That is an error. Apologize.

The simple economics is: Uncle Sam wants to spend $10 next year. Uncle Sam can earn $10 by raising taxes or borrowing money.

The economics is fine. The problem is that Uncle Sam forgot about the $11 trillion he borrowed from China, a part of which is due tomorrow.

Well, if fiscal cliff goes into effect it certainly will be a great reduction in deficit which is good, but painful. Politicians, especially in the US, hate the "R word", which is recession, though it's not a big deal.

But this time, the big deal is, the economy is still vulnerable, it doesn't have a sustainale growth, and it can't handle shocks very well. So actually leaving the tax cuts, etc in place could give soe breath to the economy. The risk of this solution is, it just piles up a lot more debt and can lead to a much more painful correction in a few years, when the market will correct the process in an uncontrolled way. (Most likely inflation)

Personally I'd say take the pain asap, because it willl be a bigger sacrify later. A politician says, let's kick the can down the road, so the next guy takes the pain. :)

To answer your question, I prefer deficit reduction.

@ava:

I apologize, then...though I thought that tax increase (Uncle Sam raising $10) and the deficit and all was more or less what was laid out above, but if I'm wrong, I'm wrong, I suppose.

@rokakoma:

Well, the idea of cutting into the deficit sounds nice, but how much of a tax increase (and more importantly, a tax increase to WHO) would that entail?

After all, I'm just trying to get a steady job and raise enough money to rent an apartment somewhere in Northridge or Padadena (even a crap studio apartment, I'm really not picky, out of the backwater area of LA county where I live is OUT, and it means less of a commute to school, I'll take it) so while deficits could probably hurt down the road, I also need to get down that road and need to get going now...

The mistake is as follows: you outline the choice as being between going ahead with programs, or cutting them and accruing debt.

However: You earn $10 either way. You can choose to spend the $10 on programs or on repaying part of the $11 trillion debt. If you repay the debt, some people will go hungry because you cancelled the programs. If you go ahead with the programs, the creditors will come at you with stakes and try to take something anyway. Economically, there is a cliff either way.

Hm.

OK, thank you, ava, that was helpful...

http://www.washingtonpost.com/business/economy/recession-imminent-if-fiscal-cliff-of-tax-hikes-budget-cuts-not-averted-cbo-says/2012/08/22/05727792-ec86-11e1-9ddc-340 5efb1e9c_story_1.html

"Republicans, including presidential candidate Mitt Romney, want to postpone the biggest chunk of the cliff — $331 billion in tax hikes — to give Congress time to overhaul the tax code.

They have also sought to pin the scheduled deep cut in military spending on President Obama, working to undercut his support in electoral battlegrounds where defense spending is key to the economy. The Republican-led House passed legislation in the spring that would shift those defense cuts onto domestic programs.

Democrats, including the president, want to avert tax increases for those making less than $250,000 a year but say they will not avert tax increases for those making more, arguing that higher tax revenue is needed to help close deficits."

Of those two plans...

I definitely agree with the latter a good deal more.

I don't like the idea of shifting cuts in defense spending (we spend far too much on it already as is) to domestic spending, and I agree with shifting the tax increase to those $250,000 annually and above.

As long as I can still get a job, I think I'd prefer the latter approach, cutting into the deficit and cutting defense spending rather than shifting it to domestic cuts...

If I get a steady job, it won't be paying $250,000+ annually...and if it DID, I'd hardly complain! ;)

So I see there are pros and cons to both, but I think I prefer the latter, though this does sound like a lose-lose.

It can be elimination of preferential rate for capital gains tiem nao pls?

@ ava "The problem is that Uncle Sam forgot about the $11 trillion he borrowed from China, a part of which is due tomorrow. "

I wouldnt worry about that. That amount of money is simply what it costs to buy into the Wests economic system. If the Chinese dont play by our rules, they wont see the money again.
However I dont believe money really means anything in that stratshpere; just print more. The man with the biggest guns rule

If the fed printed 11 trillion dollars, forget Zimbabwean hyperinflation, the Mayan prophecy will come true.

Eh. If Obama wins they'll make a deal since he wouldn't want to start off a second term with a mess like that. If Romney wins it's the same deal. If they don't get it done right in time they'll just make the deal retroactive.

"I wouldnt worry about that. That amount of money is simply what it costs to buy into the Wests economic system. If the Chinese dont play by our rules, they wont see the money again."

Why does China care? The west relies on China far more than vice versa.

The US government spends more than it can afford this is true and proven. However, the US public also spends more than they can afford. People will cry outrage at a tax increase but quite simply Americans can and should a) reduce household spending, especially on foreign goods and b) afford to pay higher taxes if it will help their country in the long run.

The US SHOULD raise taxes AND reduce spending, it is the only way they will get back on track. It is already a pretty shitty place to be/live as is.

@obi - The only reasons you agree with the later proposal are A) you are in that bracket and B) your party and teachers and others have convinced you the rich don't pay enough.

But let me put it to you this way... The rich invest in companies and create jobs. If you take more from them, they have less to invest amd the jobs don't get created resulting in rising unemployment and more people falling into poverty. So by taxing the rich you increase the income gap between the avergae American amd the wealthy because you lower the average. All while getting and extra 5% from fewer than 1 million households.

"The only reasons you agree with the later proposal are A) you are in that bracket and B) your party and teachers and others have convinced you the rich don't pay enough."

A = True enough...though everyone acts out of self-interest (after all, what do politicians do but look after their own constituencies which, in turn, allow them to stay in power and thus serve their self-interest?) so I don't see why that's a detriment here, it seems only natural, and

B = Partly yes, partly no; it isn't that I don't think the rich don't already pay plenty, they do, statistically speaking, but I simply feel that if taxes need to be increased (and it sounds as if they need to be in order to tackle this deficit, which both sides have hawed about) then the most logical group of people to tax are those that can most easily "take" the tax, namely, the rich.

"But let me put it to you this way... The rich invest in companies and create jobs."

I'm sorry, but I do not buy that.
AT ALL.
I do not buy Reaganomics.
I do not buy the Trickle Down Theory.

I simply do not, I have not seen one thing in my lifetime or my own personal experience (limited, sure, by age, but still, I can only work with the years I've had, after all) to make me think that that is true or, to put it another way, at all true to the extent that it justifies NOT taxing the rich more.

"If you take more from them, they have less to invest amd the jobs don't get created resulting in rising unemployment and more people falling into poverty."

Again, I'm sorry, but if you taxed a Bill Gates--I KNOW he donates quite a bit and is a great philanthropist, just using him as a euphemism for "The Rich"--by 5% more, he'd still have PLENTY to invest.

And by plenty I mean...PLENTY.

The man's a billionaire--raise his taxes, and he'd still have the money to invest in the philanthropy projects he does invest in (and THEN SOME) 10x over.

Same with a Mitt Romney or a (now-deceased) Steve Jobs or a Donald Trump.

On and on.

And I'm sorry, but I disagree--the rich do not create new jobs...

A burgeoning middle class does.

Trickle Down doesn't work...

From-the-Middle-Class-Out DOES.

When the Middle Class grows and grows more prosperous, THEN the whole nation prospers...that goes back to Aristotle, for goodness' sake, saying such a thing. Granted I'm not arguing for this via Aristotle's philosophy, I'm just saying, it's a tried and true method for socio-economic improvement.

When the rich get richer...the rich get richer.

When the middle class get richer, it creates social mobility, which is good for a nation's social landscape as well as its political atmosphere.

After all, for all their claims of loving small business owners, these Republicans who favor the rich...well, who FOUNDS those small businesses?

It's not the rich, it's the middle class attempting to move upward, which is hard to do in a deficit-ridden landscape.

So I must disagree, Draug:

It's not out of the sort of hatred for the rich The Stalinist (I'm borrowing that term, whoever began it) has here...

But simply because I don't think Trickle Down works, and it hasn't helped *me* personally, so why should I endorse it, especially when, as you yourself said, this other plan *will,* selfishly or no, help me more at the expense of others who, quite frankly, are the ones who can most easily shoulder a tax hike?

I would, in fact, disagree with the idea of reducing spending at all. Instead, we should lower taxes on the people most likely to spend the extra cash, and increase government spending.

When a person is in debt, it makes sense to cut back. But a country can - and SHOULD - spend even if it is deeply in debt. Our economy is limping along -- what it needs is more money, everywhere. Invest in infrastructure, invest in public works and schools and support for the lowest income brackets. Put money into the economy, not by just printing more, but by spending where that money will do the most good, economically and socially. The return-on-investment for every dollar spent on infrastructure is actually more than $1 -- that is, in the long run, you are *saving* money by repairing infrastructure.

Then, once our economy has more fully recovered and we begin to reap the rewards of that spending, we can use those rewards* to pay down the debt we've accrued. It sounds backwards, but only because governments aren't the same as individuals. If I as an individual am deeply in debt and have little money coming in, I should cut spending and pay off my debts best I can. A government, though, needs to spend more when the economy if failing, and take in more money during good times to pay that debt down and prepare for the next recession.

* Ideally, the government would also raise taxes on everyone during boom times, taking in that extra money to offset the tax cuts that were issued during the recession times. This runs into the problem that the average voter views a politician who raises taxes as roughly equivalent to a politician who comes to your house and steals food from your children.

So who is going to pay your salary in this modest job you seek? And how are they going to expand the company if they have to keep giving the profits to Uncle Sam? I'm not talking Reaganomics, but simple logic. The rich want to get richer. To do that they divest and invest. To do that they need money. Take away their money and the economy suffers. The current economy is a good example. Supergreed resulted in the housing bubble bursting which resulted in reduced investments in all sectors which resulted in layoffs and high unemployment. Deny it all you want but if you take off the liberal tax and spend glasses, you will see it in reverse as the rich got poorer and the redulting reduction in investments significantly contributed tp our present situation.

"So who is going to pay your salary in this modest job you seek?"

Well...

I want a tutoring job at CSUN, where I go to school...

But, see, they have to cut back due to state and nation-wise budget cuts to education that Romney SUPPORTS.

So...clearly not ROMNEY and his people...

Oh boy....the 800 lb gorilla in the room that nobody wants to mention. I don't envy our current policy makers because I have no clue as to how to tackle this.

To start off reviewing everyone else's comments, I'd have to say rokakoma has the best handle on the situation. loowkey and lando would run the country into the ground....and possibly send the world into recession to boot.

@Loowkey - we can't just *not* pay back the Chinese creditors. First of all, China isn't our biggest creditor. The US taxpayer is (and actually Japan is about to surpass China as our biggest foreign one. China's been dumping US bonds). Secondly, and more importantly, our credit rating would take a massive and catastrophic hit...to the point that in the next...oh 7 years or so... 100% of tax revenue would go to paying off the interest on our debt. Also, we can't just print more money. That would cause hyperinflation which is the #1 easiest way to absolutely ruin this country. The Great Depression in the US wasn't shit compared to hyperinflation in Germany a decade earlier.

@Lando - China relies on us and needs us. 49% of the Chinese economy is export based. If exports slow down, the Chinese economy will suffer even more substantially than it is now. I believe their GDP growth this year is forcasted for 6%....which is awful for them. Not to mention that the Chinese are sitting on one of the largest asset bubbles in history. In terms of China's economy, its larger than the subprime bubble was in comparison to the US economy. China's state-owned banking system covers this up somewhat, but the fact of the matter is the Chinese government is taking the hit on the losses...and even the Chinese are not made of money.

Now my previous comments are not tangental, they tie into my main point. The US level of debt is unsustainable and must be dropped if we are to have a healthy economy in the long term. HOWEVER, should we make a serious endeavor at cutting the deficit the following will occur (some of the following is only speculatory) 1) The U.S. economy will contract by 3% and go into recession. 2) Millions of Americans will lose their jobs 3) U.S. tax revenue will fall, pushing us even further into debt and potentially triggering a Greek-like fiscal death spiral, only with no one big enough to prop us up. 4) A drop in U.S. imports and investment will cause Europe to fall even sharper into recession and deliver another heavy blow to the economies of the world, causing a world-wide recession.

Now, will the world go into the recession at this point in time if the U.S. does? My answer is yes. Europe is already in a recession, China and India are slowing down, and Brazil is throwing up mercantilist import tariffs. If it were to happen within the year, a global recession would not be avoided

Now, is recession necessarily a bad thing? No. Recessions are a good and natural part of the economic cycle, and for Europe it could indicate a rebalancing and the gradual elimination of debt. Should governments continue to collect more than they spend even during the recession, things shall go fine. If tax revenues fall too fast though...the effects on that country would be catastrophic. But like I said, to heal this problem, you need to go into a recession on purpose - through higher tax rates and lower spending.

The problem lies with the fact that the US cannot do this while Europe is recovering and China is digesting its own problems. The global economy cannot handle all of that at once. Once Europe recovers, or once China recovers, then perhaps the US can seriously deal with this, but until that time comes I'm afraid we can't really do much of anything/

Oh amd comparing Bill Gates to the struggling small business owner is disingenuous at best. 250k is a common income for a small business owner. I would agree with more taxes for 7 figure plus incomes or.maybe even 500k, but I am over halfway to the 250k mark and have many friends in that range. Some.own their own businesses, others are VPs or CTOs. These are not the fat cats you think they are.

But politics aside--

"The rich want to get richer. To do that they divest and invest. To do that they need money."

I don't (for the most part) disagree...

It's the EXTENT I disagree with--I don't think the amount we (someone like me, that is, the average US citizen trying to break into the work force) benefit from their freelance investing, as it were, outweighs the good we would get vs. higher taxes for them to help fund projects (like education, thus helping getting ME employment in that field, as they can't hire new teachers and tutors when they're always getting slashed and the defense budget is still sitting there, one of if not the--pretty sure it is the--largest in the world) and paying down the deficit.

jmb has the right of it with his comments

@obi - do you use facebook, tumblr, instagram, zipcar, opentable, groupon, linkedin or any of the other thousands of companies that only exist today because of the funding they received from venture capitalists (ie freelance investing by the rich). Or do you know anyone who works at one of those companies? Or what about any of the new consumer products that only are mass produced today because some rich guy took a chance on an inventor and funded him to continue his research and patent his product? That is how investment helps you. Investment = high paying jobs

Hahahahaha!!!! Obi - If everyone suddenly gets a free education, there will be more people competing for the already limited number of jobs! So your programs will make it *harder* for you to find work.

Most of the rich don't create jobs. They minimize their taxes by putting their money in safe havens not risky venture capital projects where they can lose it all.

Give the money to the poor and middle class that are spending it as fast as they make with tax cuts. They are the ones buying products that companies sell so the companies can hire more workers to make them, There are limits to how much rich people can buy. Sure you read about a few building Mcmansions, but how much are they buying compared to the rest of the economic classes?

"do you use facebook, tumblr, instagram, zipcar, opentable, groupon, linkedin or any of the other thousands of companies that only exist today because of the funding they received from venture capitalists (ie freelance investing by the rich)."

Of all those, I only use one--and as much as I like Facebook and as much as it's benefited some, I don't think it justifies your example.

"Or do you know anyone who works at one of those companies?"

In fact, I do NOT.

"Or what about any of the new consumer products that only are mass produced today because some rich guy took a chance on an inventor and funded him to continue his research and patent his product?"

Examples? Just to see if your examples pan out better than the Facebook one?

"That is how investment helps you. Investment = high paying jobs"

Not so far as I can see AT ALL I'm afraid...none that I have seen or been able to apply to or been offered in my lifetime, none that I have seen friends or people far older and with far more experience able to attain...

So until you give a more plausible example, or back that up...

(And again--they can't invest AND be taxed more? Are you honestly telling me a Romney or Gates couldn't easily do both and still live the multi-hundred-millionaire lifestyle? Why must it be one or the other, why can't they do both? They'd have "less?" Less from an already-enormously-huge sum is...still an enormously huge sum.) :)

"Hahahahaha!!!! Obi - If everyone suddenly gets a free education, there will be more people competing for the already limited number of jobs! So your programs will make it *harder* for you to find work."

O.o

1. I don't believe I EVER said "let's give everyone free education?" I said that with cuts to education spending, that leads to TEACHERS BEING *LAID OFF,* and TUTORING PROGRAMS BEING CUT, and thus it makes it harder for ME and millions like me to find a job!

2. Are you honestly suggesting that more people shouldn't receive an education?

Generally speaking, Consumer spending drives the economy, not expands it (this is not literal, but in a General way) and investment expands it (by creating more jobs) . However, taht requires the fat cats to get off their loot and invest it.

and also, the middle class does not generally spend it as fast as they can. Especially as of late,. American debt to income ratio have dropped quite a bit in the last decade for the middle class.

For the poor, well, they dont have 2 nickles to rub together, and are just hoping to make it to the next month without some financial emergency.

@Obi - I'm suggesting that a high school education is sufficient for some people and that not everyone has the requisite intellect and drive to be professionals in a high paying field. sorry if that sounds elitist, but it's a simple fact. The average high school graduate doesn't belong in college. College should be for the top students to turn them into the tops in their chosen fields and the money for tuition assitance should go to those who will best use it. If a poor person demonstrates they have a brain, give them a full ride. But don't give it to someone just because they are poor. You are just wasting the funds when they flunk out.

I was going to contradict something, if you increase taxes, this doesn't take money out of the economy (it redirects it)

But if you cut spending you do infact send the money towards paying off the national deelbt instead of being in the economy...

What i was going to say was wrong... On the other hand, a sovereign debt crisis like Europe is not a better solution...

My opinion is that we should cut spending, pay off the debt, and get rid of Obama. Also abolish unnecessary programs, cut funding to ALL institutions, repeal Obama Care, as well as every single Obama regulation.

...What about his social reforms--repealing Don't Ask Don't Tell and the Dreamer Act?

Or do you just mean his economic policies?

(Though my loathing for Romney--which has only grown with Paul Ryan added to the ticket--would never allow me to vote for them, I'm afraid...

To me...well, Obama's just "OK," and I'll take that over "UGH!!!" x1,000)

@Sbyvl: paying off the debt literally makes money dissappear from the economy...

The government could create a national invesment fund (basically an investment bank) whose sole aim was to make a profit, and would lend money into the US economy, this would boost the economy without any new 'social' programs.

It would be pure national capitalism, and wouldn' pay off the debt, or cut funding... Tax increases to cover this kind of expense would effecitvely redistribute wealth from those who have to those who this investment bank thinks will make tue most from it...

This would be the ultimate in big government, only because the government (and not corporations) would be the one exploiting everyone....

Also big government but NOT socialism... Might be the saviour of the economy.

@Obi - I don't have specifics in mind on inventions. In general though, to get a new product off the ground if you're an individual inventor, you need help from people with lots of money to invest. Have you ever seen the show on ABC, Shark Tank? However, I found a venture capital firm that does deal in inventions

http://www.intellectualventures.com/index.php/inventions-patents

My basis for the comment on investment creating higher paying jobs is that investment as is the reason for many of the tech companies we see today as giants in industry. Microsoft needed some work jumping off, as did every other company in Silicon Valley. Not to insult you, but you're an English major, correct? Investment deals with more technology-related fields of work as far as I am aware.

But from a layman's point of view, yes if you have gobs of money who cares that the government takes more? But these people's goal is to make more money. If you're taxed more, you make less money. From an economist's point of view, it makes perfect sense - people will put their money where they will make the greatest returns in correspondence to their level of risk they are comfortable with. Higher taxes means that they have lower returns, so they'll put their money where the taxes are lowest.

@Randomizer - Now, just to be clear, investment doesn't always happen directly. In fact, most happens indirectly, through hedge funds, banks, or other financial institutions. These may be some of the "Safe havens" you're talking about (though really many of these are simply investment institutions located in other countries which have a lower tax rate)

But you're right on the fact that in terms of consumer purchases, the rich aren't the mainstay of the economy. That falls to the middle class. The rich, however, provide the funds needed for investment.

Draug and Stressed +1

@Sbyvl - that would wreck the economy for reasons I already mentioned.

@Ora - the idea you laid out in your second post is very interesting. Care to expand upon it a little more? Where would the funding for said fund come, etc?