Does not raising the debt ceiling = US defaults on its debt?

OK ... so this is a question with the potential for a HUGE political charge. But I ask it with a pure motive, and to show that, I'm not going to opine on the "why" and the political philosophy.

My motive? To gauge what this tiny sample of American society believes.

As discussed in another thread, people who can't or won't answer a simple question will always obfuscate. As this question isn't a "when did you stop beating your wife" type question, it is answerable.

My direct answer: no. The government still has money coming in ... at least, it's still being deducted from my paycheck and I assume it's going to the government. Once they have it, they decide where to spend it.

Since I don't rely directly on any of the gov's services(SS, Medicare/aid, etc.) , I could care less what they do. But, I wish there was one thing they would do, and that is quit wasting money on stupid shit!

Not immediately. There are certain outlays which the government must pay at a certain time or it will be deemed 'in default'. These are the interest payments on the bonds it issues. Other outlays, like Medicare payments to doctors for care already rendered, if not paid 'on time' will not be considered a government 'default', but rather a delay. The federal government not funding a museum, although very worrisome for the museum, would not be considered a 'default'. Laying off or furloughing workers would also not be a 'default'. Basically not allowing the feds to keep spending more money than it is taking in just forces the tough decisions that the democratic leadership would never make if not forced to.

I agree with SOOPOO, but still voted "yes." If the government can't borrow more money then spending at the current rate will exceed tax revenue. However, as SOOPOO said, that doesn't mean it can't pay all its debts. It could still pay most of them. In the short term it could cut non-essential spending. However, eventually, it would not be able to cover in full obligations like Social Security and interest payments. That is why I voted "yes." Had the question been phrased as meeting its obligations on Aug 2, I would have voted "no."

By the way, I think this crisis illustrates that the so-called Social Security trust funds do not exist. Otherwise we could borrow from them for at least a short-term solution.

Quote: Wizard

By the way, I think this crisis illustrates that the so-called Social Security trust funds do not exist. Otherwise we could borrow from them for at least a short-term solution.

If they existed, Obama could not say he wasn't sure SS checks are going out. Of course they would, if there was the money in these funds.

Quote: Wizard

By the way, I think this crisis illustrates that the so-called Social Security trust funds do not exist. Otherwise we could borrow from them for at least a short-term solution.

An excellent truthful SS article HERE
http://www.craigsteiner.us/articles/69

Don't get me started on SS, I'm 61 y/o.

On PAPER, SS looks good, but the US Gov INVESTS that money in US Bonds. What does that mean???

They have already SPENT ALL that money and now owes it back! There are only IOUs in that trust fund as well as 10 or more other trust funds.

problem is, They use one credit card to pay another, that pays another, that pays another etc.!

They think $$$ grows on trees, and in a way it does since it is printed on PAPER!

My wife and I decided two years ago to not ever borrow any more money. (Lowered our debt limit) Guess what? All of our bills get paid every month! Gov't should not be any different. But getting politicians to say "Sorry we can't afford it...." LOL not gonna happen.

Quote: Wizard

By the way, I think this crisis illustrates that the so-called Social Security trust funds do not exist. Otherwise we could borrow from them for at least a short-term solution.

I don't think the crisis will have anything to do with paying immediate debts, the crisis will come in terms of other countries, particularly China, acquiring bonds for their foreign exchange. There will be a shift to other currencies. The exact composition of each countries FOREX is a state secret, but in aggregate some of it is identified.

Currency Composition of Official Foreign Exchange Reserves (COFER)
$5,305,526 World allocated foreign exchange in US$ millions
$3,219,964 US dollars
$1,409,099 Euros
$..218,365 pounds Sterling
$..201,976 Japanese Yen
$.....5,649 Swiss francs
$..250,472 Other currencies

But the government will not pay some debts in order to create an emergency situation. It's like closing the National Parks when a budget agreement can't be reached. How else do you get the middle class to feel some pain from day one, without actually endangering the lives of people.

Quote: SOOPOO

Other outlays, like Medicare payments to doctors for care already rendered, if not paid 'on time' will not be considered a government 'default', but rather a delay.

Aren't delays already factored into the system because of the bulk of claims? If a partial government shutdown further erodes the payment process, the system will simply back up with unpaid claims with others piling on top. Since the government will only eventually reemploy the same number of processors, it will likely be twice as much work that will take 2/3s longer as they are un-incentivized government paid paper pushers.

Well, I don't know, I'm just trying to spread alarm.

Quote: SOOPOO

Not immediately. There are certain outlays which the government must pay at a certain time or it will be deemed 'in default'. These are the interest payments on the bonds it issues. Other outlays, like Medicare payments to doctors for care already rendered, if not paid 'on time' will not be considered a government 'default', but rather a delay. The federal government not funding a museum, although very worrisome for the museum, would not be considered a 'default'. Laying off or furloughing workers would also not be a 'default'. Basically not allowing the feds to keep spending more money than it is taking in just forces the tough decisions that the democratic leadership would never make if not forced to.

Removal "democratic" from this statement and it makes sense... the sort of tough decisions will be tough decision for either stripe of government (though I would suspect the knife to much sharper under a Republican leadership to cut deep into certain areas very easily, but never make a tough decision to raise taxes).

I find the current impasse amusing (it's not my country, I don't live there....) as both sides seem to have a reasonable set of changes to make, but neither will mix in each other's ideas (reducing tax breaks AND cutting spending would appear to me to be the way forward).

No, it does not. Imagine if Capital One (or whoever) shut off your credit card because you were at your limit. You still pay your credit card, car payment, insurance, and mortgage. As cash flow is tight, you call the guy who mows your lawn and say, "Sorry, Bo, I need to cut back, cash flow is tight." You may feel bad since he has been a good contractor, but did you default? NO.

On the debt subject, looks like the left realizes it is losing the argument as the race card has been played. http://www.realclearpolitics.com/video/2011/07/15/dem_congresswoman_blames_debt_ceiling_fight_on_obamas_race.html. I find her speech pathetic and wonder where she was when Obama himself voted against raising the debt limit in 2006? Maybe someone should tell her those who want respect give respect?

Quote: Wizard

By the way, I think this crisis illustrates that the so-called Social Security trust funds do not exist. Otherwise we could borrow from them for at least a short-term solution.

Not totally sure about this, but didn't the "trust fund" go negative cash flow this year or last? IOW, instead of all the FICA deduction money going to pay benefits then the excess contributions Treasury Securites now the FICA deductions do not cover current benefits and the SSA now has to redeem its holdings (special issues payable on demand with no penalties) to meet monthly obligations. I thought I heard this and I thought I heard it happened a few years ahead of forecast.

A question for Wiz--when you did acturial predictions was it mostly the aging of the population or did the economy come into play. And for that matter, how much did you change your predictions for a slowing economy causing more people to take partial benefits early? Just curious.

Default means to stop payments on a debt previously contracted or assumed. usually this means you don't pay the bank for a credit they extended you, be it a loan, mortgage or credit card. If you miss a payment now and then, it's not default so long as you intend to keep paying. Most banks require you to miss several payments in a row before they deem you to ahve defaulted on the debt.

For countries it can be more complex, because while they may own money to banks all too often they owe it to another country. Sometimes to a government, sometimes to a bank or banks which extended credit backed by a governmetn (remember the loan gurantees to Mexico in the mid-90s?), sometimes to a combination of both.

In the US, and to a lesser extent in other countries, the debt is owed to people, institutions or countries who've purchased debt instruments like bonds. I think all the US sovereign debt is in the form of such instruments, not outright laons from banks or other governments. But these isntruments are owned by banks, brokerages, individuals and the governments of other countries. And to complicate matters more, as has been said the US owes some of that money to itself (or rather one aprt of the government owes them to another part)

Default then would be if the US stopped paying what the government owes in such instruments.

BTW raising the debt ceiling means granting the Dept. of the Treasury to issue more bonds and such.

Quote: thecesspit

I would suspect the knife to much sharper under a Republican leadership to cut deep into certain areas very easily, but never make a tough decision to raise taxes

I'd argue that politically, raising taxes is far easier than cutting spending. There is always some billionaire not "paying his fair share", or an evil corporation "exploiting hardworking taxpayers through tax loopholes." The tax raisers are lauded as being courageous.

Spending cuts generate news accounts of the working poor no longer able to heat their apartments, and throwing grandma into the streets. Tax cutters are Scrooges.

Quote: Calder

I'd argue that politically, raising taxes is far easier than cutting spending. There is always some billionaire not "paying his fair share", or an evil corporation "exploiting hardworking taxpayers through tax loopholes." The tax raisers are lauded as being courageous.

Spending cuts generate news accounts of the working poor no longer able to heat their apartments, and throwing grandma into the streets. Tax cutters are Scrooges.

This is sadly so true. Lately the game the left has been playing is saying "Americans want higher taxes, polls show it!" But it is about taxes on someone else and it seems about 40% of this country has gotten very greedy to the point they are happy someone else's taxes go up.

Hmm, if that were the case, wouldn't the removal of the Bush tax breaks be sailing through congress/the Senate?

I think both are hard to do, and it depends on the prevailing wind whether it's tax hikes or spending cuts that political will is there for. I have no idea what the mood of the US public as a whole is for either choice (or both).

Quote: guido111

On PAPER, SS looks good,

It looks like a giant Ponzi scheme, which it is. Have a lot of people pay in to support a small number of people at the top. Squander whats left over. When the people at the top outnumber those paying in, it tips over and there's nothing left because its all been stolen. I remember reading this 30 years ago, so they knew it was happening, while it was happening. Mark Twain said all politicians are crooks, steal as much as they can while in office, and leave the problems for the next guy. And that was 125 years ago, long before SS.

Quote: thecesspit

Hmm, if that were the case, wouldn't the removal of the Bush tax breaks be sailing through congress/the Senate?

I think both are hard to do, and it depends on the prevailing wind whether it's tax hikes or spending cuts that political will is there for. I have no idea what the mood of the US public as a whole is for either choice (or both).

Where have you been? If not for procedural rules (ie: cloture) the Democrats would have erased the Bush Cuts their first month in office. In 1993 they were applauding and cheering right on the floor when they raised taxes. You cannot get a Democrat to talk for five minutes on camera without them saying they want to raise taxes.

And in 2001 look at all the uproar over cutting taxes in the first place--when we had a surplus!

The hidden and unexpected beauty of the Bush Cuts is the way the "expiration" packages them. When one cut expires they all expire. Obama couldn't just let them expire on some people and not on others. And the moment most people's paycheck was smaller he would have gotten blamed.

Quote: AZDuffman

Where have you been? If not for procedural rules (ie: cloture) the Democrats would have erased the Bush Cuts their first month in office. In 1993 they were applauding and cheering right on the floor when they raised taxes. You cannot get a Democrat to talk for five minutes on camera without them saying they want to raise taxes.

Up in Canada. I'm not denying that Democrats want to raise taxes, I'm just saying if it was easy they'd have passed already. It's obviously not easy to raise taxes, due to a variety of reasons.

Quote:

And in 2001 look at all the uproar over cutting taxes in the first place--when we had a surplus!

Yet the tax cuts happened, right? Meaning it's possible to cut taxes (this doesn't surprise me...).

I'm only taking issue with the statement it's easier to raise taxes than cut services. I'm not convinced either are easy if the prevailing will of the parties in power are against them. This isn't meant to be a party political statement, and I'm making no value judgement on whether taxes should be raises, spending cut or the entire eastern seaboard of the US sold to China in return for cancellation of the debt.

Quote:

The hidden and unexpected beauty of the Bush Cuts is the way the "expiration" packages them. When one cut expires they all expire. Obama couldn't just let them expire on some people and not on others. And the moment most people's paycheck was smaller he would have gotten blamed.

Cunning. Very cunning. I don't expect anyone to bite the bullet and let them all expire.

Quote: Wizard

I agree with SOOPOO, but still voted "yes." If the government can't borrow more money then spending at the current rate will exceed tax revenue. However, as SOOPOO said, that doesn't mean it can't pay all its debts. It could still pay most of them. In the short term it could cut non-essential spending. However, eventually, it would not be able to cover in full obligations like Social Security and interest payments. That is why I voted "yes." Had the question been phrased as meeting its obligations on Aug 2, I would have voted "no."

By the way, I think this crisis illustrates that the so-called Social Security trust funds do not exist. Otherwise we could borrow from them for at least a short-term solution.

I'm sure this is an oversight on your part ... spending at the current rate is already exceeding tax revenue, hence the "need" to increase the debt limit. Not increasing the limit would mean that the government can no longer spend at at a rate that exceeds tax revenue without breaking the law. Which means, they have to decide what they will spend the money on.

Anyone else still having withholding, MED, and OESA taken out of their paycheck? If so, who is collecting that money? If it's the government, then the government is still bringing in revenue.

Quote: Wizard

By the way, I think this crisis illustrates that the so-called Social Security trust funds do not exist. Otherwise we could borrow from them for at least a short-term solution.

This is sad because I think the Wizard is a smart person. The Social Security trust fund does indeed exist. It is currently invested in US Treasury Securities. In other words, the United States Government has already borrowed the money from the Social Security Trust Fund and the SSTF is holding the Bonds as an interest bearing investment. Since the Constitution of the United States states that the debts and obligations of the US shall not be questioned, there is absolutely no reason to believe that those bonds will not be repaid. The SSTF can sell those bonds on the open market and get the money it needs to pay its obligations to seniors. The problem is that if the debt ceiling is not raised, then those bonds that will come due will be in default making their value significantly less than in normal situations. So Mr. Wizard, if you were just stating things that way as a shortcut then I apologize for splitting hairs but to say that the "So Called" SSTF doesn't exist is simply untrue. It's currently invested in the safest security the world has ever known.

Quote: s2dbaker

This is sad because I think the Wizard is a smart person. The Social Security trust fund does indeed exist. It is currently invested in US Treasury Securities. In other words, the United States Government has already borrowed the money from the Social Security Trust Fund and the SSTF is holding the Bonds as an interest bearing investment. Since the Constitution of the United States states that the debts and obligations of the US shall not be questioned, there is absolutely no reason to believe that those bonds will not be repaid. The SSTF can sell those bonds on the open market and get the money it needs to pay its obligations to seniors. The problem is that if the debt ceiling is not raised, then those bonds that will come due will be in default making their value significantly less than in normal situations. So Mr. Wizard, if you were just stating things that way as a shortcut then I apologize for splitting hairs but to say that the "So Called" SSTF doesn't exist is simply untrue. It's currently invested in the safest security the world has ever known.

Can you please refer me to documentation to back this up? I believe that the Feds spent the money as soon as it was collected. I would be very interested in reading how this money has been invested.

Quote: timberjim

Can you please refer me to documentation to back this up? I believe that the Feds spent the money as soon as it was collected. I would be very interested in reading how this money has been invested.

Go to town! The SSA site posts all of that information for public consumption:
Social Security Investment Portfolio

I hesitate jump in, given that The Wizard used to work for the SSA.

I thought current collections pay for current obligations. The first of the Baby Boomers are just hitting retirement, and there are not enough current payers to support them going forward. Thus the problem.

thecesspit: I don't contend that raising taxes was easy, just that it's politically easier to than cutting services. There is some resistance to tax increases in the Senate from those senators up for re-election in 2012. Of course, they haven't passed a budget since the last election, either.

Quote: Calder

I thought current collections pay for current obligations. The first of the Baby Boomers are just hitting retirement, and there are not enough current payers to support them going forward. Thus the problem.

Ronald Reagan raised our taxes in anticipation of the shortfall to come. We have been paying too much into the trust fund for thirty years building up the huge surplus that we currently have. This pile of money is going to bleed off as more Boomers start collecting from it. This imbalance will return to normal once the Boomers thin out. The current estimate is that the huge pile of money will be brought to its normal level in about 30 or so years. After that, Social Security will still have enough income to pay off anticipated benefits at over 80% with absolutely no changes whatsoever.

So the whole Social Security kerfuffle is a bunch of nothing? All is well? What a relief!

Quote: Calder

So the whole Social Security kerfuffle is a bunch of nothing? All is well? What a relief!

Pretty much with the notable exception that if the debt ceiling isn't raised, the securities that the Social Security Trust Fund holds will fall in value. The lower the value of the SSTF, the less surplus for the Boomers. So if the debt ceiling isn't raised, it will cost us a lot of money in the long run to cover the completely avoidable shortfall.

Keep in mind that the spending authority was already approved either by this or prior congresses' budgets and singed into law by this or prior Presidents. Not raising the debt ceiling is like vetoing all of the legislation that's already been passed. I don't even know why they bother with a debt ceiling.

Quote: s2dbaker

Ronald Reagan raised our taxes in anticipation of the shortfall to come. We have been paying too much into the trust fund for thirty years building up the huge surplus that we currently have. This pile of money is going to bleed off as more Boomers start collecting from it. This imbalance will return to normal once the Boomers thin out. The current estimate is that the huge pile of money will be brought to its normal level in about 30 or so years. After that, Social Security will still have enough income to pay off anticipated benefits at over 80% with absolutely no changes whatsoever.

I'm not sure what bizarro America you're describing here, but there are several things here that aren't reflective of reality.

First, that Reagan raised taxes. He signed one of the largest tax rate cuts in history. The folks who spin this little tale generally mean that Reagan took steps to see increased revenue to the government. That is true ... and reduced tax rates were one of those steps. To believe that higher tax rates = more tax revenue is a fundamental and critical mistake.

Among the things that Reagan did to increase revenue included removing lots of loopholes and reducing tax breaks. This meant that people's tax burden went up over what it was before the loopholes were removed, but it's not a tax increase. The difference can be viewed as semantic, except that thinking so fails to remember the decrease in tax rates, which resulted in an overall lowering of tax burden. It's like complaining that you have to leave a tip when your meal is comped.

The tax "reforms" in 86 eliminated the "paper loss" that real estate investors were taking, which wasn't real as the loss was due to non-cash expenses (depreciation, etc.). It was followed by an extended period of low real estate values and the RTC, but it was not "realized" gains.

If you call "closing loopholes" = "tax increase," then okay. I would almost agree, as there's nothing illegal or sneaky about "loopholes" anyway ... it's just people who do the work to avoid taxes, which is perfectly legal. If the tax code is tricky in that sense, then I would think you would be in favor of "closing loopholes" as it simplifies things.

As for the social security rate increases, that was actually an increase. And he did introduce taxation of SS benefits to those above a certain income level. So ... you got something there. But asking self-employed people to pay the whole amount rather than the half if they're employed by someone else is not an increase; it's the employer paying the employer's portion.

But your thinking is right-side up on the SS trust, which turned its own purpose upside-down. There's no surplus. There's no pile of money. Any "surplus" in the SS "account" is spent by Congress, leaving only IOUs. This "worked" so long as inflows exceeded outflows, which has been mostly the case. When outflows exceed inflows because of boomers retiring, the SS trust is going to look to collect on the IOUs from over the years, but Congress won't be able to pay them. It doesn't matter when this happens. Congress has grown to "expect" the use of that surplus, so not only will the IOUs not be collect-able, Congress will still be trying to spend inflows even though there's no excess.

Ideally, these accounts should be separate, and that was the thinking behind Gore's infamous "lock box" comedy joke. But they're not. They're commingled. The deficit number you hear encompasses Congress's overspending AFTER using the excess from the SS fund ... see p. 97 of your 2010 1040 instruction book. The number would be even higher (ceteris paribus) if the SS fund were truly kept separate.

Quote: s2dbaker

Pretty much with the notable exception that if the debt ceiling isn't raised, the securities that the Social Security Trust Fund holds will fall in value. The lower the value of the SSTF, the less surplus for the Boomers. So if the debt ceiling isn't raised, it will cost us a lot of money in the long run to cover the completely avoidable shortfall.

Keep in mind that the spending authority was already approved either by this or prior congresses' budgets and singed into law by this or prior Presidents. Not raising the debt ceiling is like vetoing all of the legislation that's already been passed. I don't even know why they bother with a debt ceiling.

Bad laws are still bad, even though they're laws. It was once legal to own humans in this nation. Thank goodness that a later congress overturned laws that a previous congress wrote.

Laws that allow overspending are (generally) bad laws. Thank goodness a later congress is (possibly) working to overturn all those previously-passed bad laws.

No one doubts the authority of the previous congresses. They just doubt their wisdom in writing all those overspending laws.

Quote: ItsCalledSoccer

As for the social security rate increases, that was actually an increase.

Thanks for acknowledging that Ronald Reagan raised the FICA taxes. Since my comment was limited in scope to the Social Security Trust Fund, I didn't think I needed to state everything that Ronald Reagan did to cause the incredibly huge debt burden that we have today but if you want to do that, may I recommend starting another thread.

Quote: Calder

thecesspit: I don't contend that raising taxes was easy, just that it's politically easier to than cutting services. There is some resistance to tax increases in the Senate from those senators up for re-election in 2012. Of course, they haven't passed a budget since the last election, either.

It would -seem- from the news reports that the prevailing mood is to cut services (and hence government spending) over raising taxes. This might be only the impression being served me by Fox, CBC, the BBC and USA Today. I'm willing to be told otherwise.

Some here would contend that a tax rate rise will always result in a reduce tax take.

I am not convinced of that, nor am I convinced of the argument that raising taxes back to the pre-Bush cut level would stymie growth in the US. Nor would a slight raise in the base line lending rate cause the economic world to fall apart. Nor would I disagree with those who which to limit government spending to some extent... it's clear the US can't keep spending at the current rates. What you cut, and how... I'll take a pass, I don't read enough or live enough in the US to know, I'm more interested in the general macro economics right now.

But that's just ideas, I'm not economist, nor do I play one on TV.

To defend the WoO, it's worth taking a jab at folks who have a fantasy about the SSTF. It is certainly true that the SSTF money has not just been turned into cash and stuck in a vault. Then again, when you deposit your money in your local bank in an interest bearing account, the same thing is true. Unless you stick your cash in a safety deposit box, it has been taken and used, just like the SSTF money is taken and used. For banks, it is well known that one thing that must never happen is a Run on the bank; if enough depositors want their money at the same time, it is simply not there. The SSTF money is also "not there" like a lot of folks think, and you can make that sound dire if you like. Hey, Obama is currently threatening to delay SS checks to the old folks , something he would never ever do sure enough!

Well, maybe if he could be absolutely sure the Republicans would be blamed.

I don't think the US would actually default very soon if the debt ceiling is not raised BUT it would cause turmoil. There is enough revenue coming in to pay the debt each month but there isn't enough revenue coming in to pay for all of the things we have said (through budgets, entitlements, etc.) we would pay for each month. We have a spending problem--we spend more than we take in each month. We can either cut spending or raise taxes so that we don't continue increasing our debt but continually raising the debt ceiling has not "fixed" things and raising it this time won't fix anything, either.

Would we default on debt eventually if there is no increase in the debt ceiling, increase in revenue, or decrease in spending? Once we couldn't delay payment dates on other items any further and we continued the overspending, it is possible. We won't default or miss any payments on August 3rd unless a politician makes a decision to do so.

Our largest problem is that are elected officials are not citizens serving their country--they are mostly politicians serving their own needs. None of them seem to want to do a good job and go back to being country farmers or lawyers...they all aspire to higher office or, at the very least, amassing power by staying in office. We happily oblige them by consistently electing them again and again even if they are ineffective or seem corrupt. The negotiations now are not as much about the future of the country (which they should be) but about which party "wins". There is one thing sure about that formula--WE lose.

The answer may be to make serving in Congress a bit of a pain. I know we can't make them ride a horse and buggy to Washington (well, we could....hmmm...) but taking away the perks and making them work for us would change a lot of things. Longer work periods with less cleverly disguised campaign trips, lower benefits, etc. just might be the answer.

Quote: s2dbaker

The SSTF can sell those bonds on the open market and get the money it needs to pay its obligations to seniors.

No, the SSA cannot do this. The "trust fund" is invested in a special issue of Treasury Bonds issued only to the SSA and unlike most Treasurys they are redeemable "on demand" as funds are needed to pay SSA obligations. They cannot be sold to the public. The Treasury would be crazy to sell securities "redeemable on demand" to anyone but another part of the government.

The kicker is everyone said what a joek the Trust Fund was in the first place. Everyone knew the Feds were just sepnding the money on daily running of the government. It was clear this was a sort-of "baloon payment" that would come due.

Lets look at it. First Baby Boomers were born in 1946. 1946 plus 65 equals 2011. No acturial math needed here (no offense, Wiz) to see what happened.

Over the years, Bush43 was the only politician with the guts to propose ending the Ponzi-elemenmts of the scheme by letting you put part of the funds in a private account. Sadly the establishment as usual went on the attack without proposing their own soultion other than yet more taxes.

Quote: thecesspit

Up in Canada. I'm not denying that Democrats want to raise taxes, I'm just saying if it was easy they'd have passed already. It's obviously not easy to raise taxes, due to a variety of reasons.




Yet the tax cuts happened, right? Meaning it's possible to cut taxes (this doesn't surprise me...).

I'm only taking issue with the statement it's easier to raise taxes than cut services. I'm not convinced either are easy if the prevailing will of the parties in power are against them. This isn't meant to be a party political statement, and I'm making no value judgement on whether taxes should be raises, spending cut or the entire eastern seaboard of the US sold to China in return for cancellation of the debt.

Didn't realize you were north of the Border (unless Detroit is across the river from you lol.) Sorry if my relpy sounded scolding on civics, but I do get tired of people born here in the USA who probably couldn't come close to passing the citizenship test. Anyhow, the reason raising taxes is easier than cutting spending is that when you cut spending the howl of protest is louder than the groan of raising taxes. The headlines are premade: "___________ proposes cutting spending on __________, women and minorities expected to be hardest hit."

As to the eastern seabord, NY, ME, RI, and MA are almost communist already so I doubt they would notice the difference up there.

Quote:

Cunning. Very cunning. I don't expect anyone to bite the bullet and let them all expire.

Cunning by luck. The GOP was forced into making it an expiring package of cuts. Logially it was written as one law that all expires at once. GOP backed into a very tight conrer procedural-wise got to say, "we already won the election, we are not extending just part of it. You want our cooperation after running us over since 2008? Drop dead." But intentional? Like they said about New Coke, "we are not that smart and we are not that stupid."

I'm not in Windsor, but I am south of the border :)

Quote: s2dbaker

Go to town! The SSA site posts all of that information for public consumption:
Social Security Investment Portfolio

Interesting information. I guess we see things differently. My idea of an "investment" is not giving my money to an entity that is spending over $1,000,000,000,000 more a year than it is taking in, while showing no inclination to reign in spending, and trusting them to be fiscally sound.

By your statements, I must assume you trust the government as to what they say and to be good money managers. I do not.

Quote: AZDuffman

A question for Wiz--when you did acturial predictions was it mostly the aging of the population or did the economy come into play. And for that matter, how much did you change your predictions for a slowing economy causing more people to take partial benefits early? Just curious.

Our office took under consideration both economic and demographic factors. The outlying assumptions we used for such things were provided by the Board of Trustees, which oversees the Social Security program. From there complicated programs estimated thousands of pages of statistics about all kinds of things pertaining to Social Security for a 75 year period. It has not unusual for outsiders to say that the assumptions we were given are too rosy. One such skeptic is former chief actuary A. Haeworth Robertson, author of Social Security: What Every Taxpayer Should Know.

The office was divided roughly in two between "short range" and "long range." The long range actuaries were the ones to do the 75-year projections. When you hear such things as the year the trust funds will be exhausted, it comes from them. Short range also helped in the long-range projections, but did a host of other things as well. One of such responsibilities was determining 10-year projects of the effect of any change in laws affecting Social Security. That was my job. My particular area of specialty was changes in the law concerning benefit or taxation calculations.

Quote: s2dbaker

This is sad because I think the Wizard is a smart person. The Social Security trust fund does indeed exist. It is currently invested in US Treasury Securities. In other words, the United States Government has already borrowed the money from the Social Security Trust Fund and the SSTF is holding the Bonds as an interest bearing investment. Since the Constitution of the United States states that the debts and obligations of the US shall not be questioned, there is absolutely no reason to believe that those bonds will not be repaid. The SSTF can sell those bonds on the open market and get the money it needs to pay its obligations to seniors. The problem is that if the debt ceiling is not raised, then those bonds that will come due will be in default making their value significantly less than in normal situations. So Mr. Wizard, if you were just stating things that way as a shortcut then I apologize for splitting hairs but to say that the "So Called" SSTF doesn't exist is simply untrue. It's currently invested in the safest security the world has ever known.

I don't disagree with any of the facts provided. Social Security bonds exist just as much as the ones that may be sitting in your safe deposit box in the bank. My point is that they are based on the hope that a future taxpayer or bond buyer will produce the money when the owners wants to cash the bond. So far, this has always happened. My point is there is no vault somewhere full of money or other asset to cover these bonds. I'm not trying to argue that the bonds will not be repaid. I am arguing that in looking at the overall strength of the national economy we can't count the trust funds as assets, because we owe that money to ourselves.

To put it another way, if you look just at Social Security, yes it does hold a lot of bonds. However, if you step back, and look at the whole economy, those trust funds are offset by the obligation and burden of paying them.

Quote: thecesspit

It would -seem- from the news reports that the prevailing mood is to cut services (and hence government spending) over raising taxes. This might be only the impression being served me by Fox, CBC, the BBC and USA Today. I'm willing to be told otherwise.

I wish the president shared that mood.

Quote: AZDuffman

As to the easternb seabord, NY, ME, RI, and MA are almost communist already so I doubt they would notice the difference up there.

It's good to see nothing but useless rhetoric seems to come from Duffs Keyboard. I do not think he is an idiot I just think he can't cease posting idiotic things. I often wonder if he is doing a parody like Colbert.

Once again what started out a thoughtful debate has been turned by AZ to a political rant. Yes Everything bad was from the Democrats and everything good comes from the GOP. Signal to noise issue as usual.

Quote: Wavy70

It's good to see nothing but useless rhetoric seems to come from Duffs Keyboard. I do not think he is an idiot I just think he can't cease posting idiotic things. I often wonder if he is doing a parody like Colbert.

Once again what started out a thoughtful debate has been turned by AZ to a political rant. Yes Everything bad was from the Democrats and everything good comes from the GOP. Signal to noise issue as usual.

Nice to see Wavy distorting what I say. Despite several posts about if SSI takes economic factors into account; the fact that SSI-owned bonds are not saleable to the general public; and how the Bush Tax Cuts being packaged in one bill have casused Obama to be unable to remove some but not all--despite all that Wavy picks out one line he doesn't like and then makes it out that I am just adding "noise" to the board. One sharp-edged comment and he throws a hissy fit.

I sold all my equities and treasuries. I'm holding onto my CD's, TIPS and muni's for now. The brinksmanship is just too frightening. If no agreement is made this week, by the week after markets will tumble.

--Ms. D.

Quote: s2dbaker

Thanks for acknowledging that Ronald Reagan raised the FICA taxes. Since my comment was limited in scope to the Social Security Trust Fund, I didn't think I needed to state everything that Ronald Reagan did to cause the incredibly huge debt burden that we have today but if you want to do that, may I recommend starting another thread.

Again ... bitching about paying the tip when dinner was free. More money was in the pockets at the end of the day.

As for the rest of it ... it's impossible to have any discussion with someone who denies truth. I may as well try to convince JerryLogan that Singer's VP system doesn't work. Some discussions are not worth engaging.

Just for objectivity and clarity in framing the discussion, here's a table using data provided by the CBO at http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/hist07z1.xls (dollar amounts in millions):

Years	President	Control of House	Debt at BOP	Debt at EOP	Incr/(Decr)	Annl. Pct.
1977-1981	Carter	Dems	706,398	994,828	288,430	8.9
1981-1987	Reagan	Dems	994,828	2,867,800	1,872,972	14.1
1989-1993	HW Bush	Dems	2,867,800	4,351,044	1,483,244	10.9
1993-1995	Clinton	Dems	4,351,044	4,920,586	569,542	6.3
1995-2001	Clinton	Reps	4,920,586	5,769,881	849,295	2.7
2001-2007	W Bush	Reps	5,769,881	8,950,744	3,180,863	7.6
2007-2009	W Bush	Dems	8,950,744	11,875,851	2,925,107	15.1
2009-2011	Obama	Dems	11,875,851	15,144,029	3,268,178	12.9
2011-2013	Obama	Reps	15,144,029	17,453,482 (est)	2,309,453	7.3

Even this is a little deceiving because it doesn't account for programs instituted by a predecessor. For example, Obamacare doesn't "kick in" until 2013 or 2014. The new president (can't see Obama winning so long as the Republicans don't implode, which is entirely possible) is saddled with it, and, using only tools like this chart, may be accused of being a big spender when, in fact, the only thing he is, is unable to repeal Obamacare. The big jump the day W Bush took office would seem to suggest that something similar happened with him ... a Clinton "poison pill" kicked in. The only major program I remember W Bush implementing was the prescription drug thing. (BTW, wars are cheap compared to entitlements, see also p. 97 of your 1040 instructions, so it wasn't the wars that caused the jump in debt.)

Using the limited data, the only apparent trend is that a Republican-controlled House gives us the lowest increases in spending. The largest comes with Republicans as president and Dems in the House. But to say that "Reagan = huge increase in debt" is a bizarro over-simplification.

Looking forward, the chart should frighten anyone, and lend understanding to the position of the Tea Party. Your portion - each and every man, woman, and child - is about $48,900. I doubt most of us drive cars that expensive or have credit limits that high. Whatever and whoever is to blame - and there's plenty of blame to go around - is a matter of debate. But stopping the spending is no longer under debate.

Note that stopping the spending is the answer, and not increasing revenues via higher tax rates. First, higher tax rates does not = higher revenue. Second, revenues have been going up that whole period, and still the debt increases. Third, the economy "crashed" after years of increased government spending under W Bush. Rather than conclude, "Hmm, govt spending can stimulate the economy," this data seems to support, "Hmm, govt spending leads to crashing the economy." Obama is doing the exact opposite, indicating that something other than reality is driving his thinking. (At least, if you stay within the data shown, you have to conclude that ... but if you leave the confines of the chart, you also leave the confines of the "Reagan = big deficits" point. Your choice, I'll go either way.)

You simply cannot, with intellectual honesty, support a politician that thinks revenues-too-low-but-spending-more-is-okay and at the same time express concern about the state of historical or current spending. It is like supporting USA soccer and then saying you only support teams that have won a (men's) World Cup. You would be talking out of both sides of your mouth.

Quote: ItsCalledSoccer

Your portion - each and every man, woman, and child - is about $48,900. I doubt most of us drive cars that expensive or have credit limits that high.

Of course it is MUCH worse than that. Most Americans will pay nothing towards that debt. Those of us that actually do pay federal taxes will pay some multiple of that. And remember, if you are the classic 'family of four', and are responsible for your proportional amount, that is 200k.

Quote: ItsCalledSoccer

Just for objectivity and clarity in framing the discussion, here's a table using data provided by the CBO at http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/hist07z1.xls (dollar amounts in millions):

Years	President	Control of House	Debt at BOP	Debt at EOP	Incr/(Decr)	Annl. Pct.
1977-1981	Carter	Dems	706,398	994,828	288,430	8.9
1981-1987	Reagan	Dems	994,828	2,867,800	1,872,972	14.1
1989-1993	HW Bush	Dems	2,867,800	4,351,044	1,483,244	10.9
1993-1995	Clinton	Dems	4,351,044	4,920,586	569,542	6.3
1995-2001	Clinton	Reps	4,920,586	5,769,881	849,295	2.7
2001-2007	W Bush	Reps	5,769,881	8,950,744	3,180,863	7.6
2007-2009	W Bush	Dems	8,950,744	11,875,851	2,925,107	15.1
2009-2011	Obama	Dems	11,875,851	15,144,029	3,268,178	12.9
2011-2013	Obama	Reps	15,144,029	17,453,482 (est)	2,309,453	7.3

There are four double digit increases in debt listed in that table. Only one of them belongs to a president who is a Democrat. There are five single digit increases in debt listed in that table and only one of them belongs to a president who is a Republican. I hope that a Republican wins the White House in '12 so that we can go back to where deficits don't matter.

Like a lot of liberals, you conveniently ignore the meat of the content, taking pieces out of context. To show that, most of my response is quotes from what I already wrote.

Quote: s2dbaker

There are four double digit increases in debt listed in that table. Only one of them belongs to a president who is a Democrat. There are five single digit increases in debt listed in that table and only one of them belongs to a president who is a Republican. I hope that a Republican wins the White House in '12 so that we can go back to where deficits don't matter.

Quote: ItsCalledSoccer

Even this is a little deceiving because it doesn't account for programs instituted by a predecessor. For example, Obamacare doesn't "kick in" until 2013 or 2014. The new president (can't see Obama winning so long as the Republicans don't implode, which is entirely possible) is saddled with it, and, using only tools like this chart, may be accused of being a big spender when, in fact, the only thing he is, is unable to repeal Obamacare.

Am I Kreskin? Or are the responses of liberals simply that easy to anticipate? You choose which, but I'll give you the strong hint that I'm no Kreskin.

But let's stipulate to all the ignoring you do ... it's an excuse for Obama because others before him did it? To do the single-largest two-year increase in history? It worked so well that we should double-down on it?

Quote: ItsCalledSoccer

You simply cannot, with intellectual honesty, support a politician that thinks revenues-too-low-but-spending-more-is-okay and at the same time express concern about the state of historical or current spending.

But even blaming Obama isn't consistent. It's Democrats in the House. Obama only gets blame insofar as he supported the House his first two years, which was pretty much 100%, so yeah, he rightfully gets a large chunk of blame. Never mind that any increase is a step in the wrong direction, a better way to say what you're saying is ...

Quote: s2dbaker

There are four double digit increases in debt listed in that table. Only one All of them belongs to a president House who is a Democrat. There are five single digit increases in debt listed in that table and only one of them belongs to a president who is a Republican. Every single time Republicans control the House, it is single digits. I hope that a Republican Democrats wins the White House in '12 so that we can go back to where deficits don't matter and certain double-digit increases in spending percentage.

You seek to assign blame in a place that validates your predisposition, never mind the condition of the nation. See also the Constitution, which says the House writes the spending bills, not the President. So, if you're really going to be that simplistic, at least follow the Constitution. If you truly think that spending bills originate somewhere other than the House, then that makes you insane. Until you can get past that, there's not much more to talk about.

Quote: ItsCalledSoccer

Whatever and whoever is to blame - and there's plenty of blame to go around - is a matter of debate. But stopping the spending is no longer under debate.

Quote: ItsCalledSoccer

Note that stopping the spending is the answer, and not increasing revenues via higher tax rates.

I don't care who stops spending, I want spending to stop. I couldn't have been clearer. But you only seek to assign blame.

But I guess that's what ignoring does to people ... it makes them sound stupid. I'm not saying you sounded stupid, but I am saying you did a bunch of ignoring. Why? To satisfy a predisposition. Predispositions are fine, and you're perfectly entitled to have them. Just don't say that it's anything but a predisposition, don't try to assign it any weight based on facts, and don't try to make it a basis for discussion and debate. I may as well be trying to convince a fundamentalist Christian that Jesus wasn't God. But your faith seems to be even stronger than that. At least the Christians have some brain-work behind their belief, whereas yours is utterly unsupported.

You can believe a ladder supports your weight, so you put your weight on it under that belief. The ladder might actually hold your weight, but you're still fucked if your structurally-sound ladder is leaning against the wrong building. "Government Spending" is a weak ladder no matter who steps on it, and "House controlled by Democrats" is the wrong building and should be avoided at all costs.

I don't know why you're so hysterical. I already stated that I want a Republican to win the White House in '12 so that Deficits go back to not mattering anymore. What more do you want?

Quote: ItsCalledSoccer

You simply cannot, with intellectual honesty, support a politician that thinks revenues-too-low-but-spending-more-is-okay and at the same time express concern about the state of historical or current spending.

Intellectual honesty hasn't been a major force in U.S. politics for a very long time now. Everyone's blaming each other for the same thing, and not all of them can be right. But all of them can be, and often are, wrong. The economy is broken because Congress is broken. Congress was never intended to be a divided entity the way it is now, where loyalty to party trumps loyalty to legislative body. That's thrown off the entire balance part of the "checks-and-balances" we all learned about in grade school. It's all well and good to deride "years of increased government spending" under both GOP and Dem Presidents, but that's the way Congress voted. They're the ones writing the spending bills. The President just signs them.

And now you have the Tea Party saying "no more taxes, period". Hundreds of GOP legislators have signed a pledge from the Americans for Tax Reform that they will never raise taxes, and that includes not repealing tax-break loopholes. Quite frankly, that's stupid. It implies that the current taxation policy is correct even while everyone who's paying attention agrees that it's not. So it's broken but we'll pledge not to fix it? That's nonsensical -- and intellectually dishonest.

The right thing to do is to examine the levels of government spending in the various programs that the public demands (e.g. "cut social security over my dead body") and then figure out how to pay for that. I recall that the big 3 entitlement programs are set to grow to more than 100% of tax revenues at some point in the next 20-25 years if everything stays as-is. The bare facts of an increasingly older population and increasingly longer post-retirement life make accelerated entitlement spending a certainty -- accelerated beyond the rate of tax revenue increases. Yet Congress has failed to make a credible attempt at putting in place a plan to smooth over the coming turmoil, because anyone who even brings it up will get voted out of office. So I don't know what the right answer is, but I do know that blaming each other for the situation is the wrong one. I also know that rigid, dogmatic fixation on using only one of the two big levers in fiscal policy is wrong-headed. That's like trying to play roulette on a layout with only red numbers -- you're missing half the game.

Quote: MathExtremist

And now you have the Tea Party saying "no more taxes, period". Hundreds of GOP legislators have signed a pledge from the Americans for Tax Reform that they will never raise taxes, and that includes not repealing tax-break loopholes. Quite frankly, that's stupid. It implies that the current taxation policy is correct even while everyone who's paying attention agrees that it's not. So it's broken but we'll pledge not to fix it? That's nonsensical -- and intellectually dishonest.

Actually a base belief of most in the Tea Party is to repeal the right of congress to collect an income tax and replace that with a consumption tax. I'd be for this as long as the pols do not start handing out money to "make up" for the burden. Anything to get the bottom half of the country used to the idea they need to pay something and maybe then the next handout proposal we ask "how will this be paid for?"

The consumption tax could have an added benefit. The USA gets a lot of inflow of tourists, this would capture revenue from them. All the illegal aliens would start paying a fair share as well.