going over the NEXT fiscal cliff might not be so bad.

[unblock]

ok, yes, republicans are all giddy about the upcoming hostage-taking opportunity in two months.

debt celing plus fiscal cliff part deux. well, really, part trois, but whatever.

but having "solved" the tax side of the situation, the remaining fiscal cliff isn't nearly as ominous.

sure, across-the-board spending cuts will hurt, and beyond that it's just plain stupid. even if you believe overall spending should be cut, there are a few programs that should expand, other should be cut or canceled entire. at best this is a sledgehammer where a scalpel is called for.


still, the economy is getting stronger and while is certainly couldn't handle both the sequestration and the tax hikes, it's not clear that it couldn't handle sequestration given the new tax structure. moreover, the pain will be felt by republicans and democrats alike.


now, i'm not saying this is brilliant policy, but i am saying that we don't need to pay a king's ransom. calling their bluff and saying, ok, sequestration, bring it on is not an unrealistic response to unrealistic demands.


i don't care for obama's signaling on "entitlements", but i do like that he's talking tough about the debt ceiling limit. i think that separation is good. if we can resolve the debt ceiling part (through negotiation and/or the trillion-dollar coin idea and/or the 14th amendment solution) and call their bluff on the remaining fiscal cliff, we're in a position to cut spending in a more rational way.

personally, i think we should demand that the lion's share come from defense. let's start tough and say 10 to 1 ratio of all cuts must come from defense. hey, that was the republican going in ratio....

[Yo_Mama]

1. You're quite misled - sequestration is not the problem

Last edited Fri Jan 4, 2013, 11:56 AM - Edit history (1)

Sequestration scheduled for this year, and now deferred until March 27th, was minor - less than the payroll tax increase. It would not have a big effect on the economy.

Failing to raise the debt ceiling would force cuts at least seven times greater than included in sequestration - more than included in the entire fiscal cliff scenario. That's because the US is running a high deficit - approximately one-third of the federal budget - and so spending would have to be cut by one-third if the Treasury cannot borrow on net to make up the difference.

The tax increases just passed close less than 200 billion of the deficit, which last year was 1.1 trillion. Assume that a better economy closes another 100 billion. That still leaves us 800 billion in deficit. Sequestration was about 100 billion spread out over the year. If we cannot borrow to fund federal spending, you are looking at a budget gap of at least 800 billion, and it would have to be cut out of spending at a rate close to 90 billion a month.

Believe me, the debt ceiling was always the big issue.

[unblock]

2. that's what i'm saying.

i'm saying the sequestration isn't all that great a bargaining chip for the republicans, we could call that bluff.

i'm hoping obama outmaneuvers them on the debt ceiling issue through some combination of political posturing, minting a trillion-dollar coin, or invoking the 14th amendment.

[Yo_Mama]

3. No, the debt ceiling is not avoidable.

Congress could eliminate the law, but the President absolutely cannot.

Congress also controls the money supply under the Constitution, and this nonsense about the 14th amendment will turn out to be nonsense if the Executive tries it - and I don't think they will. The debt ceiling has been around since the 1980s, and every legal analysis has always shown it to be binding.

The debt ceiling was set in 1917, when Congress needed to raise money through a huge debt issue to fund WWI. The reason for the debt ceiling is to lower the costs of floating US debt.

Of course, we ended up defaulting on the last round of the Liberty bonds anyway in the 1930s, because debt got too high and the last issue of Liberty bonds was priced in gold, so we f__ked our creditors then.

And maybe that makes you smile, but this time, the US people are the largest block of US creditors - uncontrolled debt is what will make those IOUs in the SS trust fund worthless.

So don't think this is some Republican issue. If the US lets the debt completely get away from us, the single largest losers will be US retirees who will lose about a quarter of their SS income and most of their Medicare benefits, and this could happen within ten years at the rate we are going.

The debt ceiling isn't avoidable because it is not just a legal limit - it's a legal limit related to the ability of the US to borrow funds in the near future. The next debt limit increase will take us to what - 109% of GDP? That's well past the danger line - it's worse than Greece was. The only reason the markets haven't fled screaming already is that an awful lot of US debt isn't debt - it's in the trust funds. It's debt owed in the future to US retirees, and everyone is happily buying US Treasuries expected that those are the people who WON'T get repaid. ''