Sitting in the modest living room of the home she shares with her parents, husband and two teenage children, Stella Firigou fretted about how the family would cope with the uncertainties of an economy crashing all around them. But she was adamant about one thing: she would not pay a new property tax that was the centerpiece of a new austerity package announced this month by the Greek government.

“I’m not going to pay it,” Ms. Firigou, 50, said matter-of-factly, as she lighted a cigarette and checked her ringing cellphone to avoid calls from her bank about late payments on a loan. “I can’t afford to pay it. They can take me to jail.”

While banks and European leaders hold abstract talks in foreign capitals about the impact of a potential Greek default on the euro and the world economy, something frighteningly concrete is under way in Greece: the dismantling of a middle-class welfare state in real time ”” with nothing to replace it.

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On Monday, President Obama arrived at the place that many presidents reach when a recession won’t quit: He went after the rich.

Obama said he planned to increase tax rates on the wealthy, to ensure they “pay their fair share, just like everybody else.” Republicans called Obama’s ideas “class warfare” and suggested that they would hurt the economy by leaving small-business owners with less money to spend.

Their argument sets up a replay of an old American debate occurring across a new political landscape.

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All told, federal taxpayers last year received $1.08 trillion in credits, deductions and other perks while paying $1.09 trillion in income taxes, according to government estimates.

Only about 8 percent of those benefits went to corporations. (The write-off for corporate jets equals about .03 percent of the total.) The bulk went to private households, primarily upper-middle-class families that Obama has vowed to protect from new taxes.

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It sounds like a good plan, but here’s the real risk: even after this restructuring, Greece ends up defaulting on those new EFSF-backed bonds. Remember, this is a solvency problem not a liquidity issue.

So the EFSF takes a loss, and maybe even its partner, the IMF. The debt is removed from bank balance sheets and put directly on the taxpayers of Europe and, via Washington’s 17% stake in IMF loans, Americans.

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Tax evasion in Greece threatened to take organised form on Thursday when café and restaurant owners refused to pay a 10-point VAT rise, as a deep recession clashes with the government’s increasingly desperate search for revenue.

The steep rise in value added tax on the hospitality sector from 13 per cent to 23 per cent is part of a package of fiscal measures agreed in return for the country’s second financial rescue by European Union partners.

But for many of Greece’s ubiquitous cafés and souvlaki stands, which have already seen a 20-40 per cent decline in business in the past year as customers rein in spending, the VAT rise is the final straw….

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Beginning Sept. 1, Hungarians will have to pay a 10 forint (€ 0.37) tax on foods with high fat, sugar and salt content, as well as increased tariffs on soda and alcohol. The expected annual proceeds of €70 million will go toward state health care costs, including those associated with addressing the country’s 18.8 percent obesity rate, which is more than 3 percent higher than the European Union average of 15.5 percent according to a 2010 report by the Organization for Economic Cooperation and Development. In Germany, by comparison, 13.6 percent of adults are obese, with Romania at the bottom of the list with 7.9 percent.

Hungarian Prime Minister Viktor Orban has said, “Those who live unhealthily have to contribute more.” In other words, the new law is based on the idea that those whose diets land them in the hospital should help foot the bill, particularly in a country with a health care deficit of €370 million.

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Continued involvement of the ECB could be stymied by two factors. The first is its own distaste for the job. “The fact that markets are dysfunctional is, in our opinion, the responsibility of governments,” ECB President Jean-Claude Trichet said in Brussels on Monday. “They are issuing their own securities. They have the responsibility for the credibility of their own securities.”

There are also question hanging over the Italian austerity plan that the ECB wanted as the price of its support. On Monday, a proposed tax increase on high earners was ditched and some cuts to local-authority funding were scaled back.

“If Italy can’t deliver austerity, it is going to run into some hard questions from the ECB this year,” Mr. Penn said.

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In absolute numbers, the total public debt as of Aug. 11 was $9.924 trillion, and the intra-government debt was $4.666 trillion, for a total of $14.587 trillion. That’s well over 300 million times the country’s median household income….

The GDP of the United States was $15.003 trillion at the end of the first quarter in 2011. That makes the public debt equal to 66.1% of GDP and the intra-governmental debt 31.1%. Total debt is now 97.2% of GDP and climbing rapidly.

And it’s the climbing rapidly part that is worrisome, not the debt’s current size relative to GDP. Indeed, the debt has been substantially higher by that measure in earlier times. In 1946, in the immediate aftermath of World War II, it was 129.98% of GDP. But while the debt had increased enormously during the war (it had been 50% of a much smaller GDP in 1940), it did not increase substantially over the next 15 years….

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… let me say that in English: the European Union is cracking up. The Arab world is cracking up. China’s growth model is under pressure and America’s credit-driven capitalist model has suffered a warning heart attack and needs a total rethink. Recasting any one of these alone would be huge. Doing all four at once ”” when the world has never been more interconnected ”” is mind-boggling. We are again “present at the creation” ”” but of what?….

As for America, we’ve thrived in recent decades with a credit-consumption-led economy, whereby we maintained a middle class by using more steroids (easy credit, subprime mortgages and construction work) and less muscle-building (education, skill-building and innovation). It’s put us in a deep hole, and the only way to dig out now is a new, hybrid politics that mixes spending cuts, tax increases, tax reform and investments in infrastructure, education, research and production. But that mix is not the agenda of either party. Either our two parties find a way to collaborate in the center around this new hybrid politics, or a third party is going to emerge ”” or we’re stuck and the pain will just get worse.

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Experts say the parsonage allowance was originally included as a way to minimize taxes on clergy members, whose compensation was often meager. It still is widely used for that purpose, church officials said, although the IRS doesn’t track usage of the benefit.

“For most of them the housing allowance is modest because their compensation is modest,” says Daniel Gary, an attorney with the United Methodist Church in Nashville.

Similarly, D. August Boto, general counsel of the Executive Committee of the Southern Baptist Convention, says for leaders of the organization’s 46,000 churches “the housing allowance is critically important for making ends meet””it is not a luxury.”

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I have spoken to this many times in public. Those with the capacity to hire American workers”•small businesses as well as large, publicly traded or private”•are immobilized. Not because they lack entrepreneurial zeal or do not wish to grow; not because they can’t access cheap and available credit. Rather, they simply cannot budget or manage for the uncertainty of fiscal and regulatory policy. In an environment where they are already uncertain of potential growth in demand for their goods and services and have yet to see a significant pickup in top-line revenue, there is palpable angst surrounding the cost of doing business. According to my business contacts, the opera buffa of the debt ceiling negotiations compounded this uncertainty, leaving business decisionmakers frozen in their tracks….

…put yourself in the shoes of a business operator. On the revenue side, you have yet to see a robust recovery in demand; growing your top-line revenue is vexing. You have been driving profits or just maintaining your margins through cost reduction and achieving maximum operating efficiency. You have money in your pocket or a banker increasingly willing to give you credit if and when you decide to expand. But you have no idea where the government will be cutting back on spending, what measures will be taken on the taxation front and how all this will affect your cost structure or customer base. Your most likely reaction is to cross your arms, plant your feet and say: “Show me. I am not going to hire new workers or build a new plant until I have been shown what will come out of this agreement.” Moreover, you might now say to yourself, “I understand from the Federal Reserve that I don’t have to worry about the cost of borrowing for another two years. Given that I don’t know how I am going to be hit by whatever new initiatives the Congress will come up with, but I do know that credit will remain cheap through the next election, what incentive do I have to invest and expand now? Why shouldn’t I wait until the sky is clear?”

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Tea Party activists in and out of office, including 1st District Rep. Tim Scott, have been demanding more spending-cut assurances than House Speaker John Boehner can deliver on the debt accord. They should realize that with Democrats still controlling both the Senate and White House, they can’t get everything they want this time around.

Tea Party folks also should realize that unless the debt ceiling is raised in time, the immediate bottom-line consequences could include a federal default and U.S. credit-rating downgrade.

Of course, even with a debt deal, the nation still faces serious financial risks — including a credit-rating demotion. Fortunately, next year’s presidential and congressional elections will give voters another chance to send the message that Washington can’t keep spending so far beyond our means.

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The biggest share of federal spending now goes for Social Security (20.4 percent in 2010) and Medicare (13.1 percent), the two entitlement programs that big majorities of Americans want to protect from any reductions, according to a recent poll. Together these two programs for senior citizens consume more than one-third of spending, far more than national defense, which accounts for just 20.1 percent, despite the increases of recent years….

Who pays all of these taxes? The best information on that comes from the Congressional Budget Office, which has tracked the tax burden for many years. The most recent complete data cover 2007. CBO figured in that year more than half of all federal taxes was paid by the top 10 percent of income earners. They paid 55 percent of all federal taxes in 2007, CBO said.
That’s a comprehensive figure, counting the income tax, payroll taxes, excise taxes and even the corporate income tax (borne by stockholders in the form of reduced dividends and appreciation). And perhaps surprisingly, the top 10 percent of earners pay a greater share of federal taxes now than they did before the Bush tax cuts, which Democrats constantly criticize as a giveaway to “the rich.” The top 10 percent paid 50 percent of all federal taxes in 2001.

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House and Senate negotiators have not reached a deal that would lift the nation’s debt ceiling just hours before markets in Asia are set to open ”” a test of whether Washington political dysfunction is beginning to shake the global economy.

House Republicans are not able to reach a deal with Senate Democrats, said congressional sources, though staff-level negotiations are continuing.

And in a sign that talks with Republicans appear to be going sour, Senate Majority Leader Harry Reid (D-Nev.) began to draft his own legislation Sunday that would slash at least $2.5 trillion to match an extension of the nation’s borrowing limit through the 2012 election, leadership aides said.

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This medicine is very hard for Americans to swallow, but the truth is, we can’t have it both ways. We want an arms-length relationship with the government in good times. In bad times, the cries go out to “do something,” even if it’s pay us to do nothing. We want a free-market economy during expansions, a nanny state in periods of recession. Privatized profits during the boom, socialized losses during the bust.

–Caroline Baum, in a Bloomberg News piece this week

For years now, America has been spending more money than we take in. The result is that we have too much debt on our nation’s credit card ”” debt that will ultimately weaken our economy, lead to higher interest rates for all Americans, and leave us unable to invest in things like education, or protect vital programs like Medicare.

Neither party is blameless for the decisions that led to this debt, but both parties have a responsibility to come together and solve the problem. That’s what the American people expect of us. Every day, families are figuring out how to stretch their paychecks a little further, sacrifice what they can’t afford, and budget only for what’s truly important. It’s time for Washington to do the same.

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President Obama and top House Republicans are deep in negotiations over a far-reaching plan to save $3 trillion over the next decade through sharp cuts in agency spending and politically painful changes to popular health and retirement programs, but without any immediate increase in taxes, Democratic congressional leaders reported Thursday.

White House officials insisted that Obama remains committed to including revenue increases in any comprehensive deficit-reduction package as the two sides seek an agreement that would also raise the federal borrowing limit in the face of a looming Aug. 2 deadline.

But congressional Democrats were furious over what they described as the latest twist in White House talks, which they said now appeared to taking an unacceptable turn.

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Moody’s Investors Service warned Tuesday that it probably will lower the credit rating on five states ”” including South Carolina ”” if it downgrades the U.S. government’s credit rating.

The credit rating agency said it has placed on review for possible downgrade the triple-A bond ratings of South Carolina, Maryland, New Mexico, Tennessee and Virginia.

A triple-A rating is the highest for debt and tells investors an institutional borrower presents a minimal credit risk.

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It’s not that Republicans needed to tug their forelock and go along with whatever grand bargain the White House whipped up. But to win the endgame, they needed something they were willing to concede, something they could tout in public as an example of meeting the Democrats partway.

Their inability to make even symbolic concessions has turned a winning hand into a losing one. A majority of Americans want to close the deficit primarily with spending cuts ”” which is to say, they’re primed to side with conservatives in the debt-ceiling debate. But in trying to turn that “primarily” into a “completely,” the right has squandered this advantage….

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In February, President Obama submitted his budget. The CBO reported that it would steeply boost the national debt.

In April, the president released a revised deficit-reduction plan so short on detail that the CBO deemed it too vague to evaluate.

Also in April, the Senate unanimously rejected the president’s February budget. Since then, the Democratic leadership in the Senate and the White House have put forward no clear budget approach….

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…a quick, informal selection of voices from across the country over the weekend found both pessimism and cynicism about the state of negotiations in Washington, resignation about the partisan jousting and more confusion than conniption about what exactly will happen if the president and his Republican opponents cannot make a deal to raise the debt ceiling by Aug. 2.

And neither side, they say, looks good.

“They’re all boneheads,” said Steve Ruzika, 55, an entrepreneur from Boca Raton, Fla., who added that while he is politically conservative, he is fed up with both ends of the political spectrum.

“This has been brewing for a long time,” Mr. Ruzika said. “They should have solved it before now.”

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[BOB] ABERNETHY: But the common good. This idea of the common good, very important in religious and ethics. How do you define it? And who says what the common good is?

[JIM] WALLIS: Well, this week we’ve organized 5,000 pastors to say let’s look at the real people in our congregations and our communities, what’s going to happen to them as opposed to the Washington, D.C. question, who’s up who’s down, who’s going to be the Speaker of the House next time, who’ll win the next election. The common good is about the real people, the people we have to always take into account. And pastors, I think, I wanted to talk to people whose job it is to have re-read the Bible. To get to, to focus on who the real people are here.

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Several states have passed laws requiring affiliates of online retailers like Amazon (AMZN) to collect and remit sales taxes. “Amazon tax” laws have passed in California, New York, Colorado, Rhode Island, North Carolina, Connecticut and Illinois. Lawmakers have tried in at least 14 other states.

But in nearly every case, online retailers have cut ties with their state affiliates. Residents can still buy from the e-tailers, but the affiliates lose business or move.

“The nation’s first few Amazon taxes have not produced any revenue at all, and there is some evidence of lost revenue,” according to a National Tax Foundation study last year.

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….Americans are skeptical with good reason and that level of distrust will not go away if all we get is another bipartisan approach to kicking the debt problem down the road. In case you have forgotten, we raised the debt ceiling as recently as February 2010.

When will we gain control of our budget? We routinely hear about trillions in spending cuts, yet we spend more and more each year. Lip service is paid to cutting back, but we all know that spending cuts never, ever happen in Washington DC.

With a slowing economy, the argument is often made that government has to step in and do something. As you can see from the list above, our government has been doing exactly that. Yet, those policies have been ineffective so far.

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The Internal Revenue Service didn’t always properly notify taxpayers after inadvertently disclosing personal information, according to a Treasury Department audit released Thursday.

Not all citizens were notified that their personal information had been released, in a sample of 98 case files from the 2009 and 2010 fiscal years that the IRS had flagged as inadvertent disclosures of personal taxpayer information, according to a report from the Treasury Inspector General for Taxpayer Administration.

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Free lunchism is ultimately the problem with the no-new-taxes pledge that so many politicians have adopted. A refusal to raise taxes, no matter how principled, cannot take us back to the good old days. It would instead lead to a very different American society. For taxes to remain where they are, Washington would need to end Medicare as we know it, end Social Security as we know it, severely shrink the military ”” or do some combination of the above.

“We cannot repeat the past when it comes to the federal budget,” Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, recently wrote. “The aging of our population and the rising cost of health care have changed the backdrop for federal budget policy in a fundamental way.”

The most important part of the recent Republican budget plan, written by Representative Paul Ryan, was that it acknowledged this reality…

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It’s a sad mark of the times to have to point this out, but “averting calamity” doesn’t suffice as governing strategy. It’s not what more effective public sectors in places such as Singapore or Finland, or even China, are doing.

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The major advanced economies should not just be worried about Greece, it said, they should be worried about themselves. If the huge debt levels of the major economies prompt the world financial markets to wonder if those debts will be honoured, so that the markets take a set against sovereign debt in general, the majors, too, will be in big trouble.

But as the British economist Dr Diane Coyle reminds us in her new book, The Economics of Enough, it is worse than that.

We have known for years that the major advanced economies are facing immense pressure on their budgets from the ageing of their populations. They are committed to generous pension payments and healthcare spending for their retiring baby boomers at a time when, for many countries, their populations will be falling.

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MARK SHIELDS: On revenue.

The reality is this, that every single group, whether it’s Simpson-Bowles, whether it’s Alice Rivlin and Pete Domenici, whoever it is — semi-serious, we probably should have said — yes, there have to be budget cuts to deal with the deficit problem and the debt, but there have to be revenue increases.

It’s become a dogma with Republicans now that anybody who votes for a tax increase is no longer a member of the club or the party….

MICHAEL GERSON: I think — I think Democrats are being equally unreasonable on the issue of entitlements.

This is our long-term spending challenge. It’s not that we tax too little. It’s that we have expensive entitlement commitments, an aging population, and health care inflation that have made that portion of the budget completely unsustainable….

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Despite already passing the largest package of tax increases in state history, legislators must return to Hartford on Thursday after an agreement with the state employee unions imploded. But the unbalanced budget is hardly the only problem. Connecticut, despite its affluent image and past successes, is facing a startling series of economic and fiscal challenges that it now has no option but to confront.

“No state had more resources and did less with them over the past 20 years,” said William E. Curry Jr., a former Democratic candidate for governor who now writes about state and national politics. “Yeah, we wiped out in finance and real estate, but the real problem was our own poor choices.

“We tried to import jobs you must grow yourself. We tried to save cities with ballparks and convention centers. We borrowed like shopaholics, shortchanged pension funds and barely showed up for collective bargaining.”

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