The Fiscal Cliff for Dummies
Discussion
Pesty said:
Stedman said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
Something 'like' 90% I think. Don't quote me on it 
I have no idea Pesty. Merely a number I remember from a BBC news website/television article about how Japan's 'economic climate' is different to ours etc etc. I'll try and find it. I do remember having the same "Eh?" moment too
Pesty said:
Stedman said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
Something 'like' 90% I think. Don't quote me on it But their GDP/debt ratio is eye watering but I believe because of the way it's structured and who owns it makes them less of a basket case than the Euro zone.
(could be nonsense disclaimer)
Edited by Wills2 on Friday 4th January 22:46
Edited by Wills2 on Friday 4th January 22:46
Apologies for the long piece. Gregg Easterbrook's comments in the fiscal cliff deal.
At least the fiscal cliff deal announced last week had an element of humor relief -- the claim by President Barack Obama, embraced uncritically in news reports, that the tax details are permanent. "Permanent" in this sense appears to mean "may last a couple years, depending which way the wind blows."
George W. Bush's 2001 tax cut was written as a measure that would expire in a decade. The legislation was gimmicked that way to prevent the Congressional Budget Office from projecting trillion-dollar deficits far into the future. Obama's payroll tax holiday was presented as a one-year expedient, then extended twice. Last week's action is "permanent" only in comparison to measures such as these, which were programmed to self-destruct. Congress can change any detail of the "permanent" agreement reached last week, and change any detail any time it pleases. The 112th Congress which just closed shop enacted three major tax bills, each amending the most recent. Nothing is "permanent" in tax policy. That's part of the problem.
As for the fiscal cliff agreement, it may charitably be called a fiasco.
Obama achieved the political goal of raising taxes on the top 1 percent. For some, this was visceral: The Democratic Party's left wing longs to punish the making of money. The president's motive was straightforward: in November, the public voted for higher taxes on the rich, so Obama fulfilled a campaign promise. Increased taxation of the rich clearly was necessary, but also was the sole politically attractive fiscal maneuver available. Now it's been used up -- the arrow has been shot. Tax-the-rich is no longer available as a deficit-fighting policy alternative.
Last week every difficult decision about revenue and spending was kicked down the road. What's being depicted as a great bipartisan achievement really was a mutual Republican-Democratic decision to pretend something happened.
Higher rates on the topmost incomes cannot alone stop growth of the national debt. Defense cuts, entitlement reductions, more taxes on the middle class -- there's no long-term solution (other than an eight-cylinders economic boom) that does not involve defense and entitlement cuts plus raising taxes on average people, who for a generation have enjoyed steadily higher government benefits at lower federal income-tax rates. Defense cuts, entitlement reductions and middle-class taxes are the crunch issues of confronting the national debt. Yet for the second consecutive time the debt-ceiling showdown of 2011, now the fiscal-cliff showdown on 2012 all action on substantive issues was studiously avoided.
Medicare taxes on the affluent were already scheduled to rise this year by 0.9 percent to underwrite part of Obamacare. (They are only 0.9 percent increases, certainly not 1 percent increases!) Mid-affluent taxpayers who own stocks will see a scheduled 3.8 percent rise in the capital gains tax to underwrite another part of Obamacare. (It is certainly not a 4 percent rise!) But any serious deficit reduction will require higher taxes on the middle class too.
At least the higher taxes on the rich, agreed to last week, raise $60 billion annually to reduce the deficit. No wait, the deficit does not shrink. Having legislated $60 billion in new revenue, Congress immediately spent every penny.
Half of the new revenue was spent to award another year's extension of unemployment benefits. Loss of unemployment benefits is a severe concern in the lives of some Americans. The unemployment premium deducted from paychecks funds 26 weeks of benefits. Already many who lost jobs have received a year and a half of benefits free, and now the figure rises to two and a half years free. Most people would rather be working than receiving unemployment checks, but two and a half years of free pay is pretty generous. As the new book A Nation of Takers shows in great detail, social welfare policy treats middle America more generously than most pundits and activists claim. One key fact from the book: when John Kennedy was president, 28 percent of U.S. households drew federal benefits, while today 48 percent do.
The other $30 billion raised last week has already been spent to prevent a scheduled reduction of Medicare physician payments. TMQ pointed out last year that at the end of the Clinton administration, Congress mandated a reduction in Medicare physician payments -- then annually since has postponed the reduction. Last week's action marks the 13th consecutive year Congress postponed cuts in Medicare payments. The ObamaCare plan becomes an ocean of red ink without the assumption of $716 billion in unspecified future Medicare reductions. If the White House and both parties in Congress lack the will to cut Medicare by $30 billion today, how is a $716 billion future reduction magically supposed to happen? The claimed future Medicare cut appears pure make-believe. That means the looming national debt will be much higher than the White House is pretending.
Last week's "fiscal discipline" decision included about $40 billion in new tax cuts to special-interest groups and campaign donors. Twelve billion more in tax credits for wind energy, extending what was sold, at enactment in 1990, as a short-term transitional plan. Two billion dollars in subsidies for biodiesel, a very costly alternative fuel at a time of cheap natural gas. A $225 million tax giveaway to rum producers. Tax giveaways to subsidize auto racing, a vital component of the economy. These and other pork-barrel expenditures buried in the fiscal-cliff deal were said to be paid for by new revenue from a change in tax treatment of IRAs. But that change, which essentially borrows tax revenue from the future and spends it now, makes the country's long-term fiscal picture worse.
To top off the fiasco, delaying the sequester by three months, as Congress and the White House just did, adds about $27 billion to the national debt. Don't worry, Senate Majority Leader Harry Reid (D-Nev.) said Congress will make up that amount -- with unspecified future cuts at an unspecified time.
In sum, last week Congress and the White House pretended to agree to a deficit-cutting plan, then immediately increased the deficit. "Fiscal discipline" did not last till the end of the first day!
At least the fiscal cliff deal announced last week had an element of humor relief -- the claim by President Barack Obama, embraced uncritically in news reports, that the tax details are permanent. "Permanent" in this sense appears to mean "may last a couple years, depending which way the wind blows."
George W. Bush's 2001 tax cut was written as a measure that would expire in a decade. The legislation was gimmicked that way to prevent the Congressional Budget Office from projecting trillion-dollar deficits far into the future. Obama's payroll tax holiday was presented as a one-year expedient, then extended twice. Last week's action is "permanent" only in comparison to measures such as these, which were programmed to self-destruct. Congress can change any detail of the "permanent" agreement reached last week, and change any detail any time it pleases. The 112th Congress which just closed shop enacted three major tax bills, each amending the most recent. Nothing is "permanent" in tax policy. That's part of the problem.
As for the fiscal cliff agreement, it may charitably be called a fiasco.
Obama achieved the political goal of raising taxes on the top 1 percent. For some, this was visceral: The Democratic Party's left wing longs to punish the making of money. The president's motive was straightforward: in November, the public voted for higher taxes on the rich, so Obama fulfilled a campaign promise. Increased taxation of the rich clearly was necessary, but also was the sole politically attractive fiscal maneuver available. Now it's been used up -- the arrow has been shot. Tax-the-rich is no longer available as a deficit-fighting policy alternative.
Last week every difficult decision about revenue and spending was kicked down the road. What's being depicted as a great bipartisan achievement really was a mutual Republican-Democratic decision to pretend something happened.
Higher rates on the topmost incomes cannot alone stop growth of the national debt. Defense cuts, entitlement reductions, more taxes on the middle class -- there's no long-term solution (other than an eight-cylinders economic boom) that does not involve defense and entitlement cuts plus raising taxes on average people, who for a generation have enjoyed steadily higher government benefits at lower federal income-tax rates. Defense cuts, entitlement reductions and middle-class taxes are the crunch issues of confronting the national debt. Yet for the second consecutive time the debt-ceiling showdown of 2011, now the fiscal-cliff showdown on 2012 all action on substantive issues was studiously avoided.
Medicare taxes on the affluent were already scheduled to rise this year by 0.9 percent to underwrite part of Obamacare. (They are only 0.9 percent increases, certainly not 1 percent increases!) Mid-affluent taxpayers who own stocks will see a scheduled 3.8 percent rise in the capital gains tax to underwrite another part of Obamacare. (It is certainly not a 4 percent rise!) But any serious deficit reduction will require higher taxes on the middle class too.
At least the higher taxes on the rich, agreed to last week, raise $60 billion annually to reduce the deficit. No wait, the deficit does not shrink. Having legislated $60 billion in new revenue, Congress immediately spent every penny.
Half of the new revenue was spent to award another year's extension of unemployment benefits. Loss of unemployment benefits is a severe concern in the lives of some Americans. The unemployment premium deducted from paychecks funds 26 weeks of benefits. Already many who lost jobs have received a year and a half of benefits free, and now the figure rises to two and a half years free. Most people would rather be working than receiving unemployment checks, but two and a half years of free pay is pretty generous. As the new book A Nation of Takers shows in great detail, social welfare policy treats middle America more generously than most pundits and activists claim. One key fact from the book: when John Kennedy was president, 28 percent of U.S. households drew federal benefits, while today 48 percent do.
The other $30 billion raised last week has already been spent to prevent a scheduled reduction of Medicare physician payments. TMQ pointed out last year that at the end of the Clinton administration, Congress mandated a reduction in Medicare physician payments -- then annually since has postponed the reduction. Last week's action marks the 13th consecutive year Congress postponed cuts in Medicare payments. The ObamaCare plan becomes an ocean of red ink without the assumption of $716 billion in unspecified future Medicare reductions. If the White House and both parties in Congress lack the will to cut Medicare by $30 billion today, how is a $716 billion future reduction magically supposed to happen? The claimed future Medicare cut appears pure make-believe. That means the looming national debt will be much higher than the White House is pretending.
Last week's "fiscal discipline" decision included about $40 billion in new tax cuts to special-interest groups and campaign donors. Twelve billion more in tax credits for wind energy, extending what was sold, at enactment in 1990, as a short-term transitional plan. Two billion dollars in subsidies for biodiesel, a very costly alternative fuel at a time of cheap natural gas. A $225 million tax giveaway to rum producers. Tax giveaways to subsidize auto racing, a vital component of the economy. These and other pork-barrel expenditures buried in the fiscal-cliff deal were said to be paid for by new revenue from a change in tax treatment of IRAs. But that change, which essentially borrows tax revenue from the future and spends it now, makes the country's long-term fiscal picture worse.
To top off the fiasco, delaying the sequester by three months, as Congress and the White House just did, adds about $27 billion to the national debt. Don't worry, Senate Majority Leader Harry Reid (D-Nev.) said Congress will make up that amount -- with unspecified future cuts at an unspecified time.
In sum, last week Congress and the White House pretended to agree to a deficit-cutting plan, then immediately increased the deficit. "Fiscal discipline" did not last till the end of the first day!
Petition for minting a $1 trillion coin has support from some economists.
Bizarre.
Article said:
A petition urging the creation of platinum coin worth $1tn (£624bn) has attracted nearly 7,000 signatures and the support of some heavyweight economists.
Experts say the plan would be lawful and should allow the government to keep spending if President Barack Obama fails to convince lawmakers to raise the "debt ceiling" - a cap, set by Congress, on the US government's borrowing ability.
But most believe the coin is more likely to be used as a threat than ever actually come into being.
http://www.bbc.co.uk/news/magazine-20951417Experts say the plan would be lawful and should allow the government to keep spending if President Barack Obama fails to convince lawmakers to raise the "debt ceiling" - a cap, set by Congress, on the US government's borrowing ability.
But most believe the coin is more likely to be used as a threat than ever actually come into being.
Bizarre.
Wills2 said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
Art0ir said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
http://useconomy.about.com/od/monetarypolicy/f/Who...
"The breakout of foreign-held debt shows that China was the largest holder, at $1.161 trillion (as of October 2012, most recent data). Japan came in second, at $1.134 trillion. The oil exporting countries have been increasing their holdings, and have edged up to become #3 at at $266 billion. The Caribbean Banking Centers have also increased their holdings in recent years, and are now fourth, holding $258 billion. The Bureau of International Settlements has stated that the Caribbean centers, Luxembourg (at $139 billion) and Belgium ($133 billion) are probably fronts for oil-exporting countries and hedge funds that don't want to reveal their positions. Brazil is the fifth largest holder, at $255 billion. The next largest holders are Taiwan, Switzerland, Russia, Hong Kong and the United Kingdom, holding between $117-$201 billion each. (Source: Foreign Holding of U.S. Treasury Securities, December 17 2012; U.S. Treasury report ”Petrodollars and Global Imbalances”, February 2006)"
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
youngsyr said:
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
Note: I haven't done the sums, just picking up the billion/trillion error.
London424 said:
youngsyr said:
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
Note: I haven't done the sums, just picking up the billion/trillion error.
London424 said:
youngsyr said:
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
Note: I haven't done the sums, just picking up the billion/trillion error.
Knock off 8 zeros from each:
$160,000 divided by 3 is $53,333.
youngsyr said:
Really? $16bn divided by 300m people gives an average debt holding of $53,333 for every man, woman and child in the US. Seems extremely high?
Would it not be the US pension/investment funds and corporates who buy the treasurys, therefore they keep most the debt within their borders?Jimbeaux said:
Art0ir said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
http://useconomy.about.com/od/monetarypolicy/f/Who...
"The breakout of foreign-held debt shows that China was the largest holder, at $1.161 trillion (as of October 2012, most recent data). Japan came in second, at $1.134 trillion. The oil exporting countries have been increasing their holdings, and have edged up to become #3 at at $266 billion. The Caribbean Banking Centers have also increased their holdings in recent years, and are now fourth, holding $258 billion. The Bureau of International Settlements has stated that the Caribbean centers, Luxembourg (at $139 billion) and Belgium ($133 billion) are probably fronts for oil-exporting countries and hedge funds that don't want to reveal their positions. Brazil is the fifth largest holder, at $255 billion. The next largest holders are Taiwan, Switzerland, Russia, Hong Kong and the United Kingdom, holding between $117-$201 billion each. (Source: Foreign Holding of U.S. Treasury Securities, December 17 2012; U.S. Treasury report ”Petrodollars and Global Imbalances”, February 2006)"
USEconomy said:
Foreign governments and investors hold 48% of the nation's public debt.
Art0ir said:
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
http://useconomy.about.com/od/monetarypolicy/f/Who...
"The breakout of foreign-held debt shows that China was the largest holder, at $1.161 trillion (as of October 2012, most recent data). Japan came in second, at $1.134 trillion. The oil exporting countries have been increasing their holdings, and have edged up to become #3 at at $266 billion. The Caribbean Banking Centers have also increased their holdings in recent years, and are now fourth, holding $258 billion. The Bureau of International Settlements has stated that the Caribbean centers, Luxembourg (at $139 billion) and Belgium ($133 billion) are probably fronts for oil-exporting countries and hedge funds that don't want to reveal their positions. Brazil is the fifth largest holder, at $255 billion. The next largest holders are Taiwan, Switzerland, Russia, Hong Kong and the United Kingdom, holding between $117-$201 billion each. (Source: Foreign Holding of U.S. Treasury Securities, December 17 2012; U.S. Treasury report ”Petrodollars and Global Imbalances”, February 2006)"
USEconomy said:
Foreign governments and investors hold 48% of the nation's public debt.
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
http://useconomy.about.com/od/monetarypolicy/f/Who...
"The breakout of foreign-held debt shows that China was the largest holder, at $1.161 trillion (as of October 2012, most recent data). Japan came in second, at $1.134 trillion. The oil exporting countries have been increasing their holdings, and have edged up to become #3 at at $266 billion. The Caribbean Banking Centers have also increased their holdings in recent years, and are now fourth, holding $258 billion. The Bureau of International Settlements has stated that the Caribbean centers, Luxembourg (at $139 billion) and Belgium ($133 billion) are probably fronts for oil-exporting countries and hedge funds that don't want to reveal their positions. Brazil is the fifth largest holder, at $255 billion. The next largest holders are Taiwan, Switzerland, Russia, Hong Kong and the United Kingdom, holding between $117-$201 billion each. (Source: Foreign Holding of U.S. Treasury Securities, December 17 2012; U.S. Treasury report ”Petrodollars and Global Imbalances”, February 2006)"
USEconomy said:
Foreign governments and investors hold 48% of the nation's public debt.
I wonder where the other 3 is accounted for. I've seen that 48+/- figure a number of times so it's not a typo. Do the Treasury figures only list foreign government owned debt?
Art0ir said:
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
http://useconomy.about.com/od/monetarypolicy/f/Who...
"The breakout of foreign-held debt shows that China was the largest holder, at $1.161 trillion (as of October 2012, most recent data). Japan came in second, at $1.134 trillion. The oil exporting countries have been increasing their holdings, and have edged up to become #3 at at $266 billion. The Caribbean Banking Centers have also increased their holdings in recent years, and are now fourth, holding $258 billion. The Bureau of International Settlements has stated that the Caribbean centers, Luxembourg (at $139 billion) and Belgium ($133 billion) are probably fronts for oil-exporting countries and hedge funds that don't want to reveal their positions. Brazil is the fifth largest holder, at $255 billion. The next largest holders are Taiwan, Switzerland, Russia, Hong Kong and the United Kingdom, holding between $117-$201 billion each. (Source: Foreign Holding of U.S. Treasury Securities, December 17 2012; U.S. Treasury report ”Petrodollars and Global Imbalances”, February 2006)"
USEconomy said:
Foreign governments and investors hold 48% of the nation's public debt.
I wonder where the other 3 is accounted for. I've seen that 48+/- figure a number of times so it's not a typo. Do the Treasury figures only list foreign government owned debt?
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Art0ir said:
Jimbeaux said:
Wills2 said:
IIRC the Japanese owe themselves the majority of the money.
TBH, the U.S. "owes themselves" the majority of our debt as well. They hold the vast majority of debt, not a foreign government. 46% was the amount of foreign held debt last I checked.
http://useconomy.about.com/od/monetarypolicy/f/Who...
"The breakout of foreign-held debt shows that China was the largest holder, at $1.161 trillion (as of October 2012, most recent data). Japan came in second, at $1.134 trillion. The oil exporting countries have been increasing their holdings, and have edged up to become #3 at at $266 billion. The Caribbean Banking Centers have also increased their holdings in recent years, and are now fourth, holding $258 billion. The Bureau of International Settlements has stated that the Caribbean centers, Luxembourg (at $139 billion) and Belgium ($133 billion) are probably fronts for oil-exporting countries and hedge funds that don't want to reveal their positions. Brazil is the fifth largest holder, at $255 billion. The next largest holders are Taiwan, Switzerland, Russia, Hong Kong and the United Kingdom, holding between $117-$201 billion each. (Source: Foreign Holding of U.S. Treasury Securities, December 17 2012; U.S. Treasury report ”Petrodollars and Global Imbalances”, February 2006)"
USEconomy said:
Foreign governments and investors hold 48% of the nation's public debt.
I wonder where the other 3 is accounted for. I've seen that 48+/- figure a number of times so it's not a typo. Do the Treasury figures only list foreign government owned debt?
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff