debt ceiling concerns.

[larig]

so, I think DH and I are taking all of our money out of the money market today...I don't trust that the republicans are going to acquiesce and do the right thing with regard to our debt ceiling, so I fear that our account will lose its value. Is anyone else taking similar precautions?

[mommylamb]

I was actually going to call my financial adviser today and talk to him about what we should do. It's a scary prospect.

[egoldber]

Not taking any money out, but we have a bunch of money we need to re-invest and our financial advisor suggested waiting until after this gets resolved before putting the money back in the market.

I can't believe they are playing chicken over this.

[mommylamb]

Unfortunately, there is a sizable contingent of House Republicans who just don't believe that defaulting is as dangerous as every economist and most other rational people seem to think it is. And there is an unwillingness to compromise at all on new revenues, even when the President dangles major cuts to entitlement programs in front of them. It's really scary.

[larig]

we have our rainy day fund (a really significant amount) in a money market fund--we're trying to research what to do. It's scary. I'm tired of people playing chicken with my financial future.

[brittone2]

If anyone is trying to get up to speed on this, Diane Rehm's current show is on this topic. I'm listening to it streaming through WUNC via iTunes (10 am segment).

Just tossing that out there for anyone interested. It will be available tomorrow as a podcast if you don't catch it today and want to hear it later this week.

[minnie-zb]

It's enough to make a person nauseous. I'm honestly sick of all politicians and what is happening to our country. It really boggles the mind.

[larig]

great, thanks. I'll catch it now!

[arivecchi]

Interesting article on Boehner:

http://www.nytimes.com/2011/07/11/us/politics/11boehner.html?_r=1&hp

[egoldber]

Boehner is really between a rock and a hard place on this.

[mommylamb]

Boehner is really between a rock and a hard place on this.

That's very true. He can't control his caucus and a lot of them don't trust him.

[scrooks]

so, I think DH and I are taking all of our money out of the money market today...I don't trust that the republicans are going to acquiesce and do the right thing with regard to our debt ceiling, so I fear that our account will lose its value. Is anyone else taking similar precautions?

I'm confused (I completely admit to not being up to speed on this topic). Are you taking your money out of a money market savings/ checking type of account or the stock market?

[HIU8]

I've got money tied up in several places (it's all we have--it's not much). So, I will be attempting to get it if I need to (to scared to think about it though).

[larig]

I'm confused (I completely admit to not being up to speed on this topic). Are you taking your money out of a money market savings/ checking type of account or the stock market?

money markets are not guaranteed to retain their value, nor are the backed by the FDIC. If the US dollar is ruined by the debt ceiling not being lifted who knows what will happen. Shares of money market accounts, which traditionally are always $1 may no longer be. This hasn't happened before, there's no telling what will be the result.

I don't sense that the public is as concerned about this as they should be, or even aware of the dangers.

I am not talking about a bank savings account which would be FDIC insured, but something at Vanguard, etc. I am not talking about stocks or stock index funds, etc.

we will likely move from place like vanguard money market to several 5 star rated bank savings accounts. This is money that we want and need to keep liquid.

[marymoo86]

money markets are not guaranteed to retain their value, nor are the backed by the FDIC. If the US dollar is ruined by the debt ceiling not being lifted who knows what will happen. Shares of money market accounts, which traditionally are always $1 may no longer be. This hasn't happened before, there's no telling what will be the result.

I don't sense that the public is as concerned about this as they should be, or even aware of the dangers.

I am not talking about a bank savings account which would be FDIC insured, but something at Vanguard, etc. I am not talking about stocks or stock index funds, etc.

we will likely move from place like vanguard money market to several 5 star rated bank savings accounts. This is money that we want and need to keep liquid.

Just curious as to why you would be holding this type of investment rather than using an FDIC insured banking MM account product.

[maestramommy]

Just curious as to why you would be holding this type of investment rather than using an FDIC insured banking MM account product.

We have some savings in a money market. I didn't know they aren't insured though. Is that true across the board?

[egoldber]

I think all (most?) money market accounts are FDIC insured.

http://www.fdic.gov/consumers/consumer/information/fdiciorn.html

[secchick]

Just curious as to why you would be holding this type of investment rather than using an FDIC insured banking MM account product.

Because those are the primary options for cash accounts that accompany brokerage accounts. Ours is in a fairly diversified tax free municipal money market, and I have reviewed the diversification and credit of the investments and am comfortable leaving them there. I really wouldn't worry about any money market fund breaking the buck after the guarantees that were put in place after the Primary Fund did following the Lehman collapse.

[mommylamb]

I would be most concerned for personal money issues if I were heavily invested in government treasury bonds (which I'm not) or if I had any adjustable rate debt. People with ARMs could really get hurt by this. But indirectly, the dollar falling fast could have a major impact on lots of areas of the economy. I'm sure there's a lot more that I just don't understand.

[marymoo86]

Because those are the primary options for cash accounts that accompany brokerage accounts. Ours is in a fairly diversified tax free municipal money market, and I have reviewed the diversification and credit of the investments and am comfortable leaving them there. I really wouldn't worry about any money market fund breaking the buck after the guarantees that were put in place after the Primary Fund did following the Lehman collapse.

I understand that but OP made it seem like that was the primary mode of investment not that it was a hold for ongoing investments or perhaps I just misunderstood

IMO - both sides are at issue here not just the Republicans. If Democrats are able to keep status quo, it goes a long way toward election season.

[larig]

I understand that but OP made it seem like that was the primary mode of investment not that it was a hold for ongoing investments or perhaps I just misunderstood

IMO - both sides are at issue here not just the Republicans. If Democrats are able to keep status quo, it goes a long way toward election season.

It is where we keep a big stash of cash that accompanies our other investments, as PP suggested. It's convenience, in part, for sure. Its security never concerned me until now. Yes, it's a lot of cash, but we like to be able to easily put it in and out of the market as we see fit--plus the yield has been better at our investment company.

I didn't mean to start a political debate, but when the GOP have revenue increases off the table entirely, it certainly seems as if they are the ones holding up the negotiations.

[mommylamb]

I didn't mean to start a political debate, but when the GOP have revenue increases off the table entirely, it certainly seems as if they are the ones holding up the negotiations.
:yeahthat: A deal was put on the table that included $4 trillion in spending cuts, including major cuts to entitlement programs, and Boehner walked away from it because it would have required $1 trillion in new revenues. Now, I don't blame Boehner for that because if he can't muster the votes, he can't muster the votes.

[scrooks]

I think all (most?) money market accounts are FDIC insured.

http://www.fdic.gov/consumers/consumer/information/fdiciorn.html

That's what i was thinking. So if money is in a savings account type money market or under your mattress a dollar is a dollar. No matter what a dollar is worth.

[KrisM]

I think all (most?) money market accounts are FDIC insured.

http://www.fdic.gov/consumers/consumer/information/fdiciorn.html

Pretty sure it'll depend on the type of money market. Mutual fund money market funds aren't the same as those at banks. Read the 2nd paragraph under Mutual Funds in the above link.

[janine]

Um, there is no reason to panic and pull money out of anywhere?!

This is politicking, of course they'll cut a deal just in time. This is a game of chicken (on both sides) and everone knows it. Just go about your business and things will be just fine. And I"m unclear how you think Republicans are going to somehow endanger your money market, which is about as stable investment as you can get. The horrendous debt debacle we find ourselves is has been worsened by recent unrestrained spending.

And revenue increases off the table means no tax increases. Which is exactly the mandate the Republicans got voted in on in RESPONSE to the out of control spending which occured in the past 2 years (with a Democratic controlled house,senate and WH).

[BabyBearsMom]

I would be most concerned for personal money issues if I were heavily invested in government treasury bonds (which I'm not) or if I had any adjustable rate debt. People with ARMs could really get hurt by this. But indirectly, the dollar falling fast could have a major impact on lots of areas of the economy. I'm sure there's a lot more that I just don't understand.

:yeahthat: The really horrible thing about this is that the people who invest heavily in government treasury bonds tend to be those who are retired or close to retirement. T-bonds are supposed to be the low-risk investment and these are the people who will need the money the soonest. Very sad.

[eh613c]

Um, there is no reason to panic and pull money out of anywhere?!

This is politicking, of course they'll cut a deal just in time. This is a game of chicken (on both sides) and everone knows it. Just go about your business and things will be just fine. And I"m unclear how you think Republicans are going to somehow endanger your money market, which is about as stable investment as you can get. The horrendous debt debacle we find ourselves is has been worsened by recent unrestrained spending.

And revenue increases off the table means no tax increases. Which is exactly the mandate the Republicans got voted in on in RESPONSE to the out of control spending which occured in the past 2 years (with a Democratic controlled house,senate and WH).

:yeahthat:

[niccig]

And revenue increases off the table means no tax increases. Which is exactly the mandate the Republicans got voted in on in ).

BUT, they don't control both houses. If they did, then fine you've got a mandate to not increase taxes. Neither party controls both houses, neither party has a mandate, both sides have to compromise.

I've been reading some articles that willingness to work on a solution was much more evident in congresses of the previous decade or two. Now it's, this is my side, that's your side and we'll just keep arguing the same line and NOTHING gets accomplished...that's the real reason we're in such a mess. No one makes any decisions to DO something, as they're all trying to CYA, so they get re-elected or keep their prominent position within the party. And this is done by both sides. So, the can keeps getting kicked further down the road. Just watch, they'll be all this grandstanding and then at last minute they'll agree to something, but it'll be a temporary stop-gap measure and in 1-2 years they'll have to come back and rehash it all over again.

[kijip]

It is important to remember that games of chicken do not always end with a winner and a loser. Frequently they end with two losers, both dead from an avoidable head on collision.

This is reckless not to negotiate with give and take. No party has a mandate. We all expect our leaders to govern and sometimes that means actually working rather than jockeying for political position. I would not want to be Rep. Boehner right now. Nor would I want to be Pres. Obama. God have mercy on us all should the unthinkable happen.

[larig]

Um, there is no reason to panic and pull money out of anywhere?!

This is politicking, of course they'll cut a deal just in time. This is a game of chicken (on both sides) and everone knows it. Just go about your business and things will be just fine. And I"m unclear how you think Republicans are going to somehow endanger your money market, which is about as stable investment as you can get. The horrendous debt debacle we find ourselves is has been worsened by recent unrestrained spending.

And revenue increases off the table means no tax increases. Which is exactly the mandate the Republicans got voted in on in RESPONSE to the out of control spending which occured in the past 2 years (with a Democratic controlled house,senate and WH).

It's like real life, if you are spending too much money, you can do 2 things. spend less or make more. It seems to me if you're serious about reducing your debt you'd be trying to do both things at once.

Also, it seems like selective memory to only point to the spending in the past two years, btw. Bush and the congress lowered taxes on the wealthy, and then started 2 hugely expensive wars.

[vonfirmath]

It's like real life, if you are spending too much money, you can do 2 things. spend less or make more. It seems to me if you're serious about reducing your debt you'd be trying to do both things at once.

In RL you don't go to your employer though and say "Give me a raise"

In RL, when you try to "balance the budget" you do it by spending less money. Not giving yourself permission to borrow more.

[larig]

In RL you don't go to your employer though and say "Give me a raise"

In RL, when you try to "balance the budget" you do it by spending less money. Not giving yourself permission to borrow more.

So, you're opposed to raising the debt ceiling?

[kijip]

In RL you don't go to your employer though and say "Give me a raise"

In RL, when you try to "balance the budget" you do it by spending less money. Not giving yourself permission to borrow more.

This is not true. No self respecting debt counselor or financial expert will tell someone to not look at ways to increase their income. Dave Ramsey says get a job delivering pizzas. Suze Orman says ask for a raise or find a higher paying job. Increasing revenue through taxes and fees has long been part of belt tightening for nations. When you go to war, as understood in WWI and WWII and Vietnam, you have to find a way to pay for it. We went to war and cut taxes at the same time. That has consequences.

[wendmatt]

This is not true. No self respecting debt counselor or financial expert will tell someone to not look at ways to increase their income. Dave Ramsey says get a job delivering pizzas. Suze Orman says ask for a raise or find a higher paying job. Increasing revenue through taxes and fees has long been part of belt tightening for nations. When you go to war, as understood in WWI and WWII and Vietnam, you have to find a way to pay for it. We went to war and cut taxes at the same time. That has consequences.

Yes, that! No one likes to pay taxes, but for gods sakes people, we have to get money from somewhere...this war did not pay for itself.

[mommylamb]

And revenue increases off the table means no tax increases. Which is exactly the mandate the Republicans got voted in on in RESPONSE to the out of control spending which occured in the past 2 years (with a Democratic controlled house,senate and WH).

Yes, revenue increases means bringing in more revenue, so you can call it a tax increase, a revenue raise, closing loop holes, whatever. It's just semantics and I'll embrace any one of them. And, while Republicans might have gotten voted into office by saying they wouldn't raise taxes, there are times when compromise and good governance trump campaign promises. I would rather have a government that acts for the benefit of the country, even if they risk getting voted out of office at the next election.


In RL you don't go to your employer though and say "Give me a raise"

In RL, when you try to "balance the budget" you do it by spending less money. Not giving yourself permission to borrow more.

IRL, you might get a second job. IRL, you might sell stuff of craig's list. IRL, you would do whatever you could to meet your obligations, including trying to bring in more revenue to your family.

[KrisM]

In RL you don't go to your employer though and say "Give me a raise"



I've done that. It was 9 or 10 years ago and I thought I was underpaid and I got an 8% raise, just by asking and making a case.

[janine]

Yes, revenue increases means bringing in more revenue, so you can call it a tax increase, a revenue raise, closing loop holes, whatever. It's just semantics and I'll embrace any one of them. And, while Republicans might have gotten voted into office by saying they wouldn't raise taxes, there are times when compromise and good governance trump campaign promises. I would rather have a government that acts for the benefit of the country, even if they risk getting voted out of office at the next election.



IRL, you might get a second job. IRL, you might sell stuff of craig's list. IRL, you would do whatever you could to meet your obligations, including trying to bring in more revenue to your family.

Oh please - the health care reform was shoved through the houses (at the time Democrat dominated) against the majority public opionion. Once mid term elections came around the Republicans won big and Pelosi was out - the mandate was clear to the Republicans: block or slow down parts of the Obama agenda that do not have popular support and stop the spending. Since when do politicians go against their constituents and platform to satisfy what you call "good governance" - that is simply your POV. IN many other's POV Boeher is doing exactly what he should and therefore acting in the interest of the country. If not, he will hear it from his party/supporters/constituents, just as he should.

We are in this hole becuase of the trillions that were spent in recent years, there is no blank check to keep on "increasing revenue". Time to play hardball and pull back and make cuts. While Obama may support one philosophy many others do not. Taxing and spending and taxing will only lead to slowed down hiring, spending and you can look to Europe to see how that'll turn out.

[sste]

Does anyone have an opinion on the effect of this mess on the one thing we can all always agree on - - the recovery of the housing market?

To me as a potential buyer, this is not the kind of climate that makes me want to rush forward with that house purchase. It makes me call into question the trajectory of an economic recovery and more narrowly the effect on housing markets.

[kijip]

Does anyone have an opinion on the effect of this mess on the one thing we can all always agree on - - the recovery of the housing market?

To me as a potential buyer, this is not the kind of climate that makes me want to rush forward with that house purchase. It makes me call into question the trajectory of an economic recovery and more narrowly the effect on housing markets.

Worst case scenario: the ceiling does not rise because the chicken game crashes. If that happens, interest rates will rise. Fewer people will buy. Prices will fall further, leaving many more families underwater. People who need to sell for normal life events- outgrowing house or condo, moving for a job etc will be hurt when it is that much harder to sell. Foreclosures on ARMs wil increase, further dampening prices.

But frankly the implications for the rest of the market are much much worse to me. Life will get much much harder for people who it is already hard for. People are not paying enough attention to this because they don't understand it. But there is no reputable economist of any stripe, school or political leaning
who thinks we can avoid raising the ceiling. None. This should be an issue that the parties work together on, but instead we are beholden to a bunch of Congressmen who don't even get what it is they have control over.

[kara97210]

Also, it seems like selective memory to only point to the spending in the past two years, btw. Bush and the congress lowered taxes on the wealthy, and then started 2 hugely expensive wars.

:yeahthat: There is plenty of blame to go around when it comes why we have had an issue with the debt ceiling. The issue is how you fix it now and just grandstanding for the next election, without offering a solution, is really irresponsible.

[wellyes]

This is, I think, the ( intended) legacy of the Bush tax cuts. 'Starve the Beast' realized. Drastically cut the nation's income, dramatically increase spending, blame financial crisis entitlement programs, grandstand to avoid actually solving problems, then you can rightly say that the federal govt is the problem.

[ShanaMama]

I would rather have a government that acts for the benefit of the country, even if they risk getting voted out of office at the next election.
.
I think every sane American would agree with you on that- except those Americans who want our votes. Sadly, it seems that politicians who actually lead & don't pander are history.

[ShanaMama]

This is, I think, the ( intended) legacy of the Bush tax cuts. 'Starve the Beast' realized. Drastically cut the nation's income, dramatically increase spending, blame financial crisis entitlement programs, grandstand to avoid actually solving problems, then you can rightly say that the federal govt is the problem.
Conspiracy much? I think Bush truly felt he had no choice but to go to war. Eta: We can agree or disagree with his reasons, but he did not go to war as an economic policy.

[larig]

Worst case scenario: the ceiling does not rise because the chicken game crashes. If that happens, interest rates will rise. Fewer people will buy. Prices will fall further, leaving many more families underwater. People who need to sell for normal life events- outgrowing house or condo, moving for a job etc will be hurt when it is that much harder to sell. Foreclosures on ARMs wil increase, further dampening prices.

But frankly the implications for the rest of the market are much much worse to me. Life will get much much harder for people who it is already hard for. People are not paying enough attention to this because they don't understand it. But there is no reputable economist of any stripe, school or political leaning
who thinks we can avoid raising the ceiling. None. This should be an issue that the parties work together on, but instead we are beholden to a bunch of Congressmen who don't even get what it is they have control over.

:yeahthat: the implications for the rest of the market are exactly what prompted my post originally. I'm seriously concerned. I just don't think people have ANY idea what this will mean for the country, and indeed the world. This is HUGE and I think we're in bigger trouble than we were in 2008--it will be unprecedented.

[larig]

Conspiracy much? I think Bush truly felt he had no choice but to go to war. Eta: We can agree or disagree with his reasons, but he did not go to war as an economic policy.

regardless, it was not paid for. we can disagree about whether it was justified or not, but it's hard to argue that it was paid for--it wasn't.

[kijip]

regardless, it was not paid for. we can disagree about whether it was justified or not, but it's hard to argue that it was paid for--it wasn't.

And paired with the massive tax cuts it was reckless for the debt. Not saying that the Dems don't bear any responsibility here. But I am sick and tired of people trying to maintain that this all happened in the last two years. Sorry people, it doesn't work that way.

[wellyes]

Conspiracy much? I think Bush truly felt he had no choice but to go to war. Eta: We can agree or disagree with his reasons, but he did not go to war as an economic policy.

I agree he acted with sincerity in attacking Iraq while we were at war with Afghanistan. He trusted his advisors on the dire and immediate necessity of that action, despite most of the world trying to point out how wrong those advisors was. But giving carte blanc for the ongoing occupation, with constantly changing goals and no end sight, was not an urgent response to a crisis. It was an extremely expensive maneuver. This is when the massive tax cuts comE in. It is not a conspiracy. But I do believe it is a political strategy.

[KrisM]

:yeahthat: the implications for the rest of the market are exactly what prompted my post originally. I'm seriously concerned. I just don't think people have ANY idea what this will mean for the country, and indeed the world. This is HUGE and I think we're in bigger trouble than we were in 2008--it will be unprecedented.

I only understand a bit of it. Can you tell us more about what might happen if it is not raised?

[MissyAg94]

Raising taxes in this economy is STUPID!!!!

[kijip]

I only understand a bit of it. Can you tell us more about what might happen if it is not raised?

http://economix.blogs.nytimes.com/2011/04/26/what-happens-if-the-debt-ceiling-isnt-raised/

Also, this is not authorizing us to spend more, it is authorizing us to assume the debt we need to keep basic government functions running on a day to day basis at current spending levels in the current budget.

This has never been a partisan issue. Duke it out on tax increases. Duke it out on spending cuts. Duke it out on declaring February National Salamander Appreciation Month. But do not play chicken with people's lives, up to and including people's ability to eat on an issue that some Congresmen clearly do not fathom. This is not a partisan issue. We need to meet our day to day obligations. I am all for balancing the budget and reducing the debt. Raising the debt ceiling is not going to help us do that. In fact, with a dropped dollar and higher interest rates, this will make the situation worse and COST US MONEY. Without resolution, government at some point will need to selectively start halting payments to employees or cease making ordinary payouts...like paying contractors, servicemen, promised money to states for road projects, Grandma's SS check, you name it. Without acts of Congress, just not pay things because there won't be the cash for it. That is not how you balance the budget. That would be like a family who does not have enough resources choosing between the lights and the food that month rather than proactively making a budget and solving the problem with reduced spending and increased income.

[kijip]

Raising taxes in this economy is STUPID!!!!

It is not that simple. As a nation we need to get past the name calling and labels and start having real, complex discussions about real and complex issues.

[kijip]

The only time since Reagan took office that the debt has fallen dramatically as a percentage of GDP was in the late 1990s which were marked by several things: lowered interest rates, increase to top marginal tax rates (the increase was still lower than they were in the 1950s and 1960s) and an economic boom. The removal of the "Clinton Era" tax rates , ie the "Bush Tax Cuts" which are set to expire in 2012 now have directly helped the debt spiral upwards in a serious way. And many economists say they have worsened the economic crisis.

[MissyAg94]

It is not that simple. As a nation we need to get past the name calling and labels and start having real, complex discussions about real and complex issues.

It is that simple. President Obama said the same thing in 2009. And don't be mistaken. Tax increases are being proposed for all taxpayers, not just the "rich." There is no denying that raising taxes increases revenue. The question is whether it is wise to raise taxes in a bad economy. People are hurting. Raising taxes won't help that.

Ronald Reagan said that one of the his biggest mistakes was agreeing to tax increases in return for spending cuts. The tax increases happened. The spending cuts didn't.

[kijip]

Ronald Reagan said that one of the his biggest mistakes was agreeing to tax increases in return for spending cuts. The tax increases happened. The spending cuts didn't.

The Reagan years were great for the debt. As in great for unprecendented increases in the the debt as a percentage of GDP. For the most part Reagan tended to lower taxes, and as a family who lived with his spending cut proposals to say nothing of actually following and studying political history in detail, I know that your recollection here is overly simple.

Furthermore, the Democrats tried to extend the Bush tax cuts for the middle class only and were denied. No significant number of Democrats have proposed ending them for the middle class.

Finally taxes or not, cuts or not, paper or plastic or not, we can not seriously consider leaving the debt ceiling as is. It sounds all nice and fiscally restrained, until you are paying huge prices for household goods and your retirement nest egg is further obliterated and government employees are paid IOUs. Anyone who says we can is hiding their head in the sand and fundamentally does not understand economics and the markets.

[kijip]

It is that simple. President Obama said the same thing in 2009. And don't be mistaken. Tax increases are being proposed for all taxpayers.

Who exactly is proposing these all taxpayer increases? Cause that does not match everything I read that is on the table seriously by any caucus.

[mommylamb]

Conspiracy much? I think Bush truly felt he had no choice but to go to war. Eta: We can agree or disagree with his reasons, but he did not go to war as an economic policy.

I agree with this. I think the "starve the beast" mentality was more a Reagan strategy than a Bush II strategy. The fact remains that when Bush came into office, there was a surplus. Lots of things contributed to the end of that surplus, including the expected increases in entitlement spending, the wars, the 2001 and 2003 tax cuts (of which I think the 2001 tax cuts to a large extent were good, but not the 2003 cuts), and Bush touted increases in discretionary spending, for example the prescription drug program. Bush wasn't necessarily about starving the beast, he was about tax cuts while feeding the beast, which turned out to be pretty bad for our debt. Of course additional spending happened after Obama took office (stimulus bill) compounding the debt issues, even if it was intended to (and many would argue succeeded in) diverting the country from a total economic meltdown. The health care reform bill was revenue neutral.


Raising taxes in this economy is STUPID!!!!

Not only is it not that simple, but let's try to stay above board here instead of using words like stupid. You can disagree without name calling.

Historically, taxes are at an all time low. There have been many times in the past when taxes were higher than they are now and the economy was far better than it is now. Does that mean that high taxes cause a strong economy? No. But it does mean that a better economy can be had even when taxes are at higher levels than our current historic lows. You only have to look back to the 90s.

Also, the tax increases on the table at the moment are not rate increases, they are loop hole closures, deductions, etc.


It is not that simple. As a nation we need to get past the name calling and labels and start having real, complex discussions about real and complex issues.
:yeahthat:


Overall, the way I see it, President Obama put $4 trillion in spending cuts on the table with only $1 trillion in revenue increases. That included major spending cuts to entitlement programs-- something a lot of Democrats will balk at, no doubt. If it it the goal of the Republican party to reduce the debt, than this is a golden deal. It would make fundamental changes to entitlement programs that would put them on a different trajectory for not only the $4 trillion in cuts now, but lower costs well into the future. We're talking statutory changes to entitlement programs. That's a big deal if you actually care about reducing the debt in the long haul.

Now, will $1 trillion in tax increases hurt the economy? Maybe, who knows. What we do know is that reduced spending also hurts the economy. People will lose their jobs. It will hurt. In my mind, you don't reduce the debt without hurting the economy-- whether through tax increases or lower spending. There are a lot of government workers out there who stand to get laid off. There are a lot of private sector workers who depend on government contractors who will lose their jobs. That's just a fact. So, the $4 trillion in spending cuts also hurts the economy. But, so does a large debt. Which hurts the economy more, the soaring debt or tax increases/spending cuts to contend with that debt? I don't know. The many people with stronger economics backgrounds than I have can fight that one out.

Economic policy is more an art than a science. Disagreeing doesn't make anyone stupid. It is my opinion that reducing the debt is a good thing in the long run, even if it hurts in the short run, and the hurt needs to be distributed between painful cuts and painful tax increases. I think it's fair. I think that's the right thing to do.

ETA: Another point worth making is that a lot of businesses are sitting on cash right now. They're not using that cash to hire because they don't think that will translate into higher business revenues considering that people aren't buying their products, so they're sitting on it. Who can blame them? Will continued lower taxes and more cash to sit on make them hire? No. They aren't hiring for lack of cash, it's for skepticism abut the state of the economy.

[maestramommy]

I agree with this. I think the "starve the beast" mentality was more a Reagan strategy than a Bush II strategy. The fact remains that when Bush came into office, there was a surplus. Lots of things contributed to the end of that surplus, including the expected increases in entitlement spending, the wars, the 2001 and 2003 tax cuts (of which I think the 2001 tax cuts to a large extent were good, but not the 2003 cuts), and Bush touted increases in discretionary spending, for example the prescription drug program. Bush wasn't necessarily about starving the beast, he was about tax cuts while feeding the beast, which turned out to be pretty bad for our debt. Of course additional spending happened after Obama took office (stimulus bill) compounding the debt issues, even if it was intended to (and many would argue succeeded in) diverting the country from a total economic meltdown. The health care reform bill was revenue neutral.



Not only is it not that simple, but let's try to stay above board here instead of using words like stupid. You can disagree without name calling.

Historically, taxes are at an all time low. There have been many times in the past when taxes were higher than they are now and the economy was far better than it is now. Does that mean that high taxes cause a strong economy? No. But it does mean that a better economy can be had even when taxes are at higher levels than our current historic lows. You only have to look back to the 90s.

Also, the tax increases on the table at the moment are not rate increases, they are loop hole closures, deductions, etc.


:yeahthat:


Overall, the way I see it, President Obama put $4 trillion in spending cuts on the table with only $1 trillion in revenue increases. That included major spending cuts to entitlement programs-- something a lot of Democrats will balk at, no doubt. If it it the goal of the Republican party to reduce the debt, than this is a golden deal. It would make fundamental changes to entitlement programs that would put them on a different trajectory for not only the $4 trillion in cuts now, but lower costs well into the future. We're talking statutory changes to entitlement programs. That's a big deal if you actually care about reducing the debt in the long haul.

Now, will $1 trillion in tax increases hurt the economy? Maybe, who knows. What we do know is that reduced spending also hurts the economy. People will lose their jobs. It will hurt. In my mind, you don't reduce the debt without hurting the economy-- whether through tax increases or lower spending. There are a lot of government workers out there who stand to get laid off. There are a lot of private sector workers who depend on government contractors who will lose their jobs. That's just a fact. So, the $4 trillion in spending cuts also hurts the economy. But, so does a large debt. Which hurts the economy more, the soaring debt or tax increases/spending cuts to contend with that debt? I don't know. The many people with stronger economics backgrounds than I have can fight that one out.

Economic policy is more an art than a science. Disagreeing doesn't make anyone stupid. It is my opinion that reducing the debt is a good thing in the long run, even if it hurts in the short run, and the hurt needs to be distributed between painful cuts and painful tax increases. I think it's fair. I think that's the right thing to do.

ETA: Another point worth making is that a lot of businesses are sitting on cash right now. They're not using that cash to hire because they don't think that will translate into higher business revenues considering that people aren't buying their products, so they're sitting on it. Who can blame them? Will continued lower taxes and more cash to sit on make them hire? No. They aren't hiring for lack of cash, it's for skepticism abut the state of the economy.

Good points, all of these, as well as the ones raised by Kjip. It's given me a lot to think about, considering I really don't understand all the nuances of this issue.

[sfmom]

I just wanted to clarify some things from previous posts (I'm not sure if they were addressed):

Money market funds are NOT FDIC insured. Neither are interest-bearing saving deposits at commercial bank. Only non interest bearing demand deposits (i.e. checking accounts) are FDIC insured (currently without limit, but as of 2012 limited to $250,000).

Let's be clear, the U.S. Government is not insolvent. The issue is the authority to make the payments. A default could occur if the U.S. does not pay interest on debt coming due. But all sides agree - from what I gathered - that paying interest will be prioritized over other expenditures (i.e., social security or medicare payments)

Per the discussion about raising taxes. Keep in mind that deep spending cuts in a recession are equally contractionary. The most effective and non destructive way would be some combination of the two.

[secchick]

Let's not forget Obamacare included the largest tax increases since 1993 (including the additional .9% medicare tax and requiring medicare taxes to be paid on investment income for "millionaires and billionaires" who make $200/$250K per year). Note that these income levels are not indexed for inflation, kind of like the AMT, originally intended to apply to only a handful of millionaires. We know how that ended up. The reason I believe it's a spending, rather than a revenue problem is that 20% of the people already pay 84% of the federal taxes. You could literally double the burden on the wealthy and not close even 1/4 of a single year's deficit. To balance the current spending would require increasing every single federal tax by 70%. Now is the time when we need to separate the nice-to-haves from the must-haves.

Honestly, if it would help, I wouldn't be totally against increasing tax revenue and paying more myself, if (1) the tax code were simplified so as to not distort rational appropriation of capital (eg. let all investments be determined by the market and not promote use of capital for one purpose over another through the tax code) (2) it were accompanied my meaningful Medicare/Medicaid/SS reform and (3) some of the 50% of the people who pay nothing in federal income taxes take some stake and pay *something*. I also think we should do away with refundable tax credits. If something is welfare, call it welfare and let it go through the normal process. The tax code is an inappropriate place for it. I applaud Senators Snowe and Demint for proposing (again) a balanced budget amendment, but would really be great would be if they proposed a balanced budget. Due to shortness on timing, I am quite certain that any "binding agreement" reached in the next 3 weeks will be no match for creative legislative staffs.

ETA: It is ironic that Obama is proposing to extend the payroll tax cut for another year in order to create jobs, when he has already singed in to law a significant increase in payroll taxes to go into effect in 2013. If the cut will create jobs next year, would the increase not destroy jobs in the year following?

[MissyAg94]

Not only is it not that simple, but let's try to stay above board here instead of using words like stupid. You can disagree without name calling.

I'm not name calling! Calling a proposal stupid isn't calling a person stupid. Sorry if you find it inappropriate.

Our revenues have gone down because of the recession. However, our spending is at an all-time high. That is the problem. Raising taxes in this economy (which, again, President Obama has said on multiple occasions) is a really bad idea. Do I think our tax code needs a major overhaul? Heck yeah. When you only have half of earners paying ANY federal income tax and big corporations like GE paying none, you have a tax structure problem. But now is not the time to raise taxes on the payers who create the jobs, the small businesses.

I think the ceiling will be raised. Not sure how they'll get there but we won't default IMO.



Let's not forget Obamacare included the largest tax increases since 1993 (including the additional .9% medicare tax and requiring medicare taxes to be paid on investment income for "millionaires and billionaires" who make $200/$250K per year). Note that these income levels are not indexed for inflation, kind of like the AMT, originally intended to apply to only a handful of millionaires. We know how that ended up. The reason I believe it's a spending, rather than a revenue problem is that 20% of the people already pay 84% of the federal taxes. You could literally double the burden on the wealthy and not close even 1/4 of a single year's deficit. To balance the current spending would require increasing every single federal tax by 70%. Now is the time when we need to separate the nice-to-haves from the must-haves.

Honestly, if it would help, I wouldn't be totally against increasing tax revenue and paying more myself, if (1) the tax code were simplified so as to not distort rational appropriation of capital (eg. let all investments be determined by the market and not promote use of capital for one purpose over another through the tax code) (2) it were accompanied my meaningful Medicare/Medicaid/SS reform and (3) some of the 50% of the people who pay nothing in federal income taxes take some stake and pay *something*. I also think we should do away with refundable tax credits. If something is welfare, call it welfare and let it go through the normal process. The tax code is an inappropriate place for it. I applaud Senators Snowe and Demint for proposing (again) a balanced budget amendment, but would really be great would be if they proposed a balanced budget. Due to shortness on timing, I am quite certain that any "binding agreement" reached in the next 3 weeks will be no match for creative legislative staffs.

ETA: It is ironic that Obama is proposing to extend the payroll tax cut for another year in order to create jobs, when he has already singed in to law a significant increase in payroll taxes to go into effect in 2013. If the cut will create jobs next year, would the increase not destroy jobs in the year following?
:yeahthat:

[o_mom]

I just wanted to clarify some things from previous posts (I'm not sure if they were addressed):

Money market funds are NOT FDIC insured. Neither are interest-bearing saving deposits at commercial bank. Only non interest bearing demand deposits (i.e. checking accounts) are FDIC insured (currently without limit, but as of 2012 limited to $250,000).


Really? Money market mutual funds are not, but Money market deposit accounts should be as well as savings accounts and CDs.

From the FDIC website (http://www.fdic.gov/consumers/consumer/information/fdiciorn.html):

FDIC-Insured
Checking Accounts (including money market deposit accounts)


Savings Accounts (including passbook accounts)


Certificates of Deposit

Not FDIC-Insured

Investments in mutual funds (stock, bond or money market mutual funds), whether purchased from a bank, brokerage or dealer


Annuities (underwritten by insurance companies, but sold at some banks)


Stocks, bonds, Treasury securities or other investment products, whether purchased through a bank or a broker/dealer

[sfmom]

Really? Money market mutual funds are not, but Money market deposit accounts should be as well as savings accounts and CDs.

From the FDIC website (http://www.fdic.gov/consumers/consumer/information/fdiciorn.html):

FDIC-Insured
Checking Accounts (including money market deposit accounts)


Savings Accounts (including passbook accounts)


Certificates of Deposit



Not FDIC-Insured

Investments in mutual funds (stock, bond or money market mutual funds), whether purchased from a bank, brokerage or dealer


Annuities (underwritten by insurance companies, but sold at some banks)


Stocks, bonds, Treasury securities or other investment products, whether purchased through a bank or a broker/dealer


O Mom - you are absolutely right. I don't remember why I thought saving accounts were not FDIC insured. I remembers that it was mutual funds and something else, for some reason I thought it was savings account. Thanks for the information.

[o_mom]

O Mom - you are absolutely right. I don't remember why I thought saving accounts were not FDIC insured. I remembers that it was mutual funds and something else, for some reason I thought it was savings account. Thanks for the information.

No worries! I just had a minor panic-attack reading your post and had to go looking. Dh moved our brokerage cash account to the banking side of the company a year or so ago so that it would be FDIC insured (this was in the middle of the bank failures) and that made me do a double-take. :)

[mommy111]

No worries! I just had a minor panic-attack reading your post and had to go looking. Dh moved our brokerage cash account to the banking side of the company a year or so ago so that it would be FDIC insured (this was in the middle of the bank failures) and that made me do a double-take. :)
:yeahthat::yeahthat: Had a minor panic attack there :)

[kijip]

Various polls contradicting the idea that a wide majority of Americans oppose tax increases (such as increasing income subject the SS and closing Corp. loopholes and letting the Bush tax cuts expire for the wealthy).

The article language, especially at the end, is partisan but it links to a lot of good survey data so I thought it was a good thing to share here.

http://www.politicususa.com/en/polls-taxes-deficit

[arivecchi]

http://www.nytimes.com/2011/07/13/business/economy/why-taxes-will-rise-in-the-end-david-leonhardt.html?hp

Interesting colum explaining why taxes must rise.

Apparently, we cannot maintain Medicare, Social Security and a large active military without closing tax loopholes and letting the Bush tax cuts expire. Seems pretty clear cut to me.

P.S. I had no idea that only 23% of the population uses the mortgage deduction.

P.S.2. "Obamacare" did not cause the deficit, although is is a pretty nifty red herring.

What caused the current deficit? Read on: http://www.businessinsider.com/us-budget-deficit-2011-7

[mommylamb]

I know this thread has been dead for a few days, but I just read this David Brooks column and thought I'd link it. It's nice to hear from a practical conservative. http://www.nytimes.com/2011/07/19/opinion/19brooks.html?ref=opinion

[marymoo86]

I know this thread has been dead for a few days, but I just read this David Brooks column and thought I'd link it. It's nice to hear from a practical conservative. http://www.nytimes.com/2011/07/19/opinion/19brooks.html?ref=opinion

Interesting - this passage sums up how I feel about ALL of the elected officials in D.C.:

"The Permanent Campaigners. For many legislators, the purpose of being in Congress is not to pass laws. It’s to create clear contrasts you can take into the next election campaign. It’s not to take responsibility for the state of the country and make it better. It’s to pass responsibility onto the other party and force them to take as many difficult votes as possible.

All of these groups share the same mentality. They do not see politics as the art of the possible. They do not believe in seizing opportunities to make steady, messy progress toward conservative goals. They believe that politics is a cataclysmic struggle. They believe that if they can remain pure in their faith then someday their party will win a total and permanent victory over its foes. They believe they are Gods of the New Dawn."

too many people trying to do the least possible that will put the problem into the next election cycle which unfortunately means no one EVER pays attention or concerns themselves with predictable long term outcomes.

[mommylamb]

Interesting - this passage sums up how I feel about ALL of the elected officials in D.C.:

"The Permanent Campaigners. For many legislators, the purpose of being in Congress is not to pass laws. It’s to create clear contrasts you can take into the next election campaign. It’s not to take responsibility for the state of the country and make it better. It’s to pass responsibility onto the other party and force them to take as many difficult votes as possible.

All of these groups share the same mentality. They do not see politics as the art of the possible. They do not believe in seizing opportunities to make steady, messy progress toward conservative goals. They believe that politics is a cataclysmic struggle. They believe that if they can remain pure in their faith then someday their party will win a total and permanent victory over its foes. They believe they are Gods of the New Dawn."

too many people trying to do the least possible that will put the problem into the next election cycle which unfortunately means no one EVER pays attention or concerns themselves with predictable long term outcomes.

I agree. And, while I'm a Democrat, I do think this applies to my party as well for the most part, especially many members of Congress. This particular issue with the debt is an egregious example from the Republicans, but Democrats do these things too. Unfortunately, there's more at stake here than there is in a lot of other issues.

[scrooks]

I haven't had a chance to read the article yet but the comments remind me of a conversation DH and I had recently. DH thinks the only way to get real change is to get a group (or a few key individuals) elected that simply want to make the appropriate or necessary changes without caring about reelection. A political suicide mission of sorts.