# Fiscal Cliff

Discussion in 'Politics' started by Buddha12, Apr 19, 2012.

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## Will the US go over the Fiscal Cliff?

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1. ### CowboyMy Aim Is TrueValued Senior Member

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LOL.

The economy is already ruined. The Republicrats agreed to raise taxes AND increase the deficit. How anyone could consider that a victory defies logic. :shrug:

If I recall, Paul Ryan's "extremist" solution that was floated around would still take nearly three decades to balance the budget. We're fucked no matter what, and it's funny to see partisan types pretending that their party of choice will somehow save us by doing more of the same. It's just a matter of time before this country collapses under the weight of its own fiscal irresponsibility.

A while back I read that roughly 40% of the money our government spends is borrowed. Assuming that was accurate, it means the government could implement a 100% tax rate for everyone and still barely break even as far as the national debt is concerned (and that's not even taking into consideration that people would have no money for food, shelter, clothing, gas for their cars to drive to work, etc. and would likely rebel against the government if they didn't all starve or freeze to death first).

This is why I've been paying less and less attention to politics over the years. Why fight to the death over who gets to captain the Titanic AFTER it hit the iceberg?

3. ### CowboyMy Aim Is TrueValued Senior Member

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3,707
Yes, in the sense that they've agreed to use smoke and mirrors to hide the obvious.

I said this before a few months back but, by all realistic standards, America went over the "fiscal cliff" a long time ago.

5. ### CowboyMy Aim Is TrueValued Senior Member

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3,707
With regard to the poll, the correct answer is actually a combination of both choices.

A pox on both their houses. Fuckers.

7. ### joepistoleDeacon BluesValued Senior Member

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The economy is ruined? How so? The economy has been consistently growing for three years now. The economy has been consistently adding jobs for 3 years now and inflation has been very tame. The unemployment rate is down signficantly, now only about 2% to 3% above full employment which is down from 5% over the full employment rate. So you call that ruined? That, my friend, defies logic.

Two, they didn’t agree to increase the deficit last night. They agreed to raise taxes to reduce the deficit. According to the Simpson-Bowls Deficit Reduction Commission, we need to reduce our current 10 year expected deficit by 4 trillion dollars. Point in fact the deficit has been falling since the end of the Great Recession. Last year they reduced the expected deficit by more than a trillion. The tax increases the passed last night will take 600 billion out of the deficit. The deficit problem has not been resolved, it is a work in progress. I suggest you read my previous post in this thread explaining how we went from budget surpluses to budget deficits.

Failing to see that we are not doing the same old thing is really a profound blindness. As I pointed out, the deficit is falling. The economy is growing. The policies that created the economic contraction and the huge deficits have been and continue to be dismantled. Refusing to acknowledge same doesn’t make those changes go away.

Last edited: Jan 2, 2013
8. ### ElectricFetusSanity going, going, goneValued Senior Member

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18,523
Get your guns ready and in preparation to the inevitable economic collapse in which everything is going to be like roadwarrior and every armed white man is going to live out his secret dream of killing a negro or any other minority who has come to violate "his" women. Oh word of advice though make sure your guns are lock up well don't want any psychopathic family members getting in to your stash and firing off before the true ecomocalypse comes!

9. ### Buddha12Valued Senior Member

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2,862
Now we will be paying higher taxes which still won't stop the government from spending more and more with each year increasing our debt and deficit. So the long run is that we don't go into a recession now but only postpone it once again for awhile, how long, who knows, it depends upon how much the government spends and it seems it will keep spending until the system collapses and a depression hits.

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Why is recession depended on government spending? When you say "we will be paying higher taxes" do you mean make over $400,000 a year? In the late 1990's we managed to actually stabilize national debt for a brief time, until bush jr. rescinded that tax policy and got us into two very expensive wars. And yet somehow we didn't collapse into depression, heck japan get over 200% debt by GDP and it has not collapse. All this talk of an ecomocalypse is BS! We survived the great recession with its 10% unemployment, we survived the great depression with its 30% unemployment, how is this "coming" ecomocalypse going to be so much more devastating? 11. ### Buddha12Valued Senior Member Messages: 2,862 We still owe 16 trillion and that will only continue to rise. The deficit isn't going away either, it is lower but still is close to a trillion again. Since spending won't stop and taxes are , for some , going up then when will we ever see an end to this fiscal mismanagement of the government. just because we don't have a depression yet doesn't mean it can't happen and with spending continuing ever upwards we won't see and end for over 100 years as to the debts we incure today. 12. ### ElectricFetusSanity going, going, goneValued Senior Member Messages: 18,523 Oh certainly a depression can happen, probably will someday, but its not the end of the world! What exactly will the debt we incur today do, and when? I mean we had more debt per GDP before (end of ww2) some countries have more debt then us (japan, stagnant but not dying), we been able to neutralize and pay off most of our debt before, I just don't see it as that big of a issue. Lets focus on make energy cheap (and self sufficient) and increasing quality jobs and then with the economy on the up and up we can pay off the debt with increase taxation (which won't hurt people as much if they are making more money) and reduced social services (which won't hurt people as much if they are making more money!). 13. ### pjdude1219The biscuit has risenValued Senior Member Messages: 16,474 actually in the past the democratic party has in fact managed to reduce the debt so history would prove you wrong. 14. ### joepistoleDeacon BluesValued Senior Member Messages: 22,910 Oh please do explain in some detail how that will work. Please Register or Log in to view the hidden image! I could make mindless rants too, but that would not make them true. Just what is the mechanism that would cause us to will suffer a great depression because of government spending? Let's start at the top, what is wrong with government spending? Governments cost money to run. Roads do not build themselves. All the government services you receive don't just magically appear without cost. There are no magic wands. Do you understand what causes a recession? Do you know what a recession is? Apparently not, a recession is caused by a lack of demand for goods and services, and that is not caused by government spending. Government spending does not produce less demand for services and products. In fact it creates more demand for goods and services. I will keep it simple so it will be easier to understand. Recession = A period of reduced demand for goods and services resulting in an excess supply of goods and services. Depression = A severe recession. Government Spending = Increased demand for goods and services (e.g. labor, road building materials, paper, electronics, office supplies, food, etc.) Money spent by government doesn’t magically disappear. Government spending creates the opposite of a recession or depression. So the bottom line here is your prognostication here just doesn’t make the least bit of sense. Last edited: Jan 2, 2013 15. ### joepistoleDeacon BluesValued Senior Member Messages: 22,910 Yes we still owe 16 trillion dollars about half of which the government owes to itself. So the money that is really owed is about half that number. You do understand that this country has run a deficit for most of its existence, more than 200 years without causing an economic crisis. I guess you didn’t know that. And no as long as we have a government, it will cost money. Government will spend money as long as we have a government. Those roads, bridges and schools don’t just magically appear. Per my previous posts, government spending or private spending for that matter doesn’t cause recessions or depressions. That is nonsense – pure and simple. Here is the irony in your beliefs. The grains of government profligate spending were sown 12 years ago when George II and his Republican buddies opened up public coffers to special interest raids. Now Democrats, no thanks to Republicans, are trying to restore fiscal sanity to Washington and get more value for our tax dollars. It was Vice President Cheney (Republican) who famously stated that the one thing former President and Republican icon Ronald Reagan taught them was that deficits don’t matter. Well deficits do matter. But this is why, if fully sovereign governments (e.g. not Greece as Greece abrogated its ability to print money when it entered the EU) spend too much money, they can print more money to pay down their debts. That devalues the currency and creates inflation. Inflation is what can occur when governments accumulate more debt than they can service – not depression as you have alleged. The exact opposite of a depression would occur in that case. Fully sovereign governments never need to pay off their debt or ever not run deficits. What they need to do is to be able to service their debts and govern responsibly (e.g. don’t threaten to intentionally default on their obligations as Republicans like to do) and grow their economies. The United States does need to fix its deficit problem and it is. But as with most things there is a right way and a wrong way to do it. You don’t fix your deficit problem by causing another great recession which reduces federal revenues while simultaneously increasing the deficit as we did in The Great Recession of 2007-2009. You don’t fix the deficit by suddenly cutting back spending. That would cause a recession or depression. You don’t just stop paying your bills (e.g. refusing to raise the debt ceiling). It’s a bit complicated for your average Joe. But you start solving the deficit problem by growing the economy (e.g. Clinton era), increasing tax revenues, and prudent investment and management of public coffers. The resounding surge in the markets today clearly shows the House made the correct decision last evening in passing the Fiscal Cliff legislation. Markets don’t rally when investors think a depression is at hand or when inflation or government is out of control or will be in the near future. You can see by the market reaction today that investors and businessmen and women don't think the tax increases passed last night by the House will hinder economic growth. 16. ### billvonValued Senior Member Messages: 21,003 Your assumption that "the market knows best" is, IMO, not a good one. Their firm confidence in real estate circa 2007 and Internet startups circa 1999 comes to mind. You are correct; running a deficit is, in and of itself, is not a bad thing. Running an unsustainable level of debt is. That's where we are now, and the recent bill passed by the House will make things much, much worse. 17. ### joepistoleDeacon BluesValued Senior Member Messages: 22,910 You can believe what you want to believe, but the stock market is a leading indicator of future economic performance which is used by the National Bureau of Economic Research, investors and business leaders, because empirical evidence proves its accuracy in forecasting future economic performance. http://en.wikipedia.org/wiki/Economic_indicator http://en.wikipedia.org/wiki/National_Bureau_of_Economic_Research The House passage of HR 8, the Tax Relief Extension Act, does reduce the deficit by increasing government revenues. It does not by itself solve the deficit problem. But it is an essential part of getting the nation’s finances in order. Unfortunately people like simple solutions. And for many things simple solutions just don’t get the job done. More revenues will be needed, and spending reductions will be needed as well. But the additional revenue increases and spending reductions need to be done in a way that does not impede economic growth. Congress kicked the can down the road on spending reductions because they just were not able to get the deal done in the limited amount of time remaining. If they had done nothing those tax increases would have kicked in very quickly, and the middle class would have been adversely affected which would have resulted in a slowing of economic growth. It would have been counter productive, assuming the objective is to reduce the nation's deficit. There were three key things that came out of the passage of HR 8 last evening. One, it demonstrated that we still had a congress that could get things done to avert a fiscal crisis. They worked together to produce something the country needed. And a power shift occurred last evening. The Republican caucus in the House split. You could hear the crack all across the nation. Republicans have traditionally voted in a monolithic block – it didn’t happen last evening. Republicans did do what they had sworn not to do, raise taxes. Two, the nation made a significant down payment on reducing its deficit. And three, President Obama reaffirmed that he doesn’t intend to let Republicans hold the nation hostage with the debt ceiling. Over the coming months, if Republicans in Congress persist, we may have a constitutional crisis over the debt ceiling. But in the end, we won't have Congress putting the Full Faith and Credit of the nation on the line every few months to further a political agenda. We will have to see how things shake out over the course of the next few months. Last edited: Jan 2, 2013 18. ### joepistoleDeacon BluesValued Senior Member Messages: 22,910 Do you earn more than 400k a year? If not, you won't be paying any more income tax. Your Republican entertainers will however be paying income taxes. I guess this means they will work less. Please Register or Log in to view the hidden image! 19. ### billvonValued Senior Member Messages: 21,003 Oh, absolutely. Primarily because it is a very incestuous indicator; a rising stock market causes increased investor confidence, which in turn causes increased investment, which in turn causes a rising stock market. This positive feedback is why the stock market is inherently unstable and prone to booms and busts, but also why in the short term it seems to "do what people expect." So in the short term (6 months or so) it is an extremely accurate predictor of future economic performance. Going longer - say, out to four years - it's terrible, primarily because of that cyclic behavior. Any rise in stock prices is going to be matched by a drop, and the stock market's health is a combination of several of those cycles. Thus I would expect a solution that makes people happy today and tomorrow and next week - but is really a "poison pill" that will clobber us in ten years - will result in a market rally. It will, of course, be matched by a precipitous decline due to the effects of the poison pill. Yes, it does. If we had gone with the$250,000 income limit we would have gained about $440 billion a year. We went with a$450,000 limit instead so that's closer to \$180 billion. That's less than 20% of our deficit.

So now we have to make up the other 80%.

Well, there's the rub. We may not be able to have both a growing economy and a way to pay down the debt. And if we don't pay down the debt it will keep growing until it bankrupts us.

Keynesian economics says that we can stimulate the economy by spending lots of money. Build a useless bridge and you at least employ a bunch of people who then buy more Miller Lite and movie tickets, which supports brewers and actors, and they then support blah blah blah. But you can't do that indefinitely; at some point you have to say "OK, we got a boost, now we're going to have to pay it back." And that means having to stop the Keynesian spending at least for a while - and that's going to have a negative impact on the economy. There is no way to say "OK let's spend less but not have it impact the economy."

Not really. We solved 20% of the problem. The other 80% - the painful part - we did almost nothing about. If we continue to kick the can down the road (which we will) then our problems just became worse - because we got the tax cuts without the spending cuts.

20. ### pjdude1219The biscuit has risenValued Senior Member

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you do realize that keynesian economic theory also calls for having asurplus and paying down the debt

21. ### joepistoleDeacon BluesValued Senior Member

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LOL, so now you are talking gibberish in a vain attempt to rationalize your error. The bottom line here is that the stock market is a widely recognized leading indicator of economic performance. And the stock market went up dramatically today on news that HR 8 is now the law of the land. The stock market reacts well to good news and poorly to bad news and is a leading indicator of economic performance. Investors, business leaders and academics are a lot more knowledgeable and skilled than you are, and they don’t react well to “poison pills” or any other bad economic news. And they reacted well today on the news of HR 8' passage in the House.

I guess you haven’t been paying attention. We are now at 1.8 trillion. We need another 2.2 trillion. It can come from Medicare, requiring Medicare to make drug purchases competitive, similar to what other agencies of government do like the Veterans Administration. Medicare Part D passed by a Republican congress and signed into law by a Republican president prohibits Medicare from using a competitive bid process.

That is nonsense. You have not been paying attention. We can selectively raise revenues and reduce costs (e.g. selective taxation, selective cost containment like Medicare Part D reform).

Why do you think the nation needs to ever pay down its debt? In our more than 200 years of existence we have rarely paid down the nation’s debt. I could count the number of times we paid down our debt one hand and have four fingers left over. As I have said before we need to keep our debt level in line with our ability to service that debt. And let me remind you here, no one in Washington or in the business community or in academia are talking about reducing the nation’s debt. We are talking about reducing the growth of our debt, keeping it in line with our income.

And finally fully sovereign nations, like the United States, do not go bankrupt unless one day they wake up and decide they are not going to pay their bills (e.g. in the case of the US, fail to raise the debt ceiling). Sovereign countries can always pay their bills if they have the will to do so. They can print money – if you had been paying attention you would have known this in part because I have written about it umpteen times including a few in this thread. So all that bankruptcy talk is just more manna for the ditto head.

What Keynesian economic policy really says is that in times of slack economic demand the government should be the buyer of last resort, taking up the slack demand in the economy with spending. And in times of prosperity, meaning when an economy approaches full employment, government should slow economic growth by increasing taxation thereby replenishing its balance sheet. That is the nutshell version of Keynesian economic policy.

Keynesian economic policy does not advocate spendthrift behavior like building bridges to nowhere. It does advocate investing in infrastructure during periods of slack economic demand. The best time to invest in needed infrastructure is during periods of slack demand (i.e. at times when you have an excess of unemployed individuals). At those times government can procure goods and services at reduced cost while simultaneously causing economic growth.

And contrary to your statement there are ways to spend less and not impact the current economy. What you don’t seem to understand is this is a 10 year effort. It is not an all tomorrow or its all gotta be done this year project. It is a 10 year project. The 4 trillion dollars we are trying to save is savings over the course of 10 years. The current federal budget is only 3 trillion dollars for God’s sake.

Additionally, you are under the impression that we are going to spend less. That is not being discussed by either the Republican or Democrats. We will spend more each and every year. And the economy hopefully will grow as well along with our population and money supply. What is being discussed is reducing the deficit, the difference between what the government takes in revenue and what is spends. The debt will take care of itself over time as long as we continue to grow the economy and manage our deficits in a responsible manner. Each year the value of our national debt shrinks in value by about 2% due to inflation.

Yeah really, and your numbers are off. You have not been paying attention. We have solved more than 20% of the problem. Our fiscal problem is not in the near term. It is a long term problem that will need long term solutions. The most troubling problem in our federal budget is healthcare spending. With a large number of people approaching retirement age, the impact on the nation’s healthcare future healthcare expenses will be huge. That is the big problem. Obamacare was a critical first step in getting those costs under control. We pay more than twice what other industrial countries pay for healthcare and have lower quality outcomes to show for it.

What we got last evening was a continuation of the George II tax cuts for those earning under 400k per year and a tax increase for those earning more than 400k per year. And the reason we are taxing those earning more than 400k per year is because those individuals have cash sitting unproductively in banks where it does little to stimulate the economy. If you give the same dollar to someone in the middle class they are much more likely to spend that dollar which will create demand in the economy and be much more simulative to the economy. That is why raising income tax rates on the wealthy is important and much less damaging to economic growth.

Last edited: Jan 4, 2013
22. ### iceauraValued Senior Member

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30,994
I see nothing in Dodd-Frank that contradicts my post. Could you be specific? The provision of Dodd-Frank that restores the Glass-Steagal separation of investment banking from mortgage lending, for example.
Or something showing that banks are smaller now, and present less risk of being too big to fail.

The Fed always had that power. The Comptroller of the Currency always had that power. Now they have to do more paperwork while not doing the job, is all.

23. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

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23,198
Because financing it with newly printed money has always led to run-away inflation. When investor buy bounds with pre-existing money that does not lead to inflation. Now the FED has an unlimited (if unemployment remains greater than 6.5%) policy of buying with printed paper 85billion per month. The Fed is already a greater holder of US debt than China and buying more than a trillion dollars more each year with thin air money.

China has already started to reduce its holding of US paper promises. How many years of Fed buying more than 1 trillion do you think it will be before ONLY the FED is buying at non-economy-crushing rates? I.e. FED holding interest low but making "run-away inflation" like Germany or Zimbabwe had is the result of printing new money to pay your debts, year after year.