Reasoned Answers, Please: What Happens If US Defaults?

[JohnStOnge]

Oh what the heck I'll go ahead and do it because it's easy. Go to http://www.cbo.gov/ftpdocs/98xx/doc9884 ... Letter.pdf" onclick="window.open(this.href);return false;.

It's for 1979 through 2005 and I'm guessing now household incomes are a little lower than in 2005 but I don't think enough so to change the basic trend showing that the idea that the "middle class" has less income now than it did in the relatively distant past is a myth.

Let's say the "middle class" is the middle 60 percent of the population. In that series of tables that's the second, third, and fourth quintiles. If you go to Table 3 on the 15th page you will see the following with average incomes reported in inflation-adjusted terms (2005 dollars).

The 2nd quintile went from an average annual income of $34,000 in 1979 to $37,400 in 2005.

The 3rd quintile went from $51,000 to $58,500.

The 4th quintile went from $69,000 to $85,200.

I can also tell you that, though it's not expressed directly in the link document, if you do the math you will find that the total Federal tax liability per household declined substantially for each of those quintiles between 1979 and 2009.

So, again, what's happened is that the "middle class" has been insulated from the impact of what it means to keep increasing government spending. The middle class has more income now and pays less taxes in spite of the fact that per capita government spending has increased dramatically. And it's very easy to support expanding government when you're not the one paying for it.

[JohnStOnge]

Ok I need to correct myself just a LITTLE bit because I hadn't looked at the average total Federal tax burden for the fourth quintile before. For that one the total Federal tax liability on average rose a little bit between 1979 and 2005. However, here is how it went in terms of the total Federal tax liability per household for each of the first four quintiles between 1979 and 2005 (2005 dollars):

First quintile - $1248 in 1979 vs. $684 in 2005

Second quintile - $4868 in 1979 vs. $3715 in 2005

Third quintile - $9489 in 1979 vs. $8324 in 2005

Fourth quintile - $14627 in 1979 vs. $14869 in 2005

So you can see that the overwhelming majority of the population had its total tax burden go DOWN in inflation adjusted terms while total government spending as well as per capita government spending went UP. Most of the population wasn't "feeling" the cost of increasing government.

I haven't done the top 20%. But I have a spreadsheet for the top 9%. The average total Federal tax liability for the top 9% went from $50,998 in 1979 to $92,782 in 2005 in 2005 dollars.

So you can see what's been happening. While government has been expanding and expanding spending most of the population has been insulated from the cost while politicians keep going back to the "tax the rich" well to finance...or at least partially finance...the explosion in spending.

So, YES, we should start making sure that when people support increasing government they are likely to bear some of the cost consequences of doing that instead of living in a world designed to make them think money grows on trees and somebody ELSE is always going to pay for it.

[houndawg]

We can't, John, the rich have all the money. You aren't seriously suggesting that we tax people that don't have any money are you? Back when we had a thriving middle class we could spread the pain, but it ain't like that no more.

I won't do it right now but I've done it before and the idea that the "middle class" has less resources now than it had 10, 20, 30, 40 and so on years ago is a myth. That's if you define the "middle class" in some reasonable way. Say you define the "middle class" as the middle 60 percent of households in terms of income. That middle 60 percent now has a higher average income, as does every quintile within it, than it did back in 1979 or 1980 in inflation adjusted terms.

Besides, the point I was making in the post to which you were responding is that we will reach a point such that, even if we take everything the "rich" make each year, we won't be able to make ends meet. We may not be able to tax people that don't have any money. But we CAN change our paradigm with respect to government and decide that we are going to move towards having government spend maybe half of what it currently spends.

And, yes, that is possible if we ditch the idea that government is responsible for ensuring the well being of each individual and managing us like we're a giant herd of cattle. Like even stuff like the EPA. We don't NEED the EPA to be telling Baton Rouge, Louisiana (for instance) what its ozone level should be. We don't NEED for the Federal government to own most of the land in a number of western States. There are MANY things we don't NEED for the Federal government to be doing.

We don't NEED 700+ military bases outside our borders. We don't NEED to be involved in three unnecessary wars.

[JohnStOnge]

We don't NEED 700+ military bases outside our borders. We don't NEED to be involved in three unnecessary wars.

Well, that's fine. I actually agree that we shouldn't be as interventionist as we are in general and could cut way back on our military spending. But even if we eliminated military spending entirely we'd still be running deficits. The "government will ensure well being" concept is a much bigger factor in the problem than military spending.

Take a look at the pie charts and accompanying text on page 37 of the 1040EZ instructions at http://www.irs.gov/pub/irs-pdf/i1040ez.pdf" onclick="window.open(this.href);return false; . Upfront let's note that we're looking at data on a feedback system so that changing expenditures means changing revenues in different ways. Like if we eliminate social security and medicare that means there are no social security and medicare taxes. And changes in government spending impact the economy and that impacts tax revenues. But let's just assume that the system would be adjusted so that the total Federal tax revenue would remain the same. Just talking about how much it would take to run the government.

So if you do the math you see that "military and foreign affairs" spending accounted for 22% of spending or about $774 billion in 2009. Subtract that from total spending and you get about $2.744 billion. If spending had been at that level the deficit would've still been about $639 billion.

Now let's look at "ensure well being" programs. "Social Security, Medicare, and other retirement" accounted for 34% of spending. Let's be conservative in estimating Social Security and Medicare spening by assuming "other retirement" accounted for a third of that. I think we both know that's probably WAY overestimating the proportion accounted for by "other retirement." Anyway that takes us to about 23% (rounded to nearest percent). Now let's add "Social Programs." That's 21% of spending so adding the two up we're at 44% of Federal spending being on "ensure well being" programs. I'm sure there's more. Like if you look at "Physical, human, and community development" you can see some. But let's err on the side of underestimating the "ensure well individual well being" total and just use 44%.

That's twice what was spent on the miltary. Do the math and we come up with about $1.55 trillion. If the same revenue level could have been achieved through some means, there would have been a surplus of about $135 billion.

So, yeah, go ahead and look at the military. But that's not the fundamental, structural problem. We won't solve this problem until we give up on the idea that government is supposed to try to make sure each person's basic needs are taken care of and also manage things to the extent that it manages them. The "Government is our Daddy" mentality and the entitlement mentality have got to go.

NOTE: I know "health research and public health programs" is menationed as part of "Social Programs." Some of that is probably directed at attempts to ensure individual well being and some is probably not. But I also left out consideration of "Physical, human, and community development'" which includes such things as direct assistance to college students. I think it reasonable to say that I probably under-estimated the percentage of Federal spending devoted to "ensuring" well being. And, if not, I also don't think the Federal government should be managing things to the extent that it does. For instance: I don't think it should be spending money on education (even though I DO like playing with that NAEP data).

[OSBF]

So they paid no taxes...the government paid them...

Thus they have no financial equity in our government...

wrong

They owed no INCOME taxes

INCOME taxes are just 1 part of the federal Tax code/system

They paid Federal Taxes, primarily via payroll deduction

I highly doubt that the EIC was enough to cancel their entire Federal Taxation

Only 10% of American workers have zero tax burden

[OSBF]

You said 49% of Americans PAY NO TAXES.

That's a DIRECT quote from you.

As the artical points out, that is a lie.

The number is 10%.

I don't see why that is so important. The point is that the majority of the US population pay way less than an equal share of the tax burden in this country. They effectively support more and more government spending by virtue of how they vote but they are insulated from feeling the cost of what it takes to sustain what they are supporting. They just keep going back to the well of "the rich."

It's important because the INCOME tax is only 1 part of the Federal Tax code/system.

Conservatards run around proclaiming that 50% of Americans PAY NO TAXES

And that, frankley, is a big pile of steaming bullshit

The number is 10%, not 47%, not 49%, and not 50%

10% of working americans have a total net tax of 0% or a negative total tax burden.

[BDKJMU]

I don't see why that is so important. The point is that the majority of the US population pay way less than an equal share of the tax burden in this country. They effectively support more and more government spending by virtue of how they vote but they are insulated from feeling the cost of what it takes to sustain what they are supporting. They just keep going back to the well of "the rich."

It's important because the INCOME tax is only 1 part of the Federal Tax code/system.

Conservatards run around proclaiming that 50% of Americans PAY NO TAXES

And that, frankley, is a big pile of steaming bullshit

The number is 10%, not 47%, not 49%, and not 50%

10% of working americans have a total net tax of 0% or a negative total tax burden.

No, tards like you don't pay attention. Conservatives say that close to 50% pay no fed income taxes.

Medicare payroll are only 1.45%, 2.9% if you include employer matching.

And don't tell me about FICA payroll taxes. That's contributing nothing towards running the govt because thats just the govt saying your too stupid to invest your own retirement $ so they hold onto it in the Social Security Trust Fund (on paper anyway) and start paying it back to you once you reach retirement. And the monthly payments you get upon reaching the retirement age are based upon what you and/or your spouse paid in.

[kalm]

It's important because the INCOME tax is only 1 part of the Federal Tax code/system.

Conservatards run around proclaiming that 50% of Americans PAY NO TAXES

And that, frankley, is a big pile of steaming bullshit

The number is 10%, not 47%, not 49%, and not 50%

10% of working americans have a total net tax of 0% or a negative total tax burden.

No, tards like you don't pay attention. Conservatives say that close to 50% pay no fed income taxes.

Medicare payroll are only 1.45%, 2.9% if you include employer matching.

And don't tell me about FICA payroll taxes. That's contributing nothing towards running the govt because thats just the govt saying your too stupid to invest your own retirement $ so they hold onto it in the Social Security Trust Fund (on paper anyway) and start paying it back to you once you reach retirement. And the monthly payments you get upon reaching the retirement age are based upon what you and/or your spouse paid in.

And what role do they currently play in the "debt crisis"?

[OSBF]

It's important because the INCOME tax is only 1 part of the Federal Tax code/system.

Conservatards run around proclaiming that 50% of Americans PAY NO TAXES

And that, frankley, is a big pile of steaming bullshit

The number is 10%, not 47%, not 49%, and not 50%

10% of working americans have a total net tax of 0% or a negative total tax burden.

No, tards like you don't pay attention. Conservatives say that close to 50% pay no fed income taxes.

Medicare payroll are only 1.45%, 2.9% if you include employer matching.

And don't tell me about FICA payroll taxes. That's contributing nothing towards running the govt because thats just the govt saying your too stupid to invest your own retirement $ so they hold onto it in the Social Security Trust Fund (on paper anyway) and start paying it back to you once you reach retirement. And the monthly payments you get upon reaching the retirement age are based upon what you and/or your spouse paid in.

10% of American workers have a zero or negative tax load

accept it and get over it

it is what it is

[AZGrizFan]

I don't see why that is so important. The point is that the majority of the US population pay way less than an equal share of the tax burden in this country. They effectively support more and more government spending by virtue of how they vote but they are insulated from feeling the cost of what it takes to sustain what they are supporting. They just keep going back to the well of "the rich."

It's important because the INCOME tax is only 1 part of the Federal Tax code/system.

Conservatards run around proclaiming that 50% of Americans PAY NO TAXES

And that, frankley, is a big pile of steaming bullshit

The number is 10%, not 47%, not 49%, and not 50%

10% of working americans have a total net tax of 0% or a negative total tax burden.

Hey, Ralph, riddle me this: When was the last time you filed a tax return on your Social Security or Medicare taxes taken out of your paycheck?

49% of Americans pay NO federal income taxes. Period. You can try to fuckin' spin this anyway you want to, but a fact is a fact. SS & Medicare aren't used to pave highways, pay for the FBI, CIA, EPA, OSHA, etc., etc., etc.

INCOME TAXES.

It ain't that complicated, especially for a Mensa man.

edit: and if libtards like you had your way, wage-earners like me would be carrying their OTHER tax burdens as well.

[OSBF]

It's important because the INCOME tax is only 1 part of the Federal Tax code/system.

Conservatards run around proclaiming that 50% of Americans PAY NO TAXES

And that, frankley, is a big pile of steaming bullshit

The number is 10%, not 47%, not 49%, and not 50%

10% of working americans have a total net tax of 0% or a negative total tax burden.

Hey, Ralph, riddle me this: When was the last time you filed a tax return on your Social Security or Medicare taxes taken out of your paycheck?

49% of Americans pay NO federal income taxes. Period. You can try to fuckin' spin this anyway you want to, but a fact is a fact. SS & Medicare aren't used to pave highways, pay for the FBI, CIA, EPA, OSHA, etc., etc., etc.

INCOME TAXES.

It ain't that complicated, especially for a Mensa man.

edit: and if libtards like you had your way, wage-earners like me would be carrying their OTHER tax burdens as well.

then use the termminology correctly and consistently

Don't be like hoagie and say "paid no federal taxes"

when that's a bold faced mis-representation of the facts

Conservatards oft intentionally use the terms interchangeably to intentionally mis-lead and mis-represent the real facts

[kalm]

I'm not sure the 49% number supports either sides economic philosophy.

[AZGrizFan]

Hey, Ralph, riddle me this: When was the last time you filed a tax return on your Social Security or Medicare taxes taken out of your paycheck?

49% of Americans pay NO federal income taxes. Period. You can try to fuckin' spin this anyway you want to, but a fact is a fact. SS & Medicare aren't used to pave highways, pay for the FBI, CIA, EPA, OSHA, etc., etc., etc.

INCOME TAXES.

It ain't that complicated, especially for a Mensa man.

edit: and if libtards like you had your way, wage-earners like me would be carrying their OTHER tax burdens as well.

then use the termminology correctly and consistently

Don't be like hoagie and say "paid no federal taxes"

when that's a bold faced mis-representation of the facts

Conservatards oft intentionally use the terms interchangeably to intentionally mis-lead and mis-represent the real facts

And libtards often aren't smart enough to understand and must have everything spelled out to them step by step like 4-year-olds. Only retards such as yourself would think that anywhere in the discussion were we EVER talking about FICA and Medicare taxes. We're talking about running the country, not running it into the ground.

[OSBF]

http://www.politicususa.com/en/half-americans-taxes" onclick="window.open(this.href);return false;

[kalm]

We don't NEED 700+ military bases outside our borders. We don't NEED to be involved in three unnecessary wars.

Well, that's fine. I actually agree that we shouldn't be as interventionist as we are in general and could cut way back on our military spending. But even if we eliminated military spending entirely we'd still be running deficits. The "government will ensure well being" concept is a much bigger factor in the problem than military spending.

Take a look at the pie charts and accompanying text on page 37 of the 1040EZ instructions at http://www.irs.gov/pub/irs-pdf/i1040ez.pdf" onclick="window.open(this.href);return false; . Upfront let's note that we're looking at data on a feedback system so that changing expenditures means changing revenues in different ways. Like if we eliminate social security and medicare that means there are no social security and medicare taxes. And changes in government spending impact the economy and that impacts tax revenues. But let's just assume that the system would be adjusted so that the total Federal tax revenue would remain the same. Just talking about how much it would take to run the government.

So if you do the math you see that "military and foreign affairs" spending accounted for 22% of spending or about $774 billion in 2009. Subtract that from total spending and you get about $2.744 billion. If spending had been at that level the deficit would've still been about $639 billion.

Now let's look at "ensure well being" programs. "Social Security, Medicare, and other retirement" accounted for 34% of spending. Let's be conservative in estimating Social Security and Medicare spening by assuming "other retirement" accounted for a third of that. I think we both know that's probably WAY overestimating the proportion accounted for by "other retirement." Anyway that takes us to about 23% (rounded to nearest percent). Now let's add "Social Programs." That's 21% of spending so adding the two up we're at 44% of Federal spending being on "ensure well being" programs. I'm sure there's more. Like if you look at "Physical, human, and community development" you can see some. But let's err on the side of underestimating the "ensure well individual well being" total and just use 44%.

That's twice what was spent on the miltary. Do the math and we come up with about $1.55 trillion. If the same revenue level could have been achieved through some means, there would have been a surplus of about $135 billion.

So, yeah, go ahead and look at the military. But that's not the fundamental, structural problem. We won't solve this problem until we give up on the idea that government is supposed to try to make sure each person's basic needs are taken care of and also manage things to the extent that it manages them. The "Government is our Daddy" mentality and the entitlement mentality have got to go.

NOTE: I know "health research and public health programs" is menationed as part of "Social Programs." Some of that is probably directed at attempts to ensure individual well being and some is probably not. But I also left out consideration of "Physical, human, and community development'" which includes such things as direct assistance to college students. I think it reasonable to say that I probably under-estimated the percentage of Federal spending devoted to "ensuring" well being. And, if not, I also don't think the Federal government should be managing things to the extent that it does. For instance: I don't think it should be spending money on education (even though I DO like playing with that NAEP data).

I get what you're saying but Medicare costs are less than private insurance and social security by law can't add to the deficit. Also, take away the Iraq War and Bush Tax cuts and our debt problems are much more manageable.

[GannonFan]

Well, that's fine. I actually agree that we shouldn't be as interventionist as we are in general and could cut way back on our military spending. But even if we eliminated military spending entirely we'd still be running deficits. The "government will ensure well being" concept is a much bigger factor in the problem than military spending.

Take a look at the pie charts and accompanying text on page 37 of the 1040EZ instructions at http://www.irs.gov/pub/irs-pdf/i1040ez.pdf" onclick="window.open(this.href);return false; . Upfront let's note that we're looking at data on a feedback system so that changing expenditures means changing revenues in different ways. Like if we eliminate social security and medicare that means there are no social security and medicare taxes. And changes in government spending impact the economy and that impacts tax revenues. But let's just assume that the system would be adjusted so that the total Federal tax revenue would remain the same. Just talking about how much it would take to run the government.

So if you do the math you see that "military and foreign affairs" spending accounted for 22% of spending or about $774 billion in 2009. Subtract that from total spending and you get about $2.744 billion. If spending had been at that level the deficit would've still been about $639 billion.

Now let's look at "ensure well being" programs. "Social Security, Medicare, and other retirement" accounted for 34% of spending. Let's be conservative in estimating Social Security and Medicare spening by assuming "other retirement" accounted for a third of that. I think we both know that's probably WAY overestimating the proportion accounted for by "other retirement." Anyway that takes us to about 23% (rounded to nearest percent). Now let's add "Social Programs." That's 21% of spending so adding the two up we're at 44% of Federal spending being on "ensure well being" programs. I'm sure there's more. Like if you look at "Physical, human, and community development" you can see some. But let's err on the side of underestimating the "ensure well individual well being" total and just use 44%.

That's twice what was spent on the miltary. Do the math and we come up with about $1.55 trillion. If the same revenue level could have been achieved through some means, there would have been a surplus of about $135 billion.

So, yeah, go ahead and look at the military. But that's not the fundamental, structural problem. We won't solve this problem until we give up on the idea that government is supposed to try to make sure each person's basic needs are taken care of and also manage things to the extent that it manages them. The "Government is our Daddy" mentality and the entitlement mentality have got to go.

NOTE: I know "health research and public health programs" is menationed as part of "Social Programs." Some of that is probably directed at attempts to ensure individual well being and some is probably not. But I also left out consideration of "Physical, human, and community development'" which includes such things as direct assistance to college students. I think it reasonable to say that I probably under-estimated the percentage of Federal spending devoted to "ensuring" well being. And, if not, I also don't think the Federal government should be managing things to the extent that it does. For instance: I don't think it should be spending money on education (even though I DO like playing with that NAEP data).

I get what you're saying but Medicare costs are less than private insurance and social security by law can't add to the deficit. Also, take away the Iraq War and Bush Tax cuts and our debt problems are much more manageable.

I don't disagree that tax revenues could be higher than they are currently, and could certainly be back at the 17%-18% historical average of GDP, but that doesn't get around the fact that spending is and has been around 25% of GDP for the past 2-3 years (versus norms of 19%-20%). That's not an impact from the Iraq War as the war ran for a good 6-7 years before spending spiked like that and is still spiking. The Iraq war is a red herring when it comes to spending issues and the debt. Tax revenues are slightly below historical norms while spending is significantly above the same norms. If the spending had jumpstarted the economy that would be one thing, but it didn't. Continuing to double down on that strategy is folly.

[Ivytalk]

Jim Cramer says that the political scaremongering over the debt ceiling -- particularly Obama's -- is counterproductive and exaggerated, and the markets will find a way through this. His sound message: don't trade on the panicky rumors, keep focused on earnings.

[ASUMountaineer]

Jim Cramer says that the political scaremongering over the debt ceiling -- particularly Obama's -- is counterproductive and exaggerated, and the markets will find a way through this. His sound message: don't trade on the panicky rumors, keep focused on earnings.

He also said to buy Bear Stearns in March 2008.

[youtube][/youtube]

I actually like him though...despite his antics.

[89Hen]

What a fucking joke that press conference was. I've never seen a sitting President stump so hard in a non-election year. Saying W and Reagan did something so he should do the same. Nice change. Shame on Obama.

[Wedgebuster]

What a fucking joke that press conference was. I've never seen a sitting President stump so hard in a non-election year. Saying W and Reagan did something so he should do the same. Nice change. Shame on Obama.

He's swinging the stick hen, repubs are about to hang themselves with their own rope, and he is going to stand by and let them.

[89Hen]

He's swinging the stick hen, repubs are about to hang themselves with their own rope, and he is going to stand by and let them.

That's one theory.

[Wedgebuster]

He's swinging the stick hen, repubs are about to hang themselves with their own rope, and he is going to stand by and let them.

That's one theory.

Watch and see.

[89Hen]

That's one theory.

Watch and see.

I know that's what you're hoping for. I saw the Prez giving a stump speech that wasn't even thinly veiled. He's a bigger partisan hack than Rush, Hannity or Coulter at this point.

[LeadBolt]

Clowns, clowns, everywhere are clowns... (at least in DC).

[Wedgebuster]

Watch and see.

I know that's what you're hoping for. I saw the Prez giving a stump speech that wasn't even thinly veiled. He's a bigger partisan hack than Rush, Hannity or Coulter at this point.

You forgot to mention the teleprompter.