First Bernanke, now the GAO: It appears the adults — an admittedly small group of folks in Washington DC —   are beginning to assert themselves.

The GAO issued a research report discussing what raising the US Debt Limit is about:

“The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred.

While debates surrounding the debt limit may raise awareness about the federal government’s current debt trajectory and may also provide Congress with an opportunity to debate the fiscal policy decisions driving that trajectory, the ability to have an immediate effect on debt levels is limited. This is because the debt reflects previously enacted tax and spending policies.”

That is your wonk update of the day . . .

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Source:
Delays Create Debt Management Challenges and Increase Uncertainty in the Treasury Market
Highlights of GAO-11-203 report to the Congress
February 2011
http://www.gao.gov/new.items/d11203.pdf

Category: Fixed Income/Interest Rates, Politics, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “GAO: Debt Pays For Past — Not Future — Spending”

  1. “It ain’t over on April 15! If you stop, for example, for a $10 pizza on
    Thursday night to celebrate being done with the IRS for another year, the
    taxman will be right there to grab a slice or two. On top of paying the sales
    tax, you’ll also be picking up a major chunk of what the government charges the
    pizza shop owner for local property taxes, unemployment insurance taxes,
    federal payroll taxes, federal and state and local income taxes, and worker’s
    compensation taxes. Altogether, according to a study by the Americans for Tax
    Reform, that comes to $3.80 on a $10 pizza for the omnipresent taxman. If you
    pick up a Bud six-pack to go with the pizza, there’s another 43 cents of each
    beer dollar that goes straight to the taxman for excise taxes, income taxes,
    property taxes, etc. For something stronger, say Jack Daniels, the taxman’s
    share is $7.20, on average, out of every $10. Go lighter and just drink Pepsi
    and it’s 35 percent of what you pay that goes for taxes at all levels. Add some
    Marlboros and its 75 percent of the retail price that’s funneled directly into
    the state’s coffers. Get home and hit the light switch and another $26 out of
    every $100 on the electric bill goes for government rather than electricity. If
    you’re flying the next day, the taxman is up early and waiting at the aiport,
    pocketing $40 on every $100 airline ticket. And he’s there in the hotel lobby
    when you land, snatching $43 on every $100 of the hotel bill. Go out to dinner
    and it’s another $28 of every $100 of the tab that ends up with the government
    rather than with the restaurant, the farmers, truckers and everyone else who
    worked together to produce the meal.”
    – Ralph Reiland
    Prof of Economics Robert Morris College
    Source: Taxed to Death
    http://quotes.liberty-tree.ca/quote_blog/Ralph.Reiland.Quote.1435

    https://mises.org/articles.aspx?AuthorId=796

    http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Ralph+Reiland+Taxed+to+Death

  2. Petey Wheatstraw says:

    The GAO might just be the only remaining trustworthy source of information from the government. At least they seem to be (apolitical and fact/data based).

    I hope Congress grandstands and pushes us into default and/or crashes our credit rating. Apparently, we need to be hit over our collective heads with a baseball bat before we (re)learn anything.

  3. Greg0658 says:

    I’ll bother (again) .. its like folks know how to play cards – but not many chess players in the crowd .. one move at a time with whats in front of us … our problem as a country is we are not self sufficient in small enough circles .. and with the technology in todays world that makes it all go round thats understandable

  4. Petey Wheatstraw says:

    MEH:

    All of those taxes collected and fresh debt every day — is this a great country, or what?

  5. hbl says:

    Yes, government spending comes before government “borrowing”.

    The size of government spending is determined by:

    1. The savings desires of the non-government sector — because they strongly influence government deficits via the automatic stabilizers, and

    2. A relatively smaller amount of discretionary spending determined by congress.

    The treasury issuing debt after it spends is an “automated” (process-wise) follow through to whatever spending occurs that swaps out one kind of government liability held by the private sector for another kind. Current laws (and politics) require the government to issue debt, but doing so is not “technically” necessary in order for government to deficit spend.

    I hope this macroeconomic visualizer can be helpful to some for understanding the interactions of government and private sector as well as related concepts:

    http://econviz.com/balance-sheet-visualizer.html

  6. Joe Friday says:

    “GAO: Debt Pays For Past — Not Future — Spending”

    Trying to explain this concept to the American RightWing is like trying to explain calculus to a tree stump.

  7. Joe Friday says:

    Mark E Hoffer,

    First, ‘Americans for Tax Reform’ is a fake RightWing front group.

    Second, yet again, taxes are the lowest in six decades:

    TAXES LOWEST SINCE 1950

    Amid complaints about high taxes and calls for a smaller government, Americans paid their lowest level of taxes last year since Harry Truman’s presidency, a USA TODAY analysis of federal data found.

    Federal, state and local taxes — including income, property, sales and other taxes — consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010.

    http://www.usatoday.com/money/perfi/taxes/2010-05-10-taxes_N.htm

  8. “Joe Friday”,

    two things..

    1.) “It ain’t the Rates, it’s the Rules.”

    see some of ..

    “Another major reason why crime is increasing is that crime pays, and in our tax-ridden, regulation crushed economy, many people cannot economically survive through low-end jobs. … ‘The income that offenders can earn in the world of crime, as compared with the world of work, all too often makes crime appear to be the better choice.’ In Washington, D.C., it costs $7,000 in city fees to open a pushcart. In California, up to eighty federal and state licenses are required to open a small business. In New York, a medallion to operate a taxicab costs $150,000. More than 700 occupations in the United States require a government license. Throughout the country, church soup kitchens are being closed by departments of health. No wonder so many people turn to crime and violence to survive.”
    – Jacob G. Hornberger
    American author, journalist, politician, founder and president of the Future of Freedom Foundation
    Source: Will You be Safer if Guns are Banned?, The Tyranny of Gun Control, 9-10 (1997).
    http://quotes.liberty-tree.ca/quote_blog/Jacob.Hornberger.Quote.C0B0

    .. http://reason.com/archives/2010/04/09/up-from-serfdom

    http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Jacob+G.+Hornberger+Future+of+Freedom+Foundation

    counting as: the Quote, and the Perspective (from the “Reason”-link)

    past that, feel free to give ol’ Bumper a call, I’m sure he’d be happy to explain it to you, further..

    The Future of Freedom Foundation
    11350 Random Hills Road
    Suite 800
    Fairfax, Virginia 22030
    Phone: (703) 934-6101
    Fax: (703) 352-8678
    Email: fff@fff.org

  9. Joe Friday says:

    Mark E Hoffer posted:

    “Another major reason why crime is increasing is that crime pays”

    ????

    ~

    “and in our tax-ridden”

    Already disproven.

    ~

    “regulation crushed economy”

    Our economy is UNDER regulated.

  10. baychev says:

    let me see, if you have to pay and you cannot borrow, you have to become a net saver. you cant really be a net borrower and not pay your past dues because no one will lend you anymore.
    of course things are not that complicated from GAO’s perspective borrowing, spending, expenses are autonomous processes in time and nature.