Secretary of the Treasury Geithner just sent Senate Majority Leader Harry Reid a letter.
Noting that in 5 days the US will again have hit the debt ceiling, Secretary Geithner explains that actually, we might have an extra 2 months. In an appendix to his letter, he outlines 4 types of “extraordinary measures” that will let us avoid a debt default for awhile. He adds though, that he is not sure how long he can stretch it because of the uncertainty created by the current negotiations over tax increases and spending cuts. (Ironically, no Congressional tax and spending deal means more time to get a new ceiling.)
Where is the debt ceiling? $16.394 trillion.
Where were we on December 26th? $16.027 trillion.
In 1917, Congress decided it could not keep track of every U.S. loan. So, to maintain some control over national finance, they said, “We will decide the maximum amount the U.S. can borrow.” And, from that day onward, whenever necessary, they voted to increase how much the U.S. could borrow. Since 1962, the U.S. Congress has raised its debt ceiling 76 times.
Sources and Resources: Here is Secretary Geithner’s letter and the Treasury Department daily update of US debt totals. For some debt history, John Steele Gordon’s Hamilton’s Blessing The Extraordinary Life and Times of the National Debt is wonderful. Also, this CNN article and these these econlife posts, Debt Ceiling 101 and Looking at the Debt Ceiling, provide some background and some of the above history.
Posted by: adminEcon
Tags: Alexander Hamilton, debt ceiling, deficit, federal budget, federal debt, fiscal cliff, Harry Reid, John Boehner, Nancy Pelosi, recession, Second Liberty Bond Act, Timothy Geithner, treasury
The UK’s pasty (PASS-tee) tax battle is a good story. But, moving beyond the humor, it has considerable significance.
First the story:
Taxing the pasty has created a major flap in the UK. The pasty looks like meat in a pastry pouch, high in fat, maybe more than 500 calories, a take-out hand held basic. Because pasties cool before people buy them, they had been exempt from the 20% hot take-out sales tax. But not any more.
Part of the uproar relates to the current British government’s “upper crust” image as people who would view a pasty with distain. Pasty supporters say the Conservative government is out of touch. Pasties are the working man’s lunch.
Really though, the story is about…
- How to generate revenue. The UK has .7% economic growth for 2011, 8.4% unemployment and a massive deficit. Hoping to maintain London’s allure as a financial center, they have lowered recently elevated tax rates for the most affluent. Called the granny tax, pension exemptions have been diminished. The pasty tax is expected to raise $167 million.
- Whether you want a regressive tax. Defined as taxes that take a higher per cent of the earnings from those who earn less rather than those who earn more, a regressive tax is usually a sales tax. As a percent of the price, it is a different proportion of each purchaser’s income. By definition, the pasty tax is regressive.
- And, KISS (Keep It Simple, Stupid). This is the law: “the tax now applies to food ‘heated for the purposes of enabling it to be consumed at a temperature above the ambient air temperature and which is above that temperature’ when purchased.” One news article asked if “the buyer could ask to have it cooled to get it tax-free?”
A final thought: The National Federation of Fish Fryers was delighted.
My sources: An AP article on the pasty tax. BBC articles here and here on UK economic stats. A Telegraph article on the granny tax.
In their textbooks, economists typically refer to