I know we have a lot of Canadian and American members here, so I wanted to get your take on the current battle to raise the debt ceiling.
Of course, you have the usual partisan divide going on, but do you think they’ll really miss the deadline, or is it all just for show?
Also, what do you think about the process in its entirety? Don’t you think it’s worrying that instead of making the vast and necessary cuts needed they’re just putting a bandage on a corpse?
Of course, this affects Canada too. You could be witnessing an influx of American citizens escaping the tax hikes if the ceiling isn’t raised, and you could see the same if it is raised and the economy continues to slide.
So, whether you’re in the US, Canada or elsewhere, how serious do you believe this situation is?
It is a serious situation. I personally don’t believe that we will default. My boyfriend actually works for JPMorgan and sells these notes to Asian clients. He has said in the past week or so instead of selling his company has been buying the notes back. (I am not really sure how that all works.)
The main problem as I see it is a much larger one. It’s not so much that there is partisan divide; but the extent of the partisan divide. There is a section of the Republican party that just wont listen to reason.
One of the biggest problems in America now versus the Reagan years is that revenue as a percentage of GDP is at an all time low. I think it’s something like 17% vs 20% during Reagan’s term. So, to truly solve the debt crisis you really do need a mix of revenue and spending cuts. While there are some that believe trickle down economics works; it really doesn’t.
It’s a mess right now and the only way that a deal is going to be made if they take entitlements and tax hikes off the table.
As Lloyd said “partisan divide”. And to put it simple, it has always been the capitalists or capitalism vs. democracy. Unfortunately the Democrats haven’t had political courage since Kennedy.
The President noted in his speech last night that the problem lies in “a handful of new people in Congress” aka Teabaggers. Even the mainstream Republicans are distancing themselves from the Teabaggers.
The president is only seeking 3% tax increase on people earning over $250k, so no, there won’t be anyone running to Canada as a tax shelter. If the Republicans succeed in reducing federal spending, funding will be shifted to the state and local level. Instead of being “taxed” per se, fees like parking tickets will go up, government workers will lose benefits, courts cases will take years to be heard, and schools will close.
The secret backers of the Tea Party are hoping to weaken government to the point that most government services will be contracted out to the private sector.
(sound of banging gavel) “Court is now in session, the Honorable Judge So-And-So presiding, but first a word from Walmart…”
The US won’t default. The question is whether we can get Republican and Democrat idealists to see reason and do both cutting of benefits and raising of revenue/taxes. It’s about using this fake crisis to get some real action.
For example, people are living longer, but we haven’t raised the retirement age for social security. We don’t have price controls on medications that are paid for with public money (e.g. medicare). But you’ve got to balance cuts with adequate revenue. It’s absurd that billionaires are continuing to get tax breaks at a time like this when they’ve always paid more. They’re not creating jobs with that lost tax revenue - they’re banking the money.
The thing is the cuts and revenue they’re talking about, while in the trillions, are nothing compared to the benefit of getting the economy growing again. If the economy grows, it means more profits, which brings in more tax dollars and solves the debt crisis much faster than anything else. It’s like we’ve got our eye off the ball right now - it should be on the economy and on jobs.
[QUOTE=LavenderLounge;98785]The President noted in his speech last night that the problem lies in “a handful of new people in Congress” aka Teabaggers. Even the mainstream Republicans are distancing themselves from the Teabaggers.
The president is only seeking 3% tax increase on people earning over $250k, so no, there won’t be anyone running to Canada as a tax shelter. If the Republicans succeed in reducing federal spending, funding will be shifted to the state and local level. Instead of being “taxed” per se, fees like parking tickets will go up, government workers will lose benefits, courts cases will take years to be heard, and schools will close.
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That is so true. One interesting fact that Clinton brought up in a speech is those that make over 250k a year have seen their income raise over 50% in the past 12 years. So what is the big deal to ask them to pay the same tax that they did during the Clinton years when the economy was booming?
And I agree, it’s fascinating that we can all see the sensible way ahead, but we still seem to be in the position of “protect the corporate sponsors!”
From what I’ve seen, every government is making the short term changes to appear as though they are doing something, while in reality we all know that they need to start taxing the rich while cutting entitlements, services and government.
In the UK, we’re constantly having the debate about taxing the wealthy corporations, and the argument always comes back that they’ll simply leave the country. We had banks THREATEN to move to Asia if they were taxed too much (or what we would call FAIR and REASONABLE).
But what others fail to consider is that they need this market. No corporation or bank is going to be running away because they have to pay a little more tax, it’s not in their interest to.
I wish I was as confident that they’ll find a solution. But even if they do raise the debt ceiling, I don’t believe either party would have the balls to actually fix the situation. I’m sorry to say it, but I think some of the wiser economists out there are right (the ones not supporting the confidence trick), America cannot climb out of this hole through cuts and taxes. It’s just too big to manage.
What concerns me about the US debt mountain (and many other countries) is how they have let the debt build to such levels where they have to keep borrowing more JUST to pay the interest on their debt.
We elect politicians and governments to make sensible decisions but the problem with democracy is that they are never around for long enough to take the longer-term view. It’s all about “how can we fuddle out of this one right now”.
Unless America and many other countries face up to the situation and start paying off their debt they will, at some point, default and send the economic world in to way more severe turmoil than we’ve encountered over the past 3 years. Time is running out - an extension to an overdraft that you can’t afford the interest on already is crazy.
The real yield on longer T-Bills are just a bit over 1% - it’s all very cheap money.
When people are paying you to take their money, why not take it? We need smart leveraged investment right now… If you could loan a kid $30,000 to get through college and then the kid will pay back the money with interest and pay more in taxes in the future - why wouldn’t you borrow now to finance his education? Or if a homeless person keeps going into the emergency room and racking up $5,000 bills, why not spend a few thousand to give him free healthcare for a year and keep him out of the ER? And so on… There are social programs which pay back the money you put into them… Borrowing to keep them going is a no brainer - especially when borrowing costs next to nothing.
Debt can be a very good thing if it’s intelligent leveraged investment.
That said, the less debt the better. It sorta sickens me that Obama gave in on tax code changes to generate more revenue.
Raising tax rates does not necessarily equal more revenue.
The problem with raising taxes on those with high incomes is that they modify their behavior so that the result is the government does not receive the kinds of revenue they predict.
I point to all the people on GayDemon who just bragged about dropping their cable television service, choosing instead a less expensive mix of Internet-streaming options. [Which by the way includes avoiding paying the municipal/franchise, state and federal taxes that are a part of cable tv service.]
Everyone responds to the same initiatives. This is why states with the highest, most progressive income taxes have severe budget shortfalls this year - New York and California for example.
The benefit of low income tax rates is not so that it “trickles down”, as Lloyd remarked. Low taxes are what promote risk taking. The point is to get people taking economic risks again — not salting it away in a bank collecting interest, but investing it in new enterprises.
How bad is the Texas deficit? Comparing budget crises among states is tricky, for technical reasons. Still, data from the Center on Budget and Policy Priorities suggest that the Texas budget gap is worse than New Yorkâs, about as bad as Californiaâs, but not quite up to New Jersey levels.
Honey. The Venture Capital market is on fire now and even if taxes were raised it would still be on fire. Sticking money in a bank? No one is that crazy.
One thing to keep in mind is that over the past 12 years those the make over $250,000 have seen their income rise over 49% during that time. We are doing really good. Now, the middle class has seen very moderate increases in income. Is it asking too much to ask those that make over $250,000 a year to go back to the same tax bracket during the Clinton years; especially since they are making on average 49% more? That was the same guy that increased taxes and managed to create 23,000,000 million jobs and increased revenue by two means; the tax increase and the 23,000,000 million taxpayers he added to the IRS. Jeez. Gave us a surplus and the CBO said that in 7 years we would be debt free.
Now, do we even want to compare that to the Bush record? Let’s just start by saying that his tax cut has cost us already nearly 4 trillion dollars. Hold on, let me write it out - 4,000,000,000,000. (I think that is the right amount of zeroes?)
All one really has to do as a starting point is look at GDP and what revenue was a % of GDP. Then look at what points it was high and low and compare the tax rates. Christ. Even the guys that masterminded the tax cuts on Reagan, Bush1, and Bush2 have said this this fantasy that the Republicans have with taxes is an “illusion”.
Under Reagan a tax break made sense; but the economy is in a much different situation now. I could go on, but not worth my time really.
I just want someone to show me an instance from 1990 on when revenue as a percentage of GDP increased as a result of a tax break. I looked and I can’t find it.
[QUOTE=Adam Mason;98788]It amazes me that we can all see the sensible, balanced way forward… but the politicians can’t.
Mind you, I’m not sure the UK is on the right track either. The devil, as always, is in the detail. And that’s a pretty odd saying too![/QUOTE]
Yes, my thoughts exactly.
Canada is no different really. Of course our problem is how much we rely on the US. If the US economy dies, so does ours. Along with the other several countries on the planet of course.
All of this befuddles me to the nth degree. It’s so convoluted that it hurts the head to think about it.
This ‘crisis’ has definitely affected sales. That’s for damn sure. I sure hope that agreement bounces things back a bit.
The real yield on longer T-Bills are just a bit over 1% - it’s all very cheap money.
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And this is exactly the reason that the equity market is on fire now. You know that my boyfriend works for JPMorgan and sells these to Asian clients. The fact is that Asian clients are not buying the short term notes as much as they are the 30 year.
Christ. The equity market in the past three years has been a gold mine in the United States for those willing to tie up some capital.
No one is that crazy, eh? I suggest that no one wants to take a risk.
Another problem is that the Federal Reserve has kept the US Dollar interest rate at zero now since the beginning of the recession, continuing the policy started in the Bush Administration of low interest rates and “easy money.” The result is the dollar’s value keeps diminishing - hence the Canadians on GayDemon griping about our exchange rate with the Canadian Dollar.
One thing to keep in mind is that over the past 12 years those the make over $250,000 have seen their income rise over 49% during that time.
We are doing really good. Now, the middle class has seen very moderate increases in income. Is it asking too much to ask those that make over $250,000 a year to go back to the same tax bracket during the Clinton years; especially since they are making on average 49% more?
Has the price of a two bedroom condo in your New York City neighborhood changed since the Clinton years? What about rent? How about the price for a gallon of gas? How about the price for a stalk of celery? An increase in the neighborhood of 49% perhaps?
It’s nice that people are earning more, but considering the value of the US Dollar is less and less that does not mean that they have more.
My point is that everyone responds to incentives. When you chose to stop paying for cable television (which also means you avoid the city franchise taxes/state and federal taxes), you were responding logically. If you raise the tax rates for personal income or capital gains, people effected will behave the exact same way you did.
When Connecticut or Rhode Island implemented their Amazon Internet Tax, how many billions of dollars were they predicted to get from the new tax? Do you think that will fall short?
I still haven’t seen an instance from 1990 on where when the tax rate was reduced that we saw an increase in revenue as it relates to GDP. That is what am I am really looking for.
However, your “theory” points to one major flaw. The rich get richer & the poor get poorer.
Some of the most prosperous periods in USA history; the1950’s & 1960’ s have come during periods of super high marginal income tax rates. And some of the most disastrous periods in USA history; 1930’s, 2010’s have come after periods of super low income tax rates.
We just saw what happens in the economy when high earners get to keep most of their incomes. They spend it on SUV’s, flat screen TV’s, home renovations, vacations, hedge funds and private equity fees, & other ephemeral things that don’t add a lot of lasting value to the economy. And they certainly don’t save any of it (because they aren’t encouraged to).
[QUOTE=desslock;99146]Raising tax rates does not necessarily equal more revenue.
The problem with raising taxes on those with high incomes is that they modify their behavior so that the result is the government does not receive the kinds of revenue they predict.
I point to all the people on GayDemon who just bragged about dropping their cable television service, choosing instead a less expensive mix of Internet-streaming options. [Which by the way includes avoiding paying the municipal/franchise, state and federal taxes that are a part of cable tv service.]
Everyone responds to the same initiatives. This is why states with the highest, most progressive income taxes have severe budget shortfalls this year - New York and California for example.
The benefit of low income tax rates is not so that it “trickles down”, as Lloyd remarked. Low taxes are what promote risk taking. The point is to get people taking economic risks again — not salting it away in a bank collecting interest, but investing it in new enterprises.