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How The US Is Now Experiencing Its Own, Bizarro-World Version Of The Euro Crisis

Today New Jersey Governor Chris Christie delivered a historic tirade blasting fellow Republican John Boehner for refusing to hold a vote on aid for Hurricane Sandy.

The raw anger and emotion was like something from out of a movie, but beyond the obvious points, Chris Christie brought up one fact about the US economy that really should get a lot more attention than it does.

Rich states like New Jersey, New York, and California (which frequently get blasted by conservatives for having high taxes and big government) pay a lot more in federal taxes than they get back from the federal government. While Republican states, with their low taxes and small governments, get more back than they pay in.

This map demonstrates that phenomenon. The ones shaded blue pay in more than they get back. Texas is the only "blue" state here that doesn't vote Democratic.


Anyway, it's the system of intra-state transfers that makes the United States a functioning union, and it's the reason that we're not like the Eurozone.

The US states and the various Eurozone countries are actually similar in that they can't print their own money, and have to strive to balance their books, and if they don't, markets may lose confidence in them. But the difference is that the rich states are permanently bailing out the poor states, a mechanism which doesn't exist formally in Europe (it exists on an ad hoc basis).

Not only that, but there are mechanisms to balance things out, when there's a slump.

Although Florida currently pays in more than it receives, during the collapse, it got a big benefit.

Paul Krugman pointed out earlier this year:

1. From IRS data, we find that Florida’s tax payments to Washington fell approximately $25 billion between 2007 and 2010, the bottom of the slump.

2. From Labor Department data, we find that in 2010 special unemployment insurance programs — extended benefits paid for from DC — were about $3 billion in 2010.

3. From SNAP (food stamp) data, we see that food benefits to Florida rose about $3 billion over the same period.

Both Florida and Spain had huge housing busts, but the difference was that Spain didn't benefit from all these special programs, and lower taxes paid to a central European authority. It just had to fend for itself.

So anyway, the fact that some states help other states is great, but here's where it gets weird.

In Europe, you have rich, high-productivity states like Germany demanding that the poor, low-productivity states cut their government budgets if they want bailout money. And although the economic don't work, the sentiment is logical, especially if you're a German politician that has to explain to voters why their tax dollars are going to a different country.

But in the US it's totally different. It's the moocher states (the Greece-like states that are poor and rely on handouts) imposing austerity on everyone. Imagine if Greece were to try to dictate what kind of economic policy Germany could use to stimulate its economy. That's what's happening in the US.

And that's why Chris Christie is rightly outraged that the GOP is so reluctant to aid New Jersey, when over the years (and every year) New Jersey gives more than it gets back.

And although Christie specifically blasted Boehner (while trying to elevate Eric Cantor) in his speech today, this is not just a Cantor thing. Last year Cantor himself was demanding "offsets" for Irene aid spending in the immediate wake of the debt ceiling fight. So this is a GOP thing through and through.

The US doesn't have an acute debt problem, but it does have a growth problem. And the continued fights with the pro-austerity camp that emanates from moocher states is not helping the US break out of that trap.

SEE ALSO: Why New Jersey should be outraged with John Boehner >

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Goldman: Why This Debt Ceiling Fight Could Be Even More Of A Nightmare Than The Last One

Washington Dc American Flag

Goldman's Alec Phillips warns that the upcoming fight over lifting the debt ceiling could be harder than the 2012 fight, which was brutal and confidence crushing.

Phillips writes:

Unfortunately, the upcoming increase may be more difficult to enact than the increase in 2011. Few spending cuts had been enacted before the previous increase, which left lawmakers with several areas of the budget from which to pull potential savings. Congress eventually settled on $2.1 trillion in spending cuts, essentially all coming from a reduction in spending appropriated by Congress (about $900bn from caps on "discretionary" spending, and $1.2 trillion from "sequestration"). While hardly non-controversial, these cuts did not affect specific programs but instead capped overall spending, thus reducing political opposition. The fiscal agreement Congress just passed increases revenues by about $600bn over 10 years (compared with a full extension of expiring income tax cuts), and while this second round of savings was much more controversial than the first, a majority of the public supported the tax increase, which was targeted on high incomes.

More specifically. Suppose the Congress wants to raise the debt ceiling by $1 trillion, then that means an addition $1 trillion in cuts must be found.

But this is not easy. For one thing, no party has identified where they would find another $1 trillion in cuts to discretionary spending. Furthermore, if the cuts are going to come from entitlements, then Obama would demand that there also be new taxes, which the GOP won't accept. And beyond that, Obama has already said he won't negotiate cuts for a debt ceiling hike this time.

Says Phillips:

These factors imply that the next debt limit increase will be at least as difficult to enact as the last one was, and that there is a clear possibility of breaching the limit and causing more significant disruptions to government financing. Phillips is not alone in worrying.

Phillip Klein at the Washington Examiner says the same thing in a column tonight, that the debt ceiling could be harder this time around.  His logic is similar to Goldman's: There just aren't obvious avenues to cuts:

This time, however, it will be more difficult for Republicans to get Democrats to agree to spending cuts. In the summer of 2011, both parties were essentially placing bets on the outcome of the 2012 election. With Obama re-elected and Democrats still controlling the Senate, Democrats believe they are in a stronger position.

The 2011 debt-limit deal reduced projected spending by about $917 billion. There isn't much desire among victorious Democrats to cut discretionary spending further, and there is deep resistance to cutting mandatory spending by reforming the big entitlement programs -- Medicare, Medicaid and Social Security.

Congress is also running out of gimmicks. Scrambling to come up with further spending cuts during the 2011 debt-limit fight, lawmakers created a bipartisan, bicameral 12-member "super committee" tasked with finding at least $1.2 trillion in deficit reduction. In theory, the members would be motivated to act, or else face automatic cuts to defense and nondefense spending at the start of 2013. They failed to come up with a solution, but this week's fiscal cliff deal delayed the automatic cuts -- or sequester -- for another two months.

We wrote a few days ago that it was quickly becoming clear why The Boehner Rule (the principle that any debt ceiling hike has to correspond with a dollar-for-dollar cut in spending) is so ridiculous and unsustainable.

There just aren't obvious areas that anyone could possibly agree to find $1 trillion cuts every year. It's already significantly harder than it was just in 2011. 

By the  way: Goldman estimates that March 1 will be the day the US hits the hard debt ceiling. That's also the same day, coincidentally (?) that the sequester is supposed to kick in. Circle it on your calendars. 

SEE ALSO: Sean West is also worried about the debt ceiling >

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Tour The Ultimate Harry Potter Museum In London

Harry Potter Museum London Dining Room 2

The Harry Potter movie series finished last year, but the magic of J.K. Rowling's story continues to captivate fans.

A Harry Potter amusement park in Orlando, Florida is a hit, and two more theme facilities are under construction in Japan and Los Angeles.

But nothing gets closer to the real experience that the elaborate Harry Potter Museum in England.

Part of The Warner Brothers Studio, just outside London, "The Making of Harry Potter" features actual sets, costumes, and special effects stations used in the movies.

Russian photographer Konstantin Shestakovsky went to the museum and documented the experience in a detailed photo essay.

We are featuring some of highlights of the tour here, courtesy of Shestakovsky, that are bound to bring you back to Hogwarts.

Main entrance

Main Entrance

First stop in the dining hall. Here are the dining section for the teachers...

First Stop In The Dining Hall Here Are The Dining Section For The Teachers

...and for the students.

And For The Students

See the rest of the story at Business Insider

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