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What is the Debt Ceiling?

A lot of people appear confused at to what the debt ceiling is and why it has to be raised.

First, what is the debt ceiling? CNNMoney explains:

It’s a cap set by Congress on the amount of debt the federal government can legally borrow. The cap applies to debt owed to the public (i.e., anyone who buys U.S. bonds) plus debt owed to federal government trust funds such as those for Social Security and Medicare.

This cap was created by a 1917 law and has been raised a rather large number of times over the past almost-century.  It is important to understand that the debt ceiling itself is an arbitrary number.

NPR’s Planet Money further adds:

Every day, the federal government spends more money than it takes in. It makes up the difference by borrowing money. So every day, the government’s debt increases. Some time next month, total federal debt will rise above $14.3 trillion.

Ok, you say, so what?  Well (again from NPR):

Some time very soon, the government either has to raise the debt ceiling or stop spending more than it takes in (in other words, balance the budget).

Ok, you say: so stop spending as soon as we hit the ceiling.  That’s show ‘em, right?

Well, not so fast:

the government either has to raise the debt ceiling or stop spending more than it takes in (in other words, balance the budget).

Balancing the budget would mean cutting spending by about 40 percent, raising taxes by a comparable amount, or enacting some combination of massive spending cuts and huge tax increases.but (Context: Every penny of discretionary spending, including defense, amounts to about 40 percent of the budget.)

Balancing the budget immediately bears no resemblance to the budget and tax policies passed by Congress in the past few months. It would be a much bigger, much faster spending cut and/or tax hike than leaders of either party are proposing.

Here’s the deal:  the spending has already been authorized—the bills are going to come due (bills like, for example, continuing military operations in Afghanistan, Iraq and Libya or keeping air traffic controllers in towers and stuff like that).  As such, we have to borrow to keep paying the bills.

If you didn’t pay attention to the above paragraph, please go read it again.

In other words:  raising the debt ceiling does not authorize mores spending–we have already done that.  Borrowing simply allows us to pay for the obligations that have already been made.  Voting on the debt ceiling is not voting on the budget.

This is a fact.  It may well be an ugly fact, but it remains a fact nonetheless.  Not raising the debt ceiling doesn’t make it go away.

Back to CNNMoney on not raising the debt ceiling:

Treasury would not have authority to borrow any more money. And that can be a problem since the government borrows to make up the difference between what it spends and what it takes in. It uses that borrowed money to help fund operations and pay creditors.

In short, if lawmakers fail to raise the ceiling this year, they will have two choices, both awful.

They could either cut spending or raise taxes by as much as $738 billion just to cover the period from April 1 through Sept. 30, which is the end of the fiscal year. Or they could acknowledge that the country would be unable to pay what it owes in full and the United States could effectively default on some of its obligations.

In short:  our fiscal issues are complicated and the result of long-term policy decisions.  They cannot be fixed by stomping one’s foot and saying that the debt ceiling cannot be raised.

BTW, TAP has some comparative info:

Only Denmark has a fixed debt limit comparable to that of the U.S. There, the debt limit is raised through legislation in a separate action from the annual budget process. In Denmark, however, the debt limit is set at a level so high that the ability of debt managers to issue payments is not inhibited.

The congresses of other countries such as Canada and Sweden approve borrowing authority, but it is in connection with the approval of annual budget decisions.

The United Kingdom, New Zealand, and other countries delegate even broader authority to their treasury departments to borrow in the public interest. But because these countries have parliamentary systems of government, issues such as borrowing money to fund the government usually require significantly less deliberation.

Look, I understand that we have a problem with deficit spending and, therefore, with debt.  However, the place to fix those problems is in a combination of the budget process itself and serious reforms to various policy areas.  It is not by refusing to hike the debt ceiling.

See also:

Bloomberg Businessweek:  Washington Plays Chicken With the Debt (see the great graphic while you are there).

WaPoWhat’s the debt ceiling, and why is everyone in Washington talking about it?

Related Posts:

About Steven L. Taylor
Steven L. Taylor is Professor and Chair of Political Science at Troy University. His main areas of expertise include parties, elections, and the institutional design of democracies. He is the author of Voting Amid Violence: Electoral Democracy in Colombia and is currently working on a comparative study of the US to 29 other democracies. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging at PoliBlog since 2003. Follow Steven on Twitter

Comments

  1. Patrick T. McGuire says:

    Here’s the deal: the spending has already been authorized—the bills are going to come due (bills like, for example, continuing military operations in Afghanistan, Iraq and Libya or keeping air traffic controllers in towers and stuff like that). As such, we have to borrow to keep paying the bills.

    The problem with all the arguments I have seen about raising the debt limit is that either defense or Medicare spending is always used as a reason that we can’t limit spending. There is a helluva lot of other spending that goes on besides these two and there are other ways of raising revenues besides taxes. At present, the cash inflow is sufficient to service current debt and to pay down the amount of debt. As the debt shrinks, the cost of servicing it also shrinks. Spending cuts can be made.

    Last year we were told that without TARP the world would end. That proved to be a lie. Earlier this year we were told that the debt limit had to be increased in March, then in May, now in August. It keeps getting pushed back but the world hasn’t ended.

    As soon as the Treasury is told it can’t borrow any more money, spending will be cut and eventually this problem will be fixed.

    Like or Dislike: Thumb up 8 Thumb down 1

  2. @Patrick:

    You are still confusing the budget and the debt ceiling.

    Like or Dislike: Thumb up 1 Thumb down 3

  3. Also:

    Last year we were told that without TARP the world would end. That proved to be a lie.

    Well, it was 2008 and I don’t think the world ending was promised, just a forestalling of a second Great Depression.

    We can argue over whether TARP deserves the credit or not, but it does seem to me that we did avert said second Great Depression.

    As soon as the Treasury is told it can’t borrow any more money, spending will be cut and eventually this problem will be fixed

    It doesn’t work that way. You can’t just governing at this point.

    I agree that defense and Medicare have to be cut. But I don’t think that stopping all funding because we can’t pay our bills is the responsible way to go.

    Like or Dislike: Thumb up 3 Thumb down 4

  4. bains says:

    Perhaps Patrick is, but I think you are confusing obligations with implied promises.

    Like or Dislike: Thumb up 0 Thumb down 1

  5. I commented in the previous post, but we can cut spending in the current fiscal budget today. It will be for lack of a better term, draconian, but it can be done. As others have noted, Congress can stop Social Security payments immediately if they choose to do so. I am proposing that that may be a better solution to just incurring more and more debt, even if the spending has already been authorized through continuing resolutions or stupid budgeting gimmicks like baseline budgeting, taking some spending off the books, etc. I can be just as utopian as my critics.

    When an individual or family gets in trouble the first thing the advisor does is cut up the credit cards. You’re not borrowing any more money. Period. Then you go to work on renegotiating debt and developing a viable, however painful, plan to start paying the debt off.

    Either we as a country are serious about eliminating our debt, or we aren’t. Sadly, I’m inclined to believe we aren’t.

    Like or Dislike: Thumb up 5 Thumb down 0

  6. Southern Hoosier says:

    OK, it would be like me living off my credit card. When I reach my limit, I would simple ask the bank to raise my credit limit and keep on spending, right? As long as my credit limit keeps going up, why would I ever have to pay down my debt or even worry about it?

    Like or Dislike: Thumb up 10 Thumb down 0

  7. mattb says:

    The issue with these “family cutting up the credit cards” analogies is that THE US GOVERNMENT IS NOT A FAMILY.

    Sorry for the all caps, but this cannot be stressed enough. If the family next door goes into bankruptcy, it does not cause me to necessarily go into bankruptcy. And other than the possibility that the house goes vacant and starts a chain reaction that slowly takes down the neighborhood, that bankruptcy will have very little effect on the rest of the people in the neighborhood.

    The US is not a family… it’s the ENTIRE FREAKING NEIGBORHOOD — including essential services.

    And while I realize many out there have some libertarian dream of you as an Ubermench surviving by the sweat on your brow and a bit of luck alone, the fact is that we’re all in this together and the current debt pays for a lot of stuff we can do without.

    Also, look at how angry things got last year in terms of any threat to medicare (and even today with the Ryan budget). Remember how many of you talked about the righteous anger of the tea party.

    Ok, imagine what happens if social security and medicare go away for everyone tomorrow like Charles is advocating. To quote the Simpsons: that Utopia is a Fruit-opia.

    Like or Dislike: Thumb up 6 Thumb down 2

  8. Wayne says:

    Steven I thought you said “it acts as a political gimmick”. I suspect you might say the same for the budget process and the budget. The politicians sure have treated them that way.

    Yes the debt ceiling and the Budget are two different things but they are very much related. A budget that spends more than it takes in increases the debt therefore the need to raise the debt ceiling. If the debt ceiling is allowed to grow uncheck then the Government can spend more than they take in for as long as they want or until the government collapses .

    Just because spending is authorize doesn’t mean it has to be spent or that it can’t be cut.

    If I budgeted for a big vacation etc then later decided I am in way too much debt. I start cutting expenses including my big vacation and prioritize my expenditures. Payment of debt and basic needs would get paid first. The same should apply to government.

    The debt ceiling should be use to keep budgets in line and budgets should be use to keep debt down. Refusing to do so and kicking the can down the road is irresponsible. The we will take care of it when we hit the debt ceiling, no the budget process, no the debt ceiling, no budget process, no later, etc is not cutting it.

    Like or Dislike: Thumb up 5 Thumb down 0

  9. Southern Hoosier says:

    If we keep raising the debt ceiling, why have one?

    Like or Dislike: Thumb up 4 Thumb down 0

  10. Wayne says:

    Yes Mattb the US Government is not a family but it is not the entire US and it is not the entire neighborhood. However if it keep spending irresponsible and outlandish then goes bankrupt, it will cause all of the US great pain.

    Some common sense that applies to family spending applies to Government spending as well. The Government exists in the real world and reality applies to them.

    Like or Dislike: Thumb up 4 Thumb down 0

  11. mattb says:

    Ok… perhaps I can put this a different way.

    The issue that Stephen has is that Congress just approved a budget that inherently required a raising of the debt ceiling. The legislative process spoke. Everyone agreed (compromised) that this was the right thing to do.

    Now, only a few weeks later, the entire thing is placed at risk by an arbitrary limit (and note one that is internally set).

    So basically, this is a fundamental abuse of the larger process.

    On the topic of family metaphors — yes, I think everyone agrees that we need to “tighten out belts.” Not raising the debt ceiling, however, would be akin to attempting to reduce debt by stopping paying for utilities and the mortgage and food (along with everything else). In other words, it would largely be a case of attempting to save the family by killing it.

    Finally, the most BS thing about the family or “me” metaphors everyone is trotting out is that, if this was really your family or you, the answer to paying down the debt would be not just cutting spending, but raising the amount of your salary going into paying down debt — in other words “raising taxes” if we’re extending this metaphor. And I know from following comments how popular that option is with most of the people advocating cutting the cards.

    Like or Dislike: Thumb up 2 Thumb down 2

  12. mattb says:

    Again, like Steven, I agree that there has to be cutting (and most likely tax hikes).

    Refusing to raise the debt ceiling, on the other hand, is creating a crisis in order to cut. That’s fundamentally irresponsible, not conservative, and ultimately threatens far more damage to the country than help.

    Again, it’s akin to saving the family by stopping the payment of utilities and food along with everything else.

    Like or Dislike: Thumb up 1 Thumb down 1

  13. mattb — bullshit. I’m not creating a crisis. The crisis was created before the debt ceiling limit was reached. It is Geithner and Obama and Orszag and Bush and and their friends that have created yet another crisis to take advantage of. If the debt ceiling is raised how long before I hear the same tired arguments about WHAT WE MUST DO to avoid yet another crisis by not raising the debt ceiling again? (See what I did with caps there, did that make the point somehow clearer or more important?)

    Families can and do sometimes fail. So do governments and civilizations. Or we can continue to pretend that a needs-based redistribution scheme will solve our problems. Hope and change!

    Like or Dislike: Thumb up 5 Thumb down 0

  14. An Interested Party says:

    As long as many conservatives and Republicans talk about balancing the budget without the option of tax increases as well as spending cuts, they really can’t be taken seriously…

    …creating a crisis in order to cut.

    Hey, that is the Grover Norquist way, so how bad could it be…

    Like or Dislike: Thumb up 1 Thumb down 2

  15. @Charles:

    So, if we do not vote raise the debt ceiling and the federal government cannot fund its operations for the rest of the fiscal year without radical cuts and/or radical tax increases, that won’t be a crisis?

    You are cool with not paying soldiers in Afghanistan (and indeed, not supplying them) or closing federal prisons or not paying for the border patrol? How do you propose that these things get done if the federal government cannot borrow for the rest of the fiscal year?

    Like or Dislike: Thumb up 2 Thumb down 4

  16. Max Lybbert says:

    I found Keith Hennessey’s post from a few months ago very helpful and basically nonpartisan: http://keithhennessey.com/2011/04/11/why-the-debt-limit-fight-will-be-different/ .

    Like or Dislike: Thumb up 1 Thumb down 0

  17. Wayne says:

    For those who think raising the Debt Ceiling is so important, I take it you are willing to agree to large spending cuts and legislation to avoid future massive debt in order to raise the debt ceiling?

    After all if you think not raising the debt ceiling would be such a crisis, surely you would be willing to make sacrifices?

    If not then you are just crying wolf.

    Like or Dislike: Thumb up 0 Thumb down 2

  18. anjin-san says:

    Or we can continue to pretend that a needs-based redistribution scheme

    Which of your needs are you prepared to give up? National defense? Roads? A working sewage system? Police and fire protection?

    Or is it just the needs that you don’t happen to need at the moment that you are prepared to cut?

    (and yes, some of the things I mention are not federal. after the federal govt. fails, how long do you think it will take for cities, counties and states to follow?)

    Like or Dislike: Thumb up 1 Thumb down 1

  19. anjin-san says:

    If not then you are just crying wolf.

    Well, the #1 priority for the GOP upon taking control of Congress was preserving the Bush tax cuts for the top brackets. In other words, the GOP is full of shit about when it comes to being serious about the deficit.

    surely you would be willing to make sacrifices?

    Interesting how it is the poor and middle class who will be doing all the sacrificing if the GOP has it’s way…

    Like or Dislike: Thumb up 6 Thumb down 3

  20. An Interested Party says:

    You are cool with not paying soldiers in Afghanistan (and indeed, not supplying them) or closing federal prisons or not paying for the border patrol? How do you propose that these things get done if the federal government cannot borrow for the rest of the fiscal year?

    Don’t be silly, Steven…we can avoid all that if the government simply stops sending out Social Security checks…

    For those who think raising the Debt Ceiling balancing the budget is so important, I take it you are willing to agree to large spending cuts and large tax increases legislation to avoid future massive debt in order to raise the debt ceiling?

    After all if you think not raising the debt ceiling would be that the budget deficit is such a crisis, surely you would be willing to make sacrifices?

    If not then you are just crying wolf full of $hit.

    Happy to be of help…

    Which of your needs are you prepared to give up? National defense? Roads? A working sewage system? Police and fire protection?

    Oh, c’mon anjin…you know what Charles is more than willing to give up…

    Like or Dislike: Thumb up 0 Thumb down 0

  21. wr says:

    Wayne — I’ll actually go further in the direction of fiscal sanity. I’m so concerned about the debt, I’m willing to pay slightly higher taxes.

    All of you who scream about the evils of debt and rule any tax increase out are simply proving that you either don’t know what you’re talking about or don’t really care about the deficit except as an excuse to stop funding programs you never liked in the first place. (Or in Wily Zels’ case, that you never liked except when you were taking their money.)

    Like or Dislike: Thumb up 0 Thumb down 3

  22. Dr. Taylor, I’m not cool with a lot of things, but so what? We are hurtling towards a cliff and most of the responses are demogogic pleas that we can’t possibly revert to a level of spending that somehow sufficed when Bill Clinton was president. Not that it matters, but I’d pay the soldiers, sailors, airmen, marines, coast guard, etc first.

    Who really believes that promises to cut spending in return for more debt will be honored? We’ve been here before, sort of like we had one amnesty and never will do it again.

    I’m giving up. People don’t want to be responsible and nothing I can say is going to change that.

    Like or Dislike: Thumb up 3 Thumb down 1

  23. An Interested Party says:

    We are hurtling towards a cliff and most of the responses are demogogic pleas that we can’t possibly revert to a level of spending taxation that somehow sufficed when Bill Clinton was president.

    Happy to be of help…

    I’m giving up. People don’t want to be responsible and nothing I can say is going to change that.

    Indeed…it’s not very responsible at all to talk about spending cuts but not tax increases…

    Like or Dislike: Thumb up 0 Thumb down 2

  24. mpw280 says:

    anjin, make a sacrifice and pay more taxes, don’t ask others, just buck up and do your part that you so love telling others to do. We don’t have a revenue problem we have a spending problem. Quit spending more money than we take in, and poof problem solved. Quit promising everybody everything to get a vote and implied promises don’t cost us more. Dropping taxes is one way to try and constrain spending, but with an ever increasing debt ceiling it doesn’t work, so limit the ceiling, limit the taxes and then decrease the spending problem that DC has. I know most of this won’t make any sense to the economically illiterate liberals but it is what needs to be done. If you put money in a politicians hands he will spend more than you give him, and promise to spend even more than that so you have to stop giving them blank checks, period. Lets put this in terms some of you might get, if your wife/sig other has a spending problem do you get a bigger credit limit on your cards or do you cut the damn things up. If you answer get a bigger limit then you fall under the Ron White heading of CAN”T FIX STUPID. mpw

    Like or Dislike: Thumb up 6 Thumb down 0

  25. An Interested Party — perhaps if you could *&^&*^%* read you wouldn’t have to make shit up about what I say.

    Like or Dislike: Thumb up 0 Thumb down 1

  26. Brian Anslow says:

    My outlook on this is somewhat differing, while I understand that the debt limit must be raised to meet our current bills and avoid defaulting on current debt owed by the United States. I feel that we must at some point put our foot down to the members in the Congress and tell them no more spending. The biggest problem with that is that Congress is the ones who have to say enough is enough and we all know that is nearly impossible. In your post you mention at least twice defense spending. According to the 2009 budget released by The Office of Management and Budget approximately 56% of our budget was allocated to only two programs: Medicare and Social Security. These two are the problems and I am not going to say necessarily what you think I am. The problem with these two programs are that they are mandatory spending programs, which means that they do not fall under budget oversight. These programs are paid based on the usage of each program. Not since Franklin D. Roosevelt in 1933 and 1936 (Social Security) has the Congress had any oversight in the budget of Social Security. Yes, we have borrowed against SSI multiple times to pay other debt (which concurrently has caused SSI to be unfunded) but we are unable to set a limit or budget on SSI on a yearly basis. The last time Congress had any budgetary impact on Medicare was in 1965 with the completion of “The Great Society” brought on by Lyndon B. Johnson. These two programs have become what are tearing the United States apart. These programs need to be adjusted yearly and budgeted appropriately by Congress. Yes, I know that I am now an easy target in saying that I don’t like old people. That is far from the case, I just think that budgetary oversight is necessary when you are talking about 56% of what this country spends annually. Now I had mentioned the defense spending according to that budget, well based on my reading if I were to put together Education and Defense it would equal approximately 22% of our budget in 2009. I do think that defense spending needs to be a part of cuts but it needs to be in the overhead portion of defense. The US Military runs at a 40% overhead rate while they require that all contractors be at 15% or less on overhead. I think that by cutting the fat of upper management in the military and getting the overhead more in line with the contractors you could save quite a large chunk of money yearly. This can all be done without cutting a single paycheck from one military personnel.

    I know this is getting long winded but I felt that I needed to back my position. I think that a debt ceiling of 15 trillion dollars needs to be passed but only with a balanced budget amendment. This is not a and/or type of thing this is a must-have-both type of thing. At 15 trillion dollars we can pay our debtors and begin to start the painful process of cutting the budget and raising taxes, or in my opinion changing the tax system entirely to a more “Fair” type of deal. This is what the first step needs to be to get this debt and deficit turned around, we are past the point of being able to make small adjustments to keep our country in line, and we are now at the moment where a major change needs to take place.

    These are all just pieces in a long and painful process of getting this whole deal turned around. I would love to hear some comments on what I have said and if there are any corrections I would love to be told so. Just keep in mind these are my opinions and how I feel so be gentle. 

    Funny nugget of information: The total debt of the US including public and intra-governmental when all is tallied is 64 trillion dollars. The total GDP of the entire world in one year is only 56 trillion dollars… just a thought.

    Like or Dislike: Thumb up 3 Thumb down 0

  27. A voice from another precinct says:

    Wpw! This is just like listening to a debate between Madelyn Murray O’Hair and Jerry Fallwell back in the day. Everybody has their own articles of faith that are immutable and resistant to both reality and the arguments of others to the contrary. No wonder we can’t solve the budget problem!

    Like or Dislike: Thumb up 0 Thumb down 1

  28. mpw280 says:

    precinct, prove that the higher taxes on less people will solve the problem, you can’t. When tax revenue goes up so does spending and promissory spending. You can say my arguments don’t solve anything but you put absolutely nothing forward. So show me the money, where you gonna get it and where you gonna spend it. You have no beliefs as I see your post other than to say mine are wrong, but you have the cat in the bag and I think we all know where that is going, right with norm, ip, et al. TAX THE RICH, you can’t cut spending. To which my reply is the same, pay more taxes if you feel you aren’t paying enough but don’t ask me to pay, I pay enough. mpw

    Like or Dislike: Thumb up 1 Thumb down 0

  29. c.red says:

    Am I actually reading right? That people are actually advocating stopping Social Security checks now to avoid raising the debt ceiling? Uhm, I don’t have the numbers in front of me, but some large number (into the millions) depend on that money soley for food, utilities and housing. Do I have to state the obvious and say you sentencing these people to death for an arbitrary number? Not to mention the money they would stop putting into the economy, causing businesses to fail (and, incidentally, sending us right back into a recession).

    I hope you’re joking because that sounds fairly psychotic to me.

    (Not to mention the troops we would have to literally abandon around the world, assuming Dr. Taylor’sdiscretionary numbers are true, which I don’t doubt for a second.)

    Soylent Green for everyone!

    Like or Dislike: Thumb up 0 Thumb down 1

  30. c.red says:

    I’m not opposed to tweaks to Social Security (means testing, raising the retirement age) and we possibly need to make changes to Medicare and Medicaid, (which don’t involve making those programs ineffective.)

    (Regarding means testing SS, I seem to remember last year the conservative line was that the money was promised and we couldn’t do that because it would be cheating our citizens. I’m going to use the same line now and add “cheating our citizens that can least afford it.)

    But I’m more in favor of raising tax rates back to a reasonable level and eliminating subsidies and tax loopholes. I would be much more in favor of growing the economy by bringing manufacturing back to the US (and I think a big step would be to divest health care costs from businesses entirely) and investing in new technology research and education.

    Like or Dislike: Thumb up 0 Thumb down 1

  31. An Interested Party says:

    An Interested Party — perhaps if you could *&^&*^%* read you wouldn’t have to make shit up about what I say.

    Oh, pardon me, you have mentioned raising taxes as well as spending cuts? I do apoligize if I overlooked that, what with all the talk of not sending out Social Security checks and needs-based redistribution schemes…

    These programs need to be adjusted yearly and budgeted appropriately by Congress.

    How, exactly, do you think Congress should go about doing that?

    …or in my opinion changing the tax system entirely to a more “Fair” type of deal.

    What kind of tax system would be more fair?

    When tax revenue goes up so does spending and promissory spending.

    Hmm, considering that during the past decade, taxes were cut and spending went up, perhaps you would care to provide some evidence to support your claim…

    …I think we all know where that is going, right with norm, ip, et al. TAX THE RICH, you can’t cut spending.

    Pardon me for a moment while I dig through all that straw…actually, what a lot of people are talking about is tax increases and spending cuts, as both will be necessary to get the budgetary mess under control…

    Soylent Green for everyone!

    Indeed…if some conservatives don’t want to be caricatured as batshit insane, perhaps they should rethink the “solutions” they offer to take care of the budget problem…

    Like or Dislike: Thumb up 0 Thumb down 0

  32. mattb says:

    Good god… that made it through the filters.

    Dr Joyner, et al, something seem busted, but for the sake of catharsis, can we not fix it for a little while?

    Like or Dislike: Thumb up 0 Thumb down 0

  33. Brian Anslow says:

    @An Interested Party

    While it would not seem as though you have put anything forward in the conversation nor did you seem to comprehend what I was getting at.

    When I said that Social Security and Medicare needed to be adjusted yearly and budgeted appropriately I was directly implying that Congress isn’t doing it and it is something that needs to be addressed. “My Congressmen” has NEVER voted on the appropriations or budget basis for SSI or Medicare. It is considered mandatory spending and is something that is not considered something that can be adjusted or changed ever….

    In regards to a “Fair” system of taxation I would like to think that most people who read that would immediately gravitate towards the “Fair Tax”. While I am not a 100% supporter of the “Fair Tax” I am inclined to think that it could provide some very positive changes while simplifying an impossible to interpret tax code and eliminate an enormous IRS budget.

    But thanks for being basically useless in the conversation… I mean I could always just say “Sooooooo?” like my two-year-old likes to do. If you are going to constantly be well…. you, it would be nice to have some substance or standing before you open your trap.

    Like or Dislike: Thumb up 1 Thumb down 0

  34. mattb says:

    “My Congressmen” has NEVER voted on the appropriations or budget basis for SSI or Medicare.

    Brian,

    Is you’re Congressman (or woman, or critter) one of the first years? If so, they did vote for the current budget. Was it a yea or nay?

    Like or Dislike: Thumb up 0 Thumb down 0

  35. Brian Anslow says:

    @mattb

    You are aware that mandatory spending is not voted on by Congress. Discretionary spending is voted on by Congress. Mandatory is auto-pilot spending, the money is calculated based upon a formula of who they think and know will be needing the money in the upcoming year, but if they are wrong and they have been every year of its existance the country is still mandated to have money for the program regardless of how much over budget it goes.

    Like or Dislike: Thumb up 1 Thumb down 0

  36. c.red says:

    By the way, somewhere around 13 million:

    “…benefits account for more than half the total income of two out of three beneficiary
    couples and unmarried individuals age 65 and older. Social Security lifts 13 million
    elders out of poverty. Without Social Security, nearly one in two seniors would be
    poor; with Social Security less than one senior in ten is poor. In addition to keeping
    seniors out of poverty, the benefits are the main source of income for middle and
    upper-middle-income elders with total incomes below $50,000…”

    http://www.nasi.org/usr_doc/Strengthening_Social_Security_for_Vulnerable_Groups.pdf page 2

    Like or Dislike: Thumb up 0 Thumb down 0

  37. mattb says:

    Brian, the issues is that when, voting upon the budget, one would expect that a congress critter would do the following calculation:

    [Mandatory Spending] + [discretionary Spending] + [accrued interest] = [something that fits under debt ceiling]

    Otherwise the entire process is moot. Or rather that any vote is immediately subject to the issue of the debt ceiling — why vote “yes” for anything that you’ll immediately oppose? Unless I’m missing something (which is entirely possible).

    So seriously, did your congress person vote for or against the budget?

    Like or Dislike: Thumb up 0 Thumb down 0

  38. Wayne says:

    WR you are for tax increases regardless wither it would be a needed as a compromise in order to raise the debt ceiling.

    Once again you, anjin-san and many others who are for raising the debt are not willing to compromise in order to get it. Throwing counter accusations and insults at your opposition doesn’t change that. It always give you all that you want and none of what we want.

    Anjin-san
    If the DNC has their way the poor, middle class and everyone else’s standard of living will be greatly reduced. Now that’s sacrificing.

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  39. Wayne says:

    Brain you are aware that mandatory spending can be change by Congress? Also if there is not enough money for the programs either from revenue or borrowing then there is not enough money for them. You can cut a little now or cut shit load later.

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  40. anjin-san says:

    If the DNC has their way the poor, middle class and everyone else’s standard of living will be greatly reduced

    Do you have anything to offer besides warmed-over Fox talking points? Anything at all?

    Once again you, anjin-san and many others who are for raising the debt are not willing to compromise in order to get it.

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  41. anjin-san says:

    Once again you, anjin-san and many others who are for raising the debt are not willing to compromise in order to get it.

    Where are you getting this? We obviously need to cut spending, cut waste, and generally get smarter about the way government works. I don’t know any Democrats who feel otherwise.

    What is the GOP notion of compromise? Oh yea, military spending is on the table. Guess what ladies, everything is on the table. Please don’t serve up this lame BS and try and pass it off as compromise.

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  42. anjin-san says:

    the poor, middle class and everyone else’s standard of living will be greatly reduced.

    That’s a nice summary of the net effect of the Bush years. Well, not everyone’s standard of living was reduced. The rich got richer. Much richer.

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  43. Herb says:

    Once again you, anjin-san and many others who are for raising the debt are not willing to compromise in order to get it.

    Wayne, remember….the debt ceiling is an arbitrary number. Why you expect anyone to compromise over an arbitrary number is beyond me. How bout this?

    No compromise. We raise the debt ceiling. The US doesn’t default. “Don’t bet against America” remains a truism.

    And if hurts the Republicans electoral chances….so be it.

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  44. An Interested Party says:

    @Brian Anslow: Oh my, I simply asked you two straight forward questions…I directed no snark your way, but, apparently, just asking you questions isn’t gentle enough…of course, you expose yourself by favorably citing the so-called “Fair” Tax…

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  45. matt says:

    So people are now arguing that the government should run no debt at all? Ever think of what would happen if the USA completely stopped issuing securities and bonds?

    I’m not arguing for a huge amount of debt or even a moderate amount but history has shown that running some debt is helpful for the private sector of the economy.

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  46. mattb says:

    If the DNC has their way the poor, middle class and everyone else’s standard of living will be greatly reduced. Now that’s sacrificing.

    Again, this is the issue with “The US as a family that’s in killer debt…” metaphor — carried to its extreme, that we need to fix this national debt now by belt tightening, it does require all of our “standards of living” to be reduced.

    You know why? That’s fundamentally required to realistically pay off debt.

    But the thing is no one wants to swallow that particular bitter pill (cutting spending and raising taxes). But even if you are not willing to do the latter (raising taxes), the fact is cutting spending deep enough to take care of the debt would fundamentally reduce our standard of living via the cutting of services.

    BTW — I’m not arguing for a massive reduction in our standard of living — but I sadly suspect that some reduction is in our future if we are serious about debt.

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  47. Rob in CT says:

    Basically, the “Fair” tax appears to be mildly beneficial to the very poor, harmful to the middle class (particularly the lower middle class, IMO), and very beneficial to the wealthy, particularly over time (no estate tax).

    It does have the advantage of simplicity in comparison to what it is designed to replace (all other federal taxes).

    Meh.

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  48. Using debt to deal with cash flow issues is one thing, using as a surreptitious means of wealth redistribution is entirely another.

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  49. Brian Anslow says:

    The issue with taxation is that less than 50% of the American public pay any taxes at all. The propositions I have heard have a flat tax somewhere between 17 & 19% while making the corporate tax 25%. This would create a system in which everyone would pay their fair share, and I do not see how this is any more or less beneficial than beneficial to the rich than the current system.

    This system would eliminate loopholes ad exemptions. So if I am poor and make 10k a year and I pay $1900 I would assume that because of the other federal agencies I would be using I would get that money back in the course of a year (Medicare, Medicaid, SSI, Food Stamps, Pell Grant and other need based programs).

    At the same time if I made 200k a year I would pay 39k in taxes and I would not receive any benefits. This seems that the rich or in this case the upper-middle class or Lower-upper class are still paying the majority of taxes in the nation without receiving much of the benefits.

    So based on this system and my rudimentary knowledge of taxes you would seem to be taxing the rich as everyone wants. Giving to the poor and elderly as everyone wants and keeping the social programs everyone wants. At the same time by realigning our corporate tax structure to a flat 25% you eliminate companies paying $0 taxes at the end of the year and bring us into a more competitive position worldwide for headquartering businesses in America. Again this will bring in more money… right?

    And remember that we will be eliminating hundreds of billions of dollars a year spent on the IRS and its budget by eliminating the insane tax code we currently live under.

    IMHO

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  50. mantis says:

    The issue with taxation is that less than 50% of the American public pay any taxes at all.

    False and preposterous. Not even bothering to read further.

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  51. @Brian:

    The issue with taxation is that less than 50% of the American public pay any taxes at all.

    While it is true that roughly half of income earners pay no income taxes, they do pay a multitude of other taxes. Indeed, three if the programs you note (Medicare, Medicaid, and SS) ate funded via payroll taxes.

    Also, it is worth noting, that benefits from government also manifest in things Luke national defense, roads, insuring the banks and financial system, amongst a myriad of other things.

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  52. Please pardon the various autocorrect typos above

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  53. Rob in CT says:

    50% of *federal income* taxes. That leaves out payroll taxes, state and local taxes. The overall tax burden in this country (which obviously various from state to state, municipality to municipality) is mildly progressive (whereas the federal income tax, in isolation, is quite progressive).

    ~50% of the population not paying federal income tax is a problem, but probably not the one you think it is. The problem is the income distribution is wacky, such that ~50% of the population brings in peanuts in wages. This is currently exacerbated by the lingering effects of the 2008 financial crash (9% unemployment).

    I’m all for simplifying the tax code as much as possible, removing deductions and rebalancing rates accordingly, so long as it’s not a stealth manuever designed to shift the tax burden down the income scale.

    One of the silliest ideas, IMO, about “simplifying” the tax code is doing away with marginal tax rates. Those are not particularly complicated: all you need is the table. It’s not hard to use at all. We should have more tax brackets, actually, since they currently top out at ~$330k. The things that make the tax code complicated and difficult are deductions and credits.

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  54. An Interested Party says:

    The issue with taxation is that less than 50% of the American public pay any taxes at all.

    Why Brian, even your two-year-old would call you out on such an obvious fib…

    And I love this argument that we have to flatten and lower taxes to make the wealthy and corporations avoid loopholes and pay what they’re supposed to…as if we couldn’t get rid of those loopholes now…oh wait, I just remembered who financed elections…nevermind…

    ~50% of the population not paying federal income tax is a problem, but probably not the one you think it is. The problem is the income distribution is wacky, such that ~50% of the population brings in peanuts in wages.

    Exactly right…

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  55. Wayne says:

    It amazes me. Almost everyone admits that we need to reduce spending but then claim it is too hard and is not politically viable. However when an opportunity presents itself to force the needed spending cuts, many want to punt. They claim the fight may not look good to rest of the world.

    Until the politicians are force to make cuts they won’t. How long are we going kick this can down the road? Beside what some may think we can’t keep kicking it down the road forever and that time is coming near.

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  56. Dr. Taylor, there is an unspoken assumption in your penultimate comment that just because things like roads, defense, etc have value that they are worth everything that was paid for them. That is debatable. When it comes to bailing out the banks, that’s more than debatable as the opportunity for and levels of graft seem phenomenal.

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  57. No, Charles, I am simply pointing out that, in fact, the government does quite a bit that we take for granted.

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  58. john personna says:

    Wayne, I am certainly for spending reduction. I’d happily end the wars, crop subsidies, energy subsidies, and on and on.

    The thing is, no one is ready for that. Neither party.

    You buy this BS grandstanding on debt limit, like it will get you from A to B.

    No, they want to go from A to A’, with a lot of hoopla and not a lot of change.

    I mean jeez, see the other thread where some guy is ready to trade debt limit for DADT or whatever.

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  59. [...] What is the Debt Ceiling? [...]

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