I still don't have time to post, but this was kind of substantive so just read it or whatever.
Canadian
gart, u there?
me
i am
Canadian
can i ask u a question re US politics?
me
yes you can
you ALWAYS can
Canadian
basically, what is the budget situation right now?
me
budget or deficit
Canadian
i know there was a couple of short-term measures to maintain current govt speding at 2010 (2011?) levels.
has obama put forward a new budget?
has it been debated, passed?
budget
me
ah yes
yes
Canadian
i know defiicit is huge. have they voted to increase teh ceiling?
me
2011 they had a last minute deal that passed about 2 weeks ago
literally, govt was going to shut down in an hour and they worked out a compromise with republicans
obama put forward a budget but republicans said no
so they had a compromise
that funded the govt through fiscal year 2011
they have not voted to raise the debt ceiling - that is what the next big fight is about
Canadian
ok, what is fiscal year 2011? that's oct 2010-oct 2011?
me
it'll have to be raised by june/july or the shit will be horrible
i'm not 100% but i think it goes through early spring 2012
Canadian
ok so the last development was two weeks ago with another continuing resolution?
me
there were a few short-term extensions, so that's why it didnt' get passed until april
right
Canadian
ok and when did obama put forward his budget?
btw you are being so helpful
me
haha good!
he announced his budget in the state of the union address in january and publicly released it around the same time
Canadian
basically current sitaution is: gov't is working via a continuing resolution prob through early 2012; at some point this summer there will be a debate over the debt ceiling; and there is a huge ideological divide in congress
me
that is 100% correct
oh and one more incidental thing
republicans say they will only vote to raise the debt ceiling if there are massive spending cuts attached to it
Canadian
but that is pointless then haha
me
yes
Canadian
why have a high ceiling if you aren't giong to go near the ceiling
me
to make it double-pointless is -- even if the republicans got every last thing they have asked for, they'd still have to raise the debt ceiling
Canadian
why will this issue be raised soon, if the gov't has a short term resolution to continue at current spending levels to 2012?
me
so they're just engaged in hostage-taking, essentially
ah
excellent q
Canadian
oh i see. got it re the ceiling
me
the continuing resolution for spending is just for the government to continue to pay people to do their jobs (postal workers, IRS, military)
the debt ceiling is different, and strangely unique to the US
the U.S. is the only country that says how much the treasury can borrow
this doesn't really make sense
Canadian
ahh ok very helpful
me
bc they pass laws saying "do this which will cost like $1billion"
but then they ALSO have to pass a law saying "you can now borrow $1billion to do that"
most countries just say "if congress passes a law saying we are going to spend money, that automatically means they can borrow it if need be"
Canadian
hahahah god
and...if you were looking at this US situation from the perspective of a canadian business, what questions would you have? hahahha
me
and the TRIPLE ironic thing is that this only happened (the debt ceiling vote) in the mid 90s when republicans wanted to get more leverage over clinton to do exactly the same thing they're doing now
so fiscally, it makes no sense -- it's purely a political issue
well
i think the debt ceiling will be raised
i think it will go pretty much down to the wire
but structurally, the incentives are (mostly) there to raise it
the last 2 big times that a deal had to come down were tax cuts in december 2010 and the budget deal just 2 weeks ago
both times they worked things out
everyone knows the debt ceiling has to be raised
the republican speaker of the house (who is the #1 negotiator with the white house on the debt ceiling) has said he knows it would be catastrophic if the debt ceiling weren't raised
everyone knows that if it's not raised it'll make america look unsafe and could literally make people stop investing in the dollar
but at the same time, this is leverage and the republicans are going to see how much in concessions they can get from the white house before passing it
that's the rational end - the irrational argument is that the republicans are crazy and don't mind ruining the US economy unless incredibly massive spending cuts are implemented
Sent at 12:32 PM on Wednesday
Canadian
ok well put.
the republicans do seem irrational
how anyone votes for them is beyond me
this has been really helpful. a good summary
me
they're irrational-ish
some of them definitely are, yet they keep actually making deals
it's kind of in their interest for people to doubt their sanity
bc they can extract more concessions that way
Sent at 12:35 PM on Wednesday
Canadian
ya and their supporters get all worked up and rally behind the issues
brb
me
right
that's the other end to it
the grassroots of the republican party IS actually fairly crazy and also has MORE power than they've ever had before
politicians are self-interested, so it's making people who used to be semi-sane say some fairly nutso things
Sent at 12:37 PM on Wednesday
Canadian
sorry, one more question -- when will the next debate be regarding the budget?
me
next year
the most optimistic situation is that there is a comprehensive & bipartisan deficit-reduction act that passes before then
then the spending bill wouldn't be controversial, bc the issues would already be worked out
Canadian
until then its up to depts and agencies to work with what they have and decide how to spend it?
me
the more likely result is this all happens again next year -- under clinton there were 2 shutdowns, one in 95 and one in 96
well the depts and agencies are fully funded until next year
then if there's not another continuing resolution, they get more money
Canadian
I'm wondering where the bulk of the money is going and how this is being decided -- e.g. to defense, core programs like medicare...?
me
ah yes
http://www.nytimes.com/interactive/2010/02/01/us/budget.html
that's not what passed
Canadian
like, how is it being decided that e.g. spending for science and tech research projects should be cut but defense spending stays high?
me
but the numbers will prob be roughly the same
Canadian
ok great. and who decides these numbers?
compromise?
me
a lot of them are just predetermined
Canadian
so these numbers stay approx same until early 2012 when they try to pass a real budget?
me
as you can see, a huge proportion of it goes to, essentially, insurance programs
right
Canadian
and what about thsi reduction act?
you mentioned. how will that impact where money is spent?
me
so you can kind of predict like, how many people will be getting social security or filing for medicare
you know how much the wars are gonna cost
the thing people fight about is all in the bottom right corner - transportation, education, agriculture, energy - but those are all tiny parts of the budget
to get the deficit under control, you need to address the big chunks - social security, medicare/medicaid, defense
that's like 75% of spending
that's what the deficit reduction plan will address
