Are you getting nervous?
I warned you weeks ago; do not think that the debt ceiling issue will be resolved so readily. With two weeks before the oh-so-important unimportant August 2 deadline, there is no indication that talks are about to break way to a solution. No one is interested in a political game like McConnell’s solution.
The mistake many are making is to try and make this into a discussion about Democrat versus Republican. This comparison invites calls of hypocrisy from people who remember all the spending the GOP did during the George W. Bush administration years.
However, a great number of the Republicans in Congress right now were never present for those years. That’s half the reason they ran for election last cycle.
The Tea Party members are not interested in you reminding them of how much money the last GOP Representatives spent. If anything, that is only making them angrier, as they make the push to tame government by chaining it to the ground.
Combine their perceived mandate with a disinterest in the repercussions of a default, and you have a very dangerous situation; one which I feel many of you are sorely unappreciative of.
As I said, never underestimate the ability of zealots to be zealots.
The question here is not who blinks first, but rather, how long will the Democrats’ stomachs hold up before they cave, as the Republicans will not be blinking at all. Because I can tell you, the Tea Party GOP has no hesitation flooring it right as they head into the wall.
If Democrats try to counter zealotry with zealotry, then we will have a most spectacular display of fireworks; one which perhaps changes the very status of this country. But regardless, a great amount of change is coming to Washington. The New GOP is most insistent about that point.
Don’t forget: these people do not care if they get re-elected (most don’t even want to be their long term). They don’t care if government borrowing costs explode (that will make it harder for the country to borrow). They don’t care if SS checks go out the door (plenty of them would cripple SS; this is just a technical way of doing that).
Really, all they do care about is cutting spending and not raising taxes. You should position yourself in anticipation of that outcome, rather than trying to fight it, for it is coming either way.
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Yeah, the Tea Party is a perfect example of tossing your idiot drunk brother in law the keys to your new car and telling him to go out and see how fast it is.
As opposed to what we were doing?
I really have no problem with what the Tea Party is doing, although I think some of them are kidding themselves into believing that they can somehow pay out entitlements while also refusing to pay government workers and not pissing off citizens in the process.
Obviously, no one is going to send out those checks and administer those services without getting paid.
But it’s about time someone hit the breaks. If it had to be a guy wearing tea bags on a straw hat, so be it.
The less happy institutional politicians like Reid, Pelosi, Boehner, McConnell or Obama seem with the process, the more I’m confident it’s the right track.
the tea party was at the right place at right time.but for me,i just find that they dont have sharp enough teeth to bite into anything solid enough. i would have figured that if a party,or a cause shouldnt align themselves with either party. thats a mistake that is gonna haunt them, “IF’,they are still around in the next few years. the tea party is anything but,what the real boston tea party stood for. ex : no strategy,at least if your gonna come in as an activist for one side or the other, show some teeth,and show the gop that they can be bit. same goes to the dems. the boston tea party/ the act it self are the teeth taking the bite. there is no clear leader,of whom this person is, and if there is one, whats their name. not someone such has rand paul,or miss bachman. for all they have done was to subscribe to the notion of a tea party like header to gain the job that paul now has, and the header that is bringing bachman to a presidential consideration. ex : where is this tea partys’ voice in this debt matter. havent heard a darn thing. is the tea party this mystical thing that poses as some kind of false threat to the 2 partys’ that if they dont get shit done, then we the people are coming with tar buckets and feathers? not enough teeth to be viable, and all the politicos now have a new base to exploit to garner votes. the people who are pissed,oh yea those people are independents / tea partiers. ex : where’s the march on d.c. and not hosted by glenn beck, or jessie jackson, but the fallen middle class who really want blood.
Cain,
interestesting perspective. assume that no deal is made by deadline and US treas are downgraded, that would just f up the system completely.
if the US is not AAA then who would be?, and I dont buy the China argument one bit as they lie through their teeth. this type of downgrade would throw institutional investors into a tizzy where their mandates require AAA holdings.
so i guess my question is, you really dont think they will reach a deal without the dems caving in?
in the meantime buy OM Puts on SP?
cheers
I’m not betting against the market. I’m in an unusual amount of cash.
We’ll see how things go today; the GOP is going to respond to three plans being put before them. The real question I suppose is how influential is the Tea Party element in the GOP? That will really define this outcome.
I’m betting they are much more influential and organized than people are giving them credit for.
A U.S. downgrade would send the markets and much of finance into a downward spiral. It terrifies me to think about it; but that’s me, not a Tea Party Congressman.
Damn crude is being resilient. I would have thought Bernanke’s remarks were good for more than a one day, 2% sell off.
However, if you look at the future’s chain, the gains are pretty consolidated in the forward months. The back months are still being thrown.
Not really in a backwardation or contango.
A refusal to budge on taxes is simply stupidity. Tax receipts in America are so low, the income gap so high, and the deficit so bad that the rich SHOULD be taxed like crazy. They, after all, have more to give than the rest and you cannot balance the budget without increasing taxes.
During the second Punic war, Roman nobles funded ships for their war out of their own fortunes, a sign of patriotism. I see nothing like that in America, simply a hollow claim to be patriotic to push their own agenda. Patriotism is sacrificing for your country when you are not required too – look no further than the armed forces.
Your history is telling; I think you’d find more wealthy individuals willing to volunteer their wealth if they weren’t being coerced and trashed in public.
Why should they suffer for people who libel them? Instead of suggesting that they owe the world, why not tax them like everyone else, but ask politely that they commit extra?
Because they spend millions a year buying off crooked politicians who then deregulate industry at home in the name of job creation while exporting jobs across sea.
Furthermore those that have more should give more for the benefit of society – communist I know – but also true if you wish to maximize the total welfare in a given country. An income gap is not beneficial for anyone.
America is the land where people can claim that raising taxes on businesses would hurt job creation the same week that Cisco cuts 7000 jobs in America. Business – big business – simply does not pay enough tax (if you could pay less than 0 I’m sure they would) because after all it is not in their interest too. Therefore for the welfare of society it becomes logical that the government steps in.
Please do not think that this means I am a fan of Obama’s retarded spending policies. I am just aware that it is impossible to close the budget deficit by cuts alone – and since then we can conclude Americans must suffer it is logical to make those who can afford to suffer suffer more – as one could argue they bear the bulk of the responsibility for the current situation.
I agree that there are too many tax loopholes for large businesses. I would see them closed and permit the revenue to flow into government coffers. There is no reason GE should be allowed to exist in supra-legal status; fuck Immelt.
However, it is unacceptable to me that almost half of this country pays nothing. I do not believe these people have any business claiming themselves citizens, when they contribute little besides complaints and belly-aching. It is an altogether unhealthy relationship.
Participating in civil life means paying for what you use. I would see the poor put something into the pot, even if it’s something trivial, just to have them take a stake in what is going on.
Running about attacking the wealthy will not close the income gap; it will only enrage them and cause them to participate and cooperate less while strategically protecting their assets. If you want the gap to close, then the government needs to stop driving inflationary policies; that’s where most of the paper wealth of the higher incomes is coming from at the moment.
Unfortunately the reason so many people have nothing is because of the structure of the system in which they reside. You will not hear any argument from me that this is a huge problem in America – ultimately many of the citizens are poor, uneducated, extremely prejudicial in their views and ultimately determine many elections. This is one of the largest problems with American democracy – aside from the fact that it isn’t in fact a democracy – similar to ancient Greece where democracy became synonymous with mob rule. You can see this by politicians pandering to their ‘base’ instead of being judged on their ability to handle the issues facing the country.
Now back to the other topic. Surely there are large personal components – competency, motivation, drive, ability… etc – to success, however the fact that so many people contribute nothing and live below the poverty line in America shows that the system is clearly not balanced in favor of these ‘freeloaders’. Add to this that the American government is not exactly small business friendly and it becomes increasingly difficult to pick yourself up by your bootstraps.
Then there is the poverty trap to consider – as many children will live in the same class and income bracket as their parents do – especially true for lower income families I am sad to say. Minimum wage in many states is not enough to live above the poverty line and furthermore while corporate profits and efficiency have soared over the last 2 decades wages have remained depressed in nominal and stagnant to negative in real terms – hence the increase in debt (destructive debt as it was used to consume rather than finance capital for further production).
It’s not that the system is balanced in favor of people who don’t pay taxes. It’s more that them not paying taxes is an encouragement for them to not participate and provides little motivation.
Sorry, but I have never met the case who was raised out of poverty by welfare programs and not paying taxes. If you know of someone, please point me in their direction.
And you can cut tax loopholes without singling out the wealthy and jacking up taxes on their earnings.
Something I forgot to mention – they are not taxed like everyone else because they have the resources at their disposal to ensure that there are loopholes and they have the expertise to take advantage of them.
I meant that the system that exists is not conducive to innovation, small business start-ups, entrepreneurship… etc. I actually agree that the welfare system provides large disincentives to work and innovate.
As always, I learn an extraordinary amount from reading and discussing your blog posts and do really appreciate the responsiveness and patience you have for me.
Thanks Mr Thaler
Patience isn’t required to discuss concepts with intelligent people. Do not apologize.
The loophole issue is bad policy, definitely. Favoring specific organizations over potential future ones is always a bad idea. This is how places in Europe have managed to stagnate with lackluster growth for so long. They sacrifice their future for their past on a regular basis, favoring businesses that are already around and deemed “essential.” They also do this with their land and buildings and pretty much their entire culture.
The U.S. being much younger is more willing to bulldoze a building or landmark that stands in the way of the next big thing.
FLAT TAX. End of story.
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I would love that. Not the time to bring it up though.
Humbled that you would say so.