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The current fiscal problems the US faces have their origins dating back to to the 1970s with fiscal policies both Democrats and Republicans supported. Neither party has a basic understanding of sound fiscal policy and engage too much in corporate welfare and such.
Republicans are the worse party right now, however. Besides the wars in Afghanistan and Iraq that were paid for on 100% borrowed money, you also have the medicaid expansion and Bush tax cuts that the Republican Party shoved down the USA's throat. Now their mantra is that lowering taxes and slashing spending will solve the budget problem?
The chief problem with the US right now is that it doesn't take in enough revenue. Half the population doesn't pay any income taxes, you have at least $1 trillion in tax breaks (many are dubious btw), and giant corporations pay squat in taxes (e.g. General Electric). Revamping our swiss cheese of a tax code would save the country from immediate fiscal ruin. Republicans, however, will continue pushing for needless things like making the Bush tax cuts permanent while sidestepping the actual reasons behind the USA's fiscal woes (as will Democrats).
On a side note, I need to remind myself to write to my US representatives and remind them of how nice it must be that they get paid regardless of the situation while several of my family members will not be so fortunate if the federal government were to shutdown. That's one thing I dislike about Congress. Members get paid regardless if they fail to do their most important job: hammering out a budget.
Last edited by Franckie; April 09, 2011 at 11:02 PM.
He didn't need to target just the businesses. Rich people should be the main target. Making middle to lower class pay more taxes hurts in the long run because they have less money to spend on stuff and thus, less money circulates and keeps the economy moving. Rich people can afford to keep spending with higher taxes, though their lifestyle wouldn't be as grand.
Anyway, notable countries are dumping their U.S. currencies for something else. I forgot which site I read it from though(it was a financially geared site) . From what I've read, the rest of the world is preparing to switch the oil reserve currency from U.S. dollars to a combination of Yuan and Yens. The fall of the dollar is occurring which was similar to how the reserve currency switched from British Pounds to U.S. Dollars.
The IMF is even ready with the new currency they have developed.
Also, the suggestion of taxing the rich is ludicrous! This reminds me of a story of taxation I read before. The middle class and the poor wanted to tax the rich. The King agreed. It was such a huge success that eventually the middle class and poor were taxed too. So if there is a hike in taxes for the rich, expect that to trickle down.
In my honest opinion, no one in Washington has a plan that will work.
What history of taxaxion did you read ? Because in middle age and a bit further nobles and church did not pay taxes, they even get some from the others.
And i think in France, at first taxes were payed only when the country was at war. It happens that england and france where engaged in the 100 years war which kinda made the tax permanents
Decreasing taxes for the wealthy, as Ryan's plan suggests makes no sense RIGHT NOW. I read that his plan would balance the budget...in 50 years, and by doing so he would privatize social security, and get rid of medicare and other social welfare programs completely. That would only increase the burden on the Health Care system, and the Republicans are the ones who are against what they call "Obamacare". They say they're for Health Care reform, but it clearly isn't that important to them.
The notion that cutting taxes for anyone right now just doesn't make sense to me.
I'd want a federal version of what Governor Cuomo is doing in New York, a Forensic Audit of where the money is actually going. You'd be shocked at how well bureaucrats and politicians are doing, despite the fact that everyone else is being gouged at the pump, paying more for goods and utilities. It's a joke.
In feudalism the rich did not pay taxes, rather the nobles actually charged taxes from the people which worked in their lands (the poor).
As for the outsourcing, I don't think there is anything anyone can do about it and it cannot be blamed on a president. Companies don't outsource because of things like principle, they do it based on numbers. As it is, the cost of operating a plant anywhere in the world is basically the same. Basically, machinery, equipment and running those costs the same everywhere. In turn what varies significantly is the cost of labor. Nowadays everyone must have heard how minimum wage in US is 7.50 and hour (depends on the state though) while elsewhere it would 1 or 2 bucks and sometimes even less. Its that simple, there are no political reasons behind it, the math behind simply works for profit.
Taxing the "rich" is usually more of a political thing though, that much is true everywhere. As for the proposed taxes, I really don't know the math behind them so to speak. I am not talking about how to actually calculate taxes but rather the effect of increasing those taxes would have on the deficit. Would it really be something actually significant enough for it to be worth it? Or would the effect be marginal? If there is anything that suggests that increasing these taxes specifically would be effective in reducing the deficit then it would perhaps be a good idea but in turn if there is no reason to believe it would have anything but marginal effects then there is nothing but political BS behind it. The cost of raising the taxes should also be considered.... What effect would increasing taxes have on expected returns on investment or the amount of overall investment? Low and middle classes have no money or credit as it is so would reducing the amount of money available the supposedly rich have left for investment be a good idea? I guess we would also have to consider whether they would actually invest or save the money though. Democrats have experienced a decrease in popularity as obama's presidency has gone by so perhaps this could be a move to counter that? It's rather easy to make people who would oppose these taxes to look like the bad guys(republicans) and those who support them as good guys (democrats). Wish I could see some numbers on all of these things, it would make things so much simpler lol.
As I see it, one way or another spending has to be reduced. Increased taxes would perhaps be an appropriate measures to deal with the debt in other scenarios but in turn the US is also dealing with the recession and unemployment.
Standard and Poor's speaking of possibly downrating U.S. ratings.
Standard and Poor's label chances of having the U.S. rated down from top rating AAA within next two years to over 1/3.
This is quite a new developement, so far nobody ever questioned the U.S. AAA, even though debts per GDP is pretty high and debts per annual tax income enormously high. But this might be the beginning for serious trouble awaiting the USA. I guess most here know about how important such ratings are for getting good and cheap credits. Having US downrated would potentially trigger a chain reaction:
Lower rating often means that credits become more expensive, as interest rate on them rises, because the risk of losing the credit is higher for the credit grantor (after all the rating means how safe it is to lend money to the rated state/company). Paying more interest means that national debt will have an even worse developement, which can backfire to the rating... and so on.
Imo it's absolutely justified. All I can imagine for the US to escape this would be some secret negotiations and "inofficial" buiseness with them... I can't see a legal way out of this.
(Renamed thread title to adjust it to this discussion)
From Standard and Poor's analyst Q&A on Wall Street Journal:
Last edited by Roflkopt3r; April 18, 2011 at 11:33 AM.
If that trully happens it will be interesting to watch.
A few days ago there was a BRICs' reunion and they were talking about trying to make a few reforms to the monetary system if US's ratings are actually cut this will probably givem them a push.
This might actually make the republicans even more popular with time.... I read somewhere they are currently betting on the debt issue being a decisive aspect when it comes to the next elections. They are currently pushing more cuts to government spending which in turn limits what the democrats actually can do and they have no intention of raising taxes which at large appeals to a more than significant section of the population. Obama is getting increasingly unpopular at large evidenced by his lose of majority at the senate so if the republicans manage to get a strong and charismatic enough candidate(Donald trump anyone?) we could actually see a republican president for the next elections.
I don't get this downrating thing. The US debt has been implicitly AAA because the US gov't controls the currency that its debt is in. So all they need to do is just print more dollars and give them back to China. Are they seriously considering the situation that the US would go into default rather than print more cash to pay back the creditors? That doesn't happen normally...
I don't think debt holders would appreciate printed dollars considering they would lose value though. I don't think it is as simple as that.
I bet they would appreciate default even less. In the end, it's not their decision whether to print more money or not. Also, as far as I know, rating agencies only estimate the probability of default, not inflation. So inflation outlook should not be a consideration in the credit rating. Hence the mystery.
Still, they are paying interest and so on, so their debts are rising and rising while it of course produces inflation.
Let's assume nobody would give loan to the US anymore, because the US have so high debt that it's doubtful they would repay that loan. Then only the FED would do so, which means that there is a lot of money "coming out of nowhere". This would be equal to enormous inflation, thus nobody would want to have dollars anymore (because it becomes worthless by inflation).
So, saying "they should just print dollars and give it back to China" would effectively mean: Shifting the debts the US has in China to the FED. But: If the FED would give away all this money for free (which means: without interest on it. Interest is the price of money), nobody would trust the FED anymore, because it would be a big balloon of debt itself. The effect for the dollar would be devastating, plus the inflation it would cause. And if the FED takes interest (as usual, the same % of interest to everyone), then the US debts continue rising as always while weakening the dollar further.
Last edited by Roflkopt3r; April 19, 2011 at 06:15 AM.