If you lose respect for someone for making a logical argument, supported with facts and evidence, then your respect is not worth having. And going from high respect to zero, as a result of someone merely expressing an opinion on a single government's solvency, is a sign of extreme fickleness - who would want such a fair-weather friend? If you wish to partake in a debate, you should stick to pointing out the errors in the argument, rather than indulging in pointless personal insults.
Cutten and Running Bears' arguments are based on the assumption that the actions the taken to get the deficit under control will have no feedback on the economic situation. If they try to tax their way out they could very well reduce revenue and spur more deficit spending on welfare/unemployment programs. Reneging on entitlement promises would also hurt future economic activity and tax receipts as most people factor the entitlements into their retirement spending plans. This will never happen anyway since the number of voters on the dole would ensure that cutting entitlements would be the last option (after defaulting or hyperinflation). I think we can all agree that the US government will attempt to inflate away at least part of the debt, but high inflation does not necessarily translate into higher tax revenues, since economic activity is hurt by inflation. Also, foreign creditors have little patience for more money printing, and are likely to stop future US bond purchases in the face of more inflation. These two factors could cause the inflation to get out of hand as the government would need to print more and more money to finance the debt. This could lead to a situation where the US would have to choose between default and hyperinflation.
And some historians contribute the fall of Rome, to no longer being able to finance an unproductive segment as the military. The reason for putting lead in the coinage,etc.
No, I specifically said that raising taxes would probably reduce growth. As for tax, most professional economists' studies of the Laffer curve show that the US is way below its potential revenue maximising point. That point is estimated at somewhere north of 60% of GDP. Most of Europe has revenues about 10-20% higher as a % of GDP than the USA does, so taxes can be hiked massively close to EU levels, and revenues will soar as a result. There's also the prior example of UK after WWII, they grew the economy, and paid down the debt until it reached manageable levels. Basically, the bankruptcy crowd are ignoring several pieces of factual evidence against their position. They do this because they are emotionally attached to their view, and are not thinking rationally. They are more interested in trying to prove they are right, than in trying to find out what is true. If I saw evidence the US was headed for default, then for sure I'd change my mind, buy loads of puts on T-bonds, and try to make a killing. The same cannot be said for the people opposing me on this thread - hell will freeze over before they change their mind on their preconceived, precious opinions.
I think the US and other Govts will be forced by the democratic system of majority rule to put up import barriers and thus protect jobs. First the unemployment will have to get much worse. 30 million unemployed is bad but not yet enough to force the " free marketeers " to eat their own words. It was ok for them to ruin the Argentinian etc. economies but not their own !! Admitedly the Chinese are not playing fair on the exchange rates and are rapidly backing themselves into a nasty corner. If trade barriers do go up all around the world then they are going to be looking at a lot of empty factories. It is really in their best interest too to have the level playing field. Anything else creates undue tensions elsewhere.
There will be no "level playing field". China can't afford for its currency to be that strong, America can't afford for our currency to be that weak.
Ghost of Cutten's assertion that taxes can be raised because thier aggregate is below the point of no return on the Laffer Curve and his further assertion as evidence that European Countries collect revenue from taxes at 60% of GDP has a couple of problems. First, there is no citation for the Eruro Rev/GDP figure...I would like to see how it is determined since it does not mention which countries or what the tax mix is that gets to that level...I assume that would be a aggregation of Federal, Euro, State (Povince) and City taxes. If that is the case then U.S. tax to GDP should include State and City taxes also...and perhaps property tax. Second, not all taxes are the same and to aggregate the concept as 'taxes' on the laffer curve is not useful. Capital Gains taxes have a much lower threshold of return than excise taxes do. Marginal Income tax rates at the highest levels have a lower threshold of return than marginal income at lower levels. If you raise taxes that are collected by wage with-holding you will increase revenue immediately (the inverse is also true) but if you raise taxes that are paid in brackets where estimated quarterly payments are made you will not get the same increase...behavior will change to defer income or otherwise reduce declared 'income' in favor of other choices which exist in these brackets that don't exist in the lower brackets...to suggest that all taxs behave the same on a Laffer Curve analysis is not accurate. If you would get federal taxes as high as you suggest then they will not be 'progressive' taxes they will be in the nature of incrased excise taxes on utilities, fuel, energy, communcation...tariff increases, value added taxes and the sort...I am not saying that you can't collect taxes at the suggested level of GDP asserted...I am saying that the nature of taxes that can be collected at those levels will focus down the income scale or they won't be revenue positive. This will not be as simple as just raising tax rates on high earners and businessess.
Breen, I am in agreement with you. A rare occurrence. You raise excellent points. Also, I might add that in a world of fiat currencies and free international trade what is important is not this or that in isolation, but rather this relative to that. And those comparisons are fraught with opportunity for error.
A quick add to the very last point: Social Security is the biggest holder of Treasury securities. Anyone who thinks the USG is going to pull an outright default on Social Security is smoking some powerful weed.
Can you verify that Social Security actually holds Treasury Securities? My understanding is that all Social Security has is an account entry that the money is owed to it by the Treasury, but there are no actual securities on the Soc. Sec. balance sheet. Which is it?