Let’s say government debt reaches statutory limit, at that time the government couldn’t spend any more money then receives. The Treasury/Fed would have to prioritize cash outlays; they would likely pay debt interest and principle obligations before any other expenditure. California had to write IOU’s to contractors and taxpayers instead of immediately making payment. Is it possible US Govt debt investors would see this action as a positive sign the US is becoming more fiscally responsible? Could this lower our cost of capital? If debt and interest payments are still paid on time, there would obviously be no default, even if some contracts or grandma’s SS payments get delayed.
Heck, I'd never say never, but if I'm investing in an entity that can't pay it's bills, I'd be thinking the investment risk is higher. I'd also be worried that the entity might changes it's mind about who does/doesn't get paid. The best thing, which you're pointing to, is that we have at least a balanced budget (even better, we're in the positive and paying down debt.) Investors would drool all over that. And that's were we need to get back to. I think everyone is pretty much in agreement over that. The biggest disagreement I see is how to get there. Some people think it needs to happen solely through spending cuts, but the smarter ones think it'll take a balance of spending cuts and tax revenues. (Lol flame suit on)
The smarter ones realize that if we cut back to Clinton's spending level, adjusted up for inflation, we'd have a surplus without raising exes at all.
the "wars" are 100B a year right now ("Overseas Contigency Operations"). The entire DoD (including the OCO's) is ~650B. The debt is 1.6T.
Clinton was quick to military action. Somalia, Sudan, Haiti, Afghanistan, Bosnia, Kosovo, Macedonia, Bangui, Albania, Congo, Gabon, Sierra Leone, Cambodia, Iraq, and a few others. Some more than once even. We had troops in Kosovo for years.
Harry Reid says increasing debt is the last thing we should be doing! [video=youtube;ELkbDdPeL7I]http://www.youtube.com/watch?feature=player_embedded&v=ELkbDdPeL7I[/video]
Is it just me or does the plan to lower mortgage interest deduction suck ass in terms of trying to get the housing situation in a better place?
Not exactly "tax the rich" - but "tax the rich" is really a smoke screen for them taxing everyone and hitting the poorer people the hardest.
Of course it does. It's another classic example of Democratic schemes being bad for business, bad for taxpayers, and bad for the country.
If I understood the seattle times article right, they'd lower taxes for the wealthy and then hit everyone with higher taxes by shrinking the mortgage deduction. I don't get it from either the R or D persepective. It'll will just make the housing problem worse longer and continue to freeze construction. Looking forward to hearing from the hardcore lefts and rights on this one.
Depends who you consider wealthy / poor. Theoretically, "poor" people would never have a chance at owning a home, so this tax increase will only hit the "wealthy". According to many liberals on this board, the "poor" are the ones that can't afford any food or healthcare. Surely they won't be affected by a shrinking mortgage deduction. Tax increases are great when they only apply to people making more than you. It becomes a little more real when the tax increases hit closer to home. (pun intended)
Hmmm. I guess I'm a little more focused on the mortgage deduction part of the deal -- does that make sense to anyone? For what it's worth, the AP/seattle times article I read, said that the biggest beneficiaries of the lowered tax rate would be those with taxable income greater than about $380,000/year. Their tax rate would drop 6 to 12 percent. Probably a lot of ways to look at who's rich & who's poor, but that's an easy one. Again, though, it's the mortgage part that baffles me. I can guess pretty easily where board members come out on taxing rich/poor, but the mortgage deduction cuts a wider swath. And it puts the housing market in an even deeper hole.
I'm definitely not in favor of lowering the mortgage interest deduction benefit. But tax increases have a downside of reducing incentive, regardless of where the tax is applied. It just so happens that this one in particular would directly affect you, which is why you don't like it. Also, you can't just look at what the "tax rate" of the over $380k/year folks would be. You want to focus on the total tax liability. From what I've read, some of those peoples' tax burden would go up and some would go down. Part of the confusing thing to me, is that these changes are being made under the name of "tax reform". I don't see this tax reform as clearing up any confusion or complications that exist.
You're off base and making assumptions about what I like/don't like. You have no idea what my own tax situation is or what would/wouldn't impact me. Truly, the impact on my own tax situation is not what I was asking about. I can suss that out on my own. Taking away the mortgage deduction (or lessening it) directly impacts anyone who has a mortgage and anyone looking to buy a house using a mortgage. If the deduction is less/removed, then the monthly payment essentially goes up. This could well mean further drops in home prices and raises the barrier in owning a home...at a time when that sector has been pretty well pummeled. My question: does this part of the plan make sense to either the left side or the right side?
You state above that the increased tax will reduce incentive. I agree that it will reduce incentive to purchase a home / take on a mortgage. It doesn't seem like a good idea. How is that different than any other kind of tax increase?
The way I see it, deductions, loopholes, tax credits, whatever you want to call them give incentives/disincentives depending on the circumstance (we definitely agree on that, I think). The stereotype is that lefties would want to up taxes on the rich and righties would fight it. Left might want higher corporate taxes, right would want lower. Many of the changes that are proposed, I can pretty well guess where people are going to come out. The mortgage deduction possibly seems like one area that neither left nor right would want to be messed with. From your response, it seems like you're saying you don't like any tax increase and the reduction or elimination of the mortgage deduction is just one of several tax increases proposed. That particular change doesn't bother you any more or less than the other proposals that involve tax increases. Is that right? I was wondering if it might be one change that is universally disliked. That's all I'm trying to understand. Personally, I can see reasons for doing it, but the timing seems wrong given the current housing struggle. If they're going to do it, it seems like it should have a long and gradual phase in.
In theory, the lower rates would offset the loss of the deduction, so it may not be that kind of disincentive. But considering nearly half the people don't pay taxes at all, the loss of the deduction would hit those on the cusp of paying taxes. I don't agree that every tax is a disincentive. It's more a matter of depriving people of that money to spend on things in general. And whether the people are better off spending the money they earn as they see fit vs letting the govt. spend it recklessly as it does.
Yeah, I might've overstated the disincentive/incentive part as a universal truth, but I think it's often true. That said, reducing or limiting tax deductions for mortgages, charitable giving and retirement savings could act as a disincentive.
IMO, reducing the benefit of the mortgage interest deduction is a bad idea. Not just because it is a tax increase, but because I think it hits in a bad place. A mortgage is the only (not only, but close) way that the normal population can leverage their resources and create an industry, and thus many jobs. It is the only way a single person can create several jobs (at least for a short term).
