The Economy and the Impasse in Debt Talks
http://thedianerehmshow.org/shows/2011-06-27/economy-and-impasse-debt-talks
The White House says Congress must raise the government’s borrowing limit by August 2, or it will run out of cash to pay its bills. In mid-May, the Treasury Department employed extraordinary measures to extend the deadline. Now economists warn of another financial crisis and recession if the ceiling is not lifted. But many lawmakers are demanding an agreement to reduce the federal budget deficit in return. Last week, talks led by Vice President biden on how to make those cuts broke down. Today, he and the President meet with the Senate’s Republican and Democratic leaders in a bid to break the deadlock. We discuss what’s at stake for the struggling U.S.economy.
Guests
Jared Bernstein
senior fellow, Center on Budget and Policy Priorities; former chief economist and economic policy adviser for Vice President Biden.
Kevin Hassett
director, economic policy studies, American Enterprise Institute.
Janet Hook
congressional correspondent, The Wall Street Journal.
Comments
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The US has become like a couple stuck in a bad marriage. They have irreconcilable differences and would really like to go their separate ways, but cannot afford to get a divorce. The gulf in political and economic philosophies in our country has become almost unbridgeable. The result is enormous frustration on both sides and compromises that don't really work and just push hard decisions further down the road. When I hear discussions of shared sacrifice, I'd like to know what the wealthiest in our society are prepared to do. I know what the poor and middle class are going through - lower wages, longer working hours if they are lucky enough to have a job, deferred retirement. What would your panel suggest the wealthy should be prepared to sacrifice?
Steve Smith just wrote
"When I hear discussions of shared sacrifice, I'd like to know what the wealthiest in our society are prepared to do. I know what the poor and middle class are going through - lower wages, longer working hours if they are lucky enough to have a job, deferred retirement. What would your panel suggest the wealthy should be prepared to sacrifice"
Like the wealthy pay 38% of all taxes. They are the ones that invests in new businesses that create jobs. What about all the paper money that is being printed up, it is hitting the middle class hard with the inflation it is causing.
Makes you wonder how these Asians and Latin Americans risks their lives coming to this country, not knowing the language, or culture. Working all the time and living in spartan accomodiations only to live the good life with sacrafice later on. Thats the way it was before when our forefathers came to this country.
Instead we have had decades of failed government programs that could have been done at a lower cost by non-government entities along with higher local taxes and regulations hitting the middle class.
Something I say for the middle class is that many of them do not have to pay federal income tax. 50% of the US population doese not pay income tax and there are many that get a check without paying into the system.
What this country needs is new blood, a leader that knows how to run an economy. We need somebody that has the experience in creating jobs not some intellect.
The rich pay 38% of taxes?? Seems high, UNLESS you can prove that they earn LESS than 38% of the country’s income (and please include ALL income – taxable, non-taxable, capital gains, deferred, sheltered, off-shore, income “in kind”, etc.) And, let’s be honest, EVERYBODY – even our illegals and those with no Federal tax liability – pays taxes. Sales tax, cigarette tax, gas tax, lottery tax, property tax (directly or indirectly if renting), and indirectly, all business and corporate taxes (where so you think businesses get the money to pay these taxes – from the French?).
The rich create jobs?? Hardly. If this were true why not advocate to eliminate ALL taxes on the rich? Do you know what Warren Buffet’s business model is? Find undervalued companies to buy and make them profitable by firing half the workers (same model Romney used at Bain Capital). It is NOT the rich that create jobs, but small business owners, entrepreneurs, inventors, innovators and risk-takers. True, that some of these folks are rich, but the rich folks I know are not into taking risks with their wealth by starting new businesses. And frankly, Bill Gates’ $100 works just as hard as the $100 in my mutual fund account.
So let’s answer Steve’s question? What sacrifices are the Rich and Corporate America willing to make to solve this problem? Seems like the Republicans want to balance the budget on the backs of the poor, elderly and middle class, and protect the wealth of their donor base.
"Like the wealthy pay 38% of the taxes". I bet you heard that on the multi-millionaire Rush Limbaugh Show or Fox News, run by the GOP's Roger Ailes and the billionaire Rupert Murdoch.
The wealthy DO NOT pay 38% of the taxes. The richest 10% earn over 34% of the income, and pay less than 18% of the taxes. Social Security and Medicare are taxes, which equal the receipts from the income tax, and the all the tax receipts have been spent immediately by the government for decades. This is done while IOU's are put in that drawer George W. talked about in West Virginia in 2005, "There is no money here, just IOU's!". SS/Medicare are payroll taxes on wages, the average worker pays SS on 100% of their income. The rich don't pay any SS tax on capital gains or dividends, and pay SS only a tiny fraction on their total income.
Since Ronald Reagan and Alan Greenspan raised the SS payroll tax rates to 'save SS' in the 1980's, the increased SS revenue was used to cut tax rates on the rich.The Reagan SS tax increase was the biggest bait and switch in history, raising the tax on wages and working people while cutting taxes on the rich. Now the GOP wants turn all SS receipts over to their rich backers on Wall Street.
I will listen to any predictions Mr. Hassett makes when the Dow reaches 36,000. Why does Washington media - including NPR - continue to give a forum to people who have shown that they just don't know what they are talking about? The same is true for reporting around the Iraq war eight years ago - none of the reporters or commentators who got it so wrong paid any sort of professional price for their incompetence. Instead, like Mr. Hassett's presence on this show, they are rewarded for being wrong.
The wealthiest Americans, during the 1950's and 1960s', paid 57% to 89% in federal taxes. During this same time, our country paid our WWII debt and completed the largest national infrastructure. Democrats and Republicans worked together to achieve this goal. In the 1960, a small group of people began to preach the conservative beliefs that government and taxes were bad for the economy and liberty. They began a concerted effort to destroy Americans faith in our government and promoted a belief system of extreme individualism. This evolved into the current religious fervor of the Republican party's central belief in tax reduction for the rich will create jobs and social programs are bad for the country. If Republicans followed the scientific method, their experiment has been a colossal failure. Instead of job creation in the US, there has job destruction. Why? The richest and most powerful Americans have saved their money and invested in overseas businesses while advocating for tax breaks and subsidies for their own businesses. We now have the greatest income disparity since 1929 and the middle and working class has lost money.
It is time for the wealthiest people, who have benefited the most for the tax cuts, to stop funneling millions of dollars into campaigning against tax cuts, corporate subsidies, and tax incentives to send jobs overseas.
38% is the Federal tax off income. I do not know what other taxes like State Income Tax. In New York state it is around 10% state income tax. Off course the rich have bigger homes so they pay higher property taxes.
By the way those off shore tax accounts are getting harder to find. One of those big Swiss Banks was made to turn over those names of its tax deferred clients .
Illegial do not pay property taxes unless they own homes. It is the landloads that pay property taxes. Property taxes in my state pay for schools so you cannot compare cigaratte, etc for the expense in schooling illegals. In certain cases employers do deduct federal taxes from illegals but in many cases it is under the table like contractors.
Glad you brought up Buffet. When he purchased a company he is using shareholder money to purchase those companies. Shareholders can be one share or a million shares individually or in a mutual fund.
I was thinking more in the realm of a inventor that does not have the money to bring his product or service in the market place due to money. That is where "rich people" are willing to take the risk. If successful this can add employement and tax revenues as well. This should be a simple way to explain Steve's question.
When you have half of the population taking more than they ever will contribute, the payers get tired of the takers pretty quick. Seems half the population has become the permanent cripple class, unable, unwilling to live within their means and see no problem stealing from others. It used to be considered shameful to take government welfare now it's a "right". The takers better get their minds right the free ride is coming to an end soon.
A recent Atlantic article points out that the 14th amendment forbids default and that it was written for just this situation. It further states that one reason for the impasse is a fierce ideological debate over defunding our social safety net. Both parties are doing the country a vast disservice, pretending we cannot 'afford' a civilized society when the wealth of the nation is great, though sequestered in ever fewer hands and pockets. The hard things are not so hard if we do the right things - tax fairly, promote the general welfare. BTW this is part of a global struggle for economic justice and equality.
http://www.theatlantic.com/politics/archive/2011/04/the-speech-obama-cou...
Why doesn't anyone talk about, or have data to document, the number of unemployed that will be created as the result of the demands of Republican budget cuts? Cut government spending will result in layoffs and increases in the employed.
Please explain to me how repealing "temporary" tax cuts designed to "return the surplus to the people" equals "raising" taxes. We need to return taxes to the pre-tax cut levels because the surplus is gone and we have bills to pay.
Please explain to me how repealing "temporary" tax cuts designed to "return the surplus to the people" equals "raising" taxes. We need to return taxes to the pre-tax cut levels because the surplus is gone and we have bills to pay.
Please explain to me how repealing "temporary" tax cuts designed to "return the surplus to the people" equals "raising" taxes. We need to return taxes to the pre-tax cut levels because the surplus is gone and we have bills to pay.
Catamaran:
Have you not read the stats in the Dept of Labor of how much the rich paid on income? It is there. Look it up. What many liberals do not know that the biggest amount of income as "a group" is the middle class. What the feds do not tax, the state and local get their share. Just look how this Administration is looking to borrow off our 401k due to a large amount of money sitting there. Geither is looking at borrowing on Federal pension in the case that a budget resolution is not passed.
Borrowing from SS started in 1966 to pay for Vietman and The Great Society. This is nothing new. Just put in those IOU just like federal pensions.
Our corporation rates when dealing with foreign entities is the highest. Even Obama admitted this during the debates.
Listen well Americans, if you are still pretending to be a success these are your "talking points" you must be repeating before your peers. Look, if you check income distribution since 2000 you will see the gap is accelerating and it is moving upward. The top ten percent? Heck, the top 400 households! That's whose starting to take in and own everything, in a society of 310 million. Something is way wrong with this old casino.
But it's only a casino folks. These debts exist only on paper and are derived from speculating in assets and future outcomes, not real goods or the fair value of labor. How can ever government (almost) in the world be broke when people are working harder than ever. Answer: It's a trick. It's the flaw the Maestro found in the social contract which says rich guys can gamble all they want and never lose because the people will pay in the end, if we scare 'em.
Democrats and Republicans both tell 25% of the truth but the other 50% about how corporatism and capitalism have imploded is kept out of the MSM. The most important material truth today is the shortage of grain even as we make gasohol, and the second most important material truth is the isotopes from Fukishima circulating around the globe, and the third most important truth is the wild weather from an overheated atmosphere, and the fourth most important material truth is the pending collapse of oceanic life. Money doesn't mean much anymore. You can't eat it and it has proven incapable of fixing anything.
A speaker suggested that making cuts without increases in revenue would force severe cuts. He does not understand why some refuse to discuss revenue increases because he does not understand that the United States has unfortunately undertaken spending that is unsustainable regardless of the revenue brought in. The problem is not revenue, it is expenditures. Adding revenues simply aggravates the problem, making it seem that the spending can continue.
Yes, painful cuts must be made, mostly in social security and medicare. That is what happens when the government becomes too large. The government should probably get out of the annuity and health insurance business over say fifty years. Cuts in discretionary programs are useless and unnecessary.
It could be worse. Consider Greece. Their condition will be ours unless the spending contracts.
I was shocked to find when I was doing the statistical searches that only about 11 million people are receiving Social Security Disability benefits. (I am eligible but do not need them and have never applied.) I think this number is quite small considering how poorly most employees are treated in this blunderful country. People at the bottom are not taking so much as they are contributing at a depressed return. After all, we are working without much of a net.
We have a built a society that does not provide enough income for the majority to live without some kind of assistance, either during their work years or certainly when they are retired. If we want a civilized society, we need to rethink our economic models. The wealthy did not achieve their status alone, but through the advantages provided by this country - infrastructure, education, government programs - and also through the hard work of their employees. The fact that many people in this country do not earn a living wage, have secure a secure retirement, and still live in fear of penury due illness is a result of conservative policies of the last thirty years.
Terrence,
Please ask your panel where the dollars to pay taxes or buy bonds comes from. By logic the dollars are first issued by the federal government through spending. The federal government is not dependent of taxes or bond sales for revenue - it creates the currency that provides the means for citizens to pay taxes or buy bonds.
The debt ceiling (circa 1917) and mandate to issue debt with deficit spending are relics of the gold standard when I spending capability was constrained by the amount of gold we had. We have a fiat currency now and those artificial constraints should be repealed at once. An issuer of fiat currency can always pay for anything billed in that currency.
The constraining mandates are like tying your shoe laces together and saying you can't walk. Our only practical constraint is inflation. With the present level of unemployment and underutilized productive capacity we're far from that being a concern.
The rich congressmen walking out on taxing the rich is like taking all my toys home because I want to play only with the rich contributors. Why is NPR having people who do not address that if we tax the rich at a higher rate our problem with the economy will ease.
The conservative speakers shifts from the elephant in the room and talk negatively about the Democrat's programs giving more to the poor and the middle class. The rich and corporations get lowers rates even though they save the money and do not spend it or create jobs they just send the jobs overseas and continue to accumulate great wealth.
Middle class what is wrong with this picture as you sink into the muck? Health insurance, food programs for the poor, and all social programs helpful to the middle class can be cut but the rich get tax cuts. The rich do have enough money to pay for social programs but they are greedy and want to take all they can to feed their greed.
Shame on the intellectuals on your program who shift the discussion away from solving the problem and onto making a case for their rich contributors.
Income tax is a great way to help our national debt problem, but how do you tax someone that doesn’t have a job or earns only poverty status. Create jobs, at a livable wage and you will have something to tax. It is a no brainer. How can you tax us if we don’t have jobs, a living wage? I also feel that outsourcing jobs is Not the the entire cause of our loss of employment. Has anyone ever done a study to determine how many jobs were lost with the information age, with computers and IT? In some ways I think this is the greatest contributor to our economic troubles. They used to say we were going from a manufacturing economy to a service economy. How come when I went to Krogers Grocery last night they had only one cashier for all of us waiting? Technology enabled them to increase their profits and hire minimal staff. Too many businesses are moving in this direction. If we all had a living wage income, most problems would be solved. A very simple solution.
Calling Social Security contributions a tax is just wrong. It is a forced savings. That is why it is called a contribution raher than a tax by the program. Raising the income level on which contributions are required would increase savings, not be a tax increase. It adds to national savings now to be paid to savers later.
If such contributions were required from people with higher income, we would be increasing public revenues until benefits were drawn down later. One could actually increase revenues and deposit them in a true "lock box" for investments in true equities rather than going automatically to be used for federal budgetary funding. If these additional contributions were made "voluntary" into a tax free fund, savings, investments, and deficit financing of the deficit would be relieved.
Although raising the taxes on rich won't solve the deficit, however, it will help. It will also feel as if there is actually 'shared sacrifice'. It's hard to believe in 'shared sacrifice' when the wealthiest are getting wealthier while we have a high unemployment rate; when corporations fire staff while the top executives receive huge compensation package taxed at the capital gains rate of 15%; when oil, gas, and coal companies are receiving huge subsidies while fighting emerging energy businesses that will reduce the pollution levels in our country; while teachers, public employees are being demonized and blamed for the current state fiscal crisis; while seniors are paying higher and higher property taxes; while women and children health care programs funding is being cut; transportation costs are rising; energy costs are rising.
The wealthiest and corporations benefit from our national infrastructure system. They use the transportation system to transport their goods; they profit from NASA and military research and development i.e. cellular phones, the internet; and our educational system. They lobby for more and more tax deductions that only apply to them. They wouldn't be able to conduct international business without a strong Defense system. Yet, people labor under the delusion that giving these people tax breaks is going to create business. It hasn't.
Our tax system is not just. It favors the top 1% and even more so the top 0.01% or 400 households. There is something wrong with our tax policy when more and more wealth is concentrated among a very few percentage of Americans. It is a sign that greed has become our God.
I find it very troubling the number of people who called in or write here thinking it is just fine for government to create government jobs for the benefit of the economy. To the think there is no problem for government to steal money from the economy to create make work jobs has to be the ultimate in short sighted thinking. Truly a desperate thought by a crippled mind.
Charles, you watch too much Fox TV. This country exists to take care of everyone not just the top 1%. Fox is a far right talking head group that ignores the majority of the citizens of the country and especially ignores the poor and middle class.
I hope some rich person can come in and save the LA Dodgers. They just might declare bankruptcy. Don't think that the State of California has the funds to bail them out.
But them why feel sorry for the players, they are overpaid millionaires.
Debt ceiling was raised 7 TIMES (!) applauded by GOP each time during W years- how else could tax breaks for wealthy have been afforded?? 3 years after Bush tax cuts were signed into law American employment was lower than before the cuts. During W, nation’s job base grew at by far slowest pace in 50+ years- this at a time when America was on a mortgage/credit-induced spending frenzy. When consumers spend, goods are produced; stimulating production- therefore job growth. W policies cleverly managed to reverse this basic law of economics, so the only people benefiting during this extraordinary period were the wealthy, until what steadily has emerged is a distorted political system run for and by the few. Founding fathers would be ashamed. The situation is very similar to how the nation stood before Great Depression. Greenspan following collapse in testimony to congress admitted he had been wrong in his continuous mantra of “allowing markets to regulate themselves” -little late weren’t you there Al?.
It is in some ways unfortunate that through extraordinary measures, 2nd Great depression has been averted, because now political will (and sanity) is not there to make some of the great structural changes necessary- including tax increases for wealthy, regulations to prevent majority from being screwed by runaway nefarious corporate interests, and improvement of decaying infrastructure. The result at best will be high unemployment for a LONG time. This of course seems to fall into general GOP strategy, who by various extensive PR tactics on a generally uninformed public are somehow blaming last 10 years demise on Dems, instead of on disastrous 40 years of Borrow and Spend GOP policy.
There was more job creation in 8 years under Clinton then 20 years of Reagan, Bush 1, and W combined.
Grady Lee- You actually came through with some thought provoking comments that made some sense today.
’preciate it.
It should have been alarming to sensible people when the ghetto chimed in on air in full ebonics spouting the democratic line on wealth redistribution using the same words you put yourself to sleep with.
Clinton, hero of the left. Too bad he was forced by Ross Perot and the take over of congress by republicans to take a fiscally sound path that lead to the prosperity. Honestly, how much credit does the left deserve when your guy was doing anything to save his job including enacting policies that you cradle to grave liberals would now and then did find reprehensible. That oval office B.J. was the best thing that could have happened for the country.