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Opening Arguments

Third choice

President Obama is overly fond of the "false choice" rhetorical devise (see here), so it's approrpriate for somebody to spring one on him occasionally:

Tim Pawlenty endeared himself to enthused Republican activists here Thursday with an impassioned attack against President Barack Obama's rhetoric on the looming debt-ceiling fight, accusing him of misleading on the issue.

"President Obama has set up a false choice," Pawlenty said at an evening meeting of the Nashua Area Republican City Committee. "He has said either raise the debt ceiling or the United States of America will default on its bills to outside creditors, which could set off a series of negative events."

The third choice would be to not raise the debt ceiling and then cut spending and borrowing. That's the kind of blindingly obvious need that even somebody who has to use a payday lender can grasp.

Comments

Doug
Fri, 04/15/2011 - 12:26pm

And a fourth choice, to raise taxes.

William Larsen
Fri, 04/15/2011 - 12:54pm

Obama is not competent to speak about a budget or he is intentionally misleading people. His statement about "why people like me should pay $200,000 less in taxes on the backs of 33 seniors paying $6,000 more in Medicare" clearly shows he has no idea of how programs are funded and what taxes are directed where.

No where in Ryan's budget proposal does it say that Medicare taxes would be lowered. For Obama to get a $200,000 reduction in medicare taxes would mean his income is at least $13.793 million and the change would reduce his medicare tax to zero.

Medicare is funded by the medicare tax of 2.9% on wages. Until politicians speak truthfully about budgets and taxes, nothing will be accomplished.

Since 1965 this country has cut income taxes in order to raise Medicare and Social Security taxes so that the "taxpayer" does not notice an increase. Politicians even pay low income people a Earned Income Tax Credit for making below a certain amount to compensate them for high FICA taxes even though they pay not a single penny in Federal Income Taxes.

I say no to increasing the debt limit. It is pretty clear what will happen.

First the government cannot borrow any more money.

Second, both Social Security and Medicare which have dedicated payroll taxes will continue to pay benefits since they are unaffected by the debt limit (Medicare and SS cannot borrow money and Federal General Revenue taxes cannot be used to pay these programs costs.)

Third, interest payments have first dibs on any federal revenues. Since April 18th is tax deadline day and this is the day most of the Federal Revenue actually is collected during the year. there is a "surplus" in funds compared to any other month in the fiscal year. This means there is funds to pay interest and to pay bond holders as bonds come due. As bond are paid off, the debt limit remains the same, but the national debt decreases allowing new bonds to be issued.

Fourth, since there is limited funds available any appropriations already made have to follow the heiarchy in terms of when they can spend money. Interest on the debt and payment of bonds have first dibs on new general revenues. This in simple terms means non critical government functions will shut down. Millions of government workers will go home without pay and we will be without some services.

Fifth, the market will take this in either of two ways; Good that the US is finally serious about getting its financial house in order unlike the PIGS (Portugal, Ireland, Greece, Spain) and interest rates stay the same or even drop. Bad in that, companies living on the gratutious handout from taxpayers will actually have to do something worthwhile to make money. This will lead to canceled contracts, higher unemployment.

Sixth, higher unemployment will cause lower wages as people negotiate for scarce paying non government jobs. The 54 years of artificial stimulus will come to an end. It will be rough, but what the only other thing would be number 7.

http://www.nytimes.com/2011/03/27/business/27view.html?_r=2

MY fellow Americans, I come to you today with a heavy heart. We have a crisis on our hands. It is one of our own making. And it is one that leaves us with no good choices.

For many years, our nation

Leo Morris
Fri, 04/15/2011 - 2:25pm

Doug -- because THIS time they'll spend the money wisely, right?

Harl Delos
Mon, 04/18/2011 - 10:06am

Medicare is funded by the medicare tax of 2.9% on wages.

Not exactly.

The medicare tax on wages only provides 86% of the funding for the Hospital Insurance Trust Fund (Medicare part A).

The Supplemental Medical Insurance Trust Fund (Medicare part B and Medicare part D) is partially funded by monthly premiums (21%) but is primarily funded by general revenue.

And the Medicare tax is slated to go up in 2013 with an increase on high-level wages of 0.9%, and a 3.8% Medicare tax on investment income.

Ryan's plan to save Medicare is very similar to the Vietnamese era "we had to destroy the village to save it."

William Larsen
Mon, 04/18/2011 - 10:33am

"Ryan

Harl Delos
Tue, 04/19/2011 - 5:32pm

"If we truly want to preserve a program than those wanting to preserve it need to fund it."

Maybe we could fund it by investing in the education of the next generation.

An individual can save dollars for the future, but that's only because everybody else doesn't. If society in general saves dollars, that means we have fewer dollars chasing more goods today, increasing the value of the dollars we have left, and as a result, we aren't really sacrificing much today. Tomorrow, when we go to spend those dollars, we have more dollars chasing the goods and services available then, and the dollars will be worth much less then, so we haven't really gained much then.

The only way for a society to invest in the future is to create a mechanism that will create goods and services in the future. It's too short a deadline to do that by making babies. We need to import young adults from Mexico and other places like that, people who are already educated so that we save THAT cost, and that will change the ratio of workers to recipients. I can't see ANYTHING else that can work.

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