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Muda69

Politicians don’t fear debt. They fear unpopularity.

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https://www.washingtonpost.com/opinions/politicians-dont-fear-debt-they-fear-unpopularity/2019/02/05/7bb2e512-297a-11e9-b011-d8500644dc98_story.html?noredirect=on&utm_term=.2804e66c8a11

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Let’s coin a new law of politics. Call it Neuman’s Law after Alfred E. Neumanof Mad magazine fame, whose philosophy is, “What, me worry?” Neuman’s Law postulates that there is never a good time to raise taxes or cut federal spending. This explains why, since 1961, the annual federal budget has been in deficit 52 times and in surplus only five times (1969 and 1998-2001). Unsurprisingly, all the surpluses occurred at the end of economic booms that automatically raised tax revenue and curtailed spending.

The latest champions of Neuman’s Law are Lawrence Summers, treasury secretary under President Bill Clinton and director of the National Economic Council under President Barack Obama; and Jason Furman, the last chairman of the White House Council of Economic Advisers under Obama. Both are economists; both teach at Harvard.

Writing in Foreign Affairs — published by the Council on Foreign Relations — Summers and Furman discuss the budget outlook in great detail, throwing hordes of facts and figures at readers. But their conclusion corroborates Neuman’s Law.

“Deficits . . . should not cause policymakers much concern, at least for now,” they write. “It’s time for Washington to put away its debt obsession,” they conclude.

“Obsession”? They must be kidding. This inverts the truth. If Washington feared debt, Congress would long ago have tamed budget deficits. (Deficits are the annual gap between federal revenue and spending. Debt is the accumulation of all past deficits.)

What both Democrats and Republicans actually fear are the highly unpopular steps — spending cuts or tax increases — they might have to take to reduce or eliminate the deficits, which are huge. The Congressional Budget Office’s latest “baseline” estimate for 2019 is nearly $900 billion. This equals 4.2 percent of the economy (gross domestic product) and 20 percent of federal spending.

So why bother? ask Furman and Summers. Deficits aren’t now doing the economy much harm. Interest rates are low and may well stay that way. If deficits are cut too abruptly, the present economic expansion could falter. These are possibilities, but doing nothing also poses dangers, as even Summers and Furman concede.

Higher debt levels could make it hard for future governments “to stimulate the economy in a downturn,” they say. If escalating debt raises interest rates, it could crowd out private investment, undermining the economy’s long-term growth potential. Or some sort of financial crisis might occur if investors become sated with U.S. Treasury bonds.

Curiously, Furman and Summers say that we can’t simply borrow indefinitely as much as we’d like. “The debt cannot be allowed to grow forever,” they write. “The government cannot set budget policy without any limiting principles or guides as to what is and what is not possible or desirable,” they say at one point. At another, they warn: “Sooner or later, government spending has to be paid for.

But what are the “limiting principles”? And when and how might government spending be paid for? They don’t say. Their promises are vague, rhetorical throwaway lines that, in isolation, have no credibility.

To be fair, there is brief mention of a proposal to accept the existing increases in government debt but insist that any new spending or tax cuts not raise the debt further. Details are few, and this provides little restraint. In 2018, the federal debt held by the public was 78 percent of GDP, more than double the 35 percent in 2007. The CBO projects that under present policies, it will be 93 percent of GDP in 2029 — and rising.

No one really knows the long-term effects of these continuously large deficits. But there is a crude analogy in the recent past that provides a warning: double-digit inflation. Consumer prices went from about 1 percent in 1960 to 13 percent in 1980. Many economists argued then that a little more inflation wouldn’t harm the economy, but a little more soon became a lot more, and only the harsh 1980-82 downturn (peak unemployment: 10.8 percent) brought it under control.

It’s doubtful that Summers and Furman will be much impressed by Neuman’s Law. But they are living proof of its power. The message that a reasonable person would take from their essay is that the government can borrow unlimited amounts for the foreseeable future. This also seems to be the position of the Trump administration.

The essay’s true purpose seems to be to provide intellectual support for what self-interested politicians would do in any case: enjoy present pleasures and postpone any future unpleasantness. Let someone else worry about the future. That’s Neuman’s Law, and it’s mad.

Yep, let someone else, like our children & grandchildren, worry about the future.  'Tis the uni-party's cowardly line.

 

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Our political system is a duopoly. Quit thinking them as political parties, they are businesses. What are businesses ONLY purpose for existing? Think of them like Coke and Pepsi. Yes, there are some small regional players, but Dr. Pepper and RC are of no consequence to Coke or Pepsi. Coke and Pepsi own the game, just like R's and D's own the game. If R's and D's actually solved problems, we wouldn't have any use for them would we? This is about money and market share. 

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On 2/7/2019 at 6:46 AM, Impartial_Observer said:

Our political system is a duopoly. Quit thinking them as political parties, they are businesses. What are businesses ONLY purpose for existing? Think of them like Coke and Pepsi. Yes, there are some small regional players, but Dr. Pepper and RC are of no consequence to Coke or Pepsi. Coke and Pepsi own the game, just like R's and D's own the game. If R's and D's actually solved problems, we wouldn't have any use for them would we? This is about money and market share. 

look in the mirror to find the cause of their decay.

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1 hour ago, DanteEstonia said:

look in the mirror to find the cause of their decay.

Perhaps I should start a go fund me site to launch my own political ambitions, how do you think that would work out DE? 

 

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38 minutes ago, Impartial_Observer said:

Perhaps I should start a go fund me site to launch my own political ambitions, how do you think that would work out DE? 

 

Worth a shot. Better than doing nothing.

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10 hours ago, DanteEstonia said:

Winners make solutions, losers make excuses.

What political solutions have you personally had a hand in implementing, Dante?  Please describe them.

 

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1 hour ago, Muda69 said:

What political solutions have you personally had a hand in implementing, Dante?  Please describe them.

 

That’s between me and the Nevada Secretary of State.

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21 hours ago, DanteEstonia said:

That’s between me and the Nevada Secretary of State.

*yawn*  I'm sure it is.  Is a FOIA request required?

 

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3 hours ago, Muda69 said:

*yawn*  I'm sure it is.  Is a FOIA request required?

 

The admins know my name and can look up my organization on the Nevada Secretary of State’s website.

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21 minutes ago, DanteEstonia said:

The admins know my name and can look up my organization on the Nevada Secretary of State’s website.

Muda is a moderator now, maybe he can do it on his own.

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35 minutes ago, gonzoron said:

Muda is a moderator now, maybe he can do it on his own.

All he needs to know is my name, and he will get all the information he wants.

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It's not a question of fear ... it's a question of not caring.

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6 hours ago, gonzoron said:

Muda is a moderator now, maybe he can do it on his own.

I am?

 

5 hours ago, DanteEstonia said:

All he needs to know is my name, and he will get all the information he wants.

Care to share?

 

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5 hours ago, Muda69 said:

Care to share?

I've already told you all you need to know.

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14 hours ago, gonzoron said:

 

moderator.jpg

Hmm.  That's news to me.

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On 2/10/2019 at 10:47 AM, DanteEstonia said:

The admins know my name and can look up my organization on the Nevada Secretary of State’s website.

Per you instructions:

https://www.nvsos.gov/elections/4783.pdf

I spent an extra minute and dug a little deeper trying find out what you’re attempting to do:

https://fundly.com/fountainhead-society-fundraising-for-ballot-initiative

https://fundly.com/users/1377271

I searched for a web presence but could not find one. Since your funding efforts aren’t going well, if I donate 20 bucks, could you set something that specifically would detail your master plan? I’m more than happy to set the wheels in motion.

 

 

 

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3 hours ago, Impartial_Observer said:

Per you instructions:

https://www.nvsos.gov/elections/4783.pdf

I spent an extra minute and dug a little deeper trying find out what you’re attempting to do:

https://fundly.com/fountainhead-society-fundraising-for-ballot-initiative

https://fundly.com/users/1377271

I searched for a web presence but could not find one. Since your funding efforts aren’t going well, if I donate 20 bucks, could you set something that specifically would detail your master plan? I’m more than happy to set the wheels in motion.

 

 

 

$200

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National Debt Hits a New Record High: $22 Trillion: http://reason.com/blog/2019/02/13/national-debt-hits-22-trillion

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The national debt hit a new record high of $22 trillion this week, according to figures released by the Treasury Department. That works out to about $66,000 for every man, woman, and child in the country.

It's a record that likely won't stand for long. We're less than a year removed from surpassing the $21 trillion threshold, and just a little over 17 months have passed since the debt climbed above $20 trillion for the first time. The Congressional Budget Office (CBO) expects the federal government to run a $900 billion deficit this year, and by next year, the government will be adding more $1 trillion to the national debt every 12 months.

Hitting the $22 trillion threshold this week is "another sad reminder of the inexcusable tab our nation's leaders continue to run up and will leave for the next generation," said former New Hampshire Gov. Judd Gregg and former Pennsylvania Gov. Edward Rendell, co-chairs of the Campaign To Fix The Debt, a bipartisan group pushing for fiscal responsibility in Washington, D.C.

 

"The fiscal recklessness over past years has been shocking," the former governors said in a statement.

Look a few more years into the future and things really start to accelerate. Unlike a decade ago, when the so-called Great Recession (and the questionable federal policies crafted in response to it) caused deficits to spike, the current increase is not a short-term problem that will be solved as soon as the economy rights itself. Instead, we're now at the beginning of a long upwards climb that has no end in sight—unless significant policy changes are enacted.

Here's how the CBO projects the national debt to grow, relative to America's gross domestic product—which roughly represents the size of the national economy—over the next few decades.

Source: Congressional Budget Office; Committee for a Responsible Federal BudgetSource: Congressional Budget Office; Committee for a Responsible Federal BudgetUnder current law—which assumes, among other things, that the 2017 tax cuts will expire in 2025 and not be extended—the national debt will double from 78 percent of gross domestic product (GDP) this year to 160 percent of GDP by 2050. It would hit 360 percent of GDP, and still be climbing, by the end of the CBO's 75-year projection window in 2093.

In the so-called "alternative fiscal scenario," which assumes current policies (such those tax cuts) are kept in place, the debt would hit 225 percent of GDP by 2050 and more than 600 percent of GDP by 2093.

Either way, that sort of trajectory should inspire immediate action. But President Donald Trump completely ignored the national debt issue in last week's State of the Union address, and he's previously shrugged off worries about the national debt because things won't get really bad until he's out of office. Mick Mulvaney, the president's acting chief of staff and a former congressional budget hawk, now says "nobody cares" about the debt.

The thing is, he seems to be right. In Washington, much of the discussion over the past week has focused on Democratic plans to spend untold piles of cash on a "Green New Deal" that would require a mobilization of the entire economy to fight climate change. Republicans, meanwhile, spent the past two years with full control of the federal government and used that opportunity to increase spending and cut taxes, which is not a formula for deficit reduction. Those tax cuts were defensible in many ways—the reduction in the corporate tax rates makes America competitive with the rest of the world—but it is undeniable that they added to the debt.

Indeed, a $22 trillion national debt is not the result of any single bad decision. Entitlement programs—Social Security, Medicare, and Medicaid—are the main drivers of the long-term deficit, but endlessly expensive (and just plain endless) foreign wars, the 2017 tax cuts, and a bipartisan consensus that spending should keep growing faster than revenues have played important roles too.

The other problem is that the national debt isn't just getting bigger—it's getting more expensive too. Already, interest on the national debt consumes about $390 billion annually. That's more than any federal department or agency except the Pentagon, and it is only going to keep getting bigger.

As Brian Riedl, a senior fellow at the Manhattan Institute, told Reason last year:

The danger is that if the debt keeps growing, at a certain point investors will stop lending us money at reasonable interest rates. They will be reasonably concerned that the debt is growing beyond our ability to finance it. They will demand higher interest rates, and every one percentage point increase in interest rates will add $13 trillion in interest costs over 30 years. As interest rates go up, we will have to borrow even more to make the interest payments, which causes the debt to go even higher. At a certain point, the investors will demand that we get our fiscal house in order. It will likely start with low-hanging fruit—tax hikes for the rich, for example—but those won't be enough.

Eventually, you'll be left with two choices. Either significantly raise taxes on the middle class or significantly cut benefits to current seniors. If we do neither, you will have a major financial crisis.

Hitting the $22 trillion threshold is just one step towards that future debt crisis, but it will take a long time to reverse these trends. The time to start is now, while the economy is still growing—because another recession will only make these problems more intractable. Unfortunately, there's little reason to expect Congress or the current president to take meaningful steps to defuse the long-term debt crisis before we hit the next milestone along the road—which won't take long at the rate we're going.

A sorry future awaits America.

 

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If We Can't Cut Entitlements, What Can We Do?: http://reason.com/archives/2019/02/19/if-we-cant-cut-entitlements-wh

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Thanks to the overspending of Congress and successive presidential administrations, America's debt totals $22 trillion, and it is projected to grow faster and larger in the years to come. Legislators have been shielded from the consequences by three decades of low interest rates and the fact that the United States is still one of the best places in the world for foreigners to invest. However, a time will come when no level of cheap debt will make up for Washington's fiscal recklessness.

Permanent low economic growth, stifled entrepreneurial spirit, and high unemployment are looming—not to mention the risk of a full-on, debt-driven financial crisis.

The way to prevent such outcomes is clear. We must deal with the drivers of our future debt: Social Security, Medicare, and Medicaid. But for those who think it is not politically feasible to tackle entitlements, the Congressional Budget Office (CBO) recently published a report with a broader range of suggestions. They include limiting highway and transit funding to expected revenues (translation: don't spend more than you collect), eliminating Head Start, and creating a federal value-added tax (VAT).

 

Disappointingly, many of the CBO's alternatives are meant to grow government revenue rather than shrink government expenditures. All told, the report details $15.9 trillion in tax hike options vs. $5.7 trillion in spending cut options. Nine of the top 10 "savings" come from tax increases, including a 5 percent VAT (which may eventually hit 20 percent, as has happened in Europe), a carbon tax, and an increase in the maximum taxable earnings for the Social Security payroll tax. These off-the-shelf options are worrisome. Given the choice, politicians will likely opt to take more of our money rather than to confront special interests and reduce the size of government.

On the spending side, the largest savings would come from establishing caps on federal outlays for Medicaid and from cutting $50 billion a year over 10 years from the Department of Defense. But even these "cuts" would be against a baseline that assumes an ever-rising level of spending. In other words, many of them would simply slow the speed at which government grows, not reduce the total spent.

All in all, the CBO's suggestions reflect a failure of imagination. Could the agency not have come up with a few bold spending reforms? Terminating the departments of Agriculture, Commerce, and Energy should all be on the table, for example. Or we could combine them into a single Department of Cronyism. Surely that would save a billion or two.

Agreed.  The goals should be to cut the size, scope, and spending of the federal government by at least 25%.   Eliminating unconstitutional cabinet-level agencies like Agriculture, Commerce, and Energy is a good start.

 

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33 minutes ago, Muda69 said:

If We Can't Cut Entitlements, What Can We Do?: http://reason.com/archives/2019/02/19/if-we-cant-cut-entitlements-wh

Agreed.  The goals should be to cut the size, scope, and spending of the federal government by at least 25%.   Eliminating unconstitutional cabinet-level agencies like Agriculture, Commerce, and Energy is a good start.

 

Or, just raise taxes.

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3 minutes ago, DanteEstonia said:

Or, just raise taxes.

And exactly how long can that go on?  How much more in taxes are you personally prepared to pay?

 

 

Edited by Muda69
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4 minutes ago, Muda69 said:

And exactly how long can that go on?

Until the debt is paid off.

4 minutes ago, Muda69 said:

How much more in taxes are you personally prepared to pay?

My share.

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