02 August 2011

I am not a financial

sort of guy - numbers confuse me - but this recent "deal" really boggles my mind.  Let me get it straight:  we're spending more than we take in, so we're in serious debt.  So the solution is to increase the amount we can borrow and as long as we cut expenses over 10 years to actually match the amount of extra we're going borrow, we're all good???  Is that what they really just did, or am I stupidly missing something?  I think we need Dave Ramsey for president.

10 comments:

Syeven Sylvester said...

Dave has already said he won't run.

Andrew said...

Since Apple has more cash flow than the U.S. maybe Steve Jobs or another Apple guru should be the next president.

Randy Asburry said...

Two things the ruling class, elitist snobs in Washington D.C. will never get:

1. The borrower truly is slave to the lender (Prov. 22:7); not only are they enslaving the American people, but they are really enslaving themselves, and

2. How foolish it is to max out one's (national) credit cards, be too stupid to figure out how to pay down the debt, and then cry and lament: "Hey, we need another credit card so that we won't go into default on these others!" How senseless it all is!

Ps-Iosifson said...

The family budget analogy breaks down quickly for lots and lots of reasons. A family doesn't have a central bank, a currency, the ability to issue its own debt, a family's money isn't a reserve currency, etc. The federal government is a little more like a well to do parent of a child who is in financial trouble. In a financial crisis and under "depression economics", the government becomes the spender of last resort bolstering demand when individuals and corporations and municipal governments cannot or will not spend. The federal government essentially lends money to the economy in the short term with the expectation that it will be paid back later in tax revenue, an expanding economy, etc. Our problem is that we were living off of credit cards in the fat times before the crisis, so when the famine hit we were already in the hole and we've gotten nervous about borrowing more. That makes sense for individuals, but if governments respond the same way they initiate a cycle whereby the economy gets worse and worse. Oddly, no one on the Right seemed all that worried when Bush ballooned the national debt and annual deficits. Politics? Cutting off the spigot now is making the same mistake the Republicans did in 1937, which extended the Great Depression until government deficit spending for WWII pulled us out of depression in 1941. (A similar pull back had happened earlier in the 1930s, too, turning a stock market crash and depression into The Great Depression). Our real problem now is unemployment (and the resulting lack of demand), which is the reason the recovery is so weak. Note that the private sector has been increasing employment while deficit busting in governments has led them to lay off as many people as the private sector is hiring thus stalling out the economic recovery which means tax revenues are low, so more cuts, more unemployment, then the private sector stops hiring and starts firing (notice all the banks laying people off lately), etc.

In addition, a deficit problem is not solved solely by spending cuts. This is another place where the family budget analogy breaks down. The only analogy to tax cuts is giving back part of your salary in the belief that it will increase your overall earnings. There's a reason it's been called voodoo economics by everyone not running for office, campaigning for someone in office, or on the payroll of someone who's intersted in a free lunch someone else has to pay for (debt). Our deficits are sky high not because of Obama spending, but because of Bush spending and Bush tax cuts (which were passed, ostensibly, to return the surplus to the American people, not to be extended indefinitely as Norquist prefers) as well as a decrease in tax revenues during a recession. There's something else going on here, otherwise "deficit hawks" wouldn't also be arguing for tax cuts, which are by definition deficit spending.

Ps-Iosifson said...

It's also worth noting that both tax increases and spending cuts during a recession or a fragile recovery are bad. That's broadly true, but not axiomatic across the board. Tax increases on the wealthy don't hurt the economy because they don't spend most of their money in ways that stimulate a fragile economy. Tax cuts for the rich are also not stimulative - rich people save tax cuts or invest them in stable markets abroad. At one point in the past it's possible that tax cuts for the wealthy led them to invest in jobs and industry locally, or at least domestically, but global financial markets and communications did away with that long ago. By contrast, tax cuts for the poor and lower middle class - and small businesses - are stimulative because they spend that money locally creating jobs. Same with infrastructure spending - it's hard to outsource a bridge in the US to China (though even that's happening, in part). Spending on the poor and lower middle class also does wonders for the same reason, that money goes straight into the local economy.

Now one can argue with this, but it's tilting windmills. One can argue against science, etc., but I don't think the Bible contradicts economics. Many seem more than willing to bet the mainstream is wrong simply because they want to.

William Weedon said...

On a tangential topic: the taxation of the church. I was just thinking that perhaps a major reason that the state originally did not tax the Church was because of how much the Church contributed towards society in the running of hospitals, the care of the poor, the tending of orphans, the running of nursing homes and schools and universities etc. But as the Church has abandoned so very much of her former areas to the nanny state, I wonder if in the eyes of the stat we have lost the right to have her properties (at times sizable) exempt - and I wonder how long it will be before bankrupt governments turn their eyes to those holdings - much as happened in the Reformation to the monasteries, etc.

Ps-Iosifson said...

The churches in Greece are exempt from tax and are paid for by the State in exchange for the Church not protesting the seizure of Church property earlier in the State's history.

In Russia, the Chrch was tax exempt because it had been made a department of State. I believe this was following the 'Lutheran' model in Germany and Scandinavia. Government doesn't tax itself.

I'm guessing a little of both can be said in Catholic countries, especially those formerly in the Papal States.

Not sure the hospital example holds for the US, though, given the time in history when the US was born. I'm sure there's a study on the history of religious tax exempt status in the US. It seems most religious hospitals, schools, etc. built by churches were for their members who were otherwise barred from mainstream establishments. That's why there are so many Catholic institutions of this kind.

Paul said...

The "gansta bankstas" are still calling the shots and will as long as we grant permission.

Becky said...

I guess I'm confused too. I do know, however, that I'm rapidly headed for the poor/lower middle class category, and when I get there, I'll be glad to contribute my free government hand-out straight back to the local economy by purchasing imported trinket junk. You can thank me later when I've been divested of what little EARNINGS I have left and can be a REAL contributor to our society and the U.S. economy. Sound like a plan?

Jim Huffman said...

In English common law tradition (ours, except for our friends in Louisiana) the church is more tax immune than exempt. This immunity comes from the church being another kingdom, and thereby not subject to taxation. It's a little like an embassy in a foreign country. I was in DC on Monday, and passed the new Canadian embassy there on Pennsylvania Ave. Despite being in the middle of Washington, if I walk through the doors of the building, I am on sovereign Canadian territory -- not subject to US jurisdiction. And despite being in Washington, the building is not subject to taxation, because it's of another "kingdom," if you will.

Likewise, the church: it's an embassy of another kingdom.