Eh, the thought is that revenues vary wildly with the state of the economy. If increased spending and/or tax cuts now can stimulate the economy, we'll have lots more money to pay down the debt next year, or so the theory goes.

Personally, I think it's pretty irritating that governments seems to think that the current revenue levels will continue forward no matter where we are in the business cycle. In the past, this has been most noticeable in state governments. Every time there is a boom, California goes and spends all the increased tax revenue and commits to spending it in the future. Of course, this is a problem when the economic boom ends.

I'm just suggesting that we tackle the debt problem when the economy is good. Doing so while unemployment is still 10+% is, I think, risking another downturn, which is going to make paying off the debt even harder.

> It would be terrible in the short run, but it would be vastly better in the long run. Presently, the US is on the unsustainable trajectory of acquiring debt until it defaults.

Some of us have been saying this ever since Bear&Stearns went down, in the spring of 2008, that you cannot just prop up an non-solvent bank/country/whatever.

At that time all the "bright" economists were saying things like "it's only a liquidity problem, we just need to grease the system with a little more printed money and things will be just fine" (which they finally did, after Lehman's collapse), while now they're saying things like "let's just raise the debt ceiling this one more time to allow the FED to print more money and things will be just fine". Well, if things have turned up to be "just fine" first time around how did we "evolve" from the level of "Wall-Street bank going into default" to "the first military power of the Earth possibly going into default" ? To this question the bright economists don't have any answer, apart from stupid things like "we should have printed more money".

Eventually there will be a good deal of money printing involved in solving this problem, especially given the paucity of options available for fixed-income investors with a low appetite for risk (what, would you prefer the Euro or the Yen?), but it will never be the case that the US will have a solvency problem in the same way as Bear Stearns or Greece because they can always print their way out of it with inflation as the downside. Inflation is still very tame relative to the period between 1972 and 1982, and it is very unlikely that we will see contributory mistakes of the magnitude of imposing price controls and eliminating the link to gold during the upcoming period.

Is inflation tame according to the Fed calculations which ignore expenses that matter to people like oil, or according to meaningful calculations? Because it sure seems to me that the prices I pay are rising pretty quickly. Quickly enough that I can notice it. A cup of coffee that cost $1.95 a couple of years ago now costs $2.30. And I'm not earning any more money than I was then, so I can feel the difference.

Including oil in inflation costs distorts the picture though.

The standard response to inflation is to suppress demand within the economy to make price rises unsupportable and dampen things down. When the inflation is due to factors that are external to the economy though, such as a global spike in commodity prices, this measure is largely ineffectual; the dampening effect on global market prices is insignificant compared to the dampening effect on the internal economy. You only end up suppressing your own economic growth to your own cost while seeing a small at best effect on inflation in the commodity that was causing the inflation for which you're trying to control.

Oil prices are rising for perfectly sensible global reasons, get used to it. This is causing inflation you can't control and which the economy can't afford to compensate for; your standard of living will drop. If you want to avoid this, work harder to earn more; it's the only way out.

CPI is computed by the Department of Labor. There is both a CPI and a separate "core CPI" index that attempts to exclude energy costs.

That's a gross mischaracterisation of the situation.

The banking collapse was significantly due to a combination of over-weak market regulation causing a real estate market bubble and outright fraud at credit ratings agencies - I can think of no other term for securitising sub-prime loans into super-prime derivatives.

So, there's a major financial market crash / correction (significantly exacerbated by a very well known liquidity shortage due to institutions having to rebuild reserves and up risk factors), leading to a generalised collapse in revenues, government included.

If government is to 'live within its means' at such a time as some suggest then the spending cuts need to be utterly, utterly vicious, no way round it - cuts have to not just cover the reduction in revenues but also the increase in welfare payments, or would you rather have the suddenly poor and unemployed either starving or rioting? For the largest single player in the economy to make cuts on that scale at a time when the economy is already severely stressed, you bet the result would snowball and put the economy into an even more severe tailspin.

Which is why President Bush authorised the stimulus packages you're complaining about, which cost more on his short watch than Obama's rather longer period and yet which has still cost less than two other measures for which we should remember President Bush - top-end tax cuts and a war in Iraq over weapons that didn't exist and was pushed for after a terrorist attack by an opponent of the Iraqi regime.

All of which is on top of the limit being raised several times by Presidents Bush 1 and 2 and President Reagan, all of whom incurred significant debts. President Clinton, on the other hand, left a rising surplus which Bush took no time at all in reversing.

This whole debacle is idiotic and intellectually bankrupt pre-election grandstanding by the Republican leadership, who deserve severe electoral punishment for this absurdity.