What is up with the US debt ceiling?

Discussion in 'Off Topic' started by jbcarioca, Jul 23, 2011.  |  Print Topic

  1. jbcarioca
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    jbcarioca Gold Member

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    It is a terrifying sport watching the US flirt with disaster over the debt ceiling. :eek: That symbol, for once, expresses my sentiments precisely.

    I do not live in the US but no news story seems to have had more interest recently worldwide, at least in economic terms. Yesterday the Brazilian Real reached the highest level against the US Dollar it has had since 1999. There is constant comment that China, Japan, Korea, Brazil and others may stop buying US Treasury obligations, or at least cut back, thus reducing more than 1/3 of the demand.

    I normally have clear opinions about such things. Sometimes I am wrong, but I still don't think events are bewildering.

    This time I am completely without a clue. Every day people ask me, because I am an American and work in finance so am deemed competent. I stutter and try to change the subject.

    Does anybody have a good idea what is happening? Please say so if you do!:confused:
     
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  2. Gargoyle
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    Game playing by the no-nothings. Once you trash the educational system, simple buzz words and silly phrases can convince people to march in step and support bizarre agendas.

    People see China taking over, so they want to compete by turning the U.S. into a third world country- push though lower wages, eliminate job security and health care, allow unrestrained pollution (gut the EPA), trash human rights, and ensure that those who benefit the greatest pay the lowest share of the support for the nation.

    Third world economies can be extremely profitable for the 1%.
     
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  3. rajuabju
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    rajuabju Gold Member

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    Basically: Both parties, and our president, are stupid.

    The government is spending substantially more than its bringing in. As some point, the government will owe so much money that it cant pay its obligations since its borrowing money to cover costs. Thats called default, which is what everyone is so freaked out about (although I personally believe the 8/2/11 is a bunch of nonsense and nothing will happen on that day).

    There needs to be HUGE spending cuts, like 25-30% if not more. There also needs to be minor tax increases. The government should not simply strive to be "even" (ie, no deficit) in terms of spending/revenue. It should pay down the existing debt accumulated over the last 50+ years or whatever its been.
     
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  4. LizzyDragon84
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    LizzyDragon84 Gold Member

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    That's how I feel too, and I'd be willing to make some sacrifices to make that happen. I'd be okay with things like a minor tax hike, having the age that folks are eligible for Social Security be higher and cutbacks in some government services. While no one wants these things to happen, we're in a mess now and something has to give or it's going to get uglier then it already is.
     
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  5. Gargoyle
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    Cutbacks in some services won't make any significant difference- that will amount to a tiny percent, but will meet the agenda of some who don't want services provided to citizens. The biggest chunks of the budget are in places that are sancrosanct (military, social security, medicare) and I don't see any congressperson voting to slash 30% of the military or social security budget, yet they all know that is the only way to achieve a "balanced budget" without increasing revenue.

    Government has already trimmed back and gone leaner; they need to look seriously at the revenue side and not focus only on the spending side. Corporations like Exxon and GE, with $10bn or $20bn pure profit per year pay $0 in corporate income tax (and then the oil companies get huge subsidies, corporate welfare). Tax rates on the wealthy are among the lowest in the industrialized world; those who get the greatest benefit from our society should also give back a bit to help build our society. The burden falls on the middle class, who then get dazzled by simplistic sound bytes from extremist politicians.

    :(
     
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  6. jbcarioca
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    jbcarioca Gold Member

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    I am no expert on the subject, but I am an American citizen who has not lived in the US for some time. The US is one of only a handful of countries that taxes people on nationality rather than residence (North Korea is another). That seems unjust to those of us who live abroad.

    OTOH, people who receive Social Security early can have unlimoted invetment income whith no reduction in benefits, while somebody who works at McDond's part time have benefits reduced. That is ridiculous. For example I receive undiminished Social Security payments even though my investment income is quite high. Were there any responsible system in the US (i.e. a means test) I would receive zero benefits. Ditto medicare. Those programs do require seriosu modification, which ought to start with a means test.

    Capital gains is another absurdity. Thanks to that wondrous system I rarely owe any US taxes at all. I am also a citizen of Brazil, and I pay handsomely there, because investment income is taxed at the source. The rates are not onerous (22%-15% depending on tenor of investment) but they do ensure that those of us are well off do not escape taxation. Sensible system, IMHO (lots of things are not so good about the system in Brazil!)

    The huge exemptions and deductions inn the US are another monstrosity. Quite legally individuals and corporations that are knowledgable manage to avoid any significant US taxation. Gargoyle alluded to some of that. Accelerated depreciation, depletion allowances, tax abatements and other tricks abound. Every one of them has ardent defenders. The reality is that every single such law is deeply regressive.

    Reported tax burdens in the US are laughable. When mega wealthy people including Warren Buffet argue that the wealthy pay too little how in the world can anyone responsible argue that they do not?

    When I lived in the US I helped my housemaid and gardener to prepare their annual tax returns. Every single year their effective tax rate was not just higher than mine, but far higher. One key reason was the deeply regressive nature of Social Security and Medicare taxes, both of which penalize wage earners, especially modest-income wage earners, to the benefit of people who are able to legally and legitimately claim capital gains, accelerated depreciations, etc. IMO, as a large beneficiary of teh present US system I think that is obscene. My US effective tax rate has not reached double digits in years, and despite frequent audits I have never paid a penny in penalties. Can anyone imagine that is a just system?

    I probably ought not comment on US military matters but it cannot be escaped when the subject is the US deficit. The US military expenditures are now far in excess of those of the next nine largest spenders combines. Here are soem 2005 figures: http://www.dollarsandsense.org/archives/2006/0706sturr.html The US now accounts for roughly 40% of world military spending. It is unsurprising that much of that expenditure is found in non-DOD accounts, is funded through "supplementals" rather than the primary budget and other such tactics. i have spent a few days researching these issues. Oddly I found lots of my wading through data might have been avoided if I had had greater confidence in Wikipedia: http://en.wikipedia.org/wiki/Military_budget_of_the_United_States. However I do not. So, if the total military expenditures of the US were reduced by half, the US will still spend more than all the next ten countries combined. It might be a trifle more difficult to invade Afghanistan, Grenada, Libya and Iraq. It might also be hard to have such beautiful vehicles as the F35, B2, C5, C17, the new B767-based airborne tanker, various nuclear warships, lovely submarines and fleets of transport aircraft for the "brass". The US might be forced to close some the military bases in Germany, Japan, Korea, Cuba, Qatar and other countries, maybe even irritate Congressional sentiments by closing a few hundred bases in the US. Unless the US is prepared to accept a gigantic reduction in military activity it seems highly unlikely that the US budget can ever be balanced.

    Although I am no expert I am trying to be responsible. I am sad that as a foreign resident I cannot vote in Congressional elections. I am nearly ready to buy property in the US and establish legal residency just to do so.

    There certainly should be large spending cuts, but there also should be a stop to the endless loopholes that only protect the interests of those of us who need no protection at all!
     
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  7. rajuabju
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    rajuabju Gold Member

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    Agreed, in part.

    1) Yes, those corporations need to pay taxes. All the loopholes need to be closed. All the favorable tax deals and various subsidies need to be stopped.

    2) 50% of the people in this country pay ZERO federal income tax. Sorry, but thats BS to me. If you pay nothing, you should have no voice in deciding how much OTHERS should pay. Even if these "low-income" people need to pay only 2% or 5% or whatever, EVERYONE who has an INCOME should pay SOMETHING. At the same time, I see nothing wrong with people who make $1M/year or more paying more.

    3) I know its not popular to cut spending. But it HAS to be done. Congress needs to grow a pair. And a small trim isnt going to be enough. It needs to be an across the board, huge reduction in spending.
     
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