Senate Fiscal Cliff Doomsday Countdown Thread

What does that even mean, exactly?

 

slash taxes across the board, remove regulation that is burdensome to private sector growth, repeal dodd-frank or at least fix it etc. we can throw all that crap back on once we're booming if we want to. i don't know why we would but it would be better to have all that stuff in a strong economy than a weak one.

 

1. Why would slashing taxes help, when most business do not cite their tax burden as a major impediment to growth right now?

2. Which regulations are "burdensome?" Are you just assuming there are a bunch?

3. What exactly is wrong with Dodd-Frank?

Did you have any specific points or was this just generic libertarian clap-trap we were supposed to ignore?

 

it is generic libertarian clap-trap that you're supposed to ignore.

out of curiosity, what do most businesses cite as a major impediment for growth right now?

 

"House Speaker John Boehner “may need a shutdown just to get it out of their system,” said a top GOP leadership adviser. “We might need to do that for member-management purposes — so they have an endgame and can show their constituents they’re fighting.”



Read more: http://www.politico.com/story/2013/01/behind-the-curtain-house-gop-eyes-default-shutdown-86116.html#ixzz2HvB4yLnk"

These people are actually insane.

 

its almost like our democracy is a terrible sham...

 

how can we default when we have a fiat currency regime? i mean, wouldn't whoever have to order the treasury not to pay the monthly bill?

 

Last I checked, it was lack of consumer demand. Which, in turn, stems from the fact that people don't have jobs. Which is why I (and the President) suggested a Jobs Bill.

Congress would have to make it illegal for the Treasury to keep paying the federal government's bills. By not raising the debt ceiling.

 

the gubmint makes more than enough money via tax revenue to pay the interest on the debt month-to-month. the debt ceiling prevents the gubmint from borrowing, yes? so i don't understand why default is inevitable.

 

Ok, for the "government shutdown" / "debt ceiling" / "sequester" crisis coming our way, how about this for solutions?


Tax Reform
* eliminate tax breaks for companies that ship jobs overseas
* eliminate subsidies to oil companies
* eliminate agricultural subsidies that give an unfair advantage to unhealthy foods
* limit the mortgage interest deduction to one residency
* provide option for a pre-filled-out tax form, to make tax-collecting more efficient and simpler to understand
* create a 1% financial transaction tax

Entitlement Reform
* allow Medicare to negotiate for cheaper drug prices
* allow imported prescription drugs
* prevent drug companies from blocking generic drugs
* medical malpractice reform
* lift the cap for Social Security, so the rich pay more into the system, extending Social Security's life to the 2080's

Spending Cuts
* stop funding the federal "war on drugs"
* speed up the troop withdrawal from Afghanistan
* close military bases in Europe (there's this thing called NATO...)
* find ways the Department of Defense can be trimmed, particularly by reviewing the recipients of additional funding since 9/11, as well as reviewing any relics from the Cold War.... looking at the rough figures, it seems like "Military Construction" could definitely be cut... and with the changing nature of warfare, the Army and Marines could likely see significant cuts... there should also be more oversight over which "special projects" of the Navy and Air Force should be funded... we should also move in coordination with Russia/China to further cut our number of nuclear weapons... the GAO has been unable to conduct a financial audit of the DoD for years due to its financial mismanagement, so a mechanism should be established that ensures automatic spending cuts for the entire DoD each year the GAO is unable to conduct a reliable financial audit
* offset any macro recessionary effects of the permanent spending cuts with one-time investments in infrastructure, such as the NIB and other infrastructure proposals in the AJA (for transportation, schools, and foreclosed homes/businesses)

 

I'm for the solution of the Republican Party isn't allowed to hold the economy hostage to their incessant demands for a decrease in spending and, because they don't understand the consequences of a default, they are willing to do that.

They can debate spending during the budget debate because, you know, that's when Congress authorized the government to pay these bills.

 

Um, are you serious? Paying bondholders isn't technically "default" if one continues to make interest payments on the debt, but the government also has obligations to its citizens.

Failing to pay Medicare/Medicaid providers (read "doctors"), social security checks (ie so senior citiznes can eat, and pay for their medications), and the military (you know, those men and women who defend our country) is default. Period. End of discussion.

If I were S and P, Moody's, and Fitch, I would respond to a breach of the debt celiing with a downgrade of US credit to "junk" status.

That's what we would deserve, and the aftermath-a collapse of the US dollar, stocks, bonds, real estate, and US Treasuries, as well as 25%+ interest rates-would be chaos.

As an aside, the US dollar would no longer be the world's reserve currency; no-one will want to trade in a currency issued by a sovereign who fails to pay its obligations, purely political reasons or no.

Do the Republicans REALLY want that on their back? Truly?

I'm willing to bet "no".

On the flip side, I think a government shutdown over the sequester/budget is a far more politically realistic and less dangerous way to get the ball rolling on spending cuts/tax reform than the borrowing limit. Fail to raise the debt ceiling, American falls.
Shut down the government, they stand a chance of winning the debate.

Think of it this way: you have a financial analyst who manages your money for 10 years. For the first 8 of those 10, he makes you an average of 20% a year, with only minor drawdowns here and there. In the last two years, he loses 30% a year.

Would you stay with him? More importantly, are you going to remember the 8 years he made you money, or the two where he lost more than 60% of your portfoliio?

Default=disaster.

Peace,

V-03

 

Because what you are describing is illegal. The government does not have the authority to pick and choose who does and doesn't get paid on time. If we are a single cent short to a single debtor, we default on the entire debt of the federal government. Period. And even were this not the law, the financial markets would still react in the same way. Because we would still be making a completely arbitrary decision that someone who deserves to get paid by the government won't. Once you do it to one person, other investors have no real assurance you won't do it to them the next day.

We did this just over a year ago. How did you not learn the first time?

 

the first time i was buried and unplugged from nearly everything, so i missed all the drama and the glitz and the glamour. now i am trying to work my way to grasping this. i guess the figure i saw was monthly interest on foreign debt only. maybe? i definitely knew we were screwed down the line from these liabilities, but i see now we're already screwed, default or no!

HOLD ME

 

Paying interest to our bondholders while holding back on everyone else = default.

What you're basically saying is that it's okay to honor bondholders and screw stockholders; technically, you may be correct, but when a company goes bankrupt and both lose out, it gets awful hard to attract investors later on down the line, especially if the stockholders lose it all.

The point of a government issuing debt is that you're not supposed to have that risk. If we throw this assumption to the wind, it will be a very, very long time before we get it back, and China will likely take our place as the new driver of the world economy. That may happen several decades hence regardless, but I for one have no desire to see it happen 2 months from now simply so the Tea Party can make a point.

Be careful what you wish for. An America where the global market for oil is priced in yuan and not dollars is a place that will look very, very different than how it does now, and not in a positive way.

Peace,

V-03

 

no my friend, i wasn't saying that. i looked at a figure and mistook it for a whole when it was only a part. at least i think it was. and at least i think i wasn't saying that. and i am certainly not wishing for it. i mean, c'mon now!

also, HOLD ME.

 

Since people like stupid "household budget" analogies, think of the proposal of the House Republicans (which you apparently "coincidentally" echoed) in this way. You run out of money, and so decide to keep paying your mortgage above everything else. In the interm, your utilities get shut off, your car gets repossessed, and your gardener puts a lien against your home for unpaid bills.

Question: Is your credit score still going to go down, even though your mortgage is on time? Obviously yes.

Picking who not to pay doesn't make default any less real. You still didn't pay everyone you were supposed to.

 

well woggie, perhaps we will get lucky and the house republicans will not let this default take place. their leader has no balls and i do not suspect that he has grown a pair of them in the last month, nor will he have by the time we hit ground zero on this. i suspect he will crumble just as he has in the past and the rest will fall in line and crumble along with him. the request for dem spandin' cuts, having cooled remarkably, will retract back in to his body, never to be seen again.

 

Do you really think he's been leading any of this? Ever? Do you think these are his demands?

That's probably the truly funniest thing you've ever posted.

 

of course i don't! i mean after all, the guy can barely see a foot in front of his face because his eyes are perpetually filled with tears, dribbling down and soaking his tie! how can anyone lead with all that crap going on?

 

So then what does "his" crumbling have to do with anything?

 

i dunno, i just assumed that was how it would work again, since that's how it happened last time. he crumbles, then his housefellows follow. but i guess it could happen the other way around this time. housefellows crumble first, then him. we will see which it is.

 

I think you're misunderstanding the players in this debacle. Boehner, most think, doesn't want a default because he...understands economics. The far-right in his caucus do. They've said it won't be that bad, or it could do the country some good, or it's better than adding more debt (all of which are ludicrous positions that are unfactual). They even want to do it just "to get it out of their system" and "member-management purposes."

The question is whether or not he'll stand up to the idiots who are holding the economy hostage and say "enough" or if he'll let them dictate what goes on.

The easiest way around this is to let the bill come up for a vote and disregard the 'Boehner rule' like he did for the Fiscal Cliff. There are enough sane Republicans to pass it with the Democrats.

 

so it's possible that his ballslessness might actually cause this thing to happen? oh crap, we're screwed...

HOLD ME

 

Except not everything that the government spends money on goes to debtors. Each appropriations bill has a built-in means to solve this issue. They all start with some variation on the following phrase:

Note carefully what I put in red there. Appropriations are always limited by how much money is in the Treasury and not already appropriated. There is no requirement to spend money that isn't in the Treasury, and so that is an automatic limit on how much can be spent.

In conjunction with that, there are primary two ways to add money to the Treasury: collecting taxes and borrowing money. The debt limit sets an upper bound for the latter only. If we cannot borrow more money because we have reached the borrowing limit authorized by Congress, then some of the appropriations cannot be continued until more money comes in. As far as what order to pay them, that's also right there in the appropriations bill. The should be paid in the order in which they were appropriated (as each new appropriations bill specifies it is out of the money "not otherwise appropriated").

Under the Constitution (14th Amendment), the government is prohibited from repudiating its debts, but debt servicing can be fully covered out of current tax revenues. Where the problem comes in is that it cannot fund both the debt servicing and the current level of appropriations. As it is required to pay the former, without an increase in the debt limit the latter must be cut back as allowed for in the law.

The good news? Social Security won't be touched, because it has a dedicated revenue stream (SS taxes), and any shortfall would be paid from the "SS Trust Fund" which consists of Treasury bonds (which count towards the debt limit). That "Trust Fund" has the same priority as other public debt under the 14th Amendment, and so any money paid there would reduce the total debt (allowing more borrowing up to the same amount). The "Medicare Trust Fund" is essentially in the same boat.

What that would boil down to is that if we hit the debt limit, there would be a partial shutdown of the government to a level corresponding to what tax revenues can support.