Deconstructing The Absurdity

Posts Tagged ‘debt ceiling’

Breaking Down The Policy of Taxing

In 2012 Presidential Election, Barack Obama, Democratic Party, Republican Party, U.S Congress on December 7, 2012 at 8:54 pm

During the 2012 political campaign we got to hear a lot about the tax policy and how unfair the United States taxing system is supposed to be. We also heard the slogan “Tax the rich more” several times. All this talk about the inequality of taxes levied on the citizens in this country made me dig a little deeper into the tax system to find out what was really going on. Who needs to be taxed, what tax breaks should be eliminated, who is not paying and why is our focus not on changing the tax policy?

How is it that tax rates have gone up and down over the years but it has never been enough to fix the budget or the economy. That leads us to draw the conclusion that somewhere the money is not coming in. Someone is not paying the fair share.


A study done by Thomas Piketty and Emmanuel Saez examines the progressiveness of the U.S Federal Tax System. The research which was published in the Journal of Economic Perspectives found that the most dramatic changes in the federal tax system almost always has taken place within the top 1 percent of income earners, with relatively small changes occurring below the top percentile. The research also suggests that any debates within the Congress on the topic of tax and tax policy also affects the top 1%. Topics like permanent reduction in tax rates for capital gains and dividends and repealing of the estate tax all concern the top income level of the society. In essence, the tax issues of the marginal voter never gets discussed making the policy of taxing in the United States extremely unfair. An opinion post on Bloomberg online carries the headline, Forget the Fiscal Cliff, Fix the U.S Tax System. The post talks about all the things wrong with the U.S Tax System and provides some ideas as to how we could fix those issues. Authors of the post, Betsey Stevenson and Justin Wolfers argue that, “The real danger, is not that we’ll fall off the cliff. It’s that Congress will solve the problem badly, missing a once-in-a-generation opportunity to design a better tax system.” The study done by Piketty and Saez only proves their [Steven and Wolfers] point. Read the rest of this entry »

What’s the Deal? The good, bad and the ugly!

In Barack Obama, Debt Ceiling, Democratic Party, Republican Party, Tea Party, U.S Congress, U.S House of Representatives, U.S Senate on August 3, 2011 at 10:03 am

Ok! So a home-made disaster just got averted. A family member spread gasoline around the house threatening to light the match UNLESS you agree to buy him his very expensive car. The deal was done and you just bought him the car and he put the matchbox in his pocket. He is sending out the message that, ‘Don’t be too happy. I might think about lighting the match anytime in the future.’

That my friends is exactly how the U.S Congress and president Obama dealt with this home-grown crisis. It is a no brainer. For the GOP there was is better time to debate spending cuts when a Democrat is in the White House. Had it been a Republican, they would have raised the debt ceiling without raising an eyebrow. Rep.John Boehner, speaker was asked by CBS if he would continue to be the speaker of the house. His reply was, “Of course! I got 98% of what I wanted and I’m happy.” 

The house passed the debt ceiling bill 269 – 161. 66 Republicans and 95 Democrats voted against the bill. This bill was forwarded to the senate where it passed 74 – 26. It was sent to the president who immediately signed the bill into a law. The progressive caucus, liberals and democrats are fuming over this debt ceiling compromise and some calling it  a ‘satan sandwich’. Republicans and Democrats alike were not happy with the deal but they had to swallow it like a bitter pill. “I would like to say this bill solves our problems. It doesn’t. It is a solid  first step.”said Representative Jeb Hensarling of Texas (R), a prominent fiscal hawk in the Republican leadership. “The default of the United States is not an option,” said Representative Steny H. Hoyer of Maryland (D). Mr. Hoyer urged lawmakers to vote not as members of either party, but as “Americans concerned about the fiscal posture of their country, about the confidence that people around the world have in the American dollar.”  This debt deal has no mention of any revenue’s which is a major sticking point for most Democrats. Both parties were worried about defections by party members and had briefings to explain the proposal. Vice President Joseph R. Biden Jr., told House and Senate members in separate meetings that the administration had to cut the deal with uncompromising Republicans to avoid a default. Speaker John Boehner met specially with Republicans on the House Armed Services Committee, an important voting bloc whose members were raising alarms about potential spending cuts for the Pentagon.

So where does this bill lead us? Who won and who lost? We have the facts and figures. Let’s dissect it.

This is President Obama’s video explaining the deal.

So the basic facts of the deal are:

  • $1 trillion of cuts over a 10 year period.
  • It guarantees that the debt limit will be hiked by $2.4 trillion.
  • Immediately upon enactment of the plan, the Treasury will be granted $400 billion of new borrowing authority.
  • After that President Obama will be allowed to extend the debt limit by $500 billion, subject to a vote of disapproval by Congress (would need 2/3 of both houses to block).
  • That initial $900 billion of increase in the debt ceiling will be paired with $900 billion of discretionary spending cuts, first identified by the bipartisan working group that had met under Vice President Biden, which will be spread out over 10 years.
  • Obama will later be able to raise the debt limit by $1.5 trillion, subject to a vote of disapproval by Congress.
  • That increase will be paired with the formation of a Congressional committee (being called the Super Congress) of 12 members of Congress (6 from each party) that will be tasked with reducing deficits by a minimum of $1.2 trillion. That reduction can be composed of spending cuts, tax increases or a mixture of both.
  • If the Committee fails to reach $1.2 trillion in deficit reduction, it will trigger an automatic across the board spending cut, half from domestic spending, half from defense spending, of $1.5 trillion.
  • The domestic cuts would come from Medicare providers, but Medicaid and Social Security would be exempted. The enforcement mechanism carves out programs that help the poor and veterans.
  • The domestic cuts would come from Medicare providers, but Medicaid and Social Security would be exempted. The enforcement mechanism carves out programs that help the poor and veterans.
  • If the Committee finds $1.5 trillion or more in savings, the enforcement mechanisms would not be triggered as $1.5 trillion plus the original $900 billion would equal $2.4 trillion, the amount the debt ceiling would be raised under this two-stage plan.
  • If the Committee finds between $1.2 trillion and $1.5 trillion, then the balance will be made up by the corresponding percentage of the enforcement mechanism’s cuts, still in a one-to-one ration.
  • There will be a vote on a balanced budget amendment. It would require a 2/3 majority in Congress. However, it is not likely to pass.

The Goods

The impact of this deal on the economy is mostly favorable for now. The economics team from JP Morgan says that federal fiscal policy will subtract around 1.5% points from GDP growth in 2012. The country would avoid a default and the cuts are big enough for the United States to retain its AAA rating. In fact it’s important to know that the credit agencies will not drop America’s rating. It’s just very simple economics. Any country would want to hold American credit.

Rep. Gabrielle Giffords was in the house. It was a wonderful thing to see her back in office. She got a 10 minute standing ovation from her colleagues with some of them even misty eyed. That, believe it or not is one of the plus points. Giffords voted on ‘Yes’ on the bill. She said, “I had to take this vote. I could not take the chance that my absence could crash the economy.” It was refreshing to see a different ray of hope among utter chaos.

Both parties have some news to be happy. Republicans virtually got everything they wanted. All their criteria’s laid down by John Boehner were met. Perhaps the only thing which the right-wing is not happy about is the amount of cuts, which in their opinion is very less. It’s a haircut, is what they love to call it. Although the  Democrats are not happy, they too get to share some ‘glee’ in this deal. At least they should. After all the time they had to take definitive action, it’s something  they brought upon themselves. The debt ceiling is out of the 2012 discussions and the deal has been struck for a long-term. Social Security, Medicare and Medicaid are off the table.

The Bad:

The biggest ‘bad’ point of this outcome is the creation of the ‘Super Congress’ or the congressional committee which would consist of 6 members from each party. Congress will have to agree and pass the bill this committee comes up with without any questions asked. If, however, this ‘super congress’ cannot come to an agreement then what is being called a trigger would kick in. It would mean automatic cuts across the board ranging from defense to entitlements. These cuts will be large and will be something both the parties would wish to avoid.

There are no revenue’s in the deal. This is the only time in the history that a budget deal has been struck without any revenues making up for that $1 trillion cuts. I’d like you to take a look at this chart below. It shows the spending % and the revenue % under each president of the United States before Barack Obama.

Notice something? Who has more blues than reds? Clinton, Carter and Johnson. All Democratic presidents. Who has more reds than blues? Bush Jr, Bush Sr, Ford and Nixon. All Republican presidents. I’m not trying to make Republicans presidents look bad. My point is this? Spending has been greater all throughout GOP’s life. How do you hold another party accountable when your party have never followed what you’re fighting for. Follow what you preach. Let’s take Clinton for example. Look at the revenue’s. It’s a huge variation. Why? He barely had any wars during his time and so he could focus all his resources at home.

No tax increases. The Republicans got exactly what they wanted. A spending cut deal with absolutely no tax increases. Taxes, as part of the GDP are at a 50 year low.

No impact on the recession. In the near future this deal will not have any impact on the recovery from recession. However, if the dollar value drops along with the United States credit ratings (which the agencies are still speculating), the country will go back into a recession.

The Ugly:

Now it’s time for the worst thing to have come out this debate. Hold on to something. It’s going to be a bumpy ride.

When the deal was done you would expect the markets to come back to its normal state. When congress gives a thumbs up to save the economy, the market reacts the same way, giving a thumbs up. That’s what usually happens. The last time congress voted against saving the economy the markets took a hit and we went into the worst recession. This time however, the congress did vote to save the economy and the markets still tanked. After the senate voted to pass the bill DOW lost 265 points.

The whole concept of the super congress is not setting well with either parties and mostly liberals. If the committee fails to reach a deal which most think would be the case, then the automatic cuts due to take place are going to be devastating for both parties. The ‘Super Congress’ is due to present its deal by Thanksgiving. The whole part of giving a group of people so much of power is unsettling. Specially when this committee will be dealing with everything on the table. As senator Bernie Sanders (I-Vermont) said, “For the committee, everything is on the table.” It becomes even more complex when you hear senate minority leader Mitch McConnel. McConnel told Fox News, “The chances of a tax increase passing with the appointees, speaker Boehner and I are going to put in (the committee), are very low.” With the debate already creating fiction I see a lot of fighting still to come.

The $900 billion worth of cuts come from fragile sectors such as infrastructure, education, clean air, affordable housing etc. The bill doesn’t include unemployment insurance extension and there are no payroll tax cuts.

It doesn’t help the job sector at all. With this deal the Republican side sent out a clear message. Jobs Jobs Jobs? Nope! Sob Sob Sob! 325 million job lost. 43 billion (-0.3%) from the GDP. The already slow economy comes to a screeching halt. 1.8 million fewer jobs in America. That -$241 billion (-0.21%) lost. The negative signifying the country going back into recession. Unemployment is a 9.2% and its only going to get worse as we roll into 2012 and 2013.

And the thing that is going to hut the most. In all these debt negotiations the FAA tax collecting authority has been neglected and now the government agency controlling air traffic is shut down. That means safety workers working without pay and all construction jobs frozen. It’s projected impact on the economy? The FAA shutdown cost American tax payers $30 million a day. 4,000 FAA workers are off work. 90,000 construction jobs at risk. Congress has been granting temporary extensions to the FAA for the past 20 times and now the Republicans have refused to even given the FAA a temporary extension. The FAA shutdown is projected to cost the American government $1.2 billion in revenue from uncollected airline ticket taxes in a quarrel between Senate Democrats and House Republicans who are demanding a $16.5 million cut in rural air service subsidies. Democrats say the subsidies fight is actually a ploy to get them to accept a GOP labor provision in a separate, long-term FAA funding bill passed by the House. Republicans deny that’s the case. Republicans complain that the new rule reverses 75 years of precedent to favor labor unions. Democrats and union officials say the change puts airline and railroad elections under the same democratic rules required for unionizing all other companies. Knowing the fact that air traffic controllers were caught sleeping one the job, I wonder how wise was it, on the part of the U.S congress, to shut down the FAA. The senate almost ready to go into vacation, house already on vacation, the FAA shutdown could go well beyond September. Senate majority leader Harry Reid said, “The House has tried to make this a battle over essential air service,” he says. “It’s not a battle over essential air service. It’s a battle over Delta Airlines, who refuses to allow votes under the new rules that have been passed by the NLRB [National Labor Relations Board].”

So if you’re a person about to travel and looking for someone to blame/ sue incase something happens to you while in an aircraft. You know who to pin the blame on. Delta Airlines!!! I know I will, since I have to fly in the next 17 days. Good luck to all those who are taking a flight soon.

And finally I leave you with a graph which shows the job losses over the last ten years. Job Creation! Something which the American government should start working on looks something like this. This however, was before all this chaos regarding the debt ceiling came up. Before all this happened. THIS is where we were heading.

The Fall of the Speaker? Inside the work of John Boehner

In Debt Ceiling, Republican Party, Tea Party, U.S Congress, U.S House of Representatives, U.S Senate on July 29, 2011 at 8:39 am

John Boehner’s leadership is collapsing. Slowly and steadily Boehner is loosing control of his caucus. This new blow came after some Republicans said they would vote ‘No’ to Boehner’s bill to raise to the debt ceiling. His bill cuts about a trillion dollars in spending with no revenue and extends the debt ceiling for six months. After six months there will be another crisis in America. Boehner’s bill would also set up a committee to work on trillions of dollars in future deficit reduction either through more spending cuts or tax increases, which would then earn another future debt increase. It would also require both the House and Senate to hold votes on a balanced budget amendment to the Constitution. 

Several house Republicans including Rep. Louie Gohmert (R-Texas), Dennis Ross (R-Florida), Jim Jordan (R-Ohio) and Jason Chaffetz (R-Arizona) are planning to vote NO! on the Boehner bill. Rep. Jim Jordan who heads the powerful conservative caucus in the House  told reporters Tuesday morning, “There are not 218 Republicans in support of this plan,”. Voting yes “assures we get to watch them vote it down,” Gohmert said of the Senate. “That’s not terribly helpful.” Senator Harry Reid as made it very clear that even if the house manages to pass the bill it will be instantly killed in the Senate. “It will be defeated,” Reid predicted yesterday, calling Boehner’s plan “a short-term Band-Aid that would put our economy at risk and put the nation back in this untenable situation a few short months from now.”

Since he could not get the votes simply by asking John Boehner is now rounding up Tea Party freshman and Republicans planning to vote ‘No’, for behind close doors discussions. Yesterday he released a statement saying, “Get your ass behind the line. I can’t do this job if you’re not behind me.” Who’s fear mongering now Mr Boehner? Today Rep. Louie Gohmert (R-Texas) said that he is, “Bloodied and beaten, No!.”  And on Thursday again, Beohner could not gather enough votes to pass his bill in the house. Voting on the bill has been delayed to Friday. This is the second night in a row that John Boehner’s efforts to get a clear majority for his own bill from his own caucus is failing. But conservative Republicans in the House, many allied to the tea party movement, said they don’t just want votes on the amendment, they want an assurance it will be sent to the states. Mr. Jordan and other conservatives said they would prefer the Senate vote on the debt increase the House passed last week (cut, cap and balance), that includes deeper spending cuts and requires both chambers approve a balanced budget amendment and submit it to states for ratification before any debt increase happens. Both the Heritage Foundation and Club for Growth, two key conservative activist groups, are also urging a “No” vote and said it will be one of the key votes they use in their annual lawmaker scorecards.

It doesn’t take a genius to see through John Boehner and his dire efforts to get some people on to his side. Maybe Mr Boehner you could drop some of your extreme idea’s and get some Democrats on board. But Boehner has never appealed to the Democrats. The worst part is he never tried. When Nancy Pelosi (D) was the speaker of the house she passed 308 laws in her first term and 254 laws in her second term. They included some major bills like health care reform, repealing of the ‘Don’t ask don’t tell’, better pay act, minimum wage act, stimulus, ethics reforms and financial reform. In John Boehner’s first term he only managed to pass 12 bills into law. YES! You saw it correct. JUST 12 bills. At this rate it can be estimated that by the end of his term he would have passed a total of 48 bills into law. That is however not taking into account situations like these where his own party and members of his own caucus revolts against him. Is John Boehner is successful speaker? Well unfortunately for him the numbers and statistics don’t lie. Maybe Mr Boehner you can try your hand at golf instead of politics.

Eh Righties! Can you hear us now?

In Debt Ceiling, Democratic Party, Republican Party, Tea Party, U.S Congress, U.S House of Representatives, U.S Senate on July 28, 2011 at 7:15 am

The very first thing John Boehner and Republicans in the house did when they came into power in 2010 was to read the constitution of America. Remember? If not then here’s the full new from back then.

Ironically congressman Steve Israel (D-New York) read section 4 of the 14th amendment. It reads:

 “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.”

So if President Obama does end up invoking the 14th amendment the GOP should have any issues about it right? Hey after all it was Boehner and his house mates who wanted to get the constitution clearly read out and understood by each member. Hope the Tea Party was paying attention.

Prioritization? Are you stupid enough for it…?

In Barack Obama, Debt Ceiling, Michele Bachmann, Republican Party, Tea Party on July 28, 2011 at 3:40 am

You must have heard Michele Bachmann saying in most of her interviews that she won’t vote to raise the debt ceiling. So any curious person would ask her back. What WOULD you do then? Let the country go into default? Well, on normal days Bachmann would have said, “Yeah. What’s wrong with default?” But now that she’s running for president she tries her best to choose her words. Here’s what she said, “Pay the interest only.” Really Michele? Why don’t you ask your small business owners, the one’s you proclaim to represent and support. Any small business would understand that if they weren’t paying their suppliers and they went to the bank and said, ‘Oh, we’re still paying our interest, will you lend us a lot more?’ that the bank would throw them out and consider them defaulters. The Washington Post reporting that Rep Louie Gohmert (R-Texas) and Michele Bachmann (R-Minn) and Steve King (R-Iowa), introduced a bill on Wednesday that would require the president to pay off interest on the nation’s debt first, if the debt limit is not increased by Aug 2. “The speaker is getting bad advice,” Gohmert said at a press conference. “I guess the problem with the speaker and him saying that [the debt limit needs to be raised by Aug. 2] is that he listened to the president.” If you think you’ve heard the name Gohmert before then you’re right. This is the same guy who thought the August 2nd deadline is because Obama plans to have a birthday bash on August 3rd. It’s all made up, he thinks.

‘Prioritization’ means paying the interest off the loan and not letting the treasury borrow. If the U.S were to seek that option then it would suck out $134 billion in August alone. That 10% of one months GDP. Speaking to The Daily Ko’s Ezra Klien and  Annie Lowrey paint a similar picture. So, Bachmann and crazy squad. Do some research before you jump out and start throwing out your ridiculous ideas.

While Democrats in the senate and house are pushing for the President to use the 14th amendment the White House shows no sign of taking ‘Plan Z’. “I have talked to my lawyers,” Mr. Obama said. “They are not persuaded that is a winning argument.” Also the fact the Supreme Court is a conservative one, the element of uncertainty and the possible court battled do not seem to appeal to the White House. It is also not very clear whether the country’s creditors would keep lending money if the president does take a unilateral decision.

Invoke Section 4 of the Fourteenth Amendment?

In 2012 Presidential Election, Barack Obama, Debt Ceiling, Democratic Party, Republican Party on July 20, 2011 at 9:39 am

There seems to be a possibility that ‘IF’ before August 2nd a deal is not reached the President might invoke section 4 of the fourteenth amendment of the United States constitution. In an interview, former President Bill Clinton stated that he would invoke section 4 of the Fourteenth Amendment in the debt ceiling crisis. Clinton stated that he would invoke the so-called constitutional option to raise the nation’s debt ceiling “without hesitation, and force the courts to stop me” in order to prevent a default, should Congress and the President fail to achieve agreement before the August 2 deadline.

Let’s be very clear of the statistics of the debt ceiling here. The debt ceiling was first set in September 1917. At that time, Congress authorized the issuance of about $7.5 billion in U.S. bonds and another $4 billion in certificates of indebtedness, under the Second Liberty Bond Act. In modern America. The debt ceiling was raised on 17 occasions under President Ronald Regan, nearly tripling from $935.1 billion to $2.8 trillion, raised on four occasions during President George H.W Bush’s one term and raised on seven occasions during President George.W Bush. Congress raised the debt ceiling more as a matter of fact rather than a serious concern ever. Why? Because it’s something that has to be done. I mean it HAS to be done. Then President Bush’s budget director Mitch Daniels (now Gov.Ind) called raising the debt ceiling, “regular house cleaning“. It’s time to really clean the house. Since we love charts here’s something interesting.

The red line as we can see is the debt limit and the yellow line is the actual debt. Looking at this chart even a 5-year-old can tell you that the U.S always raised the debt ceiling and never defaulted on its payments. So why all of a sudden is there a barrier from this Republican held House not raise the debt limit? In these past few days it’s becoming increasingly evident that Republicans in the house simply do not want to raise the debt ceiling. Initially it was about getting the Democrats and president Obama to agree to billions of dollars of cuts in the big three (Medicare, Medicaid, Social Security). But now they have come to believe that this whole debt ceiling thing is a complete fake and nothing is wrong with the U.S government defaulting a little bit. Well it never happened in the past right? So a little default wouldn’t hurt anybody. Right?  Congresswoman (Minnesota) and Presidential candidate Michele Bachmann in a press conference said that it is a “misnomer” which the Obama’s government and the Treasury secretary are spreading among the American people. She believes that paying off the interest on the debt will help keep the full faith of the United States stable in the world market. Let’s quickly review what might happen if the U.S defaults in its payments. Here’s why an average American should be concerned:

  • There would be a rise in interest rates, prompted by a decline in the number of bidders for new Treasury bonds.
  • That would raise the costs of home mortgages, student loans, credit cards and auto loans.
  • Default in social security payments and veteran’s benefits.
  • It also would increase the federal deficit by raising interest rates on the debt.

It would most certainly guarantee us going back in recession. Rep.Mo Brooks (R) (Alabama) told the Washington Post that, “on the contrary our rating should improve by not raising the debt ceiling.” Rep Eric Crawford (R) Arkansas reportedly told the same news agency that, “it is an arrogant attitude to take, to say that the U.S defaulting on the debt for the first time in history would be any sort of economic big deal.”  Here’s a very interesting one from Rep.Louie Gohmert (R) Texas. He claims he figured out WHY August 2nd is the deadline. Gohmert said, “[W]e find out the President has a big birthday bash scheduled for August the 3rd, celebrities flying in from all over. And lo and behold, August 2nd is the deadline for getting something done so he can have this massive, the biggest fundraising dinner in history for a birthday celebration.” SO! The President made up this fake deadline so that he can have a bigggg birthday party. Speaker John Boehner has already made it clear that this whole raising the debt ceiling is the “President’s problem.” He should deal with it.

You see, it’s not the GOP pushing for a sweet Republican/conservative deal anymore. It’s these people who simply believe, DEFAULT? That’s sounds like FUNNN!!! While bond rating agencies such as moody and S&P has already issued a warning to drop America’s AAA rating, it is still unknown if President Obama will take the constitutional approach to step in and save the country from defaulting.