Odds of US Government Default?

default would mean Obama definitely gets a 2nd term.

this should be a game of chicken, but i think too many republicans are on a "mission." so the fanatics will lead our country to the brink of embarrassment, hopefully not much more, but i think with every day that the tea party/right wing faction spews their "ideas" obama is more likely to win reelection. and i'm not a huge obama fan, at all.

"starve the beast"

I think we should starve the beast.

Oh, thanks alan, you said it before I managed to. We are thinking alike.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

I bet that if you split the respondents into net taxpayers and net benefit recipients, you'd find more insight than taking the New York population as a whole for this question.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

ok I give, I acknowledge you wrote that plotting post to lucille. Sly like a fox you are.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

there you go, at the end of string, YOU clearly were plotting with lucille to pretend to trick you to blame me.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

there you go again, acknowledging your duplicity.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

I bet that if you split the respondents into net taxpayers and net benefit recipients, you'd find more insight than taking the New York population as a whole for this question.

I bet that if you split the respondents into net taxpayers and net benefit recipients, you'd find more insight than taking the New York population as a whole for this question.

oops

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

:)

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

honestly, I'm shocked that you wrote this, as per the end of your last several posts. What exactly were you thinking 22 hours ago?:

columbiacounty
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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should visit me in columbiacounty. You'll need to bring your own electricity and clean water, despite "the beauty of upstate new york" because of the Rip Van Winkle Bridge, also remember George Pataki's commercials that used to be great (right alanhart?) and my family are major participants in the Special Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should visit me in columbiacounty. You'll need to bring your own electricity and clean water, despite "the beauty of upstate new york" because of the Rip Van Winkle Bridge, also remember George Pataki's commercials that used to be great (right alanhart?) and my family are major participants in the Special Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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:)

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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honestly, I'm shocked that you wrote this, as per the end of your last several posts. What exactly were you thinking 22 hours ago?:

columbiacounty
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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should visit me in columbiacounty. You'll need to bring your own electricity and clean water, despite "the beauty of upstate new york" because of the Rip Van Winkle Bridge, also remember George Pataki's commercials that used to be great (right alanhart?) and my family are major participants in the Special Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should visit me in columbiacounty. You'll need to bring your own electricity and clean water, despite "the beauty of upstate new york" because of the Rip Van Winkle Bridge, also remember George Pataki's commercials that used to be great (right alanhart?) and my family are major participants in the Special Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

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lucille, you should try this on columbiacounty. You'll need something like "the beauty of upstate new york" then you can get going on the beautiful scenery and how George Pataki's commercials used to be great (to lure alanhart in) and how we should get the Olympics again. Wait a couple of days (maybe Monday after a nice weekend) and use one of our other streeteasy posting names.

Stevejhx, Let's keep borrowing like all those sub prime borrowers and then not pay it back. We can freeze up the credit markets all over the globe and create riots on the street like what has been going on in Greece. Go back to the 1930's and see what happens to the world when credit markets freeze and people can't eat. Yeah, good idea to let the increase in borrowing exceed our country's ability to pay it off. When the cost of capital increases, asset values of all types decline and purchasing power erodes. To which most democrats will reply, just raise taxes! That too is a great idea (sarcasm intended). Imagine a world where there are two workers. One is taxed at 100% and the other at 25%. Is there any incentive to work for the one who is taxed at 100%? Of course not. All their profits are taken. Is there incentive to work for the one who is taxed at 25%? Yes, but that person will get mad because they have to support the able bodied worker who's incentive to work was taken away. What's the answer? Curb your spending and implement a value added tax so we stop discriminating through the tax code and so we can avoid social unrest.

I've always thougth it wouldn't happen because PIMCO or some other big investor (or maybe the Premier of China) would just call one of the Republican holdouts and say, I'll donate $2 million to your reelection campaign if you'll just vote to raise the debt ceiling.

Somebody who'd stand to lose more than $2 million if the US defaulted could reasonably make an offer like that. And there is no snake in Congress who would turn up his nose at $2 million -- not even a pure and vituous tea bagger snake.

I'm surprised that this hasn't happened already, and the fact that it hasn't is puzzling to me. I don't know what this means. Who stands to gain if the US does default?

0% Even those opposing the debt ceiling and tax cuts already know that the deal is already made (June). Just political talk between the parties to draw more headlines. Those of you believing and shivering over the news seem little dumb to me, as half of the world already knows the truth behind this political debate.

The Democratic Senate hasn't passed a budget in over two years, Obama proposed the most embarrasing budget any President ever has that was voted down 97-0 in the Democratic-controlled Senate, the Democrats want to raise the debt ceiling and raise taxes, and you blame all this on Republicans?

This is the kind of liberal thinking that led to Greece's current situation.

The Economist put it best:

"...This newspaper has a strong dislike of big government; we have long argued that the main way to right America’s finances is through spending cuts. But you cannot get there without any tax rises. In Britain, for instance, the coalition government aims to tame its deficit with a 3:1 ratio of cuts to hikes. America’s tax take is at its lowest level for decades: even Ronald Reagan raised taxes when he needed to do so.

"And the closer you look, the more unprincipled the Republicans look. Earlier this year House Republicans produced a report noting that an 85%-15% split between spending cuts and tax rises was the average for successful fiscal consolidations, according to historical evidence. The White House is offering an 83%-17% split (hardly a huge distance) and a promise that none of the revenue increase will come from higher marginal rates, only from eliminating loopholes. If the Republicans were real tax reformers, they would seize this offer.

"Both parties have in recent months been guilty of fiscal recklessness. Right now, though, the blame falls clearly on the Republicans. Independent voters should take note."

LICC is partly right.

Greece's current situation is the result of its inability to collect taxes. In the long Reagan-era US, we've largely given up on even trying to collect taxes from people who actually have money to pay them. So, we clearly do have a Greece problem: wealthy country, utterly irresponsible elite refusing to pay for the government we and they need, leading to slow collapse of government and economy alike.

While our taxation on the middle class is at historic highs (primarily due to FICA/Medicare/state taxes), the cuts at the top have been so drastic that our taxation overall is lower than at any point in the post-war period here or any other rich democracy today -- and the Republican/Obama plan apparently is to cut the top rate even more.

But neither eliminating taxes on the rich nor tax evasion is a "liberal" project; they owe more to the norms of the Ancien Regime and the former USSR -- the historic enemies of liberalism. Liberals, like (real) capitalists generally, believe everyone, not just the "little people," should pay for services used.

I didn't take a position in the OP - I just said that I think the chances are 99% certain that it will happen. For the Tea Party, this is a religion, and there is no compromise in religion.

If default happens - as is likely, IMHO - I think it will be one of the worst things that ever happened, and one of the best. It will force the two sides to compromise, and will deflate the asset bubble we're presently experiencing.

That's the good part. The bad part is it will bring the world economy to its knees, and all finance theory will be invalidated, based as it is on the "risk-free rate."

MGR's post is an example of what I mean: black and white thinking. MGR will forget that there is a middle ground.

And LICCDope yet again swallows the Kool-Aid: budget deficits started under Reagan, were semi-under control under Clinton & surpluses began, and then George II - hardly a Democrat he - pushed the envelope and really ran up the budget deficits, cutting taxes and starting two wars. The inevitable result of that was 2008, and (alas) the Fed's reaction to it was to do the same thing that it did in 2000. Hence the present asset bubble, slowing growth, rising inflation, increasing unemployment.

Are Democrats party complicit? Absolutely - they went along with it. But the theory is pure Voodoo Economics and the Laffer (Laughter?) Curve, swallowed hook line and sinker by Republicans, even though there is no empirical evidence to support it.

So - I think the outcome of this is inevitable, and that it will be both good and bad. Good things will come of it, but the timing couldn't be worse.

great points, Finance Guy! I'm going to borrow them.

It's true the the rich are tax evaders in the US as well as in the Greece. Our rich want roads and hospitals and police protection and the other good things that taxes buy, they just don't want to pay for them -- they don't want to pay ANYTHING for them. They want the middle class to pay for them.

The middle class gets stuck with the bill simply because we're not well off enough to buy toady Congressmen for ourselves.

stevejhx, in the beginning I thought it was preposterous that congress would allow the US to default, but honestly, I am beginning to think it might happen. And I think some part of the bond market think this might happen too. There is some ugly stuff happening with CMBS spreads.

I guess we would all survive a very brief default -- does the OMB have a priority payment plan on who gets paid and who doesn't? There won't be enough to go around so they'll have to stop paying somebody.

I'm not sure who I want them to stop paying. Maybe we can roll over short-term Treasurys for longer maturity debt, like the Greeks are going to do.

Personally, I think it's better to allow a brief default than to accept deep cuts in spending with no tax increases to offset them. That would be tantamount to handing the govt over to the crazies.

Obama will be one and done. The US govt will not default.plain and simple

I don't always agree with Paul Krugman, but his piece in today's NYT is just about spot on.

http://www.nytimes.com/2011/07/22/opinion/22krugman.html?_r=1&ref=opinion

Where we are right now is no accident. It is the natural result of the policies we have been pursuing since Paul Volcker got kicked out of the Fed because the banks didn't like him. AKA Voodoo Economics. The plan has always been clear: starve the beast (as I was gently corrected above!). Why, after all this time, would the Dick Armey's in the world give in to a compromise, when they have been working at this for 30 years?

They won't. There will be a default, and though we'll live through it, it will forever change the way risk is looked at. That's probably a good thing, but it's not going to be easy.

The policies we're now pursuing - and here I disagree with Krugman - are not working: they are causing asset bubbles. The present asset bubble will correct - either quickly, through default, or more slowly, as the economy grinds to a halt faces with high commodity prices and rents, and - for the average guy - tight credit. For better or for worse, Volcker's policies in the 70's and 80's (and I remember them well, savings accounts paying 21% interest!) ushered in 20 years of stability, undone by bad fiscal policy. George II's fiscal policy was the worst ever. Now, we pay the price.

"For the Tea Party, this is a religion, and there is no compromise in religion."
http://aynrandlexicon.com/lexicon/compromise.html

That's right, julia - no compromise on fundamental principles. Makes for very good reading in theology school, but doesn't help you play well with others - as very few people share all the same "fundamental principles."

If and when default happens - and I think "when" is better - what I think will happen is that the government will simply ignore Congress and continue to pay its debts. Who's going to stop them?

stevejhx -- I think you mean Obama will simply invoke the 14th amendment and say that Congress cannot prevent deficit spending?

GG, Congress voted for the deficit spending - ergo, constitutionally, it cannot deny it. That much is plain regarding bond debt. Whether the government could continue to operate, however, isn't so clear, as social security, for instance, though an obligation, is not contractual like a bond is.

Congress of course can prevent deficit spending. What it can't do is vote to spend the money, have the money spent, and then not pay it back. There is pretty clear Supreme Court case law in that regard; that once the government signs a contract, it cannot, by law, treaty, regulation, or otherwise, renege upon or change the terms of that contract.

Like him or not - and I'm not a fan - Obama did not cause the deficit spending. Only the Congress can do that.

thanks.

Debt ceiling will be raised to avoid the default. But the problem is how do we solve our deficit?
Ideally, we would want to cut spending first, and once the job market bounces, raise taxes. I think the problem with Obama is that once he agrees to the republican's term (cut spending without raising taxes), he won't have any cards to play with once the economy recovers with the job market.

Why raise tax rates when the job market bounces?

because we want to borrow money during recession to spend (thus our ever increasing debt ceiling) and payback during good times. We were suppose to save during our good times and spend during recession. Our country spent more and more during good times and now we are holding an empty bucket with our pants down.

From Wiki:
Marx's theories about society, economics and politics, which are collectively known as Marxism, hold that all societies progress through the dialectic of class struggle. He was heavily critical of the current socio-economic form of society, capitalism, which he called the "dictatorship of the bourgeoisie", believing it to be run by the wealthy middle and upper classes purely for their own benefit, and predicted that, like previous socioeconomic systems, it would inevitably produce internal tensions which would lead to its self-destruction and replacement by a new system, socialism.[3] Under socialism, he argued that society would be governed by the working class in what he called the "dictatorship of the proletariat", the "workers state" or "workers' democracy".[4][5] He believed that socialism would, in its turn, eventually be replaced by a stateless, classless society called pure communism. Along with believing in the inevitability of socialism and communism, Marx actively fought for the former's implementation, arguing that both social theorists and underprivileged people should carry out organised revolutionary action to topple capitalism and bring about socio-economic change.

Since our free market economy is cyclical, we would want to counter during our boom and slam.

So you are unsatisfied with increased government receipts during good times, at flat rates, you want the government to get greedy, right and raise the rates too to supplement the already increased receipts?

I just edited the Wiki page you quoted from. Marx now means something else entirely. I love Wikipedia. And people who rely on it.

Ideally, we'd want to INCREASE our spending, because we have unacceptable levels of unemployment due to a demand slump after the collapse of the housing bubble. And because we have extraordinary needs in building infrastructure, rebuilding our regulatory apparatus after decades of neglect, and freeing ourselves from dependence on carbon-based fuels.

Once we've got demand, and therefore employment, back up, a good chunk of the deficit will disappear, because people with jobs pay more taxes than people without them.

If we then (1) end the unfunded wars and institute a rational medical care funding system, for example by (2) replacing patent monopolies with a peer-review or prize system for funding drug research, and (3) offering all Americans the option of choosing between Medicare and the VA systems bringing our costs down to the level of the next-most-inefficient system, we'd be running surpluses.

Simultaneously, we should be increasing taxes on the upper classes in order to promote further growth by funding more infrastructure investment, better supervising our markets to prevent skimming and cheating, and promoting the security and equality that underpin successful and innovative economies.

Here is my opinion (as a republican):
During good times, we need to curb our spending and keep our current tax rate (already high imo). Thus save for the rainy day. In reality, our spending was increased (from democratic congress) at the same tax rate thus washing out any reserves. Now our country is on the verge of default, we dont have a dime to resolve our financial issue.

So what the heck do we do now? increase the debt ceiling and dont cut taxes (it'll even worsen the job market). Long term goal should be to curb our spending and eventually raise taxes (get rid of bush's tax break) til we are back on our foot.

Financeguy,
I completely agree with your post.

Debt ceiling should be increased (to maintain current spending) but eventually it needs to be cut along with tax increase on the upper class.

Do you want to increase taxes on people with a lot of money, or people who make a lot of money?

How would you effectively tax people with a lot of money? taxing goods, municipal level, etc?
I think the first to go is the bush's cut which obama renewed, though now is not the time.

So you just want to make it harder for people to get rich, not change anything for the already rich.

I just wanted to clarify, thanks.

Here's my opinion (as a Bloomberg Republican, or a Hillary Democrat = Same Thing): ba & fg are both right. The proper thing to do is in good times, pay off debt. In bad times, incur debt. The federal government needs to be counter-cyclical, which it wasn't, and which it isn't. So, during the good times they ran up huge debts which made the good times so good that the same thing happened that happened in 1929 (under the gold standard, I might point out, Riversider): a bubble was created, and it burst.

I have no problem with interest rates near 0%. I do have a problem with the rest of the Voodoo Economics employed by Dr. Bernake, called QEII: if money at 0% interest doesn't find an outlet, making more of it won't find an outlet, either, except to cause stagflation.

Which is what we're seeing the beginnings of. Exactly the same as the 1970's.

What is needed is a massive rebuild of infrastructure, which is falling apart. It would fix that problem, and put people to work. Tax cuts don't do anything, because the problem isn't with people who are paying taxes. It's with people who don't have jobs.

But that is anathema to the Republicans right now. As it was when Hoover was president. They are on a crusade. They want tax rates at levels that are fine in an agricultural society, but not one as complex as the one we live in. If you brought Alexander Hamilton back to life and popped him in the middle of today's Manhattan, he'd drop dead all over again, out of fright.

raise capital gains taxes. so easy to see as the solution, so impossible to accomplish as capital gains taxes seem to head only in one direction these days. the topic is totally the turd in the party punchbowl.

AR, there's lots you can do: charge social security on all earned and unearned income, lower the rate, raise retirement age to 70, and change the inflation peg. Cut defense spending by 1/3. Merge Medicare, Medicaid into the VA health system and nationalize healthcare.

Those very simple things will balance the budget.

"by funding more infrastructure investment"

how naive..

we all know those tolls/taxes are going to service of "infrastructure" right?

$321,985 a year to Toll Worker
http://www.myfoxny.com/dpp/traffic/traffic_news/audit-excessive-perks-for-nj-turnpike-employees-20101019-apx

sure, and it would be extremely fair also to raise taxes on passive income for those with a certain total income level. the estate tax is also absurdly low, and I say this despite the fact that changes could impact us personally. unlike ah I am not in favor of raising the ss tax to include all income, maybe above a certain income level but for the middle class not in fly-over states it seems awfully regressive. should seniors pay taxes on ss benefits? absofnglutely

there are a ton of options. but ask yourself, what exactly is reduced capital gains taxes achieving today, and what has it achieved the last 15 years?

>the estate tax is also absurdly low, and I say this despite the fact that changes could impact us personally.

oh give us a break. I love how you pretend to be humble while bragging.

>there are a ton of options. but ask yourself, what exactly is reduced capital gains taxes achieving today, and what has it achieved the last 15 years?

Investment?
Capital efficiency?

Hell, i haven't been humble here for at least three years. cheap, yes, humble, no.

it may have taken well over a decade for the spouse (ph41 doesn't like "hubby") to make equity partner, but we're definitely part of ah's criminal class now. earlier, not so much.

Will you buy your own toilet seat if it breaks?

If it's not obvious yet, it's much to do about nothing. This is more kabuki theater than anything else.

sure, and it would be extremely fair also to raise taxes on passive income for those with a certain total income level. the estate tax is also absurdly low, and I say this despite the fact that changes could impact us personally

More chanpagne socialism?

why not? and take heart, according to you the average person isn't achieving any capital gains. and if you can prove that this society is a purely capitalistic one, with no socialistic tendencies, well, you can't.

i'm pretty sure that estate taxes were much higher under your hero, reagan, but don't let facts get in the way of your spewing.

i'm not really a big fan of "chanpagne" or limos, etc. not humble, just cheap.

I guess I see what champagne has to do with the estate, capital gains, securities trading and other wealth taxes -- champagne is fairly expensive and wealth taxes tend to hit the better off, in a society in which the richest 1% hold 35% of all wealth and over 40% of financial assets.

But what exactly is "socialist" about taxing unearned income?

There is nothing specifically socialist about wanting an adequately funded government, so that we don't need to have toll collectors for lack of money to automate, and so that we can have the rules that are necessary for markets to function.

All civilized people, regardless of their politics, want a competent government. And competence doesn't come for free, so all civilized people want taxes -- even if many seem to want to be sure that only other people pay them.

So I assume the part you think is "socialist" is taxing passive income instead of taxing labor, work and creativity.

In capitalist societies, we want income to be a reward for effort and an incentive to future innovation. Even Ayn Rand understands that much of Adam Smith.

Passive income is just a fee that we allow past success (or monopoly or corruption or feudal theft) to charge the future. If we cut the fee, or take some of it away to finance current needs -- that just increases the incentives to succeed now, while decreasing the power of the dead hand of the past to overcome current market signals.

So, educate me. What is distinctively "socialist" about ordinary capitalist taxes designed to make markets more effective?

To clarify, when you want capital gains taxes, this is for owning a share, say of IBM bought and sold on the NYSE? Or does it also include someone who started a business and sells it after building it up for 5 or 10 or 40 years? What if the business is owned by the children of the founder?

Did you know that the top 1% of wealth Americans hold more wealth than the bottom 90%?

LICCDope, in the latter category, actually favors benefits for the former.

He also reads The Post.

The Republicans can't raise taxes because Grover Norquist won't let. them. Grover Norquist is the most powerful man in America who does not live in the White House.

Well Socialist, you should try a new approach. You haven't gotten anyone to vote your way.

Yes, more than ever the Republican party is held hostage to extremists: Grover Norquist on the economic side, and James Dobson on the God side. It's a shame - they used to be a worthwhile party.

Lots could be done to make this country a better place; the one thing that won't make it a better place is turning into an economic theocracy whose bible is an economic theory that, while great PR, has no empirical evidence to support it. If Trickle Down worked, a lot more people would have a lot more money, and there would be fewer trailer parks in America.

Oh - and fewer people would be living in Long Island City.

Because the ones who live there don't know the difference between corporate income and corporate profit.

HAHAHAHAHA!

financeguy - you are on a roll with this thread! I totally agree with some of your assessments above - especially regarding the patent issues (largely with the pharma industry).

I don't see how we can possibly lower healthcare costs while at the same time having medical services provided by (publicly traded) private corporations which are ultimately driven / motivated by growth in profits.

I was also thinking once profit motives were eliminated, all medical research would have to be done at a university level. There are definitely details that would have to be worked out, but once the main role of medicine goes back to "helping sick people" instead of a means to an ends of "making money", this company will be a lot better off from a greater good perspective.

Keep up the good posts FG!

doh - in last sentence, meant to say "this country will be a lot better off from a greater good perspective."

these text boxes have the smallest print and these eyes aren't getting any sharper as I get older....

"we should be increasing taxes on the upper classes in order to promote further growth by funding more infrastructure investment"
Oh yes, let's give MORE money to the fed gov, who has demonstrated that it is totally inept in creating economic growth!! That's like giving cash to a junkie.

It is not the province of government to create jobs, but rather, that is the province of business. Government's main function are health, safety, welfare & defense, not job creation.

Why should the debt ceiling be raised when the fed gov refuses to sufficiently cut current spending? Again: cash to a junkie.

The fed gov continually spends more than the revenues it collect. If the fed gov was an individual or a business, it'd be bankrupt, which is what this nation actually is.

Raise taxes? 46% of Americans pay no income tax & yet, many of them receive tax refunds.
http://www.huffingtonpost.com/2011/06/28/46-percent-of-americans-e_n_886293.html

We must revamp the tax system & create well paying jobs in the US so that every American has the opportunity to earn a living wage & has skin in the income tax system. As a NYC resident, I pay huge income taxes. Pay more tax, while the fed gov pisses it away & spends it on pork? No!

Having said all that, I think we should raise the debt ceiling just enough to meet the 8-2 deadline, but, cut current spending (not over 10 yrs) to off-set the raise, which is what any rational individual or business would do in similar circumstances.

There is no reason to scare people that they won't get their SS or disability checks, of course we should pay that & we have the money. But, we must also cut the pork.

I hear that no matter what happens this wknd or Monday, the US triple A rating will be downgraded, because even if we raise the debt ceiling trillions of dollars, it's still unsustainable & the root problems remain unsolved.

Bottom line: the fed gov, like any individual or business, must live w/in it's budget or face bankruptcy. We can no longer kick the can down the road. The road has ended.

but which spending gets cut? that's the problem.

you are assuming that there is some huge amount of wasteful spending.

but, unfortunately, all government spending has well established advocacy groups yelling and screaming and spending money to keep that particular amount and type of spending going.

Life is futile. Give up like columbiacounty.

Columbia, I agree. Gov has been overtaken by lobbyists, so we have the best gov that money can buy.

While I have neither the time nor desire to review ever Fed Dept, how bout this: cut 5%-10% of every Fed Dept; let's at least cut down on the number of people employed by the fed gov, which, in turn could stimulate private business to hire them.

http://www.bls.gov/oco/cg/cgs041.htm
With about 2.0 million civilian employees, the Federal Government, excluding the Postal Service, is the Nation's largest employer.

Why should the gov be our nation's largest employer? It's not like the US gov functions so wonderfully that we should pay for this bloat. I bet the fed gov would function as well (or as badly) as they currently do with less employees. How bout some of these people be re-hired by private industry that actually produces goods instead of dysfunctional/unnecessary gov services?

hold on for a second. you think that the reason people aren't being hired by private industry is that they're currently employed by the government?

do you want to cut 5-10% of the air traffic controllers? how about 5-10% of the meat inspectors?

i agree that this is a frustrating situation but these types of simplistic approaches don't make anything better.

as far as the debt ceiling is concerned, the stupid fucking congress already approved these expenditures---how can they possibly now say they won't pay the bill? this is not the way to make anything better.

Columbia, simplistic, yes. As mentioned, I'm not doing a huge analysis, but, you think there'd be a palpable decline in the quality of gov services if 5% of it's work force was laid off? I don't.

"you think that the reason people aren't being hired by private industry is that they're currently employed by the government?"
I did not say that, please don't twist my words. Point is those laid off can seek employment in the private sector and private sector would most likely be more amenable to hiring if the gov stops spending $ it does not have.

"these types of simplistic approaches don't make anything better."
True, however, we have failed pretty miserably with the "complicated" approaches, too. The "complicated" approaches have led us to downgrading & possible default.

Is there an ez answer? Yes & no. No doubt it's complicated as what & how to cut, but it's ez in this regard: we must cut current & future spending now.

so now you're down to 5%? yes, i think that cutting even 5% of the air traffic controllers without cutting the number of flights is problematic.

why do you believe that the private sector decides whether or not to hire based on government spending? if you have a business with more customers than you can handle at your present staffing level and you deem it profitable to hire to meet that demand, why would you care about government spending?

and, as far as i can see, we haven't tried anything whatsoever to rationally downsize government expenditures. not paying bills that have already been incurred is not complicated. its foolish.

Speaking of air traffic controllers, today the FAA shut down thanks to the teabaggers. Have a safe flight!

Republicans believe in freedom and liberty. Now excuse me while I sign a pledge that prevents me from ever raising taxes and another one that requires me to charge abortion doctors with murder.

"How bout some of these people be re-hired by private industry that actually produces goods instead of dysfunctional/unnecessary gov services?"

I re-phrased your querstion since I did not feel it was accurate:

How bout some of these people be re-hired by private industry that actually produces goods in China and toxic mortgages instead of dysfunctional/unnecessary gov services like air traffic control, food ispections, and public safety?

I just find it difficult to fathom the thought processes behind the likes of dwell & LICCDope: the government is incompetent, according to them, yet they entrust it with law enforcement and national defense.

Using their logic, shouldn't we entrust law enforcement and national defense - arguably the most important things there are - to private enterprise, because P.E. is so good at stuff?

This one is cool, too: "The fed gov continually spends more than the revenues it collect. If the fed gov was an individual or a business, it'd be bankrupt, which is what this nation actually is."

Hmm. Then everybody who has a mortgage - which is "spending more than the revenues you collect," to buy a house - is therefore bankrupt?

This concept of bankruptcy is the mirror image of LICCDope's concept of profit, which includes only the stuff coming in, not the stuff going out.

The govt. is grossly incompetent and corrupt, so let's entrust them with nuclear warheads, stealh bombers, biological weapons, and chemical weapons.

The government should not sell clothing, I agree. Russia tried that, with dismal results.

However, the world over the government has proved itself to be far more adept and efficient than the private sector in providing a) healthcare; b) military services; c) police services; and d) infrastructure, than the private sector (lest we return to private militias and airport security pre-TSA, and the transportation system pre-Erie canal).

Somebody has to pay for all of that. Unnecessary, agreed, if we are talking about living like the Amish, but if you're going to set yourself up in Long Island City you'd damned well better hope the trains are working, to get the hell out of there whenever you can.

HAHAHAHA!

And finally, regarding education, we should turn that over to nuns. They and a ruler are very effective at teaching the times tables.

Stop funding the wars! We can't afford them. Simple.

good idea.

what do you think the lobbyists representing the defense contractors will do with that idea?

my thinking: we have these discussions and we usu talk about 3 kinds of capital: money, labor and materials. But this leaves out natural capital, as in the environment.

Most kinds of business activity have an impact on the environment. But the business does not have to acct for this impact or pay for it. The party that pays for it is the government, when it is paid for at all. Taxpayers pick up the bill for remediation, but the actual cleanup does not really do much good (usu), and does not truly make up for loss of clean water, biodiversity, etc., caused by the business.

Now we have to start thinking about this because we have reached a tipping point, where the thousand little cuts we do to the environment, whether its Dupont or Rio Tinto or the Asian dry cleaning place on the corner -- all these thousand cuts to the environment have begun to have a big cumulatirve effect. They call it a "non-linear" result -- you might merely increase your dumping of dry cleaning solvents down the drain by only 3 or 4%, but the waterways into which you dump them are now so fragile and weakened by 100s of years of such abuse that the result your dumping has a 50% increase in toxic effect -- ie, it seems to be a small cause but it's a big result (non-linear).

The plain truth is we are running out of clean water -- in fact we have really run out of it entirely, because all our city water suppplies are tainted with prescription drugs and commercial chemicals that do not bio-degrade that are in our shampoo and shaving cream. And we are running out of soil that has not been tainted by GMOs, and running out of breathable air, and the climate is not working correctly anymore.

And the natural systems that used to filter out toxins and clean the air and water -- these natural systems depended on biodiversity. They depended on plants and insects and birds and larger creatures. But all the birds in North America are endangered and the insect populations are down by like 80% due to widespread pesticide use.

Not to mention the radioactivity. There is far more radioactivity in the air soil and water around the globe than there was even 20 years ago, and this is also contributing to the great die-off in nature.

I think that everything that is happening around the debt ceiling and the EU defaults are directly related to us running out of natural capital. Any day now we're going to stsrt including natural capital in our economic discussions....or we won't be around as a species for a whole heck of a lot longer.

And btw, this is not all due to our particular generation, it's not happening because here at the dawn of the 21st century we human primates are the most selfish and greediest ever. No. It is happening becasue it is the logical result of the way we have run our businesses since the dawn of the industrial age. It's just that it took 300 years of abuse by us little humans to start to have a big enough cumulative effect to bring down the global environmetnal system.

A little bacterium can kill a big elephant He can't do it by himself, right at first, but if he multiples and keeps damaging the elephant's tissues, and extruding his toxic wastes, eventually the little-single celled varmints will bring down the giant creature.

That's what we are -- the little single-celled bacteria. And the global environment is the elephant. We have already brought her to her knees. The question is, will she go down all the way, or will she rise back up to her feet?

cheers, GG

The debt ceiling is an entirely manufactured crisis.

Normal growing businesses and governments increase their debt over time.

For reasons that no one quite remembers, we have a statutory limit on how much debt the government can have, separate and apart from the statutes that determine how much we spend and how much we tax. This system doesn't make much sense: the statutes that require spending money are obligatory, so if we hit the debt ceiling the only effect is to make the US default on obligations it has ALREADY incurred, entirely unnecessarily.

Since refusing to pay an obligation that you can easily pay after you've accepted the benefits is clearly acting in bad faith, hitting the debt ceiling would be a strong sign that the US government is seriously dysfunctional and not to be trusted.

Accordingly, in all previous times when we've come close to the debt ceiling, which happens all the time, the Congress has voted without discussion to raise it.

This time, the Republicans refused to vote to increase the debt ceiling unless the Congress also agree to cut taxes on the rich, thereby increasing the deficit, and to cut expenditures and employment, thereby worsening the economic downturn, putting more people out of work and increasing the deficit.

For reasons that historians will debate, the President apparently has agreed, instead, to cut Social Security. Social Security, of course, has no effect at all on the deficit, since it is off budget and by law can only pay benefits from its dedicated taxes and trust fund and has a huge surplus at the moment that will last for longer than any reliable projection. Apparently, he has also agreed to extend the Bush Tax Cuts yet again, even though they are the main cause of the current deficits (other than the downturn).

So, our leaders are currently debating whether to violate the law and destroy the good name of the US, or, instead, to make harmful policy changes that will reduce employment and economic growth, while further transferring income from the middle class to the wealthy.

They do retain the option of (1) abolishing the debt ceiling, since it serves no useful purpose, (2) increasing the debt ceiling and going home, or (3) increasing the debt ceiling and taking the opportunity to do something useful that would increase employment and/or decrease inequality. Those options appear to be off the table, however.

Default looms. It is what the Republican hard-right has been aiming for for years. Now is their chance - Starve the Beast. If they don't do it now, they might never get another chance, which is why they're going to let it happen.

They will not compromise. They were elected not to compromise.

Boehner said today what he was going to do: the House will pass its own bill, and dare everyone else to let the unthinkable happen by not succumbing to the will of the minority.

The writing is on the wall.

so...what do you do if you're obama? cave in again or participate in this mess?

Go on TV and call for the GOP to immediately agree to repeal the debt ceiling.

If that doesn't work, declare that since the GOP has put you in the position of having to obey one of two contradictory statutes, you are regretfully concluding that the spending resolution, which is later in date, implicitly repeals the debt ceiling.

Then, promise to veto any bill proposing any future debt ceiling, and kill the entire concept of a debt ceiling. Let appropriations fights happen over appropriations, not over whether to pay bills that are already due and owing.

And point out that the GOP is attempting to destroy the economy, and drive the point home by introducing a jobs bill, with full publicity, every day until they pass one.