So we hit the debt limit...

[crazy canuck]

What would those conditions be?

At a certain point higher taxes can cut economic growth and so can have negative returns on revenue - especially if equivalent lower tax jurisdictions are available.

But that isnt really the problem facing the US right now.   

[Admiral Yi]

PC happening now about changing to "chained CPI" for SSA COLA adjustments. How much will that save?

With inflation running 2-3% I don't see how any COLA adjustment could save real money.

[Razgovory]

If it's heavily backloaded, it's meaningless.  You guys are all praising Obama for being so flexible on spending cuts, but is he really being that gracious if most of the cuts would be scheduled for after he's out of office (assuming a second term)?

This is true of the Republican plan as well.  I mean Ryan's plan balances the budget in 2030.

[Neil]

What would those conditions be?

At a certain point higher taxes can cut economic growth and so can have negative returns on revenue - especially if equivalent lower tax jurisdictions are available.

But that isnt really the problem facing the US right now.

And depending on the structure of the tax cut, you can also have the wealthy and corporations arranging their tax liability in such a way that it comes due during a period of lower taxes.

[grumbler]

What would those conditions be?

At a certain point higher taxes can cut economic growth and so can have negative returns on revenue - especially if equivalent lower tax jurisdictions are available.

But that isnt really the problem facing the US right now.

Plus, if a country has an enforcement/evasion problem, cutting rates and increase compliance to the point that the greater compliance brings in more than the lower rates cost.

But agree that this also isn't the problem facing the US.

The problem facing the US is that consumers and businesses don't think the government can manage the economy, and so won't spend fearing that they will need the cash later.  A tax increase right now, coupled with spending cuts, would signal that Congress's bout with insanity has ended and that the era of Arafatism is over.  Kicking the can down the road as they have been doing since they evaporated the Clinton budget surplus simply dooms them to lower and lower revenue no matter the tax cuts.

[crazy canuck]

The problem facing the US is that consumers and businesses don't think the government can manage the economy, and so won't spend fearing that they will need the cash later.  A tax increase right now, coupled with spending cuts, would signal that Congress's bout with insanity has ended and that the era of Arafatism is over.  Kicking the can down the road as they have been doing since they evaporated the Clinton budget surplus simply dooms them to lower and lower revenue no matter the tax cuts.

Agreed.  And the signal is not just o people in the US.  People here are also sitting on decisions to expand their businesses.  Right now the only viable market for many of our products is China.  To the extent businesses are also looking to the US as a potential market this insanity is creating uncertaintly which in business terms equals death of expansion which further excacerbates the problem because then the ROTW has less wealth to purchase US goods and services.

[Crazy_Ivan80]

$4 trillion isn't chump change. Say in 10 years that is $500 billion a year in cuts (since it is backloaded). I think the projected deficit is a bit over $1 trillion that far out. So we are almost cutting it in half, and a deficit of $500 billion or so isn't going to break us.  Also, this isn't the last time budget cuts can be discussed. If you want to balance the budget, you don't have to do so in the next two weeks before we are supposed to default.

If it's heavily backloaded, it's meaningless.  You guys are all praising Obama for being so flexible on spending cuts, but is he really being that gracious if most of the cuts would be scheduled for after he's out of office (assuming a second term)?

Do we know the exact details of Obama's proposal, btw?  Where is that info coming from?

that's closeby... here in Belgium the guy trying to form a government has also promised to deal with the lopsided pensions of government-employees. The method used to achieve that however would mean that "the something done" would be done in 4 decades! Francophone socialist fucker. If Belarus wasnt European he'd be leading the last old-style socialist party on the continent lol. So 4 years is soon then :p

[MadImmortalMan]

Meanwhile in the Senate..

Bipartisan support builds for Gang of Six $3.7 trillion deficit-reduction package
By Alexander Bolton and Erik Wasson - 07/19/11 02:05 PM ET

President Obama joined Democratic and Republican senators Tuesday in offering support for a $3.7 trillion deficit-reduction plan announced that morning by the five remaining members of the Gang of Six.

Sen. Tom Coburn (R-Okla.), who had pulled out of the Gang of Six in May, also rejoined the group and praised the plan as something that could win the 60 votes needed to pass the Senate.

"The plan has moved significantly, and it's where we need to be — and it's a start," Coburn said. "This doesn't solve our problems, but it creates the way forward where we can solve our problems."

Sen. Mark Udall (D-Colo.), in saying he would support the Gang's plan, added: "There's a lot of support for turning the gang into a mob.

"Count me in," he said. "I've long held this is what we need to do. The credit agencies are saying it's not enough to take care of the debt limit. We have to take care of the long-term fiscal scenario."

At the top of the White House press briefing, Obama described the plan as "good news," adding that it was "broadly consistent" with the approach he had endorsed for reducing the deficit.

Another key endorsement came from Sen. Lamar Alexander (Tenn.), the third-ranking Republican in the Senate.

"This is a serious, bipartisan proposal that will help stop Washington from spending money that we don't have, and I support it," Alexander said.

Coburn said the plan would reduce the deficit by $3.7 trillion over the next 10 years and increase tax revenues by $1 trillion by closing a variety of special tax breaks and havens.

He also noted, however, that the Congressional Budget Office would score the plan as a $1.5 trillion tax cut because it would eliminate the Alternative Minimum Tax. It would generate a significant amount of revenue out of tax reform and reduction of tax rates, which authors believe would spur economic growth.

Coburn said he expected a "significant portion of the Senate" to support the plan — "maybe 60 members."


He endorsed the plan to colleagues during Tuesday's meeting, according to a lawmaker who attended.

Sen. Kay Bailey Hutchison (R-Texas) said the plan, negotiated by the remaining members of the Gang of Six — Sens. Kent Conrad (D-N.D.), Mike Crapo (R-Idaho), Dick Durbin (D-Ill.), Saxby Chambliss (R-Ga.) and Mark Warner (D-Va.) — could win a majority of votes in the Senate.

"Likely 60 [votes]," she said. "The House should like this plan because it has spending cuts, and I believe it will spur the economy."

Hutchison said she would vote for it, and urged House Republicans to back it as well.

"I think that they have produced something that has mechanisms that are concrete, and that's what I think the House is looking for, and [so are we]," she said.

Warner also touted the Gang's proposal.

"The Gang of Six-plus is back," he said after the meeting.

Conrad said the Gang has given their colleagues 24 hours to say whether they are on board, and that signs are encouraging because Republicans and Democrats in the room stood up to support the framework.

"Obviously a group of six can't pass anything around here — we need to get to 60," Conrad said.

He added that he does not know if the framework could be used to resolve the debt-ceiling crisis, but that such an idea could be a "possibility" if enough senators signed on.

House Speaker John Boehner (R-Ohio) has not yet been briefed on the Gang's plan.

Sen. Rob Portman (R-Ohio) said he has met with the Gang a total of six times. He added that the framework "could be helpful" in the debt-ceiling fight, but said the White House and the House have to be brought in on it next.

"That is the challenge," he said.

According to an executive summary, the Gang of Six plan would stabilize the debt by 2014 and reduce publicly held debt to 70 percent of gross domestic product by 2021.

It would involve two separate bills — one implementing $500 billion in immediate deficit cuts and another implementing larger reforms. Conrad said he has held off marking up a budget in committee to use the normal budget process to move the Gang of Six plan.

On entitlements, the plan would fully pay for the Medicare "doc fix" over 10 years, allowing doctors to avoid a drastic cut in Medicare payments under the law, which is regularly avoided but never paid for.

The plan also contains strong enforcement procedures. One of these would require a 67-vote supermajority in the Senate to circumvent spending caps.

Conrad said Coburn was enticed to rejoin the group because the Gang had agreed to add $116 billion in heathcare-entitlement savings to the framework. He said the way the extra reductions are achieved is up to Senate committees, but the framework specifies that if target savings are not achieved, 10 senators can propose a way to do so on the Senate floor and have the plan receive expedited treatment.

Conrad said 74 percent of the plan's deficit-reduction goal would come from spending cuts and 26 percent from higher revenues, adding that the framework addresses Social Security but does not use savings for deficit reduction.

More than 50 senators, including an even mix of Democrats and Republicans, attended a briefing by the architects of the plan.

Sen. Mike Johanns (R-Neb.), who co-authored a letter in March urging Obama to support a comprehensive deficit-reduction package that received 64 signatures, said the remaining members of the Gang of Six have produced a politically viable plan.

"This is a very thoughtful, serious plan," Johanns said. "I have now seen the presentation half a dozen times, and each time I have seen it I have become more and more convinced that this is the vehicle that gives us the best opportunity to deal with a whole range of issues. I'm excited about the possibilities here."

Republican Sens. Alexander, Kelly Ayotte (N.H.), John Barrasso (Wyo.), Richard Burr (N.C.), Bob Corker (Tenn.), John Cornyn (Texas), Mike Enzi (Wyo.), Lisa Murkowski (Alaska), Pat Roberts (Kan.) and John Thune (S.D.) also attended Tuesday's meeting.

Democratic Sen. Michael Bennet (Colo.), who led the March letter-writing effort with Johanns, said the Gang's proposal received a warm reception from Republicans and Democrats in Tuesday's meeting.

"We need to make sure that the capital markets are reassured the paper they own is worth what they paid for it," he said. "No one is going to agree with every single thing in this plan. There is no plan that everybody is going to agree with in its entirety, but this plan meets those broad tests."

Sen. Joe Lieberman (I-Conn.) said he and many of his colleagues would support the framework because they believe Congress needs to take significant steps to reduce the deficit. He also said many see a contingency plan under negotiation by Senate leaders as insufficient.

The fallback plan being discussed by Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) would include $1.5 trillion in spending cuts and set up a special committee that would put together a larger deficit-reduction package that would come straight to the Senate floor. But some lawmakers see such a committee as a waste of time that would merely replicate the work already done by the president's fiscal commission and the Gang of Six.

"I think what happened this morning is that the Gang of Six began to turn into a bipartisan majority of senators who want to solve a national problem rather than play partisan politics," Lieberman said. "I am ready to sign up. ... I appeal to people, don't start to pick away at this.

"I was actually worried they had taken so long to come together as a Gang of Six that their moment had passed, but I think this really is the moment because everybody sees the process drifting toward a kick-the-can-down-the-road response, which is embarrassing."

Sen. John Kerry (D-Mass.) said the framework could be part of a deal to raise the debt ceiling, because it is a balanced approach.

He called the percentage of deficit reduction achieved through higher tax revenues "small" and questioned whether the plan does enough to stimulate growth, but acknowledged that every senator would probably want to tweak the framework.

[CountDeMoney]

because it would eliminate the Alternative Minimum Tax.

That's a bigger deal than people think.

[MadImmortalMan]

because it would eliminate the Alternative Minimum Tax.

That's a bigger deal than people think.

Yes. It's actually a massive tax cut.

[MadImmortalMan]

Also this:

Finance would be required to reduce tax rates to three tax brackets of rates: of 8-12 percent, 14-22 percent and 23-29 percent. The current top marginal rate is 35 percent.

The corporate tax rate would be between 23 percent and 29 percent, and tax reform would cease taxation of oversees profits.

That's a big deal too. Bringing corporate tax rates down to almost European levels and no longer taxing repatriated profits. Also, the debate about the Bush tax cuts expiring would be instantly over for obvious reasons.

[grumbler]

Yes. It's actually a massive tax cut.

That depends.  AMT exists because there are so many loopholes that people were paying zero tax.  If the loopholes disappear, so does the need for an alternative tax.

I certainly agree that there is the potential for this to amount to a massive tax break for the very wealthy, but I don't think that it necessarily is one.

[grumbler]

That's a big deal too. Bringing corporate tax rates down to almost European levels and no longer taxing repatriated profits. Also, the debate about the Bush tax cuts expiring would be instantly over for obvious reasons.

I have never paid taxes on overseas profits, because the taxes I paid before the money was repatriated was always higher than the tax I would have owed here.

I favor taxation at the individual level, not the corporate level.  Corporations have always found it cheaper to evade US taxes than citizens find it, and it makes sense to want them to store and report profits domestically. If you make it cheaper for them to pay their taxes than offshore them, you get more money.

[CountDeMoney]

I favor taxation at the individual level, not the corporate level. 

Considering how long and hard corporations fought to become legal persons, they should be taxed accordingly.

[Barrister]

I favor taxation at the individual level, not the corporate level. 

Considering how long and hard corporations fought to become legal persons, they should be taxed accordingly.

lolwut?

Corporate personhood is a pretty old concept at this point.  Like 18th century.