[Cog]

Since there has not been an announced deal between the Republicans and Democrats to raise the debt ceiling and decrease the deficit, this is your chance to make your bold predictions of what will happen. After August 2nd, we can see how much of a economic Nostradamus you are.

My prediction is as follows:

The debt ceiling will be raised by August 2nd. There will be no substantial cuts($400-500 billion range) for next year. Any promised cuts will be down the road in the out years but never materialize. But there will be tax increases for the next fiscal year.

I'm going to predict that if there are cuts in this deal, they will be very nebulous and hard numbers will be hard to come by. But we will know for sure what tax revenues are expected and who is going to get hit by them.

The Republicans will basically cave on the issue since they know substantial cuts to spending will result in the loss of jobs and a lowering of GDP. All this posturing they have done so far will be for naught. The vote on the Republican side will be close but at the end of the day, Obama will be pleased with the result.

[Oakley]

I agree with you, Cog. It will be smoke and mirrors because 99% of the politicians are politicians because they have a fundamental belief in the value and efficacy of government, the bigger the better. As Ron Paul has said, those on the left love entitlements, and those on the right love war.

Half the time, when politicians say they are cutting spending, what they do first is propose a huge budget, and then tell you they are cutting spending, when in fact spending goes up, just not as quickly as they originally proposed in the budget. These are sociopaths, after all, and lies are the stock and trade of their their profession.

All the while the public lines up to support the version of the government they like the best, militarism or welfare, and vote accordingly. As power ebbs and flows between the groups first we get more of one, and then more of the other.

It is all going to end badly, when finally the financial system collapses into rubble and we tear at one another in a violent orgy of anger and retribution. I doubt that those in power in the US will walk away as peacefully as did those in power when the USSR ended in the 1990's in a similar financial collapse; masters are usually reticent to free their slaves.

[Keith_McClary]

As Ron Paul has said, those on the left love entitlements, and those on the right love war.

Anyone bold enough to predict which will be cut?

BTW, can any Americans explain:

if you give the gumbint $ for a Treasury bond, you are entitled to get paid back with interest.
If you give the gubmint $ in contributions to the SS fund, your hoped for payback is an "entitlement".

(You might say the SS fund is a fraud, but isn't it invested in the Treasury?)

[Sixstrings]

BTW, can any Americans explain:

if you give the gumbint $ for a Treasury bond, you are entitled to get paid back with interest.
If you give the gubmint $ in contributions to the SS fund, your hoped for payback is an "entitlement".)

Sucks, doesn't it?

Raiding SS ought to illegal. Workers pay into SS their whole lives. SS uses the money to pay benefits to current retirees, invests the rest in special treasury bonds.

These bonds are held in trust for the workers who paid for them.

One would think SS has a fiduciary responsibility here.. if you can't screw over mutual fund investors then why bonds held in trust for workers? They're both the same, both classes -- workers and investors -- handed over their hard-earned cash to be invested in trust for them.

[Sixstrings]

The Republicans will basically cave on the issue since they know substantial cuts to spending will result in the loss of jobs and a lowering of GDP. All this posturing they have done so far will be for naught. The vote on the Republican side will be close but at the end of the day, Obama will be pleased with the result.

That's good analysis Cog, I agree with all that. You even acknowledge that cutting government workers / those on benefits is deflationary. Obama said he sends out 80 million checks a month.. that's a massive chunk of the economy, a cut of any amount is deflationary.

As for predictions..

The latest talk is about a temporary extension while they iron out the "grand bargain." I think they'll pass this extension then the grand bargain will fall apart but by then we'll all be onto some other news like Michelle Bachmann's headaches.

EDIT: on the other hand, from everything I've read Obama REALLY wants to cut SS, Medicare, Medicaid. So he might do a cuts-only deal, or it's a little bit possible Repubs will agree to closing maybe one tiny corp tax loophole (maybe ).

Another thing to remember though is that all these plans have the cuts way out to the future, and also assume economic recovery so the numbers will all be wrong and this is all for show no matter what happens.

[Nefarious]

if you give the gumbint $ for a Treasury bond, you are entitled to get paid back with interest.

You give the government $1,000,000 for a Treasury bond paying 5% interest. Which means they owe you $1,050,000, but they only have the $1,000,000.Someone should have said whoa we have a clusterf3ck going on here.

If you give the gubmint $ in contributions to the SS fund, your hoped for payback is an "entitlement".

Fuller was born on a farm outside Ludlow, Vermont. She spent most of her life in Ludlow, working as a legal secretary, but lived with her niece in Brattleboro, Vermont, during her last eight years. She retired in 1939, having paid just three years of payroll taxes. She received monthly Social Security checks until her death in 1975 at age 100. By the time of her death, Fuller had collected $22,888.92 from Social Security monthly benefits, compared to her contributions of $24.75 to the system.

SS is a ponzi scheme the money you pay into it now pays for people that are retired right now.When you retire the people that are then working will pay your benifits.From this very first recipient Someone should have said whoa we have a clusterf3ck going on here.

Prediction- Will raise the debt ceiling and the market will jump over the good news that we are further in debt and collapse is averted for a short time

EDIT to add : Now just think about all those unemployed that are no longer contributing to the SS fund.

[Livewire713]

Many of the Tea Party Republicans including Michele Bachmann don't want to raise the debt ceiling no matter what kind of deal is being offered. I say the debt ceiling will be raised but will it be before we lose our AAA rating.

[Oakley]

BTW, can any Americans explain:

if you give the gumbint $ for a Treasury bond, you are entitled to get paid back with interest.
If you give the gubmint $ in contributions to the SS fund, your hoped for payback is an "entitlement".

(You might say the SS fund is a fraud, but isn't it invested in the Treasury?)

Well lets guess. The Treasury bonds are held by banks and other powerful people and institutions which are the beneficiaries of government grants of privilege. Social Security is owed to the working population, which is the subject of government plunder and control. Which do you think they are more likely to screw over, those who pull their strings or those who, in spite of repeated lies and betrayal, continue to demonstrate how gullible they are and vote for the Republicans and Democrats?

There is a distinction between owning a Treasury Bond and being owed SS benefits from a "trust fund" that holds Treasury Bonds; you are one step removed as a SS participant and that is where these sociopaths can figure out how to slip it to you more easily than they can slip it to a Treasury Bond holder.

[careinke]

I predict that a deal will NOT be done, we will default, and a worldwide financial Armageddon will ensue.

Phew, got that out of the way. Since my predictions are never correct, I wanted to make sure I had this one covered. Your welcome everyone.

[prajeshbhat]

Who is more dangerous for USA- Republicans or Democrats. I say democrats. Because the conservatives have already done all the damage they could possibly do. They have been saying all along openly that we are rich people, we only favor rich people, we don't really care for the poor, if you are a failure that's because you are not good enough and you were never meant to be, so let the rich rule and leave them alone because they are the only ones creating any real wealth.
The real problem are the neo-liberals. They started showing up around the 90's. President Obama is their descendent. Far from their socialist standing up for the little guy roots, these people are overwhelmingly pro-big banks. They have a blind faith in the ability to create money out of thin air(and also renewable energy out of thin air). Just take a look at the top contributers of President Obama's campaign:-

University of California $1,642,735
Goldman Sachs $1,012,841
Harvard University $862,604
Microsoft Corp $852,167
Google Inc $814,540
JPMorgan Chase & Co $807,799
Citigroup Inc $736,771
Time Warner $623,118
Sidley Austin LLP $600,298
Stanford University $595,716
National Amusements Inc $563,548
WilmerHale Llp $549,918
Skadden, Arps et al $543,539
Columbia University $536,202
UBS AG $532,674
IBM Corp $532,372
General Electric $528,180
US Government $517,908????
Morgan Stanley $512,232
Latham & Watkins $502,045

The liberals, blacks, gays progressives who believe that this government will protect them from the vicious heartless rich people ought to think again.

[Keith_McClary]

She retired in 1939, having paid just three years of payroll taxes. She received monthly Social Security checks until her death in 1975 at age 100. By the time of her death, Fuller had collected $22,888.92 from Social Security monthly benefits, compared to her contributions of $24.75 to the system.

Wow, that's $52.98 a month! Good thing for her she didn't drop dead at age 65 - then she would have been down $24.75 on the deal.

Do people who were born more recently than 1875 also get such a sweet deal?

[AgentR11]

Hope I'm wrong... but. My bet is they punt.

The house passes a bland, blank debt limit increase that punts passed 2013; then leaves.
I was so hoping this could get fixed while the fixing won't kill us.

[mad_marten]

Yeah, I go for last minute punt after, rating downgrade.

Although, I believe some teapartiers want a default

[Sixstrings]

The Treasury bonds are held by banks and other powerful people and institutions which are the beneficiaries of government grants of privilege. Social Security is owed..

Your choice of wording is interesting. You say investors own bonds while Social Security (a pension trust for workers) is owed. Own, vs. owed. But fact is, SS owns bonds same as a mutual fund. Only difference is that SS can only sell them back to the government rather than on the market.. but the law still says if there's a shortfall in payroll deductions vs. benefit payments then SS must pull a bond out of the drawer and the gov must make good on it -- backed by full faith and credit of the US.

Of course, Congress is free to tinker with SS to avoid ever paying out (they could raise the age to 100 if they wanted), but let's not misrepresent the current state of the law and the reality of these bonds and the fact these bonds were bought with weekly deductions from the paychecks of working people -- their entire working lives.

There is a distinction between owning a Treasury Bond and being owed SS benefits from a "trust fund" that holds Treasury Bonds; you are one step removed as a SS participant and that is where these sociopaths can figure out how to slip it to you more easily than they can slip it to a Treasury Bond holder.

There really isn't a difference here.. IRA, 401k, and mutual fund investors are all "one step removed." It would be illegal for a "sociopath" to steal their money, why should working peoples' pension be any different?

I guess the difference is that you're assuming the government may renege on its SS obligations but will always enforce private sector contracts -- don't count on it though, there are plans to force 401ks into buying treasuries.

First they come for Social Security.. next they'll come for your private retirement.. respect contracts and the rule of law and everyone is better off.

[Nefarious]

Wow, that's $52.98 a month! Good thing for her she didn't drop dead at age 65 - then she would have been down $24.75 on the deal.

Then send her family a check for $24.75

If you only get paid out what you paid in it isn't a ponzi scheme. It never has to worry about becoming bankrupt. You can retire when you want to with full benefits.Maybe if you become unempolyed use it for your unemployment pay until you find work or exhaust your account. Doesn't have to add to the government's bills that way.
I particularly don't like social security being that im in my mid thirties. I've been paying into it since I was 18 and won't get full benefits till I'm 67. I know there won't be a SS 30 years from now. I would be happy if they just let me out( they can keep all the money I have already paid into it) It's a ponzi scheme and I'm like one of the last investors that really get raped.
But it is what it is and I will make due with what I have at my disposal to prepare for the future that I think is coming down the pike. Just hate to see myself throwing good money after bad.

[Sixstrings]

If you only get paid out what you paid in it isn't a ponzi scheme.

Just to be clear it's not a ponzi scheme. It's almost always run a surplus, which was justified because it's a pension and it's important retirees get what was promised.

As of 2010 SS held $2,609,537,218,000 in special treasury bonds. That's $2.6 trillion, it's not broke and not a ponzi. The government just wants to de facto default on these special treasuries.

I would be happy if they just let me out( they can keep all the money I have already paid into it) It's a ponzi scheme and I'm like one of the last investors that really get raped.

You have a point there. The irony though is that Republicans win.. they degraded it so badly you now support what they wanted to begin with -- no SS at all.

[Nefarious]

I hate going off topic on such a new thread,

It's almost always run a surplus

Throughout the 1950s and 1960s, during the phase-in period of Social Security, Congress was able to grant generous benefit increases because the system had perpetual short-run surpluses. Congressional amendments to Social Security took place in even numbered years (election years) because the bills were politically popular, but by the late 1970s, this era was over. For the next three decades, projections of Social Security's finances would show large, long-term deficits, and in the early 1980s, the program flirted with immediate insolvencySeveral effects came together in the years following the 1972 amendments which rapidly changed the outlook on Social Security's long-term financial picture from positive to problematic. By the 1970s, the phase-in period, during which workers were paying taxes but few were collecting benefits, was largely over, and the ratio of elderly population to the working population was increasing. These developments brought questions about the capacity of the long term financial structure based on a pay-as-you-go program.

During the Carter administration, the economy suffered double-digit inflation, coupled with very high interest rates, oil and energy crises, high unemployment and slow economic growth. Productivity growth in the United States had declined to an average annual rate of 1%, compared to 3.2% during the 1960s. There was also a growing federal budget deficit which increased to $66 billion. The 1970s are described as a period of stagflation, meaning economic stagnation coupled with price inflation, as well as higher interest rates. Price inflation (a rise in the general level of prices) creates uncertainty in budgeting and planning and makes labor strikes for pay raises more likely.

These underlying negative trends were exacerbated by a colossal mathematical error made in the 1972 amendments establishing the COLAs. The mathematical error which overcompensated for inflation was particularly detrimental given the double-digit inflation of this period, and the error led to benefit increases that were nowhere near financially sustainable.

The high inflation, double-indexing, and lower than expected wage growth was financial disaster for Social Security.


To combat the declining financial outlook, in 1977 Congress passed and Carter signed legislation fixing the double-indexing mistake. This amendment also altered the tax formulas to raise more money,[49] increasing withholding from 2% to 6.15%.[50] With these changes, President Carter remarked, "Now this legislation will guarantee that from 1980 to the year 2030, the Social Security funds will be sound."[51] This turned out not to be the case. The financial picture declined almost immediately and by the early 1980s, the system was again in crisis.


After the 1977 amendments, the economic assumptions surrounding Social Security projections continued to be overly optimistic as the program moved toward a crisis. For example, COLAs were attached to increases in the CPI. This meant that they changed with prices, instead of wages. Before the 1970s, wage measurements exceeded changes in price. In the 1970s, however, this reversed and real wages decreased. This meant that FICA revenues could not keep up with the increasing benefits that were being given out. Continued high unemployment levels also lowered the amount of Social Security tax that could be collected. These two developments were decreasing the Social Security Trust Fund reserves.[52] In 1982, projections indicated that the Social Security Trust Fund would run out of money by 1983, and there was talk of the system being unable to pay benefits.[53] The National Commission on Social Security Reform, chaired by Alan Greenspan, was created to address the crisis.

Also of concern was the long-term prospect for Social Security because of demographic considerations. Of particular concern was the issue of what would happen when people born during the post–World War II baby boom retired. The NCSSR made several recommendations for addressing the issue.[56] Under the 1983 amendments to Social Security, a previously enacted increase in the payroll tax rate was accelerated, additional employees were added to the system, the full-benefit retirement age was slowly increased, and up to one-half of the value of the Social Security benefit was made potentially taxable income

[prajeshbhat]

Apropos to my previous comment, here are the top campaign contributors to John McCain's campaign:-

Merrill Lynch $298,413
Citigroup Inc $269,251
Morgan Stanley $233,272
Goldman Sachs $208,395
JPMorgan Chase & Co $179,975
AT&T Inc $174,487
Blank Rome LLP $150,426
Credit Suisse Group $150,025
Greenberg Traurig LLP $146,787
UBS AG $140,165
PricewaterhouseCoopers $140,120
US Government $137,617
Bank of America $129,475
Wachovia Corp $122,846
Lehman Brothers $117,500
FedEx Corp $113,453
Gibson, Dunn & Crutcher $104,250
US Army $103,613
Bear Stearns $99,300
Pinnacle West Capital $97,700

Turns out it doesn't matter who loses, goldman,JP and Citi always win.

[Quinny]

Doesn't this just underline the fact that the illusion of democracy is simply seen as 'bread & circus' by TBTB.

[prajeshbhat]

Why all this hullabaloo about the debt ceiling. Hasn't it already been raised 70 times. May be America can give Ron Paul a shot. Everything else has been tried. The American standard of living can fall in two ways. One is through high unemployment, falling property values and share prices etc. Or through devaluation of currency. The government probably prefers the second because that way the losses could be distributed across the board. But peak oil means that both could happen at the same time. Keynesian methods worked in the 40's because back then increasing the productivity of farms and factories was very easy (thanks to cheap oil). Don't think it'll work this time.