Raising the debt ceiling with more balanced budgeting

Great Debates
1

According to ththe latest news, the Republicans want to add a balanced budget amendment to the debt ceiling talks.

  1. What concessions would Republicans have to make for Democrats to consider this?

  2. If the Dems dig in their heels and block the negotiations based on not wanting a BBA, will the voters now view them as the obstructionists?

What was he smoking when he said that? It took a perfect storm of economic growth in the 90’s for Clinton to get a balanced budget. Bush II and Obama (and yes Obama has increased the deficit with his policies) showed how easy it is to overspend and as Keynesian as Obama is, there are people on this board who think he’s not spending ENOUGH. Does Obama really believe that we will get to a point where a balanced budget is more the rule than the exception?

  1. Will this bite the Reps in the butt when eventually the Dems take control and decide to balance the budget by raising taxes?

  2. Any other salient points? <Anticipating numerous posts from the Keynesian about how this is a bad idea while simultaneously implying there are no Nobel Prize laureates from the Austrian school or how their work should be ignored because it disagrees with what the poster knows to be true cough Lobohan>

2

Well I, for one, am tentatively opposed to a BBA. I think it could be horrible policy given how emergencies sometimes happen (Katrina, 9/11, economic collapse) and emergency spending should be on the table, even if it exceeds the budget.

Regarding #3, you don’t have to take our word for it. It was a consensus of the economists that said our stimulus wasn’t large enough. As I’m nowhere close to an expert, I defer to them.

3

A balanced budget amendment is stupid. There are times when you have to run a deficit. Like when you’re in a deep recession and need to stimulate the economy because there is no private sector demand.

Also, instituting a balanced budget amendment before you cut the deficits to zero is stupid. Because then you can’t phase in the cuts and it would shock the economy.

Overall it sounds good if you don’t think about it. Which is why the right likes it.

4

But what if a deficit can be voted in with a supermajority? I believe most BBA proposals allow for deficits with war or 2/3 votes.

And to your second point, I covered that in the OP if-or-when the Reps realize that at some point eliminating the deficit will have to include a tax hike (Personally I favor an increased corporate tax for reasons that would hijack the thread)

As for your third point, do you think that continual deficit spending is sustainable or do you agree with Obama that eventually Balanced Budgets will naturally be the norm?

5

To answer one part of your OP:

The stipulation I would require of the GOP is revenue increases (at a minimum a return to the Clinton rates for the top two brackets and a return of the estate tax to Clinton levels).

The GOP will not agree, and once again prove that their desire for a balanced budget is a distant second to their desire for no new taxes ever.

6

As to the BBA itself, I’m fine with it if it’s set up such that tax increases are mandatory if spending goes up.

You want a war? Tax hike. You want Medicare to grow at 10% annually? Tax hike. Feel like adding a prescription drug benefit? Tax hike. None of this “cut taxes and eventually we will have no choice but to cut spending”. Man up, own your spending cuts, and then you get to cut taxes.

7

You can’t get a supermajority right now to keep the country from causing a world-wide depression. What on Earth makes you think the Republicans wouldn’t milk a balanced budget amendment for puerile partisan reasons ever chance they got?

Increasing taxes is a good idea, I agree. But all a BBA would do is allow an additional round of insane hostage taking every budget. Running a temporary deficit is a good idea if it will save you money in the long run. Like the highways or running fiber optics across the country. If something takes a bit of deficit spending for long term prosperity it’s a good idea. Most people don’t buy their houses with cash. They get a mortgage, because the extra cost is worth the immediate benefit.

Let’s be clear, it’s the Republicans that have problems with deficit spending. They want to reduce taxes to virtually nothing, but can’t cut the social programs to pay for it.

Obama’s contribution to the deficit was the stimulus plan which was utterly necessary. It’s not wasting money if you save millions of jobs and keep us out of a depression. Now the Bush tax cuts, that was wasted money, because it raised the deficit and provided nothing in return.

8

First off, the debt ceiling has nothing to do with any future budget. As far as I’m concerned, the debt ceiling was raised by the congress when they passed the legislation creating the debt in the first place. I can not imagine anything good happening by attaching irrelevant legislation to a purely ceremonial act.

None. They only have to make promises of concessions. There’s almost nothing they can promise to concede without diminishing their chances of re-election. I expect something along the lines of eliminating the private jet tax loop hole again for public consumption. In private, they’ll promise to pass a lot of pork barrel legislation. Hypothetically, because there is no such proposal being considered by congress and the president.

No. The BBA will not be acceptable to anybody after going through the spin cycle. Again hypothetically based on the preposterous assumption that this thing ever makes it out of the gate.

What is wrong with a balanced budget attained by competent management of the economy? That doesn’t require an amendment, and Obama gave no indication that he thought that it was a realistic concept in the current state of American politics.

No. The Dems will not take control and balance the budget by raising taxes even if they decide to do so. And in general, the Republicans benefit when the Democrats are running things for a while.

The Republicans have a little over two weeks to agree to pass a debt ceiling increase or they will be cut off by their masters. All of this political posturing is irrelevant nonsense. At the moment, Obama is making both the Democrats and the Republicans look like idiots. Don’t give him too much credit though, they are idiots.

9

The BBA is a sideshow, and probably just a diversion from the McConnell/Boehner positions that we may end up with as a means of saving face with the Tea Party in advance of elections.

Jas09, what you talk about in post 6 is actually the way to go, if we want a healthy economy (although you seem to imply the only alternative is raising taxes, not cutting other spending, but whatever - the concept is sound). Seems to me that virtually every state has a version of the same thing - pay as you go. And those that have generally tried to get around those limits, generally run by Dems for forever (California, NJ, etc) tend to be those in the deepest financial straights.

10

Well, to be fair to the politicians (gasp, I know)… they are doing what their constituencies tell them to do. Poll after poll shows that the public wants (a) a strong social safety net (i.e., no cuts to Medicare or SS), (b) low taxes (although higher taxes on the other guy or companies are sometimes OK), and (c) a balanced budget.

They care about (c) least of all, and they generally get what they want.

Really that’s what the debt limit is all about. Finding a way to put the consequences of your actions (passing debt-laden budgets, starting unfunded wars, creating unfunded social services) on somebody else (they’re raising the debt limit!!!). A balanced budget amendment is the same idea - putting the responsibility for fiscal sanity on somebody (or something) else.

And no, I’m not saying the only alternative is raising taxes. What I am saying is that it’s bullshit to cut taxes (and increase services) and then make the other side responsible when the numbers don’t add up. It’s almost like politicians figure we won’t even remember that they passed the very budgets that caused the debt in the first place as long as they don’t vote to increase the limit.

11

You can’t realistically hope to balance the budget anytime soon.

At the end of 2010 when the budget fight was getting crazy the New York Times ran a little flash game that let you attempt to balance the budget. It’s realistically not that difficult if you were an absolute dictator, in the real world every proposed cut has die hard supporters of those programs and every proposed increase in taxes enrages key people.

If all you cared about was balancing the budget the biggest changes you could make would be very simple:

Domestic Programs and Foreign Aid: Eliminate farm subsidies, reduce Federal workforce by 10%, eliminate various agencies and reduce funding for NPS, Smithsonian. (The agencies I’m talking about are ones like the Office of Safe and Drug-Free Schools), cut Federal aid to the States by 5%.

Military: Reduction in nuclear arsenal, reduction in military to pre-Iraq War size, reduction in Navy to 230 ships, complete withdrawal from Iraq and Afghanistan, drastic reduction in deployments in Europe and Asia.

Taxes:
My projections on how much revenue these various taxes would bring in come from a report by the CBO that projects the revenue for FY 2015:
[ul]
[li]Return Estate Tax to Clinton-era levels: +$50bn[/li][li]Return Capital Gains to Clinton-era levels: +$32bn[/li][li]Expiration of Bush Tax cuts for income > $250,000: +$54bn[/li][li]Raise Payroll ceiling > $106,000 until it covers roughly 90% of all earned income as it did when it was introduced: +$50bn[/li][li]Cut all tax breaks other than: child, earned income, mortgages, health & retirement benefits. Corporate rate cut to 28% and a reduction in individual rates across the board. With the removal of all other tax breaks this measure would bring in: +$75bn[/li][li]Reduce various tax breaks for high income individuals: $25bn[/li][li]5% national sales tax: +$41bn[/li][li]Tax on Bank holdings (essentially a penalty tax on banks that become too large): +$73bn[/li][/ul]
All of that without:

Any change to Social Security retirement or disability benefits.
Any increase in corporate taxes (they would be reduced.)
Any increase in regular income taxes for people earning less than $250,000. (With the simplification of the tax code many higher income earners would still potentially see a reduced rate.)
Cutting of any major Federal social programs (HUD, food stamps etc.)
Cutting any Federal support for science and research.

The Federal workforce could be reduced without significant layoffs because you simply institute a hiring freeze for most classifications until the workforce is 10% smaller.

Health care is also left unchanged. However you could significantly alter it for greater savings:
[ul]
[li]Put a cap on the rate of increase for the Medicare reimbursement rate[/li][li]Add a public option to Obamacare[/li][li]Require pharmaceutical companies to offer lower prices to Medicare and public option patients at the threat of losing patent protection for their medicines[/li][li]Pass a low requiring any State that receives Federal funds to mandate any person licensed to practice medicine in that State be required to accept Medicare and any other public option or public insurance under penalty of losing their license to practice medicine. States that do not comply have their Federal highway fund reduced by 50%, and they become ineligible to receive any Federal grants or matching funds for infrastructure improvements[/li][/ul]

12

The current negotiations are not going to solve anything.

The correct solution is to LOWER the debt ceiling.

13

Only if you want to utterly destroy the economy and add trillions of dollars in debt.

14

So you do know that sometimes an untrained amateur can not understand complex issues, right?

Would you be the lead engineer on building a bridge? Would you network administrate a huge internal network for a bank’s corporate HQ? Would you transplant a loved-one’s kidney in your garage?

I’m guessing no. Because those things are complex and you have no training with which to intelligently assist those things (I assume).

But when it comes to the economy of the wealthiest nation on Earth, and the ramifications of a disruption to the global economy, you feel fine letting your completely ignorant* gut instinct *lead the way.

Isn’t that a little stupid? I mean, really? You don’t even understand *what *the debt ceiling is, yet you’re advocating a course of action based on nothing more than an aggressive desire to punish the government for overspending.

It’s a little scary that some people can think like this. The arrogance of it is shocking.

15

Can you provide a cite that leads you to projections?

16

Seeing this gibberish over and over and over makes me want to scream.

Saint Cad, Can you define “Keynesian”? Don’t look it up, but here’s a hint:

Keynesians run balanced budgets on average. This is contrast to the Republicans who run big deficits whenever they’re in charge.

17

Unless Paul Krugman constitutes a ‘consensus’, I’d like to see a cite for that.

18

That’s old-style Keynesianism, which seeks to moderate the business cycle through counter-cyclical business policy. Even Keynes didn’t believe that would work.

The new Keynesians are all about using fiscal stimulus to correct for outlier events that cause dramatic drops in demand that are deemed temporary and unusual. They’ve given up on the business cycle correction stuff for good reason.

19

Sure, I thought I had explained it when I mentioned the New York Times flash deficit reduction calculator but I note I didn’t go into detail as I had meant to:

The calculator

Explanatory Post from the Times

A lot of it is based on CBO projections.

Even the projections are going to be debatable, but the core concept of:

-Reduce military adventurism, roll the military back to Clinton era levels if not smaller
-Key reductions in Domestic Federal spending (reduction in workforce, 5% reduction in aid to states, closure of certain agencies–again, mostly ones that 99/100 Americans do not know exist)
-Specific tax increases

Are how you reduce the deficit long term, so while we can debate the CBO’s projections the core concept is quite sound.

20

I urge everyone to think about these questions for a moment.

  1. Do you think the last six months with the huge disputes over the 2011 budget (which very nearly brought the government to a shutdown) and the current impasse over the debt limit are good things, and the way government should do business? For example, do you look at California and their perennial budget clashes, and think, I wish the Federal government were run more like California?

If so, and you like partisan budget showdowns every year, then you’d love a balanced budget amendment.

  1. Would you rather have government make long term commitments to various services, such as fixing roads, a continuous level of law enforcement and military protection, and commit to a fixed level of air traffic controllers? Or would you prefer to have government services that are subject to large increases or decreases depending on the budget situation?

If you like the idea of hiring and firing FBI agents, military personnel, and air traffic controllers simply based on whether we are running a surplus or risking a deficit in each year, then a balanced budget amendment is for you.

  1. Would you like to begin every year not knowing how to estimate your tax bill because politicians might raise or lower it at any time? Or would you rather that tax changes happen periodically, giving you a chance to plan for them?

If you like tax bills that can go up or down at the drop of a hat, then a balanced budget amendment is a great thing to support.

  1. Do you think it’s a good idea to raise taxes and cut spending in a recession? Do you think the way to generate new jobs is to stop work on highway projects, fire government employees, cut unemployment and Social Security checks, and raise taxes on everyone?

If that’s your prescription for fixing a down economy, then write your congressman to support a balanced budget amendment.