Originally Posted By mawnck Tea Party coalition forming to push for balanced budget amendment >>The amendment envisioned by the coalition includes three pillars: ending the annual deficit by requiring a balanced budget, limiting federal spending to no more than 20 percent of the country’s GDP and requiring a two-thirds supermajority vote in Congress to raise taxes.<< >>the amendment also includes capping federal spending at no more than 20 percent of GDP, the postwar historical average over the last 65 years.<< >>A handful of Republican senators—Jim DeMint and Lindsey Graham of South Carolina, John McCain of Arizona and Tom Coburn of Oklahoma—reportedly will push for a constitutional amendment when they return from the August recess. “We’ll bring that back between now and the election,” DeMint told The Hill earlier this month.<< <a href="http://dailycaller.com/2010/08/19/tea-party-coalition-forming-to-push-for-balanced-budget-amendment/" target="_blank">http://dailycaller.com/2010/08...endment/</a>
Originally Posted By SpokkerJones A bad idea, even in good times. A better idea would be a provision requiring the government to save in good times so it can go into deficit spending in bad times, evening out recessions. It would also even out economic booms but we would enjoy less risk.
Originally Posted By fkurucz We've already gone past the point of no return, as there is no way the current federal debt can ever be paid back. The feds will either monetize the debt via hyper inflation or they will default.
Originally Posted By SingleParkPassholder "We've already gone past the point of no return, as there is no way the current federal debt can ever be paid back. The feds will either monetize the debt via hyper inflation or they will default." And this opinion is based on what?
Originally Posted By mawnck >>And this opinion is based on what?<< That there are no other options. Math is math. It doesn't care what political party you belong to. We owe over 13 trillion dollars, with interest compounding daily, and another 4 billion is being added to the principal daily. We couldn't raise that much money even if we had the most spectacular economic recovery in world history, and worked from now until Hell froze over. We couldn't do it if government spending stopped completely. The government is betting that we don't need to pay it back. That investors will continue to purchase government debt despite knowing it's a Ponzi scheme (and so far they are doing just that). Someday it's going to come crashing down and then one of fkurucz's scenarios will happen. Politicians are just assuming it won't be before the next election, or if it is, that they'll be able to successfully blame it on the opposition.
Originally Posted By schoolsinger Breaking news: The US government went bankrupt today and can no longer function. There is now anarchy everywhere. Foreign powers are at war with each other in a conflict about who gets to take over the former United States. If you don't want the above headline to be our future, then we must drastically cut government spending.
Originally Posted By Sport Goofy We owe over 13 trillion dollars, with interest compounding daily, and another << 4 billion is being added to the principal daily. We couldn't raise that much money even if we had the most spectacular economic recovery in world history, and worked from now until Hell froze over. We couldn't do it if government spending stopped completely. >> That's not entirely accurate. No one stops in place and pays back debts in one fell swoop. Debts are paid over time. We are certainly on the wrong path towards fiscal soundness, but we're nowhere near the doomsday scenario suggested by some. There are many other countries that have far more debt in comparison to their GDP, and they have not spiraled out of control. I would be in favor of a balanced budget amendment -- of course, I suspect that my priorities for cutting the national budget and increasing taxes would be very different that Sen. McCain's.
Originally Posted By SingleParkPassholder FWIW, I asked my question in post 4 with genuine curiosity. I've said more than once I'm no economics expert.
Originally Posted By mawnck >>we're nowhere near the doomsday scenario suggested by some.<< That's the big question, ain't it. When is the doomsday scenario, how much longer would we like to continue marching towards it, and how fast? And the debt-to-GDP ratio is really only an indirect measure of the situation. If investors keep buying US government debt, we're fine. If they don't, we're screwed. More than likely it'll be something totally unrelated to debt-to-GDP that will cause the big crash (or whatever). The disaster is absolutely, positively, definitely coming if we continue as we've been doing. Whether it's 100 years from now or 2:00 this afternoon, nobody can say for sure, cause the Psychic Friends network is out of business.
Originally Posted By Dabob2 One of my favorite Daily Show moments: Interviewer (to Dionne Warwick): "The Psychic Friends Network went under. Did no one... see that coming??"
Originally Posted By schoolsinger >>>If investors keep buying US government debt, we're fine. If they don't, we're screwed.<<< There is a limit to how much dept investors will buy. So basically we're screwed.
Originally Posted By Oldschool Disney We need to spend more money and have the government take as much control of our spending as possible. Wait let me correct that, when the Democrats are in charge. They spend it on the needy and Health Care. Republicans will only spend it on war and the rich.
Originally Posted By fkurucz >>More than likely it'll be something totally unrelated to debt-to-GDP that will cause the big crash (or whatever).<< Correct, something will cause foreign investors to loose confidence and when that happens things will unravel quickly. My personal guess it that we will monetize the debt via hyper inflation. Once its wiped out then the trick will be to shut down the printing presses, raise interest rate and bring things back under control. This of course means massive pain at the individual level. The reason I believe we are at the point of no return is because I do not think we will be able to bring the budget deficit back under control. I think we are now stuck with trillion+ dollar annual deficits, which will get worse as the Social Security IOUs will have to be paid back. If we could stop the deficit spending we might have a prayer, but it really isn't feasible.
Originally Posted By fkurucz >>There is a limit to how much dept investors will buy. So basically we're screwed.<< At that point the Federal Reserve will crank up the printing presses and lend Uncle Sam the money. Of course this will bring hyperinflation a la Weimar Republic, but it will allow them to kick the can down the road for a few more years.
Originally Posted By Kar2oonMan I bet when fkurucz reads bedtime stories, they're usually written by Stephen King.
Originally Posted By fkurucz There is talk of having Fannie Mae and Freddie Mac automatically lower the interest rate on all the mortgages they own as a way of putting money into people's pockets. My guess is that most people won't spend it and will use it to pay off credit cards or save it if they have no CC debt. This of course has nothing to do with a Balanced Budget ammendment, which I believe has a zero percent chance of being passed. Some say that eventually Mr. Market will assert himself and will force the US to balance the budget.
Originally Posted By fkurucz >>I bet when fkurucz reads bedtime stories, they're usually written by Stephen King.<< He's way too mellow. But if I see a train wreck coming does it make sense to pretend its not going to happen? The is one thing that could help us: that everyone else be worse off than we are and that there be a "flight to safety" in the US dollar. In the end though I agree with mawnck, its a Ponzi scheme which we are only getting away with because the Federal Reserve is keeping interest rates low.
Originally Posted By Sport Goofy << My personal guess it that we will monetize the debt via hyper inflation. Once its wiped out then the trick will be to shut down the printing presses, raise interest rate and bring things back under control. This of course means massive pain at the individual level. >> The Catch-22 is that deflation is often more painful, particularly to those with debt or without any financial assets. The rich would like nothing more than to see the U.S. go through a deflationary cycle where their dollars gain more buying power in the local economy. Why inflation is often decried as a bogeyman, it is generally a mechanism that transfers wealth from those who have it to those who don't.
