What should we do IF we go over the fiscal cliff?

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12 members have voted

October 10th, 2013 at 8:04:56 AM permalink
Wizard
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Member since: Oct 23, 2012
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Let's say, for the sake of argument, that we do go over the fiscal cliff and don't have enough money to pay all our obligations. I'd like to remind everybody that we would have about 80% of the money to cover such obligations flowing into the treasury in the form of taxes, it is just the other 20% that is the problem.

Should this happen, I'd like to open for discussion the idea of just adding that extra 20% to the money supply. In other words, just creating the difference in new money. I don't want to say "print" the money, because most money in the money supply is electronic these days. I know this would increase inflation and interest rates, but please put it in comparison to the alternative short paying, or outright stiffing, some of our creditors.

The question for the poll is what do you think we should do. By "stiff" I don't mean pay nothing, but pay only what we can, and stiff the payee on the rest.
Knowledge is Good -- Emil Faber
October 10th, 2013 at 8:25:16 AM permalink
Wizard
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Not surprisingly, I see the first vote is for "slash government spending." I'd like to remind everybody that, contrary to what Mitt Romney may think, we can't balance the budget by cutting funding to Big Bird. The vast majority of spending is in the form of entitlements, namely Social Security and Medicare. If we don't touch those, the biggest form of spending is the military. We would need to scale that back to the size of Canada's military to find the missing money. Without us to rattle our saber once in a while, it is worth asking if it would lead to World War 3. I predict the first outbreak would be Iran attacking Israel.
Knowledge is Good -- Emil Faber
October 10th, 2013 at 8:27:00 AM permalink
Nareed
Member since: Oct 24, 2012
Threads: 346
Posts: 12545
Quote: Wizard
The vast majority of spending is in the form of entitlements, namely Social Security and Medicare. If we don't touch those,


I cannot stress this enough: TOUCH THOSE!!!!!!!!!!!
Donald Trump is a one-term LOSER
October 10th, 2013 at 8:38:52 AM permalink
odiousgambit
Member since: Oct 28, 2012
Threads: 154
Posts: 5055
I'd want to see cuts in entitlements [in the way of meaningful reform], a lot of general cuts, and an increase in bond purchases [combination of all 3]
I'm Still Standing, Yeah, Yeah, Yeah [it's an old guy chant for me]
October 10th, 2013 at 9:18:54 AM permalink
Face
Member since: Oct 24, 2012
Threads: 61
Posts: 3941
Quote: Wizard
We would need to scale that back to the size of Canada's military to find the missing money. Without us to rattle our saber once in a while, it is worth asking if it would lead to World War 3.


That's if we did it all in one fell swoop, no?

I wouldn't go that far, but we are ridiculously overpowered, IMO. I'm as big a fan of military firepower as anyone, but haven't the majority of our recent skirmishes been against dudes in sweatpants running around with $50 AKs? I'm pretty sure our F-16 and F-18 platforms can handle damn near anything air, land or sea of any country...do we really need a $22,000,000,000 a piece, highly specialized instrument such as the F-22? Personally, I think we should bring back the A-10!

So make it all up in military? No. But cut it? Hells yes.

End the War on Drugs. It costs $1,700+ per second it's active, and it's a complete failure. Off the top of my head, that's ~$20,000,000,000 a year.
Be bold and risk defeat, or be cautious and encourage it.
October 10th, 2013 at 10:26:04 AM permalink
Nareed
Member since: Oct 24, 2012
Threads: 346
Posts: 12545
Quote: Face
Personally, I think we should bring back the A-10!


It is supposed to be a COIN plattform, though it was designed to scarf down tanks. It can carry a lot of ordnance, though (and I mean A LOT)

Quote:
End the War on Drugs. It costs $1,700+ per second it's active, and it's a complete failure. Off the top of my head, that's ~$20,000,000,000 a year.


Not to mention the lost productivity for the people caught up in it, even tangentially.

But any serious measure to reduce the debt and deficit has to begin, contuinue and end by cutting down entitlements.
Donald Trump is a one-term LOSER
October 10th, 2013 at 10:59:24 AM permalink
Face
Member since: Oct 24, 2012
Threads: 61
Posts: 3941
Quote: Nareed
It is supposed to be a COIN plattform, though it was designed to scarf down tanks. It can carry a lot of ordnance, though (and I mean A LOT)


And it's just so damn sexy ;)

And yes... A. LOT!!

I count 2 sidewinders, 2xAGM 65s, 4x500lb bombs, two rocket pods, probably 2,000x20mm cannon rounds, and what I assume is a FLIR pod on the outmost left wing. Mmmmm, firepower



Quote: Nareed
But any serious measure to reduce the debt and deficit has to begin, contuinue and end by cutting down entitlements.


I would be absolutely fine for the gov to keep any and all SS payments I have made thus far as a gift so long as they refrain from taking anymore from this date forward. I imagine I'll be able to, you know, take care of myself.
Be bold and risk defeat, or be cautious and encourage it.
October 10th, 2013 at 11:04:34 AM permalink
AZDuffman
Member since: Oct 24, 2012
Threads: 135
Posts: 18136
Quote: Wizard


Should this happen, I'd like to open for discussion the idea of just adding that extra 20% to the money supply. In other words, just creating the difference in new money. I don't want to say "print" the money, because most money in the money supply is electronic these days. I know this would increase inflation and interest rates, but please put it in comparison to the alternative short paying, or outright stiffing, some of our creditors.


There are two flaws here. The way you say it, "add 20% to the money supply" is different than "print the money to cover the 20%." (I am using "print" because it it figuratively correct, we can agree to disagree if that is proper.) 20% of the total money supply would be about 2 Trillion Dollars. The deficit for 2013 was "only" about $750 billion in comparison.

But we cannot just print that money and do this without breaking the same debt ceiling law that is the problem right now. The Federal Reserve "prints" money by making loans to banks, nations, and other entities, as well as buying Treasury Securities. So they "print" $750MMM, the Federal Government still needs to borrow it.

At this time there is far more than enough coming in monthly that we can pay interest on our obligations. We can also "roll" maturing securities out as they come due, if we pay $1,000 to a maturing bondholder and issue a replacement $1,000 security the debt has not gone up. We would still be issuing lots of securities weekly. We even issued securities weekly during the late-1990s surplus years, though we even stopped issuing the 30 year bond for some time which played havoc in markets that used it as an index.

So we would just have to cut spending elsewhere. This can come from anything from ordering fewer paper clips to laying off workers to entitlement reform to cutting federal wages. It can be done. It gets done at state and corporate levels all the time when times are bad. I would have to say we should be able to cut 5% from government spending and not even notice it. Any manager who cannot cut his or her expenses 5% should probably be fired. The problem is Washington Pols refuse to even try.

I could write a book with my ideas but I would say:

1. Every part of every agency has to cut 5% of payroll and expenses immediately. Just tell the lower and mid level managers to come up with a plan.
2. All entitlement benefits are frozen in 2014, same with the Federal Pay Scale. Not "rate of increase" but frozen. Lots of working Americans are going without raises, these groups can pitch in.
3. Baseline Budgeting law repealed, back to pre-1970s where Congress must appropriate yearly.
4. Merge the Dept of Interior and EPA, combined agency must cut budget an additional 10% above the 5% listed above. These agencies are redundant.

There is far more to do after this, but it is a start. No "default" is coming.

'The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government can not pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America's debt weakens us domestically and internationally. Leadership means that "the buck stops here." Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.'----??????
The President is a fink.
October 10th, 2013 at 11:04:46 AM permalink
whatme
Member since: Oct 24, 2012
Threads: 0
Posts: 21
We don't have a choice we must cut now, or we will make the great depression look like the good times.

A good vid. "Funding Government by the Minute"

http://youtu.be/p0RkWqyn1y4
October 10th, 2013 at 11:40:18 AM permalink
Wizard
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Member since: Oct 23, 2012
Threads: 239
Posts: 6095
Quote: AZDuffman
But we cannot just print that money and do this without breaking the same debt ceiling law that is the problem right now. The Federal Reserve "prints" money by making loans to banks, nations, and other entities, as well as buying Treasury Securities. So they "print" $750MMM, the Federal Government still needs to borrow it.


Thanks. That was a good post. I'd be interested to hear you expand on the point above. So, you're saying that before we can print a dollar we have to borrow it from somebody. If so, why?

It is my understand we owe Japan and China each about $1.1 trillion. What would happen if we printed two $1.1 trillion dollar bills and gave them each one. That would wipe out 2.2 trillion in debt immediately, wouldn't it? Don't we already do that to a lesser extent with "monetary easing"?
Knowledge is Good -- Emil Faber
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