Debate Over Raising the Debt Ceiling
http://thedianerehmshow.org/shows/2011-04-20/debate-over-raising-debt-ceiling
The nation’s next big budget battle is shaping up over the debt ceiling. Earlier this week, the ratings agency Standard & Poor’s changed its outlook for U.S. government debt from stable to negative. And when it did, it added new urgency to the debate. The U.S. has a current debt limit of $14.3 trillion. Economists predict that number will be reached in mid-May. The White House wants Congress to increase the limit immediately. But that support may come with a high price tag. House Majority Leader Eric Cantor says Republicans want to see serious reforms. We look at the political debate over raising the debt ceiling and its economic repercussions.
Guests
David Smick
global macroeconomic advisor, founder and editor of The International Economy magazine and author of The World Is Curved: Hidden Dangers to the Global Economy
John Harwood
chief Washington correspondent for CNBC; reporter, "The New York Times;" coauthor with Jerry Seib of "Pennsylvania Avenue, Profiles in Backroom Power"
Dean Baker
co-director of the Center for Economic and Policy Research and author of "False Profits: Recovering from the Bubble Economy"
John Feehery
president of of Communications and Director of Government Affairs for Quinn Gillespie Communications, and a former congressional staffer for Bob Michel, Tom DeLay, and Denny Hastert
Mary Miller
assistant Treasury Secretary for Financial Markets
Comments
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We should raise our debt limit for now (meaning not cut our budget as the GOP wants). It is critical at this time so our recovery continues. Plus, it shouldn't hurt our 'credit rating' much.
Case in point
US 'income' = ~$14.6 trillion
US debt = ~$14.2 trillion and that is much better then the average household.
Plus, only ~$9.5 trillion is PUBLIC DEBT, the rest is Intragovernmental holdings.
Average household income of ~$40K
Ave HHLD debt of ~$117K.
If that household had the capabilities similar to what the whole US has then they would have a TOP Credit Score and be flooded with offers for more credit.
The US has great potential and the world knows that we will be 'good' for the loans no matter the short term crisis we are in.
One IF - If the GOP/Tea Party have their way, we will lose that potential as they try to return the US government to the time of our Founders. We have changed, we are not able to do the things our Founders did - it's not that simple any more.
Thanks (Stephen King, USAF Lt Col retired in 07 after 28+ years).
I like what Ron Paul said on MSNBC last night as a simple answer to Chris Matthews on this topic. Congressman Paul said that we were told of the coming doom in 2008 that our economic survival depended on bailing out Wall Street...................yes Goldman, CITI, BOA, WELLS and all the others took money right out of the Fed window and lined their wallets...........while those on Main Street with foreclosures, worthless paper and underwater mortgages still are in pain. What changed?
It is time to make a stand and not keep this artifical stock market bubble going while the Fed preints money in the trillions!
Barack Obama and Ron Paul are useful only because they are small-minded men with little imagination. The national debt, the deficit and money itself are abstractions in a Monopoly game. The national debt is, in fact, ultimately owed to the same class of wealthy people who refuse to pay taxes, disobey laws and regulations, and own most everything. The political system has now become their toy thanks in part to Supreme Court rulings. Until the larger structural problem of wealth and income concentration, and the rules that support that trend, are undone neither the economy nor the government will ever work again. The money game means that opportunity is restricted to a very few and that the rest of us are idled, exploited, misdirected and disinformed. This is fascism where the government thinks only of business success and volume to the detriment of human need and cultural vitality. Look folks, Charlie Sheen's madness and frustration are a bellweather of cascade collapse. People who do not care anymore can't work effectively. Dissonance and contradiction are building up like CO2. If we don't reconfigure capitalism she's gonna blow. We're killing the planet, and about 3 billion hungry people currently. Nothing we claim to be doing can be right.
How about starting with The Fed and that ridiculous defense budget, especially focusing on that meaningless sham of a "war" in Iraq?
How much money would be saved if we just eliminated the idiotic rule that if you don't use all of the money you are budgeted, then your budget get slashed next year. This incentives spending on unnecessary items and discourages savings. I have worked for years with government contracts and at the end of every one, there was a push to spend all the money allocated because we didn't want to have the budget cut in the next year.
S&P's problem on mortgage-backed securities was essentially overly-optimistic assumptions; so if they are making the same mistake here, it would be that they should have downgraded the US long ago.
If the Treasury can't print more money to pay the debt that comes do, then the US will default. The Treasury has to answer to Congress.
There is nothing so temporary as a permanent debt limit. The debt limit will be raised again as it has everytime we get close to it. But Americans are paying attention to how much of our annual taxes are absorbed by interest payments and we recognize that this cannot go on.
Investors will continue to buy US debt until they don't, and you don't want to be around when that happens.
Quoting Alan Greenspan, this is how low people have sunk. The guy got us the internet and housing bubbles and has completely lost any credibility.
Who cares about the national debt? Foreigners and investment bankers mostly. It seems so far removed from my daily life as a retired poor person. Don't forget that the USA has plenty of assets that far outweigh the debts, otherwise, investors wouldn't still be buying our bonds. Why not sell Alaska and Hawaii and pay off the debt? I had to sell my possessions to pay off my debt. Why not the country? It's been done throughout history. Remember that we bought Alaska and we did the Louisiana purchase to help Russia and France with their national debt.
Also, if we just stopped our quest for empire and oil wars abroad, we could reduce the debt to nothing, to a surplus, and have a higher standard of living, along with a better standing around the world.
Alan Greenspan argued on the Sunday talk shows that the debt limit ceiling should simply be done away with.
As your panel just noted... This is money all ready spent. Not money that will be spent in the future.
The "leverage" notion assumes that you can loose... we can't...
Baker just made this point
I have a question: what can we, an average family of 3,with a combined income in the 6 figures, living in the suburbs, do to help the deficit? We are seriously considering sending back our tax refund as to be honest, we do not need that extra $800-some dollars, but we want to know how that the $800 is being used correctly. Would love to have suggestions from the current guests and anyone else.
A family in Oklahoma City, OK
The final result of the continuous war economy that requires immense expenditures is wealth concentration with the eventual total economic enslavement of 99+% of the American population where ALL tax revenues go to interest payments transferred directly from wage earners to those wealthy <1% banks, corporations and individuals that hold these debt obligations. This is by design I believe.
The top 10% of wage earners pay 70% of the government's income tax receipts. Don't let your envy drive tax policy.
I find your guest's characterization of how we got to this point -- our huge deficit -- disingenuous. We were in surplus at the end of the Clinton administration. Then the Bush administration pursued some entirely irresponsible financial policies, such as conducting two wars off budget and initiating an enormously expensive addition to Medicare (Part D, the prescription drug program -- and even tying the government's hands and not allowing us to negotiate for a better deal), and then borrowing the money to pay for all of it. Then the unsustainable Bush tax cuts even for wealthy people who didn't need them contributed even more to the problem. These tax policies led to a precipitous decline in federal revenues of 30% from 2000 to 2010. All of it led to the swing from billions in surplus to billions in deficit in the course of the Bush administration.
See this link for the statistics on the fall in revenues.
http://www.tax.com/taxcom/taxblog.nsf/Permalink/UBEN-8EL2Y8?OpenDocument
You don't balance a budget on cuts alone. The trivial 14% of the budget (non-defense, discretionary) that the US House is toying with contains programs VITAL to the American people's health and well-being, and I deeply resent House Republican leadership's unfairness and cruelty.
Of course we must raise the debt ceiling. And we must also act responsibly -- all of us including millionaires and billionaires -- and pay our fair share for living in this great country.
I think it's ironic that we punish people like Bernie Maddoff, while he was only reciprocating what our Government practices in running our Government as one giant Ponzi Scheme.
scolad: You are an admirable person for your insight. I share my disposable income with worthy creative people who are down on their luck by sponsoring documentary film production. I do not expect any return and can even write it off as a loss to get more tax credits. I am a former film actor. I suggest you think of some endeavor you especially enjoy and use your money to involve deserving poor people in it. It should be something you have experience managing or doing.
$800 could sponsor a community garden, buy recreational equipment to be used by your chosen recipients, buy media you deem exceptional for your local library, or buy a used car for a single mother. Your wife or offspring may have a favorite cause. Why run the money back through government or a charity where a portion will be lost to overhead. If individualism works well anywhere it is in philanthropy. Giving should give both the donor and recipient pleasure. My wife just bought three bee hives for our community garden and is being instructed in apiary by an elderly expert. Other gardeners are also involved and understand how this will intensify pollination in our neighborhood.
To resolve our financial problems, we need to start acting like adults not spoiled children with lenient parents. For the last forty years, the American public has been subject to a propaganda campaign that government and taxes are inherently against our individual interests. We have been told that 'greed' is good by being told that social safety programs, regulation of the banking, oil & gas industry, chemical industries, public health interests are unnecessary and against the country's best interests. We have been told that reducing taxes on the rich would result in more jobs while the opposite has happened. We have led to believe that we can wage wars without any financial or personal sacrifice. We have been told that we have 'right's without 'responsibility. We want clean water, waste treatment, safe roads and bridges, and other public infrastructure programs without paying for them.
After WWII we were left with enormous debt for the war and the rebuilding of Europe and Japan. By the 1970s, we paid off our war debt, completed the largest infrastructure projects in our nation's history and paid for the education & technical training of Veterans. This resulted in the largest increase in GNP in our nation's history. What was different? We shared a national belief in shared sacrifice to pay down our debt while building our national infrastructure while everyone paid higher taxes particularly our wealthiest citizens.
We have the greatest income disparity in our country since 1929. We don't lack of capital in this country but a national belief that greed is good. It's not. While reducing taxes on our top wage-earners, attacking unions and public sector workers, allowing private health insurance companies to dictate the national health care policy resulting in record costs for consumers and record profits for their top executives, we have seen a loss of jobs, reduced pay for the majority of Americans, a failing national infrastructure system, and about 50% of our fellow citizens without health insurance. It's time for us to begin talking about what's best for the whole not the few. We need to raise taxes, revise our tax system to eliminate tax loopholes that cater to the rich, and make cuts that don't hurt the poor and the working poor. That is shared sacrifice. Let's start acting like compassionate and mature adults not selfish children.
I can't listen anymore to this Social Darwinist sales pitch, Diane. It only illustrates who the pundits serve. Goodbye, my friend Diane, until another day. You need some different voices.
I have told all my friends that raising the debt ceiling is just as an example that I have giving is that if I have bought something two years ago and it cost a lot more because you have not paid. We need to have the govt do it just as any individual. In the hindsight we all do pay through tax payments. My question will be that if the ceiling debt is raised to some extent that will affect non governmental or charitable organisations how will we be able to help people in disaster situation or afford to react to other natural or political situation that might be detrimental to the united states.
First of all, the two wars were not off-budget and hardly a secret to Congress.
Ditto for Medicare Part D which has actually come in lower than expected in terms of costs.
Congress went Democratic in 06 & the White House in 08, and the borrowing has done nothing but go up. Obama and the Dems signed off on not increasing the tax rates last year before the Repubs took control of the House.
2000 was the peak internet bubble year when capital gains tax revenues hit their highest level ever. 2010 was their trough. Nice cherry-picking.
Spending cuts would be the place to start, just like every American family has had to. Everyone will be hurt.
Don't let your envy dictate tax policy.
I hear the cries that this is the wrong time to make cuts in government spending and it seems it is always the wrong time. What happens when we have to make bigger cuts when not if we are maxed out like Greece and the economy will also be in the dumps. It will only get harder not easier to get the countries books in order.
I have told all my friends that raising the debt ceiling is just as an example that I have giving is that if I have bought something two years ago and it cost a lot more because you have not paid. We need to have the govt do it just as any individual. In the hindsight we all do pay through tax payments. My question will be that if the ceiling debt is raised to some extent that will affect non governmental or charitable organisations how will we be able to help people in disaster situation or afford to react to other natural or political situation that might be detrimental to the united states.
Where do the dollars come from to pay taxes or buy government bonds? The government. Specifically dollars issued through government spending.
The idea that a sovereign government that issues its own fiat currency can go broke is patently false.
The bloated Pentagon budget and the cost of the multiple wars are the biggest strain on the discretionary budget. The Pentagon cannot pass an audit and account for the tax dollars it spends and has not been able to do so for over two decades. If that were the case for any other department, say the EPA, the Republicans/Tea Party would demand that its budget be zeroed out. It's time for the Pentagon to share the sacrifice, cut some of their toys (the nonfunctional Star Wars missile defense at $11B per year would be a good start) and stop being a trough of corporate welfare for Lockheed Martin, Boeing, Northrop Grumman, Raytheon etc, etc etc.
In the United States at the end of 2001, 10% of the population owned 71% of the nation's wealth. The Bush tax cuts have directed significantly more towards the rich since then. Even going by the 2001 figures, the top 10% pays less towards taxes then their proportionate command of the country's wealth. Don't let your obeisance to the wealthy drive tax policy.
Tax cuts don't direct anything; they allow people to keep more of what they earn.
Wealth is a funtion of assets and liabilities. We should all be working to accumulate asets and reduce liabilitie; that may mean foregoing the big screen TV, cable, high speed internet, new cars every two years, resort vacations, Starbucks, meals out ... Our government should be on the same diet.
Diane: You closed the show by asking who would be the winner. Must debates of this nature always be framed in terms of winners and losers? It only seems to reinforce the us vs. them mindset of Washington, D.C.
hainc and Stosch725. Are you guys on the Republican mailing list of talking points? "Don't let ______ drive tax policy" It isn't envy that drives my desire to see the wealthy pay more, it is simple economics. A 1% increase in taxes can be absorbed by the millionaire because the basics have long been taken care of. The millionaire (or billionaire) is not living from paycheck to paycheck as myself and most of the country is. A 1% increase on my taxes would be catastrophic, in that I would have to make choices that would effect the whole economy, like not make mortgage, or pay the auto loan, etc. The bailout should go to the bottom who will spend it at the local grocery store, or mall, or car dealership, and that will always spur job creation.
After WWII, the greatest period of economic growth, was created by the middle class, NOT the upper class. Taxes were low for them and they spent the money. Trickle down doesn't work. Bubble up does.
During the most dificult times in this country its leaders had fought against the enemy number one: the financial interests acting behind the scenes of american politics to either adopt or maintain a national bank. Now, if this bank were at least controlled by the people, as it was supposed to be, then Congress had the obligation to keep this bank solvent and open to scrutiny to be audited. So happened that this bank is not national, is bursting at the seams with money, is not open and can not be audited! What happpened was that this bank is controlled NOT by the people through Congress but by private interests WITH Congress. President Jackson abolished it, Lincoln steered away from it to finance the war printing the greenback, and during all of history all those who stood for freedom and democracy spoke blatantly against this bank as being a strong arm that held people in slavery. Finally in 1913 the FED came into being after it was planned out at Jeckill Island by the big financial interests, and Congress came along with it.
Today it is the one institutuin calling the shots in america's life when debt is astronomical enslaving te nation. Congress does not controll it, does not have the power or the willingness to audit it, and the people just sit by in a daze and helpless. Both political parties are in this to the hilt and do not offer a solution. The Tea Party is a joke, the Blue Dogs are running after their tails, while money is being printed, squandered or distributed to those in control, but the people is holding the ever increasing debt with interest on top. This is insanity! This is not America!
The only way to stop debt is to delete the Federal Reserve. The fact is the Federal Reserve is as "Federal" as Federal Express. The Federal Reserve is a private for-profit corporation that prints federal reserve notes as currency for the United States Government AT INTEREST. The debt comes from printing money - the federal government owes interest to the private banking corporation Federal Reserve. Without debt there can be no currency under this central banking system.
Our Founding Fathers went to war against the "Mother Country" in part because the King ordered the colonies to use the King's bank for currency - at interest - rather than allow the colonies to use "Green Backs" which the colonies had created debt free.
Sad our education system has deleted so much real history to keep We-The-People in the dark (Ages).
Our nation was built because people paid into the federal coffers when we could see some of those tax dollars come back to us in highways, bridges, parks and forests.
The past twenty or thirty years we have only seen our jobs be exported, industry eliminated and it seems all the resources we contribute go overseas in war and rebuilding or subsidies in many cases going to the "enemy" we are fighting in $150 million+ per day wars.
People are willing to support government more when they see where their support is going and that support does something for them.
We don't need to cut "entitlements" (I find this term insulting when relating to people blow the poverty level) by reducing funding. We need to find a way to lower the unemployment level so these people that need the help of welfare programs can enter the workforce and become part of the taxpaying citizens they WANT to become.