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youcanchoose -> RE: market reacts to tea party retards (8/5/2011 8:48:31 PM)
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quote:
ORIGINAL: Sanity
How can you possibly call an increase in the debt ceiling
Which that increase is being spent at breakneck speed
A "massive" spending cut?
quote:
ORIGINAL: youcanchoose
I wouldn't say that that deal was Obama's wish. No new revenue and massive spending cuts to all parts of the federal government. Seems like he caved in order to get a deal at all.
Sanity, I think you actually make a good point here, and your confusion is central to understanding what is actually going on. To clarify:
1) Each year the government collects taxes (revenue)
2) Each year the government decides what it wants to do spend money on (spending)
3) When the government spends more than it collects in taxes, it takes a loan out to cover the rest
4) Each year, revenue and spending are reset, but debt is not; debt accumulates over time
The "debt ceiling" is an arbitrary limit of how much debt the government is will to have. It is not mr. Obama debt, nor is it Mr. Bush's (either one). Blame should be place on every single president who spent more money than they had (which is basically all of them). It is not the amount of money the government has overspent this year, that is called a deficit. The debt ceiling can be thought as the sum of all the deficits upto this point. Continuing, to prevent a deficit, you must either:
A) increase revenue (raise taxes, tariffs and user fees)
or
B) reduce spending (provide less services, give less more to the poor and elderly, fight fewer wars)
This debate over the raising the debt ceiling has really been about how the government is going to prevent another deficit. The Democrats are in favour of raising taxes on the rich, while Republicans wanted to reduce spending; I believe I made my feelings clear about what needs to be done in my early post.
Hopefully, this explains why spending is being reduced, even though debt ceiling was raise. They're doing it so they won't need to raise the ceiling again. And I agree, it is bizarre.
You can read a summary of the deal here:
debt ceiling deal summary
Points of interest:
No new taxes
Deficit reduce through spending caps (aka spending reducing)
A committee to find another $1.5 trillion in deficit reduction, with $1.2 trillion cuts to both social programs and the military if they fail to produce a report.
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