Whenever They Run Out of Money, Politicians Claim It'll Cause the Most Popular Programs (Teachers, Police, Fire) to not Get Paid

From Thomas Sewell

If all the administration does is pay debt interest and make already committed payments and pay salaries without making new purchases/commitments for payment, then they can stay under the debt ceiling indefinitely. All of that committed spending doesn't add up to the tax receipts and other income the federal government has coming in. What's already contracted with individuals and companies is covered. New spending is what would have to go. If the federal government starting selling their accumulated gold, that would give them a $200,000,000,000 cushion to work with. If they started selling federal land that's not currently in use for a park/military base/etc... they could raise another few trillion or so. At the very minimum, the department of the Interior could stop blocking oil and gas leases that bring in revenue and make a "mint" from that. Lots of options out there for additional revenue besides taxes.


Thomas Sewell is a little more partisan strident than I am. I think that almost all politicians act in this way. Considering the incentives that politicians face they act logically.  If they took higher moral ground they would greatly lower their chances of getting elected.

If we could unbundle Government programs it might help but we can't.  

The Upside of Government Default

By Jeffrey Rogers Hummel on The Upside of Government Default

There is a good chance that the U.S. government will be forced to default on its explicit and implicit promises within the next few decades. Fortunately, the state government experience of the 1840s suggests that this may provide the best and most durable long-run solution.

Considering the incentives that politicians are faced with and the ease of demagoging a rational ignorant electorate some kind of federal Government default might be the best option.  It would make it much more difficult for Governments to borrow money forcing balanced budgets.

The Debt Ceiling and Trillion Dollar Coins

I was asked by a friend about the trillion dollar coin scheme is a scheme and here is my answer:

The trillion dollar coin scheme is a scheme to get around the debt ceiling.  The constitution allows the treasury to mint coins, so the idea is to mint a trillion dollar coin which lowers that federal government’s indebtedness by a trillion dollars thus avoid another debt ceiling fight.  

It is my opinion considering the incentives that politicians will borrow and spend money as long as they can do so without major short term negative consequences.  That is why I think an eventual default might be the best thing, because then no one would lend them money and so they would have to run balanced budgets.  As Jeffrey Hummel has said default would be a balanced budget amendment with teeth.  I do not invest based on such things, the way I see it is that companies can do fine even while the Fed Government defaults not only that but we do not know when the real problems will start or will be the best investment at that time.  Also I am holding an appropriate amount of stock in companies outside the USA which seems prudent at al times.

Further IMHO the government does not need all the money that takes in now, I think that they could cut defense spending in half and not endanger the country’s defense, cut SS by 40% and not hurt needy retirees and cut Medicare 30% without hurt the health of the elderly and cut education (mostly not the federal Government but state and local but still) by about 50% with hurting education.   

Taxes USA vs Canada

Alexei Sadeski on Effective AND nominal rates USA vs Canada.
USA:
Income: 38
State Income: 10
Cap Gains: 36
Corporate: 46
Estate: 40

Canada
Income: 29
Provincial Income: 15
Cap Gains: 22
Corporate: 27
Estate: 22

Because Canada has such low Capital Gain and Corporate rates, high net worth individuals are able to lower their tax liability dramatically by funneling income through corporations. In the US, this is not as useful – the US has one of the highest corporate tax rates in both the world and OECD.

More Reasons to Tax Consumption Rather that Income.

Income is complicated.  Imagine 2 people earn $100,000 both are taxed the same amount and one guy spends the full net amount, the other invests half of the net.  Over 20 years the invested money doubles but inflation eroded the final value of the money.  Why is the second guy taxed so much more even on the part that is inflation.  It is better to spend your money earlier. there is dis-utility to waiting. It gets very complicated to tax income because of things like inflation capital gains, dividends and interest.  Consumption is easier to define.

Imagine 2 people one who earns $40,000/year right out of college with modest income growth and one (like me BTW) who earns close to minimum wage but then has one big year where he earns 250,000 in one year why should the latter pay more in taxes.  A progressive consumption tax would make this less likely. 

Police, Crime and Government

 Alex Tabarrok writing about "Police, Crime and the Usefulness of Economics" writes:

Using a range of reasonable elasticity estimates from the new literature and a back of the envelope calculation, Klick and I argue that it would not be unreasonable to double the number of police officers in the United States. At current levels, it’s also my belief that police are much more effective than prisons at reducing crime and with far fewer of the blowback effects. Chalfin and McCrary do a more detailed cost-benefit calculation for individual cities and they also find that many cities are severely underpoliced (and some are overpoliced–the police force of Richland County, South Carolina probably does not need a tank).

It seems to me that more police are not only more efficient than prisons at reducing crime but might be more efficient than more welfare, more school spending, food stamps etc. at improving social welfare.

Dorm rooms are often small simple block rooms but are nicer places to live than slums because you don't need to fear aggression nearly as much.

So police are one of the few things that 99%+ of people agree Governments should do, and yet they spend little on it and seem to do a poor job of it!

Simeon and Anna

Simeon and Anna

Luke 2:21On the eighth day, when it was time to circumcise him, he was named Jesus, the name the angel had given him before he had been conceived.

22When the time of their purification according to the Law of Moses had been completed, Joseph and Mary took him to Jerusalem to present him to the Lord 23(as it is written in the Law of the Lord, “Every firstborn male is to be consecrated to the Lord”^b), 24and to offer a sacrifice in keeping with what is said in the Law of the Lord: “a pair of doves or two young pigeons.”^c

25Now there was a man in Jerusalem called Simeon, who was righteous and devout. He was waiting for the consolation of Israel, and the Holy Spirit was upon him. 26It had been revealed to him by the Holy Spirit that he would not die before he had seen the Lord’s Christ. 27Moved by the Spirit, he went into the temple courts. When the parents brought in the child Jesus to do for him what the custom of the Law required, 28Simeon took him in his arms and praised God, saying:

29“Sovereign Lord, as you have promised,

you now dismiss^d your servant in peace.

30For my eyes have seen your salvation,

31which you have prepared in the sight of all people,

32a light for revelation to the Gentiles

and for glory to your people Israel.”

33The child’s father and mother marveled at what was said about him. 34Then Simeon blessed them and said to Mary, his mother: “This child is destined to cause the falling and rising of many in Israel, and to be a sign that will be spoken against, 35so that the thoughts of many hearts will be revealed. And a sword will pierce your own soul too.”

36There was also a prophetess, Anna, the daughter of Phanuel, of the tribe of Asher. She was very old; she had lived with her husband seven years after her marriage, 37and then was a widow until she was eighty-four.^e She never left the temple but worshiped night and day, fasting and praying. 38Coming up to them at that very moment, she gave thanks to God and spoke about the child to all who were looking forward to the redemption of Jerusalem.

39When Joseph and Mary had done everything required by the Law of the Lord, they returned to Galilee to their own town of Nazareth. 40And the child grew and became strong; he was filled with wisdom, and the grace of God was upon him.

James Dobson  once spoke about a pastor that he knew who would who when a young family joined his church would be extra pleased saying these are the type of people that will be the backbone of the church but he (James Dobson) said that we should resist thinking that way. 
 
Simeon was an old man waiting to die and Anna was an old widow but they are mentioned in the bible for greeting Jesus as his (I am assuming) circumcision.  God is no respecter of persons.  God wants the old, the  widow, the poor, the handicapped, the blind, the mentally ill and even those with dons syndrome.  He takes them all and sees none more deserving of his respect than any other.  And we should try to do the same in all parts of our lives.