The Fiscal Cliff....or is it more like the Fiscal Meh?

Oh, it was certainly significant, but if the recent past is any indication, and if the Tea Party sentiment is still a current in Congress, then Republicans aren't going to move much (if any) further on revenue. They've already given more than they wanted to. Why would they give more? They don't want to tackle the problem via revenue increases and spending cuts. They see this as a spending problem.

How do you see the debt ceiling going compared to how things unfolded the last time? (Especially in the wake of of tax increases on the wealthy.)

I agree.

One would hope.

 

Spending never gets addressed? That's odd. What are you reading?

Obama is the only president in recent history who knows how to cut spending.
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It's a matter of degree. Cut spending too much and the economy suffers significantly. In the absence of crippling cuts, without revenue increases, no significant deficit reduction is possible.

I guess we'll see about that.

Is Congress talking about efficiency and waste? Is that at issue?

I'm not sure how government in the U.S. works when it comes to the details. In Canada, we have arms-length government agencies that act as watchdogs and will bring any waste, inefficiency, or even corruption to the attention of parliament despite who's in power. What does Congress have that has pointed out waste or inefficiency? Is this a part of the debate, or are they merely looking at slashing entitlements, etc., on the macro level. The question of efficiency and waste hasn't caught my attention recently. Is anyone talking about this?

 

I was talking about cuts. I don't know where you got confused. But maybe this will help: Who Is The Smallest Government Spender Since Eisenhower? Would You Believe It's Barack Obama? - Forbes

If you want to talk about the debt or the deficit, then we can talk about those.

It doesn't have to be paid off; merely managed.

I owed approximately $30,000 to the provincial government upon graduation. Since then, I've been on track to pay it off in 10 years. I could have lived out of a cardboard box to pay it down faster. I could have lived on the same diet Christian Bale did when he prepared for his emaciated role in The Machinist: an apple and a can of tuna a day. But I didn't. I think the reasons are obvious. Instead I made a few moves that provided job security and a comfortable home for nearly the entire 10 years. (I'm almost there.)

What did I do? I cut spending (I stopped paying so much for education; I moved in with a nice woman and we split living costs; I now work from home and save on transportation, food, and clothing costs), but I also increased revenue (making books earns far more than selling them).

Why did I do this? It made sense. I've lived modestly but comfortably, and my debt is under control. This is an oversimplified example because I'm an individual, but the principle is the same: deficit reduction such as that in the U.S. is tackled through reasonable revenue increases and spending cuts. There are reasons for this. One being that the Bush tax cuts have allowed America to run with a much lower tax environment that it was accustomed to. Another is that cuts that go too deep will hobble the economy.

The same applies to Canada. Yes we have a debt problem. We have a deficit problem too.

So not only are you wrong, but you also ignored my questions.

Why is that?

 

I am looking at the numbers. Are you? Notice how the top line dips down a couple of times? Notice also how it didn't happen before that since '98? Does that help?

It doesn't take mental gymnastics to realize that Obama's spending increases are clearly the lowest since before Reagan.

What are you getting at? I know there is a debt problem. I know there is a deficit problem. You thought I had gone insane when I said Obama is the only president in recent history who seems to know how to cut spending. As far as I know, it's fact. Do you know anyone between Regan and Obama who has cut more than Obama has? Try to answer that question without using the word deficit or debt. It's really simple if you try.

This is what Obama is doing. He's trying to cobble together a plan for reasonable deficit reduction over periods such as 10 years. What is your idea of a timely manner? One year? Do you want to get into the ramifications of cutting spending too sharply, especially while taxes are still so low and have room to move?

My view doesn't involve cherry picking. How about yours?

You don't think Canada has deficit and debt problems? Have you looked at the numbers? If Canada doesn't have a problem, then neither does the U.S. Just because we have a history of being serious about posting surpluses and reducing the debt (thanks to liberals), it doesn't mean there isn't a current problem.

None of this matters anyway. We're talking about the U.S., but you instead focused on Canada because maybe you didn't want to respond to yet another of my questions.

Ace, you were wrong about Canada, and you literally ignored my questions. You should know this, you're the one who cut them out of the quote box you used. I assumed you did this consciously. Maybe there was a technical error. Maybe go back and read the questions I'm referring to. They're still in my original post.

 

Weren't you the one complaining that the government wasn't doing enough to make credit available to small businesses?

Also, what about the question of spending cuts?

Again, you're wrong. Canada does quantitative easing as well.

While this is true, Canadians have their own house to worry about.

 

How? QE frees up the money supply so banks will lend it out so people will spend it. Isn't that what small businesses want? Or are you just not in the mood to talk about credit problems for small businesses? Or do you not think that consumer spending will help with the debt problem? What is it? How is this diversionary when it's on topic?

You're preaching to the choir. This comes back to my earlier point: Obama is better at cutting spending than any president in recent history. Pop quiz: When was the last time government spending decreased?

Also, you (possibly rhetorically) asked me if Obama reduced the debt. Are you mad? This is about reducing the deficit. Obama is trying to work on that through a combination of spending cuts and revenue increases. Republicans think it's possible to achieve this through spending cuts alone. I think they're mad. I'm not alone. They don't seem very good at math. Or economics.

No it's not. That's absolutely ridiculous. The next time you want to pretend to know what you're talking about regarding Canada, don't.

Next you'll tell me the U.S. doesn't have a debt problem after all, because, hey, look at Japan.

 

Well, this is about making money available to those who want it—in other words, those who will use it. I know you're a staunch supply-sider, but the problem right now is demand is weak, and anything anyone can do to tap into pent-up demand should be considered. QE is not meant as a long-term strategy; it's meant as an injection to kick-start economic activity.

I think anyone serious about managing the deficit in a reasonable and sustainable manner will accept that tax raises are inevitable. And all we're really talking about, if you think about it, isn't "tax increase." It's letting temporary and unnecessary tax cuts expire. How they're let to expire at this time is the issue. It shouldn't be whether or not they should expire at all.

You know, I suspect one of two things at play here: 1) You haven't really read anything about Canadian economic issues and are making assumptions based merely on the fact that Canada is a smaller economy, or 2) Your perception of what constitutes a problem is skewed towards "crisis = problem; everything else = A-OK."

I must now assume that you believe that previous to 2008, the U.S. didn't have a debt problem. Is that the case? Because, relative to respective GDP values, Canada's current debt situation is worse that the U.S. debt problem prior to 2008. And Canada's current deficit problem is stacked on top of that.

Is the American debt problem worse than Canada's? Yes. Is Canada sitting pretty compared to the U.S.? Not exactly. The Japanese debt problem that has been ongoing for years is substantially worse than the current American problem. That doesn't mean America doesn't have a problem.

A problem is a problem regardless of how it stacks against other problems. Be realistic; don't ignore facts.

Recent politics in Canada has been frustrating. The Conservatives won much of their power on a platform that promised integrity and accountability, but they have been mired in controversy, some of which relates to misappropriation of funds. Not good.

Regardless of that, the Minister of Finance has done a passable job weathering the recession. I don't agree with everything, but the Conservatives have used a balance strategy of stimulus spending, spending cuts, etc., to keep the economy going while attempting to minimize the increasing deficit spending. More recently, they have missed forecasts in terms of the deficit, and we're not in as good a position we thought we were. Both government and household debt is increasing, and levels are getting worrisome (though household debt is slowing and will likely come down during the recovery).

I would support a combination of tax increases and spending cuts to avoid any serious deficit problems. The GST has been decreased more than once. The corporate tax rate has been decreased more than once. I think if reasonable spending cuts aren't enough, then these tax rates have room to move to help offset costs.

 

But you can't put the cart before the horse. The U.S. is at the risk of a liquidity trap, meaning people are hoarding money. There is also a serious risk of a deflationary spiral.

There needs to be enough incentive for banks to loan and in turn for people to invest. It's not quite happening as much as it should. This is where QE comes in. It's an incentive that will encourage such activity. If banks have an easier time lending, businesses will have an easier time borrowing. This should encourage further investment and, in theory, will encourage more spending overall. So what we're looking at is increased investment and increased consumption as a result of QE.

When certain entities don't want to spend money, it's a matter of encouraging them to do so, or perhaps getting others to.

Granted, Canada is in much better shape than the U.S. and most of Europe, but as you know economies are globalized and so we have our challenges. If you look at the numbers, you will see that though we've weathered the recession quite well compared to others, we currently have many of the problems the U.S. had before the financial crisis. Remember, things weren't quite peachy before 2007.

I won't deny there is a spending problem. Bush was reckless and Obama was passed the reins at an inopportune time. There are obvious savings that could be made, but many don't want to touch things like defense and security expenditures, which are incredibly high. The other problem is that taxation is too low. There are too many loopholes and the effective tax rates of top earners are too low. Also consider that the tax burden of the average Canadian household is higher than that of the average American household. This is even after reducing the federal sales tax (GST) a couple of times.

There is nothing that you or anyone can say that is convincing enough if you don't include government revenue increases as a part of the solution to reducing the deficit.

Without government revenue increases you have two options: 1) ineffective deficit reduction, or 2) crippling the economy.

This is false. America is sitting on massive amount of wealth in the form of natural resources too, as are other nations. Actually, I think Russia and the U.S. are the top two resource-rich countries in the world.