published Tuesday, August 2nd, 2011

Debt crisis put off, not solved

  • photo
    President Barack Obama speaks from White House briefing room, Sunday, July 31, 2011 in Washington, about a deal being reached to raise the debt limit.
    Photo by Associated Press /Chattanooga Times Free Press.

A majority of the members of Congress and President Barack Obama have demonstrated a failure to provide responsible financial leadership for our country, and we're afraid the latest deal to raise the so-called "debt limit" won't really change that.

With the national debt expected to hit the legislated "limit" of $14.3 trillion today, Obama and Congress apparently reached a last-minute deal to raise the obviously ineffective limit in two stages -- by up to $2.4 trillion -- with the hope that would put off yet another debt limit increase until after the 2012 elections. But should this debate really be about political careers or about bringing down our crippling debt?

As for the initial $917 billion worth of cuts promised in the deal, spending would be cut by only $21 billion next year and $42 billion in 2013, according to the Congressional Budget Office. That's nothing in the face of a debt that is $14.3 trillion and growing. Most of the cuts would take place over the next decade -- supposedly -- but the added borrowing would occur much sooner.

And an additional $1.5 trillion in cuts would have to be decided on by a special congressional committee. If that panel doesn't agree on those cuts, then cuts would be triggered across the federal government. But Congress has found a way to get around previous so-called "triggers." It may do so again. At any rate, cuts that the current Congress promises to make someday do not require a future Congress to go along.

Also of concern is the fact that the congressional committee could still impose destructive tax increases.

So we have the certainty of more borrowing in the near future but only the possibility of significant spending cuts down the road.

As U.S. Sen. Lindsey Graham, R-S.C., noted, the deal may have slightly slowed our nation's rush toward disaster, but it hasn't halted it.

"We're no longer running toward oblivion, we're walking toward it," he said.

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nucanuck said...

We will borrow and print until the American house comes down. The growing systemic fragility would lead us to believe that even a small event could trigger a Soviet type collapse of the Western economies that are all tied together through derivative products.

Knowing that, it should be incumbent upon each of us to prepare as best we can for an economic winter.

August 2, 2011 at 1:22 a.m.

Some of this borrowing could be curtailed with the voting privledge extended to only those that pay income tax. Those that are paying taxes are footing the bill for the freeloaders. The freeloaders keep the corrupt politicians in office, so they can get a bigger handout.

August 2, 2011 at 9:09 a.m.
nucanuck said...

C_S,

The bottom 50% of Americans are hording 2.5% of America's wealth. How much would you wish to tax those at the bottom?

And as for politicians, their bread is buttered at the top. Those at the bottom often vote against their own economic interests because they are poorly informed and respond more to social issue devisiveness than economic issues.

Social programs need reform, not elimination. The big adjustments need to come from the military/security sector, corporate subsidies/welfare, the 15% tax rate on hedge fund earnings instead of the rates the rest of us pay...the system has to be rebalanced so we don't develope a revolutionary underclass.

Wealth distribution indicates that the rich have it good, and America's middle class is being pushed into poverty. The taxes have to come from where the money is, pretty simple really.

August 2, 2011 at 10:57 a.m.
Livn4life said...

I was right with you Nu until you stated, "The taxes have to come form where the money is,..." Most of it is already coming from there. The problem is irresponsible and unnecessary Congressional spending for continued empowerment. You hit that on the head with social issue divisiveness as being top of people's priority. But as for the coming economic winter, YOU ARE SPOT ON! But answer this Nucanuck honestly. Do people really believe it is going to happen? I think not. Some do not even think it can.

August 2, 2011 at 11:12 a.m.
nucanuck said...

L4l,

Quite honestly, there is very little economic literacy out there. Most people assume that recessions come and go, but can't imagine that "this time is different". Well, this time is different, and you are right, very few can even begin to imagine where this is going and how long it will last.

Americans think America is entitled to the life we have lived since WWII. We have kept up appearances by borrowing, but even the ill-informed can understand that that can't continue much longer.

This isn't a political blame event, this is a "we did it together event". At this point, it doesn't look as though real reform can happen without an utter collapse to force the issue. That's why I said that not raising the debt limit might not be the worst course. We would be forced to face that which we still must face sooner or later.

August 2, 2011 at 12:52 p.m.
hambone said...

I'm sure that those that don't pay income taxes that C_S talks about would love to have a income to pay taxes on!

August 2, 2011 at 5:03 p.m.
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