifth of America’s economy." The article goes on to point out that surveys suggest that the Federal government will be liable for a huge amount of medical obligations... and all this will occur in the country which has the most expensive healthcare in the world. Something has to break.
      - rayiner 15y ago
        Staggeringly poor article. Projecting out a trend line by effectively assuming sustained exponential growth is completely retarded. It's really the same as the projections predicting that the sustained 1990s bubble would continue and the US debt would be paid off by 2009.
        CamperBob 15y ago
        Considering the demographics involved -- the population as a whole is getting older and health care for old people is expensive as all hell -- it seems the burden of proof is on you to demonstrate why sustained exponential growth in health-care costs will not take place.
- alnayyir 15y ago
  Our tax burdens are not the lowest by any means. My total tax rate partially due to living in California (although it is mostly Federal) is ~40%. There are plenty of countries in Europe that would be happy to tax me less. My buddy in Singapore pays about 8% all told and he's in the same income range. The temptation to become an expat gets stronger as I earn more money. My sin is not being a fat cat living off capital gains. I have to actually earn my income, so I get fucked.
  - Maascamp 15y ago
    Singapore's not quite the oasis you make it out to be. Have a look at how much it will cost you for a car once you get over there.
    - alnayyir 15y ago
      I've been there, thanks for assuming, and I also know how much a car costs. You don't need a car there, it's a petty way to show off. Taxis are absurdly cheap in Singapore. gothere.sg is a great site for getting places too.
    - mahyarm 15y ago
      You really don't need a car in singapore. It's one city, and you can fly everywhere in SE asia for $50-$200 round trip with AirAsia.
    - Tsagadai 15y ago
      You really don't need a car to live in Singapore. Most of the time, driving will take you longer than getting on the metro. Remember that Singapore is an extremely small country and you can easily commute to anywhere on the island with a pushbike (even in the rain, most offices have showers). Renting or buying property is the expensive part of living in Singapore. However, it is quite inexpensive to get a live-in maid/nanny.
      - vacri 15y ago
        That being said, it's also a little unfair to use it as a standard reference point, given that it's a small city-state which also happens to be the best-placed trading port in the world. Singapore is an outlier - when you can take the cream off an inordinate amount of trade pouring past, you don't need as much income tax.
- mahyarm 15y ago
  I wonder where this lowest tax burden comes from. My BC Canada income tax is pretty much identical to my California Income Tax. Does it really mostly come from the mortgage intrest deduction??

lucisferre 15y ago

Hate to just post a +1, me too, but this, it seems, just isn't be said or recognized enough. The US, with one of the lowest tax burdens in the western world (the lowest?) can easily afford to pay down it's debts but without any support for raising taxes in the slightest, not just amongst republicans but from what it seems are a vocal and loud minority (majority?) of Americans, no one can really act surprised by S&P's decision here.

jerf 15y ago
It isn't our current debts that have people concerned. It's the combination of current debts and unsustainable future obligations, which are so large that they in fact can't be paid down by just raising taxes. Barring an adjustment in what they are, they grow to the point that they eventually consume 100% of the economy in something like 40 years in conjunction with interest payments, but of course they become completely unsustainable long before then. There's no solution that doesn't involve cuts, and lots of them. That's not a political statement, at least to me it isn't... it's a math statement. We have obligations in excess of what we could possibly pay down even if we hypothesize a 100% tax that somehow magically draws from a perfectly healthy economy while its happening. The only questions are who gets them, how we do them, and when we do them. Failure to do them at all means we choose the default choice of economic collapse, at which point obligations will still not be paid. There's no solution where we simply honor all of our current "obligations". (And I would point out that I can't emphasize this point enough. If we do nothing, the default answer is still that we default on everything when the economy collapses. If you value Medicare, Social Security, and everything else, truly value it and not just valuing it the way politicians do as a vote-buying mechanism, you ought to be leading the charge to turn them into something managable, because the worst case scenario doesn't come from Evil Repulicans, it comes from economic collapse. The "evil Republicans" are the only ones taking actions that may mean that Social Security still exists for anyone in 2050.) Well, there is, technically, which is that some amazing breakthrough in technology suddenly makes us all a lot wealthier very quickly, which is such a long shot it's hardly worth talking about. (And still not worth planning for; should we become radically wealthier we can work out ways to use it when we have it.)
- jholman 15y ago
  My apologies if this is just rampant ignorance talking (including ignorance of American future obligations), but it appears to me that "The US has future obligations so large that even a magical 100% tax in a magically healthy economy cannot pay for them" is, as they say, an extraordinary claim requiring extraordinary evidence. Or at least some evidence. And even were that proven (or at least were that to be slightly persuasive), there's still substantial arguing yet to be done, to argue that a refusal to raise taxes at all is an action in _favour_ of coping with debt (indeed, allegedly the only such action).
  - Zumzoa 15y ago
    This article http://www.economist.com/node/21524889 http://www.economist.com/node/21524889 covers some of it. "Health spending will rise by 5.8% each year from 2010 to the end of 2020, according to actuaries at the Centres for Medicare and Medicaid Services (CMS). In 2020 health care will account for one-fifth of America’s economy." The article goes on to point out that surveys suggest that the Federal government will be liable for a huge amount of medical obligations... and all this will occur in the country which has the most expensive healthcare in the world. Something has to break.
    - rayiner 15y ago
      Staggeringly poor article. Projecting out a trend line by effectively assuming sustained exponential growth is completely retarded. It's really the same as the projections predicting that the sustained 1990s bubble would continue and the US debt would be paid off by 2009.
      - CamperBob 15y ago
        Considering the demographics involved -- the population as a whole is getting older and health care for old people is expensive as all hell -- it seems the burden of proof is on you to demonstrate why sustained exponential growth in health-care costs will not take place.
alnayyir 15y ago
Our tax burdens are not the lowest by any means. My total tax rate partially due to living in California (although it is mostly Federal) is ~40%. There are plenty of countries in Europe that would be happy to tax me less. My buddy in Singapore pays about 8% all told and he's in the same income range. The temptation to become an expat gets stronger as I earn more money. My sin is not being a fat cat living off capital gains. I have to actually earn my income, so I get fucked.
- Maascamp 15y ago
  Singapore's not quite the oasis you make it out to be. Have a look at how much it will cost you for a car once you get over there.
  - alnayyir 15y ago
    I've been there, thanks for assuming, and I also know how much a car costs. You don't need a car there, it's a petty way to show off. Taxis are absurdly cheap in Singapore. gothere.sg is a great site for getting places too.
  - mahyarm 15y ago
    You really don't need a car in singapore. It's one city, and you can fly everywhere in SE asia for $50-$200 round trip with AirAsia.
  - Tsagadai 15y ago
    You really don't need a car to live in Singapore. Most of the time, driving will take you longer than getting on the metro. Remember that Singapore is an extremely small country and you can easily commute to anywhere on the island with a pushbike (even in the rain, most offices have showers). Renting or buying property is the expensive part of living in Singapore. However, it is quite inexpensive to get a live-in maid/nanny.
    - vacri 15y ago
      That being said, it's also a little unfair to use it as a standard reference point, given that it's a small city-state which also happens to be the best-placed trading port in the world. Singapore is an outlier - when you can take the cream off an inordinate amount of trade pouring past, you don't need as much income tax.
mahyarm 15y ago
I wonder where this lowest tax burden comes from. My BC Canada income tax is pretty much identical to my California Income Tax. Does it really mostly come from the mortgage intrest deduction??