White House, congressional leaders reach debt deal

True, but there are real families that incease their income by robbing better off families, and there are many families who use all sorts of justifications to avoid paying for things, including all of their taxes, so they can afford other things. Just because a family can't pass a law to sanction that behavior, doesn't mean the behavior isn't comparable to the government's.

The analogy still works. Don't let taxes and wars confuse you. Both entities have limits to both the amount of revenue they take in and and the expenditures they make.

Agreed. I think it was Boehner who compared the US debt situation to a household. These comparisons are like comparing a 747 to a Hotwheels car, and not just useless in most cases but damaging in the sense they cloud the more complex bigger picture.

Ron Paul follows the Austrian school of economics. They believe that economics cannot be mathematically or statistically modeled, and the economic theories cannot be tested experimentally.

Family analogies are probably the best you are going to get for "analysis" from these people.

It's not clear to me why, if someone has a vastly incorrect notion about the actual state of the world, we should put much stock in their opinion of how the world ought to be.

The best you could hope for is to infer some directionality. If I think the temperature of a room is 15C, and I say I think it ought to be 10C, but the actual temperature is 25C, then one should probably not infer anything beyond that I want the room cooler.

More to the point, the CEOs and shareholders of the big businesses who pay for politicians to be re-elected are in the highest tax bracket.

What value does this actually create for the economy? You get some extra cash in your pocket, but for what actual gain? You spend hours, or days, or as is the case for some people I know week of their free time doing creative accounting. This is pointless busywork with no actual economic gain to a nation. The government gets less money from you, and you personally spend an amount of time on something that could be much better spent /generating/ or spending capital.

I honestly think governments should remove all deductions and just charge a lower tax rate. I know it is an economic tool to get people to do or buy certain things but income tax deductions really add very little value to the economy and waste people's time. Note, that I am talking about income tax deductions, deductions can be put on other taxes to encourage purchasing but then it is your choice to buy it or not and the gain is immediate instead of at tax time.

This is because through a regressive taxation system and very successful lobbying of government they have allowed themselves to amass an amount of wealth so vast that wealth of the 'have nots' simply pales in comparison. I consider your assertion to be one of the more damning pieces of evidence that our system of taxation and distribution of wealth is completely amoral.

Supply and demand for bonds is heavily influenced by ratings, and investors always have choices.

There are plenty of stories out there of large institutional investors who have already reduced their asset allocations on treasury bonds because of this dangerous brinksmanship on the part of the Republicans.

Take another look at the graph.

Historically US debt traded at a substantially lower interest rate than other AAA debt. In fact we even hit a negative interest rate. People paid to loan us money! (They were willing to do it because markets were incredibly volatile, and buying treasuries was cheaper than putting large amounts of money in a warehouse, paying for a guard, and risking theft. I'm not joking.)

With the USA downgraded to AA and widespread awareness that stupid politics can result in us not paying, it is hard to conceive of a way that our interest rate will not rise.

Don't get me wrong. We'll still have a large and liquid debt market. But we won't enjoy the absurdly low interest rates that we have gotten used to.

Not true!

If we'd voted for the usual "bare increase" back in Feb, the bond markets would have not noticed and our rating would have been fine.

The cause of the downgrade is that our politicians demonstrated that even when they are negotiating under the best of all possible circumstances to solve our long-term problems, they act like idiots. A "grand bargain" was the only way that put us on a course to actually bring debt under control. Our inability to negotiate that combined with our long-term fiscal problems is a major long-term problem.

If you want to know more about our fiscal situation, I highly recommend http://www.kpcb.com/usainc/USA_Inc.pdf. It is very long, detailed, and depressing.

Here are a few key facts. Our government's cash flow last year was -$11,000 per household. Our government's net worth, if we used standard business accounting, is -$44 trillion. Or -$370,000 per household. By 2025, CBO projections show that our total tax revenue will be entirely absorbed by interest payments and entitlements.

As a country we need dramatic changes. Soon. And there is absolutely no indication that the political will exists anywhere to create them.

Its not that there's no money. Its that there's no cost effective way for small organizations to negotiate the contract discovery, bidding, and award process

I suspect this sorry affair has hurt Obama's power and credibility within his own party. They would be in a much better position to decide how the US will balance its budget had Obama simply declared the debt ceiling unconstitutional, as Bill Clinton advised him to. Now, they've ceded legitimacy to the Tea Partiers and will have to acknowledge them (and their demands) in future negotiations. To the Democratic senators and congressmen who have been around long enough to know what a bad idea that is, this deal comes off as a betrayal, one made worse by the president's flat refusal to consider the constitutional option. Even if Obama wanted the Senate to capitulate on the Bush tax cuts, he could well face a revolt. The Senate will hold absolute power on that one; they need simply do nothing to see them expire.

It was pretty clear that the Tea Party wing of the GOP was willing to see the US default if it meant no increase in revenue and steep cuts to entitlements; I wouldn't be surprised to see Reid et al stick to a "keep the tax breaks for middle income Americans and close loopholes and subsidies for corporations" line, then blame the Republicans for the raise in taxes on the middle class when they don't accept his proposal. After that, it's simply a matter of what a tax break will look like. Democrats have quite clearly stated their willingness to cut taxes for "working Americans" (ugh), so the Republicans would have to argue why they think corporate subsidies and tax breaks for the rich should be enacted when they will further worsen the deficit. If you're Reid et al, that's a much nicer position to argue from than if you accept Obama's near dogmatic insistence on compromise, or, as many Democrats see it, giving everything away.

which ones? How would taking more money out of the private sector help the economy right now?

When people are forced into an unfavorable situation that they feel needs to be gotten out of, they generally try very hard to do that.

This makes it different because the government's kind of been like "We're just going to pretend to have money and not worry about it". Now, they are realizing that they actually have to deal with it. That's what I'm hoping for at least.

Only a tiny fraction of the federal budget goes to cops or teachers.

Heh, no, quite the contrary. I'm at a loss as to why the 34% is as high as it is. My point was that I'm sure the 34% is full of people that make significantly less and yet pay a higher tax rate than those they're idealistically defending (meanwhile enjoying unemployment and having their benefits put at risk due to "compromise" tactics and the in-fighting)