What Everyone Was Thinking of the Debt Debate?

Tuesday, August 2, AD 2011

A Pew/WaPo poll over the weekend asked people to give the one word they believed best described the then-still-ongoing debate in congress over the debt ceiling and budget cutting issue. The results are:

The disgust was shared by Democrats, Republicans and Independents, and people reported that their impressions of both Obama and the Republican congressional leadership had worsened (from their already low levels.)

That no one is impressed with the specter of a bunch grown men and women squabbling endlessly is probably unsurprising — if we saw what congress was up to more often we’d probably have this reaction frequently. However, it seems to me that there are two things which make this go-round particularly bad.

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20 Responses to What Everyone Was Thinking of the Debt Debate?

  • Is this different than it was in the Ratification debates, or in the debates leading up to the Civil War, or the debates of the Greqt Depression, or civil rights debates in the 1950s, or the welfare debates of the 1990s?

    A people needs time to debate and argue. Leadership rises in the midst of the argument. anything else leads to tyranny.

    I’m unconcerned. This is as it should be. It is messy and, at times, unpleasant but, while Putin style leadership is solid and reliable and Pelosi… Um, I meant “Chinese” one party rule is debate free, the Republic absolutely requires sibling squabbling to function.

    Frankly, we would be better off if Americans understood how messy democracy is. But THAT could only be accomplished with civics education and we don’t do that anymore.

  • Since when do we live in a ‘democracy’? The word is not mentioned in the Declaration or Constitution. As for the “debate,” agree that the sausage-making is unappealing but necessary for so-called “consensus.”

    In the end, however, all principles were sacrificed for a mushy compromise that satisfied neither the right or left. As political theater, it was passably entertaining but predictable in the 11th hour ‘deal’ that emerged. Rarely did the rhetoric rise above mediocrity and often sunk to the banal.

    No one ever asked the simple question: If we are cutting the budget then why do we need to borrow more money? Logic that escapes all but those who know neither the emperor nor his loyal minions are naked.

  • Is this different than it was in the Ratification debates, or in the debates leading up to the Civil War, or the debates of the Greqt Depression

    Well, hopefully things won’t get as bad as in each of those cases.

  • Mr. Green, I know full and well that our system of government is a “republic,” but, in contemporary usage, our form of government is articulated as a “democratic republic.” We can go back and forth with semantics if you like but I suspect you know what I mean.

  • Mr. Veg, of course I do and so stipulate. However, far as I know, true democracy has never been tried, nor has true Christianity.

  • I’m with you. Every time a people get close to democracy, everything goes to hell in a hand basket. California is probably as close as any place in the US has gotten and their referendums have utterly decimated their economy and their social fabric. When a society walks too far down that road, heads acquire a mysterious capacity to come popping off.

  • I think the American people are wrong. John Boehner behaved in a dignified, wise, and patient manner. Barack Obama, on the other hand, was petulant, incredibly foolish, and in general, behaved like a spoiled teenager who’s parents took away some of her allowance for crashing the car.

    The truth is, Americans in general are also acting like spoiled children, here. We act as if money grows on trees, as if we can spend trillions of dollars we don’t have, and send the bill to our kids. Let’s not pretend this is someone else’s fault.

  • For what it is worth, while it is true that our system of government is a constitutional federal republic, I don’t think that the use of the term “democracy” as shorthand is particularly misleading. In fact, technically a democracy can be defined to include both direct democracies (which actually are employed all the time, just not for actual governments) and indirect democracies (i.e., republics).

    In any case I agree with prior comments regarding the deficiencies of direct democracies. While no system is perfect, the US system has overall served fairly well. I would suggest three constitutional shortcomings, however, that simply were not properly anticipated by the Framers.

    First, I do not think the Framers ever anticipated the use of Congress’s commerce clause powers as a warrant for pretty much any type of federal intervention that a current Congress might prefer. Many blame the federal courts for this, but I actually think the expansive understanding of that clause is hard to avoid given the language.

    Second, the 14th Amendment’s extention of property and liberty rights vis-a-vis the states was poorly expressed. The federal courts basically had to legislate via guess and speculation to place some flesh on a skeleton.

    Finally, the Framers never anticipated the power they were giving to the so-called “least powerful branch.” IMO this is because they did not anticipate Marbury v Madison and its implications. This is not to suggest that M v M was wrongly decided — I don’t think it was (I think it is the only logical outcome given our constututional scheme) — it is just to point out that the result of not anticipating the potential power of federal courts was insufficient remedial checks against the judicial branch. While Congress has jurisdictional limitation and impeachment powers, these instruments are too blunt to effectively counter judicial activism.

    Just my two cents.

  • Hello, it’s me again. I agree with you on our lack of quality leadership. I think I like Plato’s(?, maybe it was Aristotle…) take on this, that our political leaders shouldn’t desire the position, but should take the position reluctantly at the request of the people because they chose him/her to be a good leader. There is way too much moral hazard (skewed incentives) when politicians want to be politicians, but that’s not what I want to get into…

    You say… “Their preferred solution of taxing only the rich while spending like crazy simply won’t work as our nation’s demographics become incapable of supporting the kind of entitlement programs we already have, and even if they were to have the courage to tell the American people the truth (that their vision can only be supported in the long term by raising taxes on the middle class) the American people do not seem to like the idea.

    I think what matters here are real goods (and services) and the employment-to-population ratio. Do we have the real goods to support the population? and how many people are working to provide the population with those real goods (and services)? Taxes and spending (in this case) are just a means to allocate real goods and services. Taxes take away my ability to command them and spending (that goes into my pocket) give me more ability to command them.

    I think if we keep things the way they are now, fewer people will work to support the aging population who will continue to command the resources given to them by the entitlement programs, which means less overall resources for those who are working and more for the aging, unless we manage to grow the economy at a rate that grows both. The only way we would need to tax the working population more is if our deficit were so large it was causing high inflation. I think you know my views from our debates on this.

    The burden that will fall on the working class is not higher taxes but a smaller “slice of the pie” than previous generations were able to command, unless we can grow the economy. So, essentially, our decision is one of ‘How much do we allocate to the aging?’ and ‘how much do we allocate to the working population?’. That’s not an easy decision, but one that government will make actively or passively.

    However, all generations are suffering from lower than possible output right now because we refuse to employ all of our available resources despite our ability to.

    I also don’t agree with your assessment that the left simply wants to tax the rich and spend like crazy. They do want to tax the rich more, but they to are looking to reduce the deficit and have agreed to cuts in entitlements. My perception is that they would like to see a more equitable distribution of wealth. Is that what you are against? If you aren’t, then how do you propose we make it more equitable without taxing the rich more?

    That being said, I agree with your assessment of our politicians. I think we certainly need more courage, honesty, and humility in Washington from both parties.

  • yes it was a full throated debate– as it should be– I’m personally glad they don’t all just go along with each other—and I don’t agree with all those negative terms given as the response of the public– I don’t mean that I don’t think people said that–I am sure they did — I think people pretty much define everything the way the media has presented it to them. The media tells us for some extended time that we are depressed sad and lonely and then asks how many of you are depressed sad and lonely, followed by “the sky is falling 85 percent of Americans are sad and depressed and lonely”!

  • Democracy should be a pressure valve not a way to actually run government.

  • What do you mean?

  • When the American people vote for divided government, which they usually do, they can expect the debates that ensue to be full-throated and often unedifying. Politics is not a college debate with applause for all concerned at the end. Big issues are never resolved in the political arena without a huge amount of struggle, and that is precisely what we are seeing now. People outside the arena often will call for people to agree on a solution and work together. This is said usually because most people have the charming conviction that all reasonable people would naturally agree with their ideas if voices were lowered and sweet reasonableness were the order of the day. This of course is a delusion, and why most people find close observation of the legislative process unsettling.

  • “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default” said Greenspan on yesterday’s NBC’s Meet the Press

    I’ve been at this “insanity” long enough to remember that Greenspan was on the wrong side of the run-up to the S&L crisis. Then, I was mildly surprised at his retooling as guru/Fed Chmn. Now, this.

    I ‘heart’ it. Give the Congress, Obama, Geithner, the Bernank, etc. more power to ruin us.

    B’ruck Omama can phone President-for-Life Mugabe and ask him to email the PDF file SOP on printing up hyperinflation.

  • I’ve been at this “insanity” long enough to remember that Greenspan was on the wrong side of the run-up to the S&L crisis. Then, I was mildly surprised at his retooling as guru/Fed Chmn. Now, this.

    No. You. Don’t. Dr. Greenspan was the proprietor of a consulting firm in New York from 1954 to 1987. He was an advisor to Richard Nixon’s presidential campaign in 1968 and chairman of the Council of Economic Advisors for a period of two years and change (1974-77). His modest forays into public life antedated the corrosion of the loan portfolios of savings banks. At the time he assumed office as Chairman of the Federal Reserve Board of Governors, fully a third of the country’s savings banks were distressed. The supervisory staff of the Federal Reserve Board is responsible for examination of a selection of commercial banks. Savings banks were not and are not a part of their portfolio.

    The Federal Home Loan Bank Board was responsible for supervising savings banks. Edwin Gray was the chairman of the Federal Home Loan Bank Board. He tried for years without success to interest both Congress and the press in the deteriorating condition of Federal Savings & Loans. What was Greenspan supposed to have done?

  • A.D.: I was referring to Congressional Committee testimony that Mr. G. offered as a privately compensated consultant in support of the bankrupt S&L’s being granted lending authority to lend on commercial real estate developments, ADC lending we call it. That massive insured deposit funded boondoggle magnified the costs of the FSLIC/RTC clean up by a factor of 10 or 20 times.

    You did not have to type so much. You previously provided full evidence of your ignorance.

  • Dial it down T. Shaw. Personal insults never strengthen a person’s argument.

  • I apologize. But, . . . He jumped me.

    It is frustrating. This country is rushing to ruin and we have to endure and answer data mining ideologues in Never Land 24/7 repeating liberal talking points . . .

  • My regrets.

    Dr. Greenspan offered congressional testimony on 27 February 1985 in favor of allowing savings banks to make direct investments in real estate projects. He also wrote memoranda to the Federal Home Loan Bank Board around the same time recommending that the practice be allowed. (The Board ignored him). He also wrote a letter to the board requesting for a client a waiver of their prohibition on direct investments. The client was Charles Keating’s bank. (The Board ignored that too).

    Dr. Greenspan testified in front of congressional committees 68 times between January of 1977 and July of 1987. Two appearances concerned savings banks, one on the effects of inflation and the other on regulatory questions.

  • A.D.: Thanks for helping me out here.

    Dr. Greenspan’s endorsement of the S&Ls’ magnifying their losses (covered by the US taxpayers) by twenty times over (to $200 billion, plus never-ending interest expenses – estimated now $500 billion and counting) was much more intelligent than this latest exemplar of brilliance:

    “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default” said Greenspan on yesterday’s NBC’s Meet the Press

    PS: Had the FHLBB seized insolvent S&L’s when they were insolvent (negative net interest margin from 6% APR, 30 year mortgages funded by 10% short term deposits), the FSLIC fund would have been quickly depleted and the taxpayer would have been on the hook for say $20 billion. Even a progressive must agree that a $20 billion loss is preferable to a $200 billion loss.

    Pursuant to Greenspan’s (and McCain’s and Cong. Wright’s, and et alles’) advice the costs to resolve brain dead S&L’s were magnified. The taxpayers’ losses were NOT from direct investments (that was way before Clinton repealed Glass-Steagall). They were defaulted commercial real estate (CRE) loans and acquisition, development and construction (ADC) loans advanced to build billions of square feet of excess/surplus commercial real estate space that were never rented, never sold and never repaid. Prior to that S&L’s could only make loans on one-to-four family residential with mortgages as collateral. FSLIC-insured deposits provided the relatively unlimited liquidity. A similar dynamic was extra liquidity provided by FNMA/FHLMC secondary market guaranties ($2.7 trillion guarantied, plus $1.8 trillion they hold) from 1999 to 2007.

    Capt. Nathan Brittles, “Never apologize. It’s a sign of weakness.”

NY Times Writers Argue For Dictatorship

Saturday, July 23, AD 2011

William Jacobson has a regular feature on his blog making fun of some of the more ridiculous bumper stickers he comes across.  Today he observes a typical moonbat parading his “thoughts” for the world to see.  Among the litany of bumper stickers he spotted was a classic: “When fascism comes to America it will be wrapped in the flag and carrying a cross.”  Yeah, there’s nothing particularly original or insightful with this bumper sticker, though it does display the leftist predilection to accuse conservatives of fascism.  The funniest part of this is that it overlooks what is obvious to those of us who kept studying history past high school, specifically that it is the left that more often proposes totalitarian policies.

For further proof of this, here’s a charming op-ed from the New York Times.

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51 Responses to NY Times Writers Argue For Dictatorship

  • I’m still a bit awed at the gall of of it all….

  • Why go through this charade every few years? Why do we even need a debt ceiling? it’s merely another excuse for tiresome political theater. As long as the full faith and credit of the U.S. is good — and despite being in the hole by 14 tril — it still is, why not just keep borrowing and printing?

    Secondly, why do the sheeple keep buying into the myth that the federal government is broke? Seems it always has plenty of dough to buy weapons and other crap it doesn’t need, spend on useless aid programs, including billions for foreign countries just to keep them in check, and countless other pork projects. Does the government ever lay off anyone? Stop hiring? All this nonsense about a “deficit” is horse crap. The governments, state and federal, are not broke but want you to think they are so you’d be willing to pony up more and “pay your fair share.” They’re awash in cash and credit, have hundreds billions tucked away in bullion and other reserves and untold assets in land, etc.

    This Obama-Boehner feud will come down to the wire, as all such fiscal drama inevitably does. A “deal” will be struck at the 11th hour with both sides trumping “compromise” and extolling “the national interest” and “the good of the nation.” The old folks and kids will be spared again from further pain and the threat of eating dog food and being starved at school, and the Republic will survive.

    Then we can go back to the important things in life, such as what Princess Kate is wearing and whether there will be pro football this year.

  • Golly, that’s nice to know– I’m not broke so long as I have a credit card!

  • Fox, you’re credit may run out but not the U.S. government’s. By the way, maybe American can raise a few tril by calling in all her markers over the past 60 years, like the nine-figures that Germany and Japan each owe us for rebuilding their countries and reparations. Both supposedly allies now, but back in the 40’s they drained us of tens of thousands of precious lives and billions in national resources. How soon everyone forgets.

  • The quote, “When fascism comes to America, it will be wrapped in a flag and a cross”, is merely a variation of the original saying by Huey “Kingfish” Long, late governor and senator of Louisiana. The original saying is,”When fascism comes to America, it will be wrapped in the flag”. Jonah Goldberg in his “Liberal Fascism” makes a pretty good case that facsism has been wrapped in the flag by liberals and foisted upon the American people in various laws and social programs.

  • Fox, you’re credit may run out but not the U.S. government’s.

    Doesn’t address what I said, and fallacious to boot.

    Remember all those big “debt forgiveness” things? I know Clinton did several when I was a kid– you can’t call in markers you don’t have. (there’s some history involved, too)

    If you were being serious, I can think of a long list of things that we could cut to help balance the budget, starting with “stop buying land,” “don’t pay people to sue you” and “stop new programs.” (including regulations)

    Sadly, you don’t seem to be serious.

  • ” . . . the necessities of state, and on the president’s role as the ultimate guardian of the constitutional order, . . . ”

    Let’s just ignore the hyperbolic irony of the statement.

    Seems that was the justification for it in ancient Rome, and in every other failed republic in history. “It” is absolute tyranny.

    “We have buried the putrid corpse of liberty.” Mussolini, 1937

    Mussolini is dead and his heirs are credentialed imbeciles.

  • Seems it always has plenty of dough to buy weapons and other crap it doesn’t need, spend on useless aid programs, including billions for foreign countries just to keep them in check, and countless other pork projects. Does the government ever lay off anyone? Stop hiring?

    Uhhh…. Isn’t that the point of this whole exercise? You say that deficits are “horse crap”, and then you say it’s because the gov’t could always cut useless spending. Kinda the point everyone is making, isn’t it?

    Sure, the gov’t theoretically can’t go broke. Just print more money. Ask Zimbabwe about that. Or if seigniorage is not your bag, issue even more debt. But at some point (maybe not today), you have to take seriously the drag that increasingly higher debt has on investment and long term growth.

  • As a son of Italy, I cut Mussolini a little slack. After all, he got the trains to run on time.
    Fox, I am serious and don’t call me Sadly.
    Christian, sorry but don’t buy the ‘debt’ argument as long as we’re owed more than we owe. Screw the Chinese; what have they ever done for us except export crap to Wal-Mart?
    Trouble is we don’t have a president or a Congress with the balls to tell em to stick it. You need oil? You got all you ever need in Saudi Arabia and Iraq, which owe us big-time. You need cash? Call in your debts; if we have to pay, let others pony up, too.
    Yeah, I’m all for halting handouts. Take the 47 million off food stamps and send em a case of mac and cheese every week or better yet, put em on Jenny Craig. Most of em are already too fat anyway.
    Enough with the wars. End the Libya campaign, pull out of Afghanistan, stop already with the Pakistan drones; close 500 bases overseas that are Cold War remnants. Hell, we’ve been in Okinawa since ’46. Let the Japs have it.
    And, yes, some of this is tongue-in-cheek. Up to you to figure out what is/isn’t.

  • And, yes, some of this is tongue-in-cheek. Up to you to figure out what is/isn’t.

    Thank you for eventually admitting you’re not serious.

    Paul-I’m wondering where we’ll find the the similar outrage over the 800+ days and counting that the Dems have failed to pass a budget. It’s probably with the outrage over Obama demanding no requirements coming in, and having a big list of his own, right? Or over the flat tabling of the cut cap and balance bill?

  • Instead of dictating, Obama and the regime need to foster private sector economic growth and development. That would dig us out of this hole.

    Whether through incompetence or by plan, the regime has achieved the opposite.

    Giuseppe: Mussolini didn’t go to an Ivy. But, direct opposite of Obama’s failures, he brought prosperity to their peoples before death and destruction caught them.

  • Who the hell us Egan-Jones?

  • “fascism’, ‘constitution torn to shreds’.

    You need to sit down and listen to yourself a while.

  • In regard to fascism and the cross phrase, that has been erroneously attributed both to Sinclair Lewis and Huey Long. Neither said it. Socialist Lewis wrote a novel It Can’t Happen Here in which he postulated that an American fascist movement could come to power promoting patriotism and Christianity, but the phrase doesn’t appear in the book. Huey Long was once asked if Fascism would ever come to America. He said maybe, but we would call it something else.

  • Joe, Mussolini failed to make the trains run on time. His own comment about his government of Italy was that it was not hard to rule Italians, it was impossible!

  • Excuse me Art, but what would you call it when someone advocates handing over unilateral authority to the President because one doesn’t like it when the two elected branches can’t agree on a policy?

    I’m wondering where we’ll find the the similar outrage over the 800+ days and counting that the Dems have failed to pass a budget. It’s probably with the outrage over Obama demanding no requirements coming in, and having a big list of his own, right? Or over the flat tabling of the cut cap and balance bill?

    Foxfier – indeed the silence is deafening.

  • Don, I realize the trains comment was urban legend. Mussolini’s remark reminds me of De Gaulle’s about France: ‘How can anyone govern a nation that has two hundred and forty-six different kinds of cheese?’

  • Excuse me Art, but what would you call it when someone advocates handing over unilateral authority to the President because one doesn’t like it when the two elected branches can’t agree on a policy?

    I would call it ‘someone advocating something of dubious legality for reasons of expediency’. No need to call up the specter of Oswald Mosely.

  • Oh ho hum, someone thinks the President should disregard the Constitution in the interests of bypassing the democratic process due to a perceived emergency. It’s not like that’s the exact playbook of all emerging tyrannies.

    Just because someone isn’t advocating that their opponents be placed in death camps doesn’t mean that their actions don’t lean in a fairly totalitarian direction. Playing on fears, perceived or imagined, in order to circumvent the constitution is precisely “shredding the Constitution.” Sure it’s a couple of egghead academics advocating it, but it doesn’t make it any less pernicious.

  • “Why go through this charade every few years? Why do we even need a debt ceiling?”

    Maybe because it draws attention to how hard the government is screwing us? Or how much money they’re wasting? Getting the public to pay attention to the fact that we’ve borrowed almost as much as the entire economy produces and think about whether or not it’s a good idea to keep that train rolling isn’t a bad thing, IMO. And Congress should have to think seriously about that, too. It’s a shame that this seems to be the only time within recent memory that our representatives have had to think through some of the implications of what they have done and are continuing to do to the nation.

  • The DeGaulle comment has always been linked in my mind Joe with the Mussolini comment!

  • Mandy P., the government is not screwing you, it just is drawing far to much on the capital markets to finance itself. There are systemic problems with the modus operandi of public agencies and some particular problems with American institutional culture and practice which render expenditure in excess of what a healthy agency would do to achieve a given purpose. There are aspects of public expenditure that politicians would be loath to defend without slipping into a sociopathic frame of mind: expenditure which cements deals between politicians, constituents, and advocacy groups. That might be 15% of the total. Then again it might not. Public spending is largely (though not entirely) driven by clear policy choices. There is a difference between ill-advised policy and scams.

  • Just because someone isn’t advocating that their opponents be placed in death camps doesn’t mean that their actions don’t lean in a fairly totalitarian direction.

    Quack quack down comes Groucho’s duck.

    It may be advisable or inadvisable to allow the executive discretion over whether or not to hold a bond sale. It certainly is not ‘totalitarian’. It is regrettable when politicians take action in contravention of law, but sometimes they do. A discrete act such as that does not change the nature of the political order in and of itself. Were Obama to instruct the Treasury to hold a bond sale, he would be committing a ‘process’ offense. There is nothing substantively nefarious about bond sales in either constitutional or authoritarian states.

    There are three questions here:

    1. How well adapted is the institutional architecture to the basic business of government?

    2. Are the habits and inhibitions abroad among salient parties in congruence with the law?

    3. And in congruence with good practice?

    The answers are ‘not very’, ‘no’, and ‘yes in 1947, not today’. Now, you can complain it is absolutely outrageous for the President to hold a bond sale without congressional authorization. The thing is that the Courts and the Congress and the prosecutocracy have long histories of behaving at a variance with Constitutional provisions. I am not talking about misbehavior of individual actors, but of large swaths of the Constitution which have been effectively abrogated. One more kid taking a dump in the latrine will make it only marginally stinkier.

    One thing we might attempt at a future date is some sort of consensual bargain which constructs an institutional set up which people are generally willing to live with as written, which is to say an actual working constitution and not an undertaker’s dressed up corpse of one. To do that, we would actually have to acknowledge what our working constitution is and blast trough the vested interests who like their current deal just fine. Ain’t gonna happen.

  • Art, I’ve got better things to do with my day than arguing with you as to whether the proposed idea is merely bad or totalitarian. Apparently you are in the mood top argue pedantic points. Very well.

  • Ah, the meaning of words. From Alice in Wonderland:

    ‘When I use a word… it means just what I choose it to mean—neither more nor less.’
    ‘The question is,’ said Alice, ‘whether you CAN make words mean so many different things.’
    ‘The question is,’ said Humpty Dumpty, ‘which is to be master—that’s all.’

  • I’m sorry, Art, but when they’ve borrowed and spent so much that effective tax rates would have to be at 70% for all Americans to even start making a dent, when my children and their children and their children will be stuck paying for this mess- assuming it doesn’t all collapse- what exactly do you call that? I call it getting screwed.

  • Especially since we’ve been talking about this train wreck and the need to fix it for literally my entire life. They’ve known it was coming all this time and still continued to borrow and spend, borrow and spend, borrow and spend. They’ve known that the legitimate “systems” needed to be fixed and what did they do? “Anyone who calls for reform wants to kill grandma and starve children!” borrow and spend, borrow and spend. There is no excuse for what’s happened here. And yes, I call that getting screwed.

  • Mandy,

    I’m sorry, Art, but when they’ve borrowed and spent so much that effective tax rates would have to be at 70% for all Americans to even start making a dent,

    This is not actually the case. Neither does the debt ceiling prevent congress from spending like a drunken sailor, nor would it be necessary to set tax rates at some ludicrous rate to make a dent in the debt.

    Art,

    While selling bonds without congressional authorization is not in and of itself dictatorial (come to that, neither was any of the stuff that King George did in the lead up to our revolution) the idea of keeping the purse strings in the hands of the legislature rather than the executive is a pretty basic piece of machinery involved in keeping our government from becoming one. The open suggestion the president simply take these new powers upon himself is particularly troubling given:

    – It’s in a media organ which has repeatedly talked about how nice it would be if our own government worked more like China’s.
    – The general trend in US history (as in late Republican Rome) seems to be towards soft dictatorship by the executive.

    Given that our country only exists because people got over exited about their political rhetoric in regards to procedure and checks and balances, it seems a little late to insist on less inflammatory discussion now.

  • There’s also the question of: What rates and buyers would be involved in a bond sale of dubious legality. I would assume that kind of move does not come free.

  • Thanks Darwin for, as usual, more calmly and clearly expressing my concerns.

  • “This is not actually the case. Neither does the debt ceiling prevent congress from spending like a drunken sailor, nor would it be necessary to set tax rates at some ludicrous rate to make a dent in the debt.”

    That assumes cuts, Darwin. If we continue spending at such high rates and don’t get the “mandatory” stuff under control, it will necessitate some pretty repressive tax rates. Also, my point at my first post was not that I thought the debt ceiling would stop Congress from spending, only that having it in place and the inevitable debate that comes any time the Feds want it increased is useful in calling attention to the amount of spending and our fiscal situation in general. People paying attention to and assessing the federal government’s stewardship of our tax dollars is a good thing, IMO.

  • Mandy, let’s posit the following:

    1. Initial federal debt as a ratio of domestic product = 119% (which I believe is the post-Reconstruction peak, reached in 1945)

    2. Nominal interest rates on Treasury issues = 7.5% (as high as it ever has been for any period longer than about a decade).

    3. Rate of increase in nominal domestic product = 4.4% (near historic averages).

    4. Budget balance (excluding debt service) over the course of each ensuing business cycle = 0. Stipulating there being no banking crisis or war of national mobilization (as there was not between 1953 and 2008), all new debt is retired within six years or so, perhaps less.

    5. Time span = 40 years (near the additional life span to be expected by a typical American adult).

    What share of domestic product do you have to devote to debt service in order to retire it in toto? The answer is (I believe) 5.3%, or a 6.4% assessment on personal income. That is a way’s away from 70%.

    Not that the political class would have the focus or commitment to actually do that, of course.

  • Art, that assumes that revenue procured by taxes is going to equal the same percentage of GDP as the percentage of the tax rate. That’s the fallacy of static tax analysis; (a) it doesn’t take into account that not everything produced is technically income, so a substantial portion of Product isn’t even in play as far as income taxes go and (b) it ignores that economic behavior, and therefore taxable income, is very, very changeable given the circumstances. In reality a tax of 25% on income does not get you revenue that equals 25% GDP. the two do not equate.

    Your figures also assume quite a bit that I think won’t be happening any time soon. Like a balanced budget and a 4.4% rate of growth. What you seem to be saying is that in the best of circumstances we could devote a small percentage of GDP to debt service and get out from under it. What I’m saying is that given the current circumstances, it’s going to take a heck of a lot more than what you’re insinuating.

  • I would also like to posit a question:

    Since almost half of all Americans do not pay federal income taxes, and even using a static analysis, what additional tax rate would those of us who do pay federal income taxes have to fork over to pay off the debt under the rosy circumstances you set out above? And what would be the effect on the economy?

  • A 4.4% rate of increase in nominal gross domestic product is unremarkable. That could be (for illustration) decomposed into an annual increase of 1.3% in per capita income (in line with the post-1973 mean), a 1% annual increase in population (ditto) and a 2% annual increase in prices (a goal of the Federal Reserve at times).

    If you add an exemption sufficient to exclude the least affluent 30% of the population (and a share of the income of those more affluent), you would have to raise the marginal rate to 8 or 9%.

    My figure on personal income came from the Bureau of Economic Analysis of the federal Commerce department. That is what they are counting.

    Yeeeessss, it was a back of the envelope calculation in need of some elaboration, as adding to the comparative size of the public sector (all things being equal) reduces economic dynamism. Sovereign default also puts you on a lower growth trajectory. It will not require a marginal rate of 70% on personal income to clear the debt, or anything close to that.

  • That assumes cuts, Darwin. If we continue spending at such high rates and don’t get the “mandatory” stuff under control, it will necessitate some pretty repressive tax rates.

    I realize I’m being the humorless pedant here, but FWIW:

    – It’s not particularly necessary to pay down the national debt, the problem is with it expanding at a rate significantly faster than the growth of the economy in the long term. (After all, buying government bonds is a standard way to save money, there’s a demand for bonds, and thus there’s essentially a demand for the government to maintain some amount of debt.)

    – I agree with the point that we’d have to significantly increase tax revenues in order to maintain entitlements (and other spend levels) at current growth rates in the long term — and I am definitely against this (and thus for cuts.) But it’s not so much that people would have to be taxed at 70% to pay for current spending growth rates as that we’d have to tax the whole population rather than just a minority of it. Countries with much more government spending than ours don’t necessarily tax their rich more more than we do, the big difference is that they tax their middle class and working class more than we do.

  • I think there must be some misunderstanding about the public debt among a lot of conservatives. There is no emergency or impending catastrophe when it comes to the debt, as Art Deco has pointed out. Yes, the rate at which it is growing now is a serious concern, which is why we’re having all these discussions about fiscal responsibility. But I bet a lot of us have mortgages that are multiples of our annual incomes, and yet we manage to pay interest on that debt… Don’t let the large numbers in absolute terms alarm you. It’s the ratios and rates that tell the story in a more meaningful way, and by historical standards, we’re not even close to our highest debt/GDP ratio.

    By all means, start turning the ship around — but the iceberg is not as close as you think.

  • Art,

    Again, that assessment assumes a balanced budget. Which ain’t exactly happening any time soon. At our current rate of growth as well as the current rate of spending including the current rate of increase, I highly doubt 8-9% increase in taxes on even the percentage that do pay into the system is going to do what you imply.

    Darwin and J. Christian,

    Obviously I’d prefer that we pay down the debt. However, I am very aware that it is the debt to production ratio that is so troublesome. And while we may not be at the all time highs, it is extremely important to point out that at the high debts of Post-WWII weren’t so devastating mainly because the US was the one of the few first world nations not decimated by the war. When you’re competing with nations that must spend their resources on rebuilding instead of producing, it’s likely that your growth in production will outstrip your debt fairly quickly. But we’re obviously not in that same climate. Couple that with the ever-growing entitlements and a shrinking tax base and we’ve got serious problems. I think you guy already know that, though.

  • Oh, Darwin, about taxing the lower classes. I greatly suspect that’s where we’re going to have to end up. The tax credits that are rumored to be on the nix list are, I think, the first steps in that direction. I’m not opposed to making sure that everyone pay taxes. Frankly, I favor it. I’d prefer a flat rate with either no or very limited deductions. I worry, though, with the soak the rich rhetoric we’ve been so privy to lately, that they’re going to try and squeeze more out of small businesses and other producers.

  • Mandy, a flat tax is an old idea that in theory sounds good. But the problem always has been on what exactly do you tax. Whether you raise or lower taxes, fiddle with rates, credits and brackets, the fundamental underlying trouble with the economy is not taxes, but as Marco Rubio says, not enough taxpayers. There are more consumers than producers.

    Which goes directly to jobs. With a real unemployment rate of about 17% and the Age of the Machine and Technology ever advancing, there either will be burger flippers or engineers in the future workforce. Manufacturing is all but dead in America except for airplane making and a few other industries. And lost in all of this is rising inflation while wages either are frozen or cut, diminishing rates of person income and savings.

  • The US is the number one manufacturing power on the planet:

    http://www.msnbc.msn.com/id/41349653/

    What we are seeing is that we simply do not need a lot of workers in manufacturing to produce endless seas of product. As robotic science advances, our long term problem will be how to provide jobs for workers in an economy that needs fewer workers due to advances in technology. My solution of course is to train more surplus workers to be lawyers, as America can never have enough lawyers! 🙂

  • Again, that assessment assumes a balanced budget. Which ain’t exactly happening any time soon.

    It assumed a balanced budget because the problem under discussion was what the tax burden would be to liquidate the debt. If you intend to do that, you have to balance your books to begin with. A different object, to which Darwin refers, is the burden of reducing the significance of the debt. As long as the growth of the outstanding debt is outstripped by the growth in nominal domestic product, you can do that. You still have to balance your books better than we have been.

    There are, by the way, debt free countries. They have sovereign wealth funds. You do not need central government debt to save. There are many other instruments: savings accounts, certificates of deposit, commercial paper, municipal paper, municipal bonds, corporate bonds, foreign bonds, &c. My uncle was born in 1927, and is still in satisfactory health. In his lifetime, we have seen two banking crises, a war which incorporated a comprehensive national mobilization, and a rapid re-armament conjoined to a regional war. That would be one fiscal disaster every 21 years. I would prefer we save our public credit for these sorts of emergencies. That is when you really need it. Otherwise, balance the budget over the course of the business cycle, even if you piss off Robert Kuttner and Paul Krugman.

    When you’re competing with nations that must spend their resources on rebuilding instead of producing, it’s likely that your growth in production will outstrip your debt fairly quickly.

    The first four years after the war were quite difficult economically and there was little economic growth. The period running from 1949-54 was the most economically dynamic of the post war period, but you are still talking along the lines of production levels 10 or 15% higher than trend for the whole period. Again, the back-of-the-envelope calculation I gave you above assumed high interest rates and average rates of growth in nominal domestic product. These are variables public agencies may influence but not control.

  • Oh, Darwin, about taxing the lower classes. I greatly suspect that’s where we’re going to have to end up.

    Income distribution statistics are soft data. FWIW, the last set I looked at had it that that about 5.8% of pre-tax personal income accrued to the least affluent 30%. There isn’t a great deal of money to be had by attempting to tax them (above and beyond what payroll and sales taxes already take).

  • Age of the Machine and Technology ever advancing, there either will be burger flippers or engineers in the future workforce

    I have been hearing that for forty years. Never seems to come to pass. Funny.

  • There is no emergency or impending catastrophe when it comes to the debt, as Art Deco has pointed out.

    To clarify, I offered that it was possible and within reason upon a fiscal consolidation to retire the debt. We are at this time in an emergency, however.

  • OK, Art, I concede to a bit of hyperbole, but it seems to me that the number of jobs for skilled workers is declining. Robert Reich wrote tellining about this trend around 15 years ago.

  • Don, this your office by any chance? 🙂
    http://h1.ripway.com/golfwiscon/LawOffice.jpg

  • Ack! Sorry I disappeared. Had to get the kids in bed.

    About taxes on the lower classes, Art. I don’t propose expanding the tax base to include them as a driver of revenue. Only because I think that we all should be paying in something. It’s very easy to keep voting for people who are going to hand you a check when you don’t have any skin in the game. I see it as another incentive to pay attention. And for all the talk inthe media and political class of people paying their fair share I find it ironic that so many don’t pay anything at all.

  • I understand why you assumed a balanced budget in your figures. What I’m asking, and forgive me for not clarifying earlier, is what is the number when you include what it will take to balance the budget. That assumes that there are no spending cuts and no entitlement reforms, so the approx. $1.5 trillion deficit we’re running would be balanced with increased taxes alone (and ignoring the economic effects on growth, obviously). And let’s be honest, I don’t see any serious entitlement reform happening any time soon. I hope I’m wrong about that. But we’ve got Senators defending spending on “cowboy poetry” as necessary, so forgive me for some skepticism there.

    I’d also like to point out that for those who are not rich, like myself, a 8-9% bump in taxes would be pretty devastating. Heck, a 3% increase would be extremely painful. so getting this under control is not easy peasy. I don’t think you were necessarily implying it would be, but it is important to point out that we’re not just dealing with numbers here, but people and their lives and livelihoods.

    Off to mass, now! Have a great Sunday all.

  • The sum of expenditures was outside the scope of the problem. The problem was the additional increment necessary to service the debt. The sum of expenditures (on current consumption and debt service) would not require 70% marginal rates unless your baseline of expenditure was higher than has been the case in more than sixty years. (Given an exemption to exclude that 30% of the population, it would presuppose federal expenditures in the neighborhood of 40% of domestic product, not the 24% we suffer today).

    Whether you finance spending out of bond sales or tax assessments, you are re-directing income to common purposes (or politicians’ purposes). It is just a question of whose is re-directed and the future pressure the state faces from the bond market.

    Keep in mind also that the 9% in question is a marginal rate, not a mean rate. Your mean rate is going to depend on the size of the general exemption vis a vis your household income.

    The effect on your household expenditures from such an assessment would be influenced by how much of your budget was devoted to putting funds in money market accounts containing Treasury issues and the distribution of burdens resulting from excising deductions and special exemptions and increasing a general exemption (in addition to any tweaking you do with the rate structure).