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Title: Tea Party Zealots Scare McConnell Straight On Debt Limit
Source:
FORBES
URL Source: http://blogs.forbes.com/beltway/201 ... onnell-straight-on-debt-limit/
Published: Jul 15, 2011
Author: Howard Gleckman
Post Date: 2011-07-15 19:48:13 by Brian S
Keywords: None
Views: 14053
Comments: 32
Let me see if I have this right: Senate Republican Leader Mitch McConnell (R-KY) has effectively embraced the debt limit plan first offered months ago by President Obama. Under the McConnell/Obama scenario, Congress would extend the government’s borrowing authority through next year without agreeing to a dime’s worth of spending reductions or tax increases. As the deadline for action nears, the partisan rhetoric heats up, and the consequences of Congress’s failure to increase the debt limit become clearer, senators of both parties seem to be climbing aboard McConnell’s do-nothing-and-get-out-of-town bandwagon. But the tea party House Republicans are spitting mad. And Obama, who senses new political advantage on the deficit issue, is publicly cool. Somehow, the president, who spent his first two-and-half years in office studiously ignoring the deficit, has now become Fiscal Hawk-in-Chief. McConnell’s proposal is devilishly complicated, with its multiple congressional votes, supermajority requirements and, perhaps, creation of another bipartisan deficit reduction panel (oh, the forests that give their lives for budget commissions). Why would McConnell, who a week ago was demanding steep spending cuts as his price for extending the debt limit, now abandon the field without getting any reductions at all? Mostly, I think, because the tea party is scaring him half-to-death. As he candidly acknowledged yesterday, McConnell fears a default would destroy the GOP brand. But the veteran lawmaker also seems to have recognized the severe economic consequences of the government defaulting on its obligations. In a new report, the Bipartisan Policy Center does a careful day-by-day cash flow analysis of what would happen if the government exceeds its borrowing authority on Aug. 2. And the results are frightening. From Aug. 3-31, the government would have to reduce spending by $134 billion. That is to say, it would pull $134 billion out of the economy in just 29 days—more than 10 percent of monthly GDP. The economic effects at a time of 9 percent unemployment would be catastrophic, even if the bond market did not demand higher interest rates on Treasury debt—which it very likely would. The BPC looked at what would happen if the government tried to preserve its bond rating by paying the $29 billion in interest it will owe on Treasury securities in August, and prioritized the rest of its spending. You might call this the Bachmann model of governing. Such a step would leave only about $143 billion to pay $277 billion in non-interest bills. Let’s say Obama paid Social Security, unemployment, and veteran’s benefits, met the military payroll, and kept the courts and the FBI running. Those programs alone would take up about $70 billion, leaving only $73 billion to run the rest of government. With those remaining funds, Washington would have to make some exceedingly unpleasant choices: It could pay doctors, hospitals, nursing homes, and home health agencies what it owed for Medicare and Medicaid services, but that would cost $50 billion and leave just $23 billion to pay all other bills—everybody from defense contractors to senior day care center operators to disaster relief. And keep in mind that these are for goods and services the government has already bought. Sure, McConnell sees some political advantage in forcing Obama and the Democrats to increase the debt limit unilaterally (I can see the attack ads now). But mostly, he seems very worried about the real world consequences of a fiscal train wreck in part of his own making. And it looks as if he’s looking for a way to stop the locomotive.
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#2. To: Brian S, A K A Stone (#0)
(Edited)
Factcheck.org: Spending isn't "out of control", it is falling relative to GDP. It's revenues stupid.
I've posted the facts before. While you aren't as dumb as Goobershit, you are as stubborn as loonymom. It's maddening. Here are the facts once again: Federal spending and taxes as a percentage of GDP: The problem is spending. PERIOD. The government is spending more money that at any time since we were in WWII. Yes, taxes revenues are a little low, but that's because we are in a horrible recession.
Maybe you didn't read what I posted? For this fiscal year federal spending is down to 24% of GDP. Spending relative to GDP is falling, but not as fast as revenues. At the state level things are a lot different, and government spending is falling quickly among state/local governments. Do you ever ask yourself why with record low taxes, massive cuts in state / local spending, and large reductions in government workforces around the country over the last year, the economy isn't booming right now?
Which is still 20% above historic rates. The conclusion you reached is that "revenues" are the problem. That's incorrect from a perspective of the last 65 years.
But falling, so why aren't we seeing a massive economic boom? Again, look at the chart, taxes relative to GDP are at historic lows. Bring them back in line with historical averages and you'll see a massively reduced deficit. You are aware, I assume, that if Congress simply lets the Bush tax cuts expire, stops patching the AMT, and stops passing the Medicare doctor "patch" each year, the budget will be balanced in less than 10 years.
Because of the recession. They are nowhere as low as the historic post-WWII spending highs. Cut spending to 19% of GDP, where it was when Clinton left office. Then we'll talk about taxes, if needed.
the net result would be further reduction in revenues as a result of negative economic impact of the cuts. Here's the CBO's take: Again, it's revenues stupid:
Wrong. Government generally spends 20% of GDP. Now it spends 24% to 25% of GDP. This is really, really simple math. Really simple. The fact that you don't understand this makes me think that you are as inumerate as loonymom and goobershit.
it fell relative to GDP in the last year. And taxes are historically low while governments everywhere are slashing spending and cutting jobs. So why isn't the economy booming?
So why isn't the economy booming? Because businesses are scared to death of what else might be coming from the most anti-business administration in my lifetime. First, as usual, you are confusing margin tax rates with tax revenues. America has the highest corporate tax rates in the world. Sure, some politically connected business may pay very little because they have massive lobbying efforts to get special deductions just for them, but most businesses are getting screwed in American compared to every other OCED country. I'm really tired of explaining this to you. Second, American is only one of five developed countries in the world that tax overseas earnings when they are repatriated. American corporations are sitting on upwards of $3 trillion of overseas that will not be brought back to the U.S. and invested here because of double taxation (taxed in the country where the money was earned and taxed again when they bring the money to the U.S.) It's a brain dead stupid policy that hurts America -- so very typical of the envious and vengeful left. Third, although Obamacare passed, the actual implementation won't happen until 2014. Although businesses already know that this is going to hurt them, they are still trying to figure out just how much pain this will cause. Until they figure this out, they are not going to start hiring a bunch of people. Forth, the Obama administration has been recklessly dishing out new regulations at a historic pace. The tyrants at Obama's EPA is even ready to declare that the stuff you exhale from your lungs is a greenhouse that needs to be regulated. All of these things are adding tremendous costs to business. Fifth, Obama keeps harping about raising taxes. This is why business are not investing and creating jobs. Once Obama gets booted from office, things will change.
Clinton raised taxes, Bush II lowered them. Reagan raised them as well. Who had the best job growth?
There are no replies to Comment # 31. End Trace Mode for Comment # 31.
Top • Page Up • Full Thread • Page Down • Bottom/LatestSomehow, the president, who spent his first two-and-half years in office studiously ignoring the deficit, has now become Fiscal Hawk-in-Chief.
The U.S. is borrowing about 36 cents of every dollar spent so far this year. It borrowed 37 cents on the dollar last year, and 40 cents in fiscal 2009.
Federal spending ("outlays" in budget jargon) is expected to equal 24.1 percent of the nation's gross domestic product in the current fiscal year, which ends Sept. 30. The figure was 25 percent in fiscal year 2009, highest since 1945.
On the other hand, federal revenues are expected to drop to 14.8 percent of GDP this year, lower even than the 14.9 percent attained in both 2009 and 2010. There has been only one year since World War II when revenues have been as low as in any of these years: 1950, when the figure was 14.4 percent.
#4. To: go65 (#2)
(Edited)
Spending isn't "out of control", it is falling relative to GDP
Period Taxes Spending Post WWII average 18% 20% 2000 19% 19% Today 16.5% 25%
#6. To: jwpegler (#4)
(Edited)
The problem is spending. PERIOD. The government is spending more money that at any time since we were in WWII.
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#7. To: go65 (#6)
For this fiscal year federal spending is down to 24% of GDP
#8. To: jwpegler (#7)
(Edited)
Which is still 20% above historic rates. The conclusion you reached is that "revenues" are the problem. That's incorrect from a perspective of the last 65 years.
The conclusion you reached is that "revenues" are the problem. That's incorrect from a perspective of the last 65 years.
#12. To: go65 (#8)
(Edited)
Again, look at the chart, taxes relative to GDP are at historic lows.
#16. To: jwpegler (#12)
(Edited)
Cut spending to 19% of GDP, where it was when Clinton left office. Then we'll talk about taxes, if needed.
...Congress' fiscal watchdog also echoed a message that Federal Reserve Chairman Ben Bernanke has been delivering for months: As tempting as it might be to take a hatchet to the budget ASAP, implementing those changes too quickly could end up worsening, rather than improving the fiscal outlook.
"Making such changes while economic activity and employment remain well below their potential levels would probably slow the economic recovery," according to the report.
http://money.cnn.com/2011/06/22/news/economy/federal_budget_debt/? section=money_latest
#18. To: go65 (#16)
(Edited)
#21. To: jwpegler (#18)
Government generally spends 20% of GDP. Now it spends 24% to 25% of GDP.
#28. To: go65 (#21)
(Edited)
And taxes are historically low...
#31. To: jwpegler (#28)
Fifth, Obama keeps harping about raising taxes.
Replies to Comment # 31.
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