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The Embarrassed Republican: What Do We Really Want From the Deficit Debate?

While cleverly employing the 'I know you are, but what am I?' defense, Republican party leaders are carefully waiting for Democrats to name some spending cuts. Then they can say 'They said it first!'

Aside from shouting “We’re broke, We’re broke” or “They refuse to be specific on cuts!” I haven’t heard much from the Tea Party’ers and others on the far right wing, at least not much that’s constructive.  Since the bargaining is going on right now, I think it’s important to identify exactly what we expect from the “Fiscal cliff” and the following potential tax or government spending reforms in the coming years.  How else do we know if we’re on the right track?

For the short term, we can only expect a quick patch to stave off the sequester (that’s the mandatory cutting of spending enacted by congress during the debt ceiling debacle last year).  The full sequester is not going to happen, no matter how loud anyone barks about it.  If things go really badly then the date may pass, which will only ratchet up the heat to get back to the bargaining table to hammer out a compromise.  Most pundits are right, the heat will be mostly on the Republican party and Democrats will warm their feet happily by that fire. 

But it’s all of congress that will be under pressure and expectations are high.    

First and foremost is the debt.  Looking massive at almost 17 trillion dollars, that’s still only a little bit more than the US brings home in a year.  How many of us have debts that exceed our yearly income?  Own a house? Then you know exactly what I mean.    As long as we keep up on the payments we’re good to go.  The government is constantly rolling over it’s debt to get a better rates.  Rates are really low right now, so we can expect to pay less on that debt than we have in the past.  In fact some investors are willing to buy our debt at what amounts to a negative rate.  Why would anyone do that?  Well, for large amounts of money (think trillions) it’s still the safest investment around.  Go figure.  Despite what you may have heard, there is no lack of interested parties for US debt. Lowered ratings or not, US debt is still the gold standard.

 

Debt facts: -http://finance.yahoo.com/news/biggest-holders-of-us-gov-t-debt.html

The biggest owner of US debt is the US, all in dollars.  (Remember when congress borrowed from social security and medicare?) 

No one in history has ever gotten a bill for their share of the national debt, so don’t fall for that that “Our children will owe...” malarky.

Debt is not a problem until you can’t pay the interest (Hint: We print our own money)

 

When we talk about the deficit, we’re really talking about Government spending.  The difference between what we get in revenue (taxes and other things) and what congress decides to spend.  This is where the rubber hits the road.  This is what affects all us tax payers, fee payers, people sued by the government and companies who buy leases from the US to hunt for oil and other things. 

The main questions here are: where do we spend our money (and are we getting value) and where does the money come from? There is no doubt that spending cuts have to be part of the equation, which will likely include the big three suckers of cash, Defense (yup, said it out loud), Social Security and Medicare.  But it will also include a lot of smaller pieces of the deficit puzzle, well-defended charges like oil company and farm subsidies, public services like education grants/subsidies and outmoded government services (we got rid of the department that tests ketchup, right?) 

Although, I’m a firm believer that there is almost no comparison between a personal or household budget and a government budget (unless you can print your own money, are self-insuring, can freely borrow from yourself and launch a missile attack on a family across town) however, one thing is usually common.  It’s the little things that kill you.  The extra dinner out once a month, the cool device you just had to have or the surprise medical expenses are the things that crash finances.

I feel the same is true of the government budget, individually small charges don’t seem like much but when added up they rapidly grow to colossal size.   I think Congress knows that as well, it’s not exciting or even headline making, just a lot of work.  If they take it on there won’t be much glory and probably a lot of wincing as every Representative’s favorite pork is chewed over.  This is what campaign donations are made of, do we really expect Congress to be able to do it effectively?

Maybe what we really need is an independent authority to step in at this point.  Someone to be rigorous with the numbers and available to blame when “Uncle Sal’s” oil importing business gets the tax “Shiv.”  This is what big businesses do.  They bring in the accountants with big glasses and sharp pencils.  We could ask the GAO to do that, a holistic review of all expenditures and tax “incentives.” 

 

Deficit facts: - http://zfacts.com/node/450

Most of the current deficit is due directly to the recession (unemployment, lost sales revenue, early retirement and lower taxes)

Some of the deficit is due to military spending, TARP and the Stimulus all of which are decreasing.

The yearly deficit is shrinking. 25% Off a high in 2010.

 

Which brings us to Taxes.  The bulk of the cash for government spending comes from taxes, right?  We can sue the pants off BP for the oil spill in the gulf, rack up the bucks from settlements against banks and hedge funds for financial chicanery, but there’s still a big hole to fill in the old wallet.  That bill stops here. 

I don’t know too many people who think “Rich” people are paying too high a rate, but even raising their rates to 1950’s levels wont fill the hole in completely.  Besides the real debate is where do we draw the lines for rate increases?  The President wants 250 grand to be the line (bargaining), calmer voices like Nancy Pelosi (if you can believe it) says it should be at around one million.  One way or another some group in those heights are going to be paying more, it’s just a matter of who and how much.  Most of us will not be affected by that part I’m glad to say.  

There is a lot of talk (but not much action) on re-structuring the tax system.  Talk about a long and difficult conversation!  Whether it’s moving to a Valued Added Tax, or just re-swizzling everyone’s rates. Most people don’t understand the Tax system we have, let alone the personal impact of any sweeping changes.  Be suspicious of anyone who says they do.  In the coming months (read:years) this will be the game to watch.  I fully expect our party to scream blue murder with every potential increase to the wealthy’s and corporate tax burdens.  Watch for the hackneyed phrases “Job killing” and “Hurt Small Business.”  Most people who have a job haven’t seen a dime trickle down to them since we started cutting the top rates and actual small business owners have already figured out these guys are not talking about them.

 

Tax facts - http://www.cbpp.org/cms/index.cfm?fa=view&id=3505

In the past, figures include up to 2009, people who made more than $50,000 a year paid 80% of the federal taxes.

Most of the citizens who don’t have to pay income or payroll taxes are low income workers who are elderly, disabled people who are unable to work, the long term unemployed or students.

Not owing taxes is not the same as not paying taxes.

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HistorianWT December 12, 2012 at 03:22 PM
@Hookerman."Underwater mortgages....are caused by the drop in property values over the past four or fice years". No, they are *caused* by people borrowing more than was prudent. This happened because the government lets you write off that interest, and also backs the mortgages. They have not only embraced huge debt themselves, they have institutionalized it in our society.
HistorianWT December 12, 2012 at 03:31 PM
@Prentiss: """"The point of the analogy is that we all have had debts greatly in excess of our take home pay, and we don't have to panic about it. Eventually it gets paid off.""" If you are not panicked when your house is worth less than the mortgage(s) you have on it, then you are truly a dolt. And the fact that a house is underwater tells a story usually -- that the person doesn't have six figures sitting around in a bank, because if they did they would refi to lower rates, put some money in, and not have their credit rating look like a horror show. So, those 30 percent or whatever aren't merely temporarily in a balance sheet glitch, they have the symptoms of a serious financial crisis. Because of cavalier borrowing. Like our government. I do not have much or any hope on New Jersey property values at this point. Borrowing rates simply can not go lower, and when they start to rise, so do the monthly payments purchasers use to price their housing bids at. Well, at least Republicans do that.
VietNam Vet December 29, 2012 at 08:01 AM
As always the demoncraps are clueless to whats really going on in this country. Prentiss you think the military is a drain on our economy, then the next time we get attacked {and we will} why don't you and your demoncraps take all the weapons that you take from US right wing nuts and go and defend the american people, or maybe we should just fall to our knees and give up. That way we won't have to have a y military draining all of the money, so odummer can have more to spend. You also think that medicare and social security are a drain, well if you got the Feds. to pay back some of the IOU's of all the cash they took, maybe there won't be a problem and when you reach that age to collect social security, why don't you tell odummer that you don't want it, that way he can spend your share too. We seniors paid in to it and medicare and we are entitled to take from it, or maybe when we all reach 65 we should just die to suit you and your zero you consider a hero. In that case instead of trying to save your aging mother, just tell her to drop dead and stop being a drain on your economy so odummer has more money to spend. For your info we do not take in enough money to even pay the interest on our national debt, thanks to odummer who is responsible for putting millions of people out of work. If they were working they would be paying taxes as well, but they aren't! Get a life and talk about something you know about first.
Chuck Ruff December 29, 2012 at 03:37 PM
Oh really??? Then how come with my first house, I borrowed 90 % of the purchase price, but still managed to make a tidy $50K profit when I sold it 9 years later??? Maybe the increase in the housing market between 1991 and 2002 might have something to do with it?
Sick of the trolls January 02, 2013 at 02:51 PM
The next time we get attacked, Mr. Brown? Wow, you really are delusional. Do you even know the last time the US was invaded by a foreign country? 1812. Get your head out of your butt. "For your info we do not take in enough money to even pay the interest on our national debt, thanks to odummer who is responsible for putting millions of people out of work." I think I have FINALLY figured it out. This "odummer" person you keep ranting about is really George W. Bush, right? Because it was his policy that started the deficit spending, and on his watch that the banking industry destroyed the American economy resulting in millions losing their jobs and homes, so it must be him. Maybe you should get a life and actually read something other than Fox News before talking about this stuff, hmm? Oh, and BTW: stop eating that spicy food. I really do worry about you and these demoncraps. Get some Preparation H, that should help as well. And baby wipes, much better than that scratchy TP.

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