Fiscal Cliff

[joepistole]

And I have several times pointed out to you that FED (or treasury) selling bonds makes no permanent reduction in the money supply. - It is just kicking the can down the road, which actually INCREASES THE MONEY SUPPLY when those bonds mature - Money supply GROWS by the interest paid when principle is returned.

Increasing the reserve requires can slow the growth of the money supply, but does not remover even one dollar of the old, already existing printing press dollars. In my last comments on this, I asked how can the FED get one existing dollar, say owned by me or citi bank to be destroyed.
Please answer as DESTRUCTION of dollars is what you claim the Fed can easily do.

The true answer is that the Fed cannot confiscate my dollar and destroy it, but they sure can and are destroying the purchasing power of my dollar - all in the name of making the US economy stronger. It has not happen in four years of consistent printing press / thin air money, policy, but the Fed, unlike a five year old, does not learn from experience / history - it is guided by theory.

The facts are Billy T that the Federal Reserve can reduce the money supply by just reversing what it has been doing. Instead of buying debt, it can sell debt. And it can sell debt until the proverbial cows come home. Instead of lowering the discount rate, it can raise it. Instead of decreasing bank reserve requirements, it can increase them. All of those actions remove money from the money supply. The Fed doesn’t need to have a big bond fire and destroy dollars to reduce the money supply; nor does it need to confiscate dollars; it just needs to be able to remove those dollars from circulation when appropriate using the aforementioned market based tools. The true answer is the Fed doesn’t need to confiscate you dollar to reduce the money supply. It just needs to be able to reverse what it has done. And the Fed is certainly capable of doing that.

 

[Billy T]

...It just needs to be able to reverse what it has done. ...

I agree but you don´t seem to understand that the reverse of CREATING money is DESTROYING money. The selling of bonds will remove, but not destroy funds from circulation. When they mature to avoid having the money go back into circulation and actually INCREASE the money supply by the interest paid, Fed must sell even more bonds in the next cycle. Etc. until the cows come home. I.e. instead of ceasing to create more printing press / thin air money this plan requires the printing of ever more at an ever accelerating rate!

As this is clear to all (but perhaps you) investors (and the so called "bond vigilantes") will demand ever higher interest rates before they will buy or roll the maturing bonds they have. Thus the Fed´s balance sheet will continue until the cows come home to grow as will the interest paid on EACH so the total cost of serving the debt grow for two reasons (1) higher debt & (2) higher interest rates.

As I have said in several posts: This is a kick the can down the road problem "solution" that GROWS the Fed´s balance sheet and total of printing press money every year at an accelerating rate. More and more every money CREATED every year without DESTROYING even one dollar.

Even the Fed is beginning to understand this. Their “QEinfinity” is now, only a couple of months after being announced, admitted to not be possible to continue "until the cows come home." The Fed now expects it must terminate the ill-named EQ infinity in 2013. - As Fed said, if it does not terminate QEinfinity, and runs the printing presses ever faster, the Fed´s creditability and the dollar´s purchasing power will be destroyed before Halloween 2014.

 

[joepistole]

I agree but you don´t seem to understand that the reverse of CREATING money is DESTROYING money. The selling of bonds will remove, but not destroy funds from circulation.

If selling debt removes dollars, which it does, then why does the dollar received by the Fed need to be destroyed? You are investing an inanimate object with supernatural powers. There is nothing magical about the Fed or the American dollar. A dollar sitting in a reserve safe or encoded in the Fed balance sheet does not cause inflation or deflation. It is inert. The Fed can burn them or do whatever the Hell it wants to with the dollars it owns. For some strange reason you seem to be fixated with destroying dollars. Dollars can only cause inflation if they are circulation or expected to be in circulation and they are or are expected to be chasing a limited number of goods and services.

When they mature to avoid having the money go back into circulation and actually INCREASE the money supply by the interest paid, Fed must sell even more bonds in the next cycle. Etc. until the cows come home. I.e. instead of ceasing to create more printing press / thin air money this plan requires the printing of ever more at an ever accelerating rate!

You obviously missed the other two tools available to the Fed, bank reserve requirements and the discount window. And two, it doesn’t have to buy just US Treasuries. The Fed has and continues to purchase private collateralized debt (e.g. mortgage backed securities). The Fed is not limited to purchasing Treasuries.

As this is clear to all (but perhaps you) investors (and the so called "bond vigilantes") will demand ever higher interest rates before they will buy or roll the maturing bonds they have. Thus the Fed´s balance sheet will continue until the cows come home to grow as will the interest paid on EACH so the total cost of serving the debt grow for two reasons (1) higher debt & (2) higher interest rates.

The Fed’s pockets are deeper than that of the sum total of all the world’s bond vigilantes. I am sure the Fed doesn’t lose any sleep worrying about bond vigilantes.

As I have said in several posts: This is a kick the can down the road problem "solution" that GROWS the Fed´s balance sheet and total of printing press money every year at an accelerating rate. More and more every money CREATED every year without DESTROYING even one dollar.

Even the Fed is beginning to understand this. Their “QEinfinity” is now, only a couple of months after being announced, admitted to not be possible to continue "until the cows come home." The Fed now expects it must terminate the ill-named EQ infinity in 2013. - As Fed said, if it does not terminate QEinfinity, and runs the printing presses ever faster, the Fed´s creditability and the dollar´s purchasing power will be destroyed before Halloween 2014.

I think you are confusing fiscal policy with monetary policy. Fiscal policy is how Congress spends its money. Monetary policy is made by the Federal Reserve and is concerned with managing the money supply and maintaining price stability and full employment.

Congress has obviously kicked the can down the road on fiscal policy for years now. We were fortunate to get some responsible fiscal policy out of Congress during the waning days of the George II administration, during the economic meltdown, and for the first two years of the Obama administration. But responsible fiscal policy, with those two exceptions, has been absent in Washington since the election of George II as POTUS.

Fiscal policy is mostly concerned with economic growth, how money is raised and spent. Inflation, money supply issues, is the Fed’s bailiwick. Economic growth is in the bailiwick of Congress. But due to Congress’s inability to effect responsible fiscal policy, the Fed has been trying, as best it can, to pick up the slack with new and innovative monetary policy. But there is a limit to what the Fed can do with respect to fomenting economic growth; it cannot replace responsible fiscal policy. The Fed is engaged in a perpetual balancing act, balancing inflation against employment. It is a difficult job and there is always the risk of a miscalculation on the part of the Fed. You don’t have to look far into Fed history to find Fed miscalculations (e.g. Greenspan’s mythical battles with inflation).

 

[Billy T]

If selling debt removes dollars, which it does, then why does the dollar received by the Fed need to be destroyed? ...

Because the inverse of creating money, which we agree the Fed can easily do is destroying money, not collecting money in for X years by selling interest paying bonds. That only takes the money out of circulation for X years and promisses to return it ALL plus interest at the end of X years. - That is kicking the can down the road for X years and INCREASING the money existing after X years by the amount of interest paid.

"Increasing" the amount of money "printed" from thin air certainly is not the inverse of creating money from thin air you claimed the Fed can easily do. It is creation of still MORE thin air money but issued with delay. Not one dollar has been destroyed, which is the true inverse of creating money.

 

[Michael]

Here is the problem with your assessment, life is better today than it was 80 years ago.

I think this is a waste of both of our times. At the end of the day, you are happy to use force against other humans, you want to control them and restrict their peaceful actions to be inline with what YOU want. I OTOH want people to have the civil liberty to peacefully interact as they wish. This was the cornerstone of what was our culture.

There is no way for us to square that circle.

In an attempt to use rational argument I have come to the conclusion that your mind (like most) is so infected with the constant exposure and overuse of cliche' nonsensical expressions like 'Uncle Sam', 'The social good', 'The Glory of Allah'' 'The Great Recession' and etc... that as far as I can see repeated exposure to evidence counter to your belief makes zero difference - for you the Central Bank didn't CAUSE the great depression, even when Ben Bernanke says they did. Even when they had control over the money supply when it happened. Even as government was paying farmers to burn their own produce and bury their own livestock WHILE Americans starved to death. For you the central bank SAVED us from the Great Depression. Up is Down. Left is Right. I don't even think you understand what the word violence means. To try to explain why the word 'Society' as commonly used is used as an allegory - is just never going to make headway. SO, we'll just have to agree to disagree.

You want more government good, you're going to get it. The 'Progressive' Democrats want to grow it to 25% GDP up another 5%. And it isn't going to stop there, soon it will be 30% and then 40% and soon enough you won't have to worry about that scary free-market at all. You won't have to worry about the question: What is the appropriate size of government?, because there won't be any aspect of your life not affected by it. Your children and grandchild will get to, thanks to you, live life in a nice government controlled violent society with probably little if any social awareness of what life was and could have been like. They won't feel the loss of their social liberties because they'll have never enjoyed them. The war on Islam will be long forgotten, but the TSA will be their normal.



Take a real good long look out your palace window, if you like what you see then that's great because these first 5 years are only the beginning and you're going to see much more of it over the coming years.

 

[joepistole]

I think this is a waste of both of our times. At the end of the day, you are happy to use force against other humans, you want to control them and restrict their peaceful actions to be inline with what YOU want. I OTOH want people to have the civil liberty to peacefully interact as they wish. This was the cornerstone of what was our culture.

That is nonsense. I believe in democracy, one person one vote. You on the other hand want it all your way all the time, anything less is tyranny in your view. You have not evolved to the point of living cooperatively with your neighbors.

In an attempt to use rational argument I have come to the conclusion that your mind (like most) is so infected with the constant exposure and overuse of cliche' nonsensical expressions like 'Uncle Sam', 'The social good', 'The Glory of Allah'' 'The Great Recession' and etc... that as far as I can see repeated exposure to evidence counter to your belief makes zero difference - for you the Central Bank didn't CAUSE the great depression, even when Ben Bernanke says they did. Even when they had control over the money supply when it happened. Even as government was paying farmers to burn their own produce and bury their own livestock WHILE Americans starved to death. For you the central bank SAVED us from the Great Depression. Up is Down. Left is Right. I don't even think you understand what the word violence means. To try to explain why the word 'Society' as commonly used is used as an allegory - is just never going to make headway. SO, we'll just have to agree to disagree.

That too is a bunch of nonsense. You cannot make an effective argument for your opinions and belief, so you are reduced to a series of straw man arguments and many other illogical arguments. You may have attempted rational argument but you have yet to advance a single rational argument. I only use one of those terms which you want to call “clichés” and that was “The Great Recession” because that is how it has gone down in the history books.

Additionally, unlike you I don’t have beliefs. I have facts. I have evidence. I have reason. I don't want to throw people in jail without evidence and due process. And I don’t have to rewrite the lexicon in order to advance an argument. The Federal Reserve in conjunction with actions taken by Congress did save the nation from another Great Depression. That is a matter of fact, not a matter of belief. You just don’t like facts because they run contrary to your dearly held beliefs. You cannot even explain what you mean by the terms you banter around (e.g. big government).

You want more government good, you're going to get it. The 'Progressive' Democrats want to grow it to 25% GDP up another 5%. And it isn't going to stop there, soon it will be 30% and then 40% and soon enough you won't have to worry about that scary free-market at all. You won't have to worry about the question: What is the appropriate size of government?, because there won't be any aspect of your life not affected by it. Your children and grandchild will get to, thanks to you, live life in a nice government controlled violent society with probably little if any social awareness of what life was and could have been like. They won't feel the loss of their social liberties because they'll have never enjoyed them. The war on Islam will be long forgotten, but the TSA will be their normal.

That is more nonsense. Government already touches the lives of every American from the day they are born until the day they die. It was the government which trained the professionals who treated your mother and you both before and after you were born. It was the government who created and maintains the roadways your parents used to go to work and take you to the hospital and to school. It was the government who oversaw the drug industry to insure you would not receive tainted drugs or food. It was the government that maintained order on the streets and the security of your home. So like it or not, you have receive a lot of benefits from the government you detest.

You are an anarchist Michael. You want to go back to the days where pollution was rampant, where child labor was the norm, where there were no work place protections for workers, back to the good old days of the robber barons and the industrial revolution. You want a world in which people like the Koch brothers can steal oil with impunity or pollute the air and water without fear of retribution or government interference. It sounds to me like you would be better suited to a place like China, Mexico or Vietnam.

I want effective government; I want a government that works for me, a government that delivers value. And value for me is opportunity, the opportunity to become the best we can be, and not a government of a few and for the few as you have and continue to advocate for. What you and those who lead your political movement have done is to hobble together a bunch of disjointed notions and try to pass them off for reason.

 

[Michael]

Here's a FREE road for you: The Big Dig

 

[madanthonywayne]

I KEEP SAYING IT BECAUSE IT IS TRUE. You are deep into that alternate reality inhabited by the likes of Michelle Bachman and the famous Mr. 999. Every month the Treasury must pay maturing obligations and issue new debt just to maintain the existing level of debt.

No, it is not true. There is plenty of money coming in to service all existing debt and retire bonds as they mature.

Contrary to White House claims, Congress's refusal to permit new borrowing by raising the debt ceiling limit will not trigger a default on America's outstanding public debt, with calamitous consequences for our credit rating and the world's financial system. Section 4 of the 14th Amendment provides that "the validity of the public debt of the United States, authorized by law . . . shall not be questioned"; this prevents Congress from repudiating the federal government's lawfully incurred debts.

The original concern of this provision was to guarantee the integrity of federal debts incurred during and immediately after the Civil War (while the debts of the Confederacy were nullified permanently), and to ensure that a newly "reconstructed" Congress—to which the Southern states were readmitted—would not reverse these decisions. However, the amendment's language was not limited to the Civil War-related debts. In Perry v. United States (1935), the Supreme Court made clear that the provision "indicates a broader connotation" protecting the nation's debts as a whole.

This means that a failure to raise the debt ceiling—to prevent new borrowing—does not and cannot put America's current creditors at risk. So long as this government exists, and barring a further constitutional amendment, those creditors must be paid.

Nor are they at risk in practice, since the federal government's roughly $200 billion in tax revenue per month is more than sufficient to service existing debts. If the executive chose to act irresponsibly and unconstitutionally and failed to make any debt payments when they come due, debt-holders would be able to go to the Court of Federal Claims and promptly obtain a money judgment.

These basic facts should inform any credible decisions by credit-rating agencies in establishing the government's creditworthiness. Significantly, these agencies have traditionally acted favorably when heavily indebted countries have not defaulted on their debt but cut deeply their public spending.

Should Congress fail to increase the debt ceiling as much as the president wants, the effective result would be major government spending cuts, with payments on public debt excluded.

http://online.wsj.com/article/SB10001424127887324081704578232080227662110.html

One of the many things you are forgetting or ignoring is that each month the Treasury must buy maturing debt and reissue it just to maintain the existing level of debt. The debt service is just the interest. You are ignoring the maturing principal that must be paid every month and reissued just to maintain the current level of debt – .

I'm not ignoring those things. There's plenty of money coming in to cover them. Failing to raise the debt ceiling would not result in a default on any of our debts. It would, however, result in serious cuts in all other government spending.

 

[joepistole]

No, it is not true. There is plenty of money coming in to service all existing debt and retire bonds as they mature
I'm not ignoring those things. There's plenty of money coming in to cover them. Failing to raise the debt ceiling would not result in a default on any of our debts. It would, however, result in serious cuts in all other government spending.

You are ignoring reality and deep into Michelle Bachman and Mr. 999 territory that alternate reality in which up is down and down is up. And no matter how many times you cover your ears, close your eyes and yell I can’t hear you, it won’t change the cold hard facts. Congress has been given notice by the Secretary of the Treasury that the US will default on its obligations late next month or early in March if Congress fails to act. So you are saying Treasury Secretary Geithner is lying? He isn’t. And you have no proof to the contrary. You are just mindlessly repeating Republican partisan nonsense. That is one of the things that are so scary about Republicans these days, facts and reason are not needed nor wanted. Republicans just make stuff up on the fly to suit their partisan needs and without regard to its impact on the nation. And the Republican foot soldier's zombie like acceptance of the most bizarre nonsense is indeed frightful.

The US has already reached its debt ceiling and is now using extraordinary measures in order to avoid a default. As I have told you repeatedly, Treasury Secretary Geithner has informed Congress that the nation will have no alternative but to default in late February or early March if Congress does not act. And you want people to believe you versus Secretary Geithner? You are the guy who helped bring us George II and Deficits Don’t Matter Cheney and the resulting economic crisis to boot.

The reason we borrow money is because we don’t have enough money to pay the bills congress has authorized. That is why we have a deficit. You don’t have to have a lot of grey matter to figure that one out. If congress wants to reduce spending, they do that through the budget process. They shouldn’t do that by threatening to not pay the nation’s bills as they have and are now doing again.

http://www.huffingtonpost.com/2013/01/04/debt-ceiling-2013_n_2410622.html

Below is an article from the Council on Foreign Relations explaining the debt ceiling problem.

“What can the government do if the debt limit isn't raised?

The U.S. Treasury has the power take extraordinary measures to forestall a default—the point at which the government fails to meet principal or interest payments on the national debt. These include under-investing in certain government funds, suspending the sales of nonmarketable debt, and trimming or delaying auctions of securities. Congressional delay in raising the debt ceiling forced Treasury to begin taking some of these measures in May 2011 and again in January 2013.

If Congress is does not act to raise the debt limit despite such emergency measures, federal spending would have to plummet or taxes would have to rise significantly (or a combination thereof). However, Geithner has warned in the past that because the government's obligations are so great, "immediate cuts in spending or tax increases cannot make the necessary cash available."

If Treasury is unable to issue new debt or take further actions to bridge the deficit, the government would be forced to default on some of its financial commitments, limiting or delaying payments to creditors, beneficiaries, vendors, and other entities. Among other things, these payments could include military salaries, Social Security and Medicare payments, and unemployment benefits.

What are the implications for financial markets?

Most economists, including those in the White House and from former administrations, agree that the impact of an outright government default would be severe. Federal Reserve Chairman Ben Bernanke has said a U.S. default could be a "recovery-ending event" that would likely spark another financial crisis. Short of default, officials warn that legislative delays in raising the debt ceiling could also inflict significant harm on the economy.

Many analysts say congressional gridlock over the debt limit will likely sow significant uncertainty in the bond markets and place upward pressure on interest rates. Rate increases would not only hike future borrowing costs of the federal government, but would also raise capital costs for struggling U.S. businesses and cash-strapped homebuyers. In addition, rising rates could divert future taxpayer money away from much-needed federal investments in such areas as infrastructure, education, and health care.

The protracted and politically acrimonious debt limit showdown in the summer 2011 prompted Standard and Poor's to take the unprecedented step of downgrading the U.S. credit rating from its triple-A status, and analysts fear such brinksmanship in early 2013 could bring about similar moves from other rating agencies.

A 2012 study by the non-partisan Government Accountability Office estimated that delays in raising the debt ceiling in 2011 cost taxpayers approximately $1.3 billion for FY 2011. BPC estimated the ten-year costs of the prolonged fight at roughly $19 billion.

The stock market also was thrown into frenzy in the lead-up to and aftermath of the 2011 debt limit debate, with the Dow Jones Industrial Average plunging roughly 2,000 points from the final days of July through the first days of August. Indeed, the Dow recorded one of its worst single-day drops in history on August 8, the day after the S&P downgrade, tumbling 635 points.

Speaking to the Economic Club of New York in November 2012, Fed Chairman Ben Bernanke warned that congressional inaction with regard to the fiscal cliff, the raising of the debt ceiling, and the longer-term budget situation was creating uncertainty that "appears already to be affecting private spending and investment decisions and may be contributing to an increased sense of caution in financial markets, with adverse effects on the economy."- Council on Foreign Relations

http://www.cfr.org/international-finance/us-debt-ceiling-costs-consequences/p24751#p6

The last time you Republicans pulled this stunt, the nonpartisan Public Policy Center estimated it cost the US government over 18 billion dollars. You Republicans have a real talent for fiscal prolfigacy. I'll grant you that.

 

[Billy T]

Americans will choose tax hikes over cuts to their own entitlements. ... Most are still in denial over their role in America's fiscal drama. And as long as they are able to find convenient scapegoats for the country's fiscal challenges they will oppose the infliction of pain on themselves. Someone needs to tell these people, it's not them, it's you.

Pogo told that bold truth, years ago, but de Tocqueville* beat him by more than a century in Democracy in America.

* see thread: http://www.sciforums.com/showthread...ments-stable&p=2573119&viewfull=1#post2573119

 

[madanthonywayne]

You Republicans have a real talent for fiscal prolfigacy. I'll grant you that.

Says the apologist for the most profligate spender in US if not world history.

 

[joepistole]

Says the apologist for the most profligate spender in US if not world history.

LOL, that is funny Mad. But it is also telling. You think the man and party who took the nation from a very bad place, losing nearly a million jobs a month and an economy shrinking at an annualized rate of 9% and getting worse with each passing month to an economy that has been steadily growing now for more than three years, and where 100k-200k jobs have been steadily added to the economy each and every month profligate? You think the man and party that has reduced the nation’s deficit by hundreds of billions of dollars and reduced future deficits by trillions of dollars profligate? I think we have identified the problem.

 

[Billy T]

Says the apologist for the most profligate spender in US if not world history.

Hardly. Here are some facts:

America has one of the lowest tax burdens of any advanced country. We may not want to fix our debt problem solely by increasing revenues, but if we wanted to, we could.

The Index of Economic Freedom published by the conservative Heritage Foundation (which presumably has no interest in lowballing current US taxation figures) puts the total of US federal, state and local taxes in 2012 at 24% of GDP. In Britain the total tax burden is 34% of GDP. In Sweden it is 46%, in France 42%, in Germany 37%. At the lower end of the spectrum of major advanced economies, Japan is at 28% and Australia is at 27%.

The federal portion of America's tax burden is in the neighbourhood of 18% of GDP. According to the dire long-term budget vision laid out by John Palmer and Rudolph Penner of the Tax Policy Center, federal government spending, currently at 24% of GDP, will rise to about 25% of GDP by 2023 (due mainly to rising health-care costs and interest payments), and may go up to 30% or more by 2037 depending on how much debt we rack up in the meantime. In other words, by gradually increasing our total tax burden by 7% of GDP through 2023, we could balance the budget; we might eventually have to raise it by perhaps 10% of GDP. That would leave us with a much higher tax burden than we have now, but it would still be only 34% of GDP, as high as Britain's is today. And that's assuming we don't change a penny of our wasteful spending habits on Medicare and defence.

Main error here, IMHO is the assumed increasing GDP. In contrast I expect it to be in accelerating decline by mid 1015 with final stages called "depression."

 

[Billy T]

Word to the wise: Go here: http://www.sciforums.com/showthread...mit-defaults&p=3035906&viewfull=1#post3035906

To see why it is quite likely the US will default if debt ceiling is not raised before 15 Feb13. On that date (when Treasury thinks it will run out of accounting trick to play) the US revenue will be 9 billion dollars of income but 52 billion of debt must be (but cannot be) paid.

 

[madanthonywayne]

Hardly. Here are some facts:

Billy, your quoted text doesn't address spending at all, just taxation. As to the graph you posted, you'll notice two recent inflection points that indicate increased spending. The first in 2007 (which cooresponds with the Democratic takeover of congress) and the second steeper inflection point in 2008 (which cooresponds with the Democrats controlling the house, senate, and the presidency). Here's another graph that focuses on 1999-2012:

You see that revenues, despite (because of?) Bush's tax cuts and 2 wars were on track to match spending until 2007.

 

[billvon]

You see that revenues, despite (because of?) Bush's tax cuts and 2 wars were on track to match spending until 2007.

What do you think happened then?

 

[madanthonywayne]

What do you think happened then?

The Democrats took congress.

 

[joepistole]

The Democrats took congress.

LOL, what happened was a little thing called The Great Recession, one of the crowning gems of the Bush II administration and his Republican congress, the result of nearly a decade of banking deregulation. When the Great Recession hit in 2007 it did two things to the federal budget without congress enacting even one law; it severely curtailed federal receipts (i.e. income) as people went from wage earners and tax payers to receivers of government aid and increased federal expenditures (e.g. unemployment reimbursements, Medicaid, food stamps, etc.). By the time President Obama was sworn into office the nation had a trillion dollar plus deficit and had lost over 4 million jobs. The economy was shrinking at an annualized rate of 9% and getting worse with each passing month. The nation was losing nearly a million jobs a month and more with each passing month.

You don't have a lot of grey matter to recognize that little fact, unpleasant though it may be for Republican/Tea Party folk, it is the truth. It is what happened.

 

[madanthonywayne]

LOL, what happened was a little thing called The Great Recession.....

The Great Recession didn't hit until December 2007, therefore it had little impact on overall spending in 2007.

Here is an interesting quote to put the next (the debt ceiling) in the series of disasters known as the Obama presidency into perspective:

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. . . . It is a sign that the U.S. government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government's reckless fiscal policies. … Leadership means that 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America's debt limit."

Sen. Barack Obama, in 2006.​

 

[joepistole]

The Great Recession didn't hit until December 2007, therefore it had little impact on overall spending in 2007.

The Great Recession began in 2007 and Bill T’s chart reflects year end data. So the inconsistency you need to exist doesn’t exist.

Here is an interesting quote to put the next (the debt ceiling) in the series of disasters known as the Obama presidency into perspective:

LOL.

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. . . . It is a sign that the U.S. government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government's reckless fiscal policies. … Leadership means that 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America's debt limit."
Sen. Barack Obama, in 2006.

The then Senator Obama did vote against raising the debt ceiling in 2006 and he has expressed his remorse over that vote. But this kind of posturing vote is not uncommon for either Republicans or Democrats. Here is what President Obama and his Democrats didn’t do and what no party has done until last year, they never threatened to put the nation into default if they didn’t get everything they wanted by not raising the debt ceiling as Republicans did last year and are doing again this year. Until last year, there was never any doubt the debt ceiling would be raised and that the US would pay its bills. Even former House Speaker and former Republican Presidential candidate Newt Gingrich has openly and repeatedly stated Republicans holding the nation hostage to the debt ceiling is stupid.

And while it might be painful to you and your fellow Republicans, I think it commendable that the then Senator Obama openly spoke out and took a stance against the profligate spending he witnessed firsthand in the Republican controlled Congress and presidency (e.g. George Junior's Interior Secretary spending $222k dollars to rennovate his office bathroom).

http://abcnews.go.com/blogs/politics/2013/01/the-interior-secretarys-220000-bathroom-2/