The debt limit needs to be abolished

[HomeStylePie]

(Summaries/important points are in bold. I realize this post is a wall and I'll do my best to make it accessible to people who don't have fifteen minutes to read it. I'd edit it but I wanna post it before my piece of **** Mac crashes again.)

So I'm not sure how closely people here follow US politics; personally I cycle between "barely" and "enough to make me lose faith all over again." In the past few weeks, another issue in Washington has pushed my righteous anger meter into the red, and I'm ready to start chopping some skulls.

That issue, as you may have guessed (well, you should have from the topic title), is the debt ceiling debate. For those of you who don't know, the debt ceiling was created by politicians almost a century ago so they could act like they were responsible about their borrowing. Since World War II we've been forced to raise it almost every year because our existing debt collects interest and we have to continue borrowing to pay that interest or our entire financial system collapses, but more on that later. The 14th amendment to the constitution says that the validity of public debt cannot be questioned, but the very existence of a debt limit does just that.

Personally, I identify as a liberal, but time and time again I find that the Democratic party is either too conservative to represent my beliefs, or too wimpy to defend them. However, this was not an issue of political beliefs or ideology- it was an issue of competence and understanding basic economics. It's been understood for decades now that the debt ceiling is fundamentally meaningless. Republicans spent eight years turning a budget surplus left by Clinton into one of the biggest deficits in history. Now they need to distance themselves from their own irresponsible policies, which they've decided to do by pulling a very dangerous political stunt that pushed us to the brink of collapse and, by slashing the government budget during weak economic times, seriously increased the likelihood of a dreaded "double dip" recession. In this whole debacle, the Democrats ****ied out and, instead of abolishing a policy that is at best meaningless and at worst capable of turning us and our trading partners into third world nations, they compromised and compromised and compromised until the Republicans had won more than they'd asked for at the outset.

Right now and for the foreseeable future, the global economy is largely dependent on the stability and credibility of the US dollar, which is an example of fiat money. Fiat money roughly translates to "faith money," which illustrates the fact that the system only works because we all believe in it. In mathematical terms, the value of a dollar is equal to what the issuing authority says it's worth (1 dollar) multiplied by our faith that said authority can honor that debt (100%). $1 x 100% = $1, the equation balances, and we all go about our happy lives.

Now imagine that the US government stops honoring its debts- government workers go unpaid, entitlement checks stop coming, and worst of all, treasury bond holders (the investors who are owed money by the government) don't get their promised dividends. The credibility of the US treasury is destroyed, and our credit rating plummets. To many people, such as soldiers in Afghanistan and old age pensioners who need their medicare benefits, suddenly the equation looks a lot closer to $1 x 0% = $0. The money you carry in your pocket has become worthless paper.

To summarize the first main point:

The world economy is EXTREMELY dependent on the idea that investing in the US dollar is one of the most secure options available to investors. Failing to honor our debts is not an option because it would invalidate the most fundamental concept in finance and economics and threaten to set us back centuries.

And yet that was the ultimatum that the Republicans handed us. By controlling only one half of one of the three branches of government, they were able to stonewall the entire government into meeting their outrageous demands. The debt ceiling was raised 17 times under Ronald Reagan because everyone understood that it had to be done. What the Republicans have done is the equivalent of a child throwing a temper tantrum and going on a hunger strike until his parents let him eat candy for breakfast, lunch, and dinner, and his parents went along with it because their psycho kid might actually starve himself to death.

Now let's take a look at the Republican party's demands. They said they wanted a balanced budget, which is really ****ing admirable after eight years of supporting possibly the most fiscally irresponsible president in history (for the record, we had a balanced budget before they took over). Balancing a budget involves two things: increasing income and decreasing expenditure.

For those who have never taken Econ 101, the government has two viable options when the economy is facing tough times: cut taxes and/or increase government investment. Either of these measures will put more money in the pockets of Americans, which will allow them to spend on goods and services, and the economy can continue to function. Doing the opposite of that, ie. raising taxes or decreasing spending, will have the opposite effect, and is only appropriate when the economy is in a period of healthy growth, like it was the last time we balanced the budget under Clinton.

To summarize point 2:

Balancing the budget and stimulating a faltering economy require doing the exact opposite things. Balancing the budget should be the least of our concerns when the economy is weak.

I'm not saying that our budget deficit isn't a problem, but it's a problem we can live with for a little longer if it means we don't have to eat our own shoes, because trust me, our budget problems will get a lot worse if the economy double dips and there's no income to tax. The Republican party has demonstrated that their overly simplistic views preclude any actual understanding of macroeconomic behavior. The so-called "debt crisis of 2011" only happened because the GOP decided that they needed an image change after annihilating Clinton's budget surplus with two wars and unsustainable tax cuts. Something is very clearly broken with the system if these types of people are able to exert such an enormous amount of control over the financial solvency of our economy.

I came up with this analogy to describe what the Republicans in congress basically just did. Imagine that an economy in recession is the equivalent of a man on a tightrope- he just wants to keep his balance and inch his way towards safety. Now suppose someone climbs out next to him and tells him that he now has to solve a complex differential equation with his hands tied behind his back, or that man will cut the rope that is the only thing that prevents him from falling to his death. Even if he's able to solve the equation, he still has to make his way to safety with his hands tied behind his back, which means he still has a much higher chance of falling into a bucket of elephant ****.

Final summary:

The debt ceiling is meaningless and unconstitutional. Republicans used it to try and gain political credibility while slashing funding for programs they dislike, and in the process they threatened to crash the world economy, possibly without even realizing it. Although a global financial crisis was avoided, we now face the possibility of diving further into recession because of the extensive budget cuts.

Makes me proud to be a Flopmerican.

Edit: Also I promise never to make a post this long ever again. I've just been enraged for weeks now about this fabricated crisis.

 

[ballin4life]

Hey Battlecow, what do you think of the S&P downgrading the US credit rating? Officially the US's credit is worth less than the UK, Germany, Johnson & Johnson, ADP, Exxon, Microsoft, France and CANADA.

OP I'll probably type up a response to your post at some later time. FYI we are going to have a big argument about what the government should do in a recession, so maybe we should split that off into a different economics thread or something.

 

[ballin4life]

Personally, I identify as a liberal, but time and time again I find that the Democratic party is either too conservative to represent my beliefs, or too wimpy to defend them. However, this was not an issue of political beliefs or ideology- it was an issue of competence and understanding basic economics. It's been understood for decades now that the debt ceiling is fundamentally meaningless. Republicans spent eight years turning a budget surplus left by Clinton into one of the biggest deficits in history. Now they need to distance themselves from their own irresponsible policies, which they've decided to do by pulling a very dangerous political stunt that pushed us to the brink of collapse and, by slashing the government budget during weak economic times, seriously increased the likelihood of a dreaded "double dip" recession. In this whole debacle, the Democrats ****ied out and, instead of abolishing a policy that is at best meaningless and at worst capable of turning us and our trading partners into third world nations, they compromised and compromised and compromised until the Republicans had won more than they'd asked for at the outset.

Basically, I think there is a problem with labels here. Yes, Republicans were ridiculously irresponsible with the budget in 2000-2006. I'm primarily thinking of the Iraq war spending. But most of the Republicans who are criticizing budget problems today are NOT the same people who ran up those deficits.

Also, let's not forget that Democrats controlled Congress from 2006-2010, and the presidency from 2008 on and widened the deficit from a few hundred billion to 1+ trillion. Now, part of that is due to the recession, but definitely not all.

The "stimulus" in particular was a big waste of money. Remember when they said that unemployment wouldn't go above 8% if we pass the stimulus? And now it's been steady at 9% for a while. Anyway, the "double dip" recession has nothing to do with the budget.

Anyway, I'd actually say that there were very few REAL cuts to the budget in the final deal. Remember how the Republicans claimed that they wanted $1 in cuts for every $1 the debt ceiling increases? How does that make sense when the $2 trillion debt ceiling increase is for 2 years, while the supposed $2 trillion in cuts are over 10? Almost none of the cuts are over the next 2 years. And future Congresses won't necessarily even have to listen to the budget made by this Congress.

There's also the issue of phony accounting - the $2 trillion number is relative to baseline estimates. That means that we AREN'T cutting government spending AT ALL, we are merely slowing the rate of increase. And that's assuming the baseline is accurate, even though it makes big assumptions, like saying our economy is going to start growing at 3+% again in 2012.

Right now and for the foreseeable future, the global economy is largely dependent on the stability and credibility of the US dollar, which is an example of fiat money. Fiat money roughly translates to "faith money," which illustrates the fact that the system only works because we all believe in it. In mathematical terms, the value of a dollar is equal to what the issuing authority says it's worth (1 dollar) multiplied by our faith that said authority can honor that debt (100%). $1 x 100% = $1, the equation balances, and we all go about our happy lives.

The US dollar doesn't have much stability and credibility when the debt is at 100% of GDP and the Fed has been inflating the currency. Decoupling will happen some day if we continue on this path.

Now imagine that the US government stops honoring its debts- government workers go unpaid, entitlement checks stop coming, and worst of all, treasury bond holders (the investors who are owed money by the government) don't get their promised dividends. The credibility of the US treasury is destroyed, and our credit rating plummets. To many people, such as soldiers in Afghanistan and old age pensioners who need their medicare benefits, suddenly the equation looks a lot closer to $1 x 0% = $0. The money you carry in your pocket has become worthless paper.

The money is going to wind up like that IF we stay on this path of massive spending and deficits.

To summarize the first main point:

The world economy is EXTREMELY dependent on the idea that investing in the US dollar is one of the most secure options available to investors. Failing to honor our debts is not an option because it would invalidate the most fundamental concept in finance and economics and threaten to set us back centuries.

Uh, we are going to fail to honor our debts unless we stop borrowing. That's the point.

The politicians did try to scare everyone with the possibility of default, even though the government would have had money to pay the debts if they prioritized debt payments over other spending.

And yet that was the ultimatum that the Republicans handed us. By controlling only one half of one of the three branches of government, they were able to stonewall the entire government into meeting their outrageous demands. The debt ceiling was raised 17 times under Ronald Reagan because everyone understood that it had to be done. What the Republicans have done is the equivalent of a child throwing a temper tantrum and going on a hunger strike until his parents let him eat candy for breakfast, lunch, and dinner, and his parents went along with it because their psycho kid might actually starve himself to death.

If you look at this from the other side you could say the same thing. The Democrats stonewalled the Republican's Cut Cap and Balance plan by demanding tax increases.

Now let's take a look at the Republican party's demands. They said they wanted a balanced budget, which is really ****ing admirable after eight years of supporting possibly the most fiscally irresponsible president in history (for the record, we had a balanced budget before they took over). Balancing a budget involves two things: increasing income and decreasing expenditure.

The most fiscally irresponsible besides Obama. Also, again, not necessarily the same Republicans.

You can balance a budget by increasing income or decreasing expenditures. In the case of the government, we see that there are MASSIVE expenditures. Maybe we should focus on those, and not on TAKING more money from the people.

For those who have never taken Econ 101, the government has two viable options when the economy is facing tough times: cut taxes and/or increase government investment. Either of these measures will put more money in the pockets of Americans, which will allow them to spend on goods and services, and the economy can continue to function. Doing the opposite of that, ie. raising taxes or decreasing spending, will have the opposite effect, and is only appropriate when the economy is in a period of healthy growth, like it was the last time we balanced the budget under Clinton.

Spending is not what grows the economy. Saving and investment is. And the government does not invest efficiently. Increasing government spending is merely a way to temporarily raise reported GDP numbers at the expense of long term economic growth.

To summarize point 2:

Balancing the budget and stimulating a faltering economy require doing the exact opposite things. Balancing the budget should be the least of our concerns when the economy is weak.

But it should be the most of our concerns when our budget problem is spiraling out of control.

Also, wasn't everyone saying that the recession is over? At least, it should be after all that "stimulus", right?

I'm not saying that our budget deficit isn't a problem, but it's a problem we can live with for a little longer if it means we don't have to eat our own shoes, because trust me, our budget problems will get a lot worse if the economy double dips and there's no income to tax. The Republican party has demonstrated that their overly simplistic views preclude any actual understanding of macroeconomic behavior. The so-called "debt crisis of 2011" only happened because the GOP decided that they needed an image change after annihilating Clinton's budget surplus with two wars and unsustainable tax cuts. Something is very clearly broken with the system if these types of people are able to exert such an enormous amount of control over the financial solvency of our economy.

Our budget problems will get a lot worse IF we continue to spend at this rate. If we actually cut government spending (not just slow the rate of increase), then we won't have budget problems. Also, cutting government and deregulating the economy would lead to some more long-term economic growth, but good luck getting a politician to do that.

The debt ceiling is meaningless and unconstitutional. Republicans used it to try and gain political credibility while slashing funding for programs they dislike, and in the process they threatened to crash the world economy, possibly without even realizing it. Although a global financial crisis was avoided, we now face the possibility of diving further into recession because of the extensive budget cuts.

How is the debt ceiling unconstitutional? I mean, 95+% of what the government does is unconstitutional, but I don't see how the debt ceiling is.

The world economy won't crash just because the US does. Most of the developed world is more fiscally sound than the US is. There would be short term pain for them as they adjust, but in the long run they would be ok.

Also, the budget cuts are minimal, so I don't see how you can say that they will drive us into recession (even if you believe that Keynesian stuff). It's only like $25 billion in "cuts" (relative to baseline) over the next 2 years. That's basically nothing. Really though, you've just picked a politically convenient scapegoat. The economy was likely to go back into recession no matter what.

 

[HomeStylePie]

You're seriously downplaying the importance of a lot of things, but I honestly don't have the energy right now to hit them one by one. However, you've demonstrated that you don't understand the potential implications of the U.S. defaulting on its debt.

While it's true that what I described was a worst case scenario doesn't mean it was an impossible or even an unlikely scenario. You're painting this debate as if it was one side challenging the rightly questionable views of the other, but actually freezing the debt ceiling for the first time in history would guarantee economic freefall. You do realize that if the US government stops paying nearly half of its bills, we're not only not paying our soldiers their salaries, but also cutting off their supplies, ie. food, armor, vehicles, fuel, etc. in the middle of unstable desert countries on the opposite side of the world?

Although the consequences are simple, the reasons will be complex. There is more debt held in the form of US treasury bonds than any other security in the world. That represents an enormous share of the world's private investors, investment banks, and mutual funds. If they stop getting returns on their investment, the stock market is bound to tank. All of a sudden, banks become insolvent and close up, and what happens to everyone's money now? The federal government insures it and now the national debt is really lookin' nasty, innit?

Your argument seems to be that borrowing as we always have since the inception of our country under republican, democrat, federalist, and whig president is a terrible thing that is guaranteed to ruin us over the next few decades, and that justifies threatening to allow our entire financial system to collapse in a matter of weeks (on the scale of financial crises, that's somewhere between the great depression and the actual biblical apocalypse).

Your burden is to prove that it was a reasonable strategy to threaten not to cooperate with the debt ceiling increase which, let me reiterate, happened seventeen times under Reagan. Teabaggers were acting like fixing the national debt was equivalent to getting out of personal credit card debt. In reality, the government has important obligations and the only way to meet them is to continue selling treasury bonds. This is not a ****ing debate. The right wing has acted like a dad refusing to allow any money to go to feeding his own children unless his wife agrees to let him have sex with prostitutes.

I must be starting to lose enthusiasm for debate, seeing as I have no desire to participate in a separate argument about chapter 1 of a macroeconomics textbook.

 

[Sucumbio]

...This is not a ****ing debate...

I must be starting to lose enthusiasm for debate, seeing as I have no desire to participate in a separate argument about chapter 1 of a macroeconomics textbook.

Just FYI, this is not the best way to go about presenting your argument. We encourage discourse, not absolutes. If you're so convinced your statement is ironclad, then a source or two that concurs will go miles in putting the point to rest. And indeed it may seem obvious to you that the principles of macroeconomics are self evident, but again it is imperative that you elaborate even the most seemingly simplistic ideas for the benefit of all of those who are not so well versed. It is possible as well that what you deem to be common knowledge is in fact not, in which case your statement boils down to ad hominem.

tl:dr; be nice, this is Smashboards, not Hardball with Chris Matthews.

 

[ballin4life]

Just FYI, this is not the best way to go about presenting your argument. We encourage discourse, not absolutes. If you're so convinced your statement is ironclad, then a source or two that concurs will go miles in putting the point to rest. And indeed it may seem obvious to you that the principles of macroeconomics are self evident, but again it is imperative that you elaborate even the most seemingly simplistic ideas for the benefit of all of those who are not so well versed. It is possible as well that what you deem to be common knowledge is in fact not, in which case your statement boils down to ad hominem.

tl:dr; be nice, this is Smashboards, not Hardball with Chris Matthews.

Yup. OP wants to just come in here and rant about the political party he doesn't like. This is the DEBATE hall. Be prepared to defend your statements.

You're seriously downplaying the importance of a lot of things, but I honestly don't have the energy right now to hit them one by one. However, you've demonstrated that you don't understand the potential implications of the U.S. defaulting on its debt.

The US will default on its debt. Especially if we don't get it under control.

While it's true that what I described was a worst case scenario doesn't mean it was an impossible or even an unlikely scenario. You're painting this debate as if it was one side challenging the rightly questionable views of the other, but actually freezing the debt ceiling for the first time in history would guarantee economic freefall. You do realize that if the US government stops paying nearly half of its bills, we're not only not paying our soldiers their salaries, but also cutting off their supplies, ie. food, armor, vehicles, fuel, etc. in the middle of unstable desert countries on the opposite side of the world?

Those troops should be brought home.

Although the consequences are simple, the reasons will be complex. There is more debt held in the form of US treasury bonds than any other security in the world. That represents an enormous share of the world's private investors, investment banks, and mutual funds. If they stop getting returns on their investment, the stock market is bound to tank. All of a sudden, banks become insolvent and close up, and what happens to everyone's money now? The federal government insures it and now the national debt is really lookin' nasty, innit?

As I said, they are going to stop getting returns if the US debt spirals out of control, which it is doing. And the debt ceiling deal did nothing to stop it.

Your argument seems to be that borrowing as we always have since the inception of our country under republican, democrat, federalist, and whig president is a terrible thing that is guaranteed to ruin us over the next few decades, and that justifies threatening to allow our entire financial system to collapse in a matter of weeks (on the scale of financial crises, that's somewhere between the great depression and the actual biblical apocalypse).

The financial system wouldn't have collapsed, because the Treasury was definitely going to prioritize debt payments. Also, what would have happened if the Treasury had defaulted is really just speculation. They used the same fear tactics to justify bailing out all the banks too.

Your burden is to prove that it was a reasonable strategy to threaten not to cooperate with the debt ceiling increase which, let me reiterate, happened seventeen times under Reagan. Teabaggers were acting like fixing the national debt was equivalent to getting out of personal credit card debt. In reality, the government has important obligations and the only way to meet them is to continue selling treasury bonds. This is not a ****ing debate. The right wing has acted like a dad refusing to allow any money to go to feeding his own children unless his wife agrees to let him have sex with prostitutes.

When you look at it from the other side though, it was the DEMOCRATS who refused to cooperate, since they didn't accept the House's Cut, Cap and Balance plan. I'm not making a judgement one way or the other on this particular issue, but you're just being partisan.

I must be starting to lose enthusiasm for debate, seeing as I have no desire to participate in a separate argument about chapter 1 of a macroeconomics textbook.

lol. Chapter 1 of a Keynesian textbook. You know, there are economists who disagree with bailouts and stimulus.

 

[HomeStylePie]

I don't like the democrats either, for reasons I've already explained. My original argument is twofold- the first point was that republicans acted irresponsibly by threatening to force the government into triage mode, where it would have had to stop paying half it's bills last week and economic chaos would have ensued. The second point was that they did it for foolish reasons, ie. to force a budget cut which could harm the economy. This point is not as important as the first one and you expressed intentions of having a separate debate on this matter, which I'm not really interested in doing.

So far I don't think I've really seen an argument that directly addresses either of these points, and I don't want this to get sidetracked. Just an FYI, I have conservative friends that understand public finance and fully acknowledge that the necessity of raising the debt ceiling was not up for debate.

The US will default on its debt. Especially if we don't get it under control.

As I said, they are going to stop getting returns if the US debt spirals out of control, which it is doing.

Most of your response to my first point revolved around this insistence that the US government will default on its debt even if we raise the debt ceiling, which isn't true. There is no "breaking point" where US debt is suddenly "too much" and we won't be able to borrow any more, because we can always borrow money from the federal reserve bank and we can sell treasury bonds to investors. I agree that US debt is spiraling out of control, but balancing the budget is not anywhere near as important to our immediate prosperity as continuing to have a functioning government. You're implying that it's okay to risk immediate financial collapse in order to mitigate the danger of an economic collapse decades or even centuries in the future.

The financial system wouldn't have collapsed, because the Treasury was definitely going to prioritize debt payments.

Okay, so we prioritize the debt payments, what do we stop paying? IMHO, since you're the one suggesting that it wouldn't be such a big deal to cut 40-45% of federal programs overnight, I think you should pick the trillion and a half dollars in government programs that we should stop paying for. Discretionary spending goes out the window, so there's tens of thousands of laid off government employees. What's next, should we stop paying social security, medicare, or should we leave our troops high and dry in Afghanistan and Iraq? Although I agree with you, "they should be brought home" isn't a solution, it's a hand-wave, seeing as how that would cost us a bunch of money and turn our military into another huge group of jobless young men and women.

And yes, I learned from a Keynesian textbook, that's because Keynesian economics is by far the most widely accepted explanation of economic behavior (hint: it wouldn't be the theory taught in every textbook if educated people didn't think it was right). The fact that you're dismissive about it is the same reason I don't bother to cite my sources (CNN Money, CNBC, Ben Bernanke)- because you'd dismiss them as scare tactics from a biased media. I'll put up this, but I honestly don't think it'll convince anyone who doesn't get the full complexity of the US budget issues.

And please stop falling back on this "Cut, Cap and Balance" plan- that was an idea to drastically cut the budget, put forth by the party that isn't in power and the democrats had every right to block it, because that's what's supposed to happen when a majority of elected officials disagree with a policy (you do understand how this whole representative democracy thing works, right). What the republicans just did though, was suggest that the debt ceiling did not need to be increased, which, (I will this repeat again until you address this fact) was not a question when we did it 17 times under President Reagan. If you recall, my whole point was that just because there's nominally a point where we have to stop borrowing doesn't mean that it's a viable option to stop borrowing, so every time we reach the debt ceiling we're forced to raise it, which means it's basically meaningless. All you have to do to prove me wrong here is to explain why it would not be financial suicide if we stopped borrowing. This isn't just fearmongering, what do you actually expect will happen if the biggest spender in history stops paying half its bills?

 

[ballin4life]

I don't like the democrats either, for reasons I've already explained. My original argument is twofold- the first point was that republicans acted irresponsibly by threatening to force the government into triage mode, where it would have had to stop paying half it's bills last week and economic chaos would have ensued. The second point was that they did it for foolish reasons, ie. to force a budget cut which could harm the economy. This point is not as important as the first one and you expressed intentions of having a separate debate on this matter, which I'm not really interested in doing.

The Democrats did the exact same thing by rejecting the Republican bill.

Also it was kinda obvious that the debt ceiling issue would get resolved at the last minute. That's why the markets didn't move at all (although they did move drastically downward in the days after).

So far I don't think I've really seen an argument that directly addresses either of these points, and I don't want this to get sidetracked. Just an FYI, I have conservative friends that understand public finance and fully acknowledge that the necessity of raising the debt ceiling was not up for debate.

It depends what you mean by necessity.

Most of your response to my first point revolved around this insistence that the US government will default on its debt even if we raise the debt ceiling, which isn't true. There is no "breaking point" where US debt is suddenly "too much" and we won't be able to borrow any more, because we can always borrow money from the federal reserve bank and we can sell treasury bonds to investors. I agree that US debt is spiraling out of control, but balancing the budget is not anywhere near as important to our immediate prosperity as continuing to have a functioning government. You're implying that it's okay to risk immediate financial collapse in order to mitigate the danger of an economic collapse decades or even centuries in the future.

There is a breaking point. You can't be fiscally irresponsible forever. China today called for a new global reserve currency, indicating that their faith in the dollar is wavering EVEN THOUGH the debt ceiling bill was passed. A Chinese rating agency had already downgraded the US credit rating from AAA to A.

Also we definitely don't have centuries or even decades before our financial mess becomes a problem. Debt is 100% of GDP right now. If interest rates rise and our interest payments go up we legitimately won't be able to pay the debt. At that point we will inflate the debt away (i.e. the Fed prints money to pay off the debt), which is basically a default. Sure, people will get their dollars back, but the dollars will be worth much less than before.

Inflating away the debt will also cause lots of political and economic problems. This basically happened already in the 70s when the US closed the gold window. That was a default on the US's original promise under Bretton Woods that you would always be able to exchange your dollars for gold.

Okay, so we prioritize the debt payments, what do we stop paying? IMHO, since you're the one suggesting that it wouldn't be such a big deal to cut 40-45% of federal programs overnight, I think you should pick the trillion and a half dollars in government programs that we should stop paying for. Discretionary spending goes out the window, so there's tens of thousands of laid off government employees. What's next, should we stop paying social security, medicare, or should we leave our troops high and dry in Afghanistan and Iraq? Although I agree with you, "they should be brought home" isn't a solution, it's a hand-wave, seeing as how that would cost us a bunch of money and turn our military into another huge group of jobless young men and women.

When did I say it wouldn't be a big deal? It certainly would be.

Although laying off government employees could be a good thing, since then they could go to work in the more productive private sector.

That's especially true for the military, and yes, they should just be brought home. I don't see how that's a handwave. We waste tons of money keeping them overseas.

And yes, I learned from a Keynesian textbook, that's because Keynesian economics is by far the most widely accepted explanation of economic behavior (hint: it wouldn't be the theory taught in every textbook if educated people didn't think it was right). The fact that you're dismissive about it is the same reason I don't bother to cite my sources (CNN Money, CNBC, Ben Bernanke)- because you'd dismiss them as scare tactics from a biased media. I'll put up this, but I honestly don't think it'll convince anyone who doesn't get the full complexity of the US budget issues.

Bernanke isn't very credible if you ask me. He has a lot of vested interest in saying things a certain way. He was also completely missed the financial crisis (he said the economy was great right up until everything went to ****). As for your article, many of the things in there are true - like the fact that previous Republicans were not very fiscally responsible at all. But that doesn't discredit the idea of being fiscally responsible. I do find some of the rhetoric about taxes amusing though. The idea that tax cuts are "spending" is ridiculous. Letting people keep more of their own money is NOT something to be vilified. It's also funny because people NEVER want to pay more taxes themselves - they always want someone else to pick up the burden. You don't hear too many stories about people sending half their paycheck to the government voluntarily because they just want to help the government out.

Also it's not really true that Federal taxes are at a low - the tax revenue/GDP number is largely due to the recession since fewer people are working. The taxes on people that are working are still high. Of course, another factor is the payroll tax freeze, which Obama supports. But the point is that when people talk about high taxes, they aren't talking about tax revenue as a percentage of GDP, they are talking about the impact of taxes on the individual.

On Keyenesian economics - some people think it's right, but other people disagree. I've looked at it and concluded that I don't think the theoretical or empirical support is strong at all. And many economists DO agree with me. Of course, I'd also argue that there is selection bias in the economic profession as well. Many economists become prominent because they work for the government, and the government is naturally going to favor economists who support massive government spending.

It doesn't help either when they make claims like "unemployment won't go above 8%" and then when unemployment is sitting at 9% over two years later their defense is "the stimulus wasn't big enough!"

I also like the fact that your primary argument consists of attempts to disparage my knowledge.

And please stop falling back on this "Cut, Cap and Balance" plan- that was an idea to drastically cut the budget, put forth by the party that isn't in power and the democrats had every right to block it, because that's what's supposed to happen when a majority of elected officials disagree with a policy (you do understand how this whole representative democracy thing works, right). What the republicans just did though, was suggest that the debt ceiling did not need to be increased, which, (I will this repeat again until you address this fact) was not a question when we did it 17 times under President Reagan.

Uh, what do you want me to address here? That was two decades ago - who cares? Yes, the debt ceiling used to be a routine vote.

As for Cut, Cap and Balance, all I'm saying is that you HAVE to acknowledge that Democrats adamantly refused to pass that bill. They would have defaulted on the debt to avoid passing that bill. So how do the Republicans come off worse?

If anything, I think Obama looks kind of bad with his insistence that the debt ceiling increase last until after the next election (seemed like he ONLY wanted this for political reasons to help his reelection attempt).

As for representative democracy, the Republicans were just voting for what their constituents would want. It's also kind of hard to argue that the Democrats have more of a mandate than the Republicans considering the results of the last election ...

If you recall, my whole point was that just because there's nominally a point where we have to stop borrowing doesn't mean that it's a viable option to stop borrowing, so every time we reach the debt ceiling we're forced to raise it, which means it's basically meaningless. All you have to do to prove me wrong here is to explain why it would not be financial suicide if we stopped borrowing. This isn't just fearmongering, what do you actually expect will happen if the biggest spender in history stops paying half its bills?

Or we could actually, you know, LOWER the debt. But that won't ever happen because both parties benefit from increasing government spending. The Republicans love to bring it up when they aren't in power because it's a winning political issue for them.

Anyway, I think the US should cut government spending, although doing it all at once would likely cause significant problems. But our fiscal path is unsustainable. At some point austerity will be forced upon the US, and that will be much worse the country than planning out the cuts.

 

[HomeStylePie]

Alright, I've probably come off here as an angry liberal blowhard, which I kind of am, but I'm trying to get over it. I don't really wanna make a habit out of arguing on the internet. I think it's rather rare someone is convinced to change their views from a debate on an internet message board, and in the end it just ends up being the seeds for future misunderstandings between otherwise nice, normal people.

It's kind of like we're arguing about two different issues here, and I feel as if the amount of effort I'm putting into this isn't worth the small chance that this topic's existence will somehow solve any problems. It's been an interesting conversation, ballin4life, and thanks for the advice, Sucumbio, but I think I'm gonna leave the temp debater group.

 

[Theftz22]

I don't think he understands what debate is or what it's for...