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Discussion in 'Politics, Religion, Social Issues' started by zimv20, Oct 25, 2005.
anyone remember the clinton years?
that was back in may 2000.
To make matters worse, our net investment position is nearing $-3 trillion.
(US property abroad - foreign property in the US).
It was only about $-800 billion before Bush took office.
Bush and the Republicans have destroyed any work Clinton had done. Imagine a president that never says NO to Congress. Welcome to our President, first thing he did when he took office was throw away the Veto pen. Clinton left economic order in our Govt,Shored up Social Security. Bush tore all that down and is going to leave a mess. Never seen a president who is so willing to throw our hard earned tax dollars away.
People do the math wrong on the debt. Sure, the per-person share is $26,900. But that's if you paid it off today. Are we going to pay it off today? Nope, so the interest gets tacked on, which, at about 4.5%, is $1,210. Then next year, you still owe the original $26,900, plus whatever you borrowed. Are you going to pay that off next year? Nope, so you pay the interest, another $1,210. Over the next 30 years, even if we never borrow another dime, we'll pay about $36,000 in interest per person, and still owe the original $26,900. It's like one of those "are you facing credit card debt?" commercials, but for your whole freakin' country.
The Democrats need to start running as the party of fiscal discipline, and point this kind of stuff out at every opportunity. Every time a rightie hauls out the "tax'n'spend" label, turn around and slap them upside the head with a "borrow'n'spend" comment.
Although the up side is that the GOP has pretty much painted itself into a corner with their anti-tax platform. State and local GOP officials that don't have the luxury of running a deficit are now in a position where if they even breath a word about raising taxes for any reason whatsoever they face a primary challenge from a tax-cutting zealot. Thus they end up either being run out of office or driving their state/locality into the ground.
Just look at the fight going on in Colorado right now.
March 2005 Public Debt: 7,776.9
Amount held by:
Federal Reserve and Government accounts: 3,921.6
Total held privately: 3,855.4
Breakdown of non-USFG holdings:
Depository institutions: 142.7
U.S. Savings Bonds: 204.3
Private (including Federal pensions): 153.3
U.S. State and Local Governments (for pensions): 145.0
U.S. State and Local Governments (not for pensions):407.0
Insurance Companies: 151.5
Mutual Funds: 261.9
other investors: 407.4
foreign and international: 1,982.2
So, most of the US government debt, folks, is owned by the US government. It's essentially a function of the monetary system? Half of the rest is owned by Americans, and about a quarter of the debt is owned by foreign investors. That's the only debt we have to "pay off" in a real sense. The rest is just redistributive within the US economy (from taxpayers to [wealthy] debt owners).
Seeing as how money isnt real. Its paper and ink. It has no value other than what was "paid" for the raw materials. What we attach to this paper and coinage is a value for trade or goods and services. but of course in reality, there is no money because what is the money standing for? Gold? Jewels? Porn stars?
Yes we have a debt, but cmon who is gonna come asking?
Don't ever say we're not paying back the national debt. If people start to believe you, then the US bond, the most secure financial instrument in the world, won't be worth the paper its printed on. Those bonds are owned by banks, insurance companies, endowments, corporate treasuries, retirees, pension funds, foreign governments, etc. And the inter-governmental debt that you mention is owned by the social security program, which has financial obligations of trillions of dollars over the next few decades.
The day that you say that we're not paying back the US national debt and people believe you is the day that you go to the grocery store with $100 and still can't afford a loaf of bread.
Heh... I'd love to watch you try and make that argument to your mortgage lender or your credit card provider!
Well, I honestly don't think that anything I do could cause a collapse of the US economy and monetary system.
I just mean to point out that some ways in which people think about the debt aren't quite realistic. I think some people think it is all owed to foreign governments. Most is owed to ourselves. So if you think about it, in terms of how much wealth the US has, the national debt that is not owned by foreigners is a wash. Every penny "we" owe "we" also own. The problem, of course, is that the owing and the owning are not held in equal proportions for all Americans. Some people own a lot of that debt, others of us own very little.
Well, you're still painting a frightening picture where Joe Average says "screw the debt, I'm not paying it off", and a bank fails, a pension fund collapses, an insurance company goes bankrupt, a retiree starves, a company can't build a new plant, etc, all within the US. It's not about Donald Trump skipping a meal, most bonds are owned by institutions that need a rock-solid investment security. Bottom line is that the government is going to have to keep making its interest payments if it wants investors to take the US treasury bond seriously. Defaulting is not an option, no matter who the lender is.
I'm really not suggesting that people not pay off the debt, and I'm not sure why you think that I am. My point is the debt is not necessarily the problem that people think that it is, and is not necessarily the drag on the US economy that people think that it is. I'll try to make this point again. OK. It costs the government money to pay off the interest and pay back the loans. Most of that money goes into the US economy to the various institutions, agencies, etc. that own those bonds. In total, it doesn't cost the US economy to pay back a bond to a US investor.
And this "frightening picture" you describe is a little odd. How does Joe Average decide whether or not he's not going to pay off the debt? I don't think Joe Average has much to say about it.
Joe Average has plenty to say about it, and unfortunately he/she keeps electing the officials who vote to cut taxes for immediate benefit rather than try to pay down the debt.
I don't doubt that currently it is not as big of a deal as some people make it out to be (although $2 trillion in foreign debt is mildly disconcerting since life could be made very difficult if we anger enough foreign governments and they decide to call in our debt and move their holdings to Euros).
However since the current borrow'n'spend policy isn't doing anything to decrease the principal or even keep it steady it becomes an exponential curve as they borrow more and more money to pay the interest on the initial balance, thus increasing the balance/interest payments in a catastrophic cycle.
Since the only method the government has of generating more revenue is to increase taxes, we'd be better of with a smaller increase now than a much larger one when the interest payments on the debt become unsustainable. Once the debt is paid off, then we could have a fairly substantial tax reduction since we'd only need to pay the operating costs of the government in a given year rather than operating costs + debt payment. By tristan's calculations this comes out as a tax cut of ~$1200 per person, kind of makes the $300 check seem kind of paltry doesn't it?
Yes the money goes into the US economy since most of the bondholders are US citizens/businesses, however more of them are owned by the wealthy so unless you only raise taxes on the upper income brackets you will end up taking more money from the poor to give to those who don't necessarily need it.
The redistributive effect was part of my original point.
My other point is macroeconomic. The government borrowing money is not necessarily a bad thing. The government pays for a lot of things that are investments in our future (infrastructure, education, research, security...) Those government investments allow our economy to grow at a faster pace, which allows us to a) have a higher standard of living now and in the future, and b) repay those loans. The problem is when the government borrows too much and effectively invests too little (like the current government is doing with its tax, Iraq, and other policies). It is very unlikely the costs of our current policies will pay off sufficiently in the future, so we are indeed making ourselves much poorer and having to sell our treasure (debt and property) to other countries. Eventually, this will all come home to roost and the American standard of living will decline (or at least stagnate while others continue to improve).
I think somewhere in there we are in agreement. I don't necessarily have a problem with the government borrowing as long as it is bringing in enough revenue to pay down the debt and is getting the money at a sufficiently low interest rate. Much like paying 1.9% interest on a car loan while making 3% on the money at your bank (numbers pulled out of the air to illustrate a point). However the current administration is not being that responsible and $8 trillion may not be as abhorrent a number as it sounds it has not been steady or decreasing which is the more disturbing part since there don't seem to be any plans in place to keep it from growing.
The even more disturbing part is when you start to look into the future and look at probable events given today's situation. If Bush doesn't pull off a miracle it's almost a sure win for the Democratic party in 2008 if they can run someone with slightly more personality than a cardboard cut out (although the cardboard cut out has potential if Cheney, Frist or DeLay were the Republican nominee). Now given the state of things an increase in taxes will be necessary to maintain some sort of fiscal responsibility. Now we get a government running surpluses so the next election turns to tax cuts... 2000 all over again... (mind you this is only based on today's current standing, Iraq could become a bastion of democracy, every indictment currently outstanding (or future) could be cleared and the economy could start booming next year)
Let's talk about the redistribution because I think you're missing something.
You have a good job and can save about $1000 a year. At the end of one year, you have $1000 in the bank. You loan it to a company to buy computers, and they pay it back in two years with $100 interest. At the end of three years, you have $3100. $3000 in saved wages + $100 in interest.
Now let's redo the scenario and say the government needs a bridge to nowhere. At the end of the first year, they take your $1000 from savings and give you an IOU for $1100. During the next two years, you earn your $2000, but they charge you an extra $1100 in taxes to pay back the IOU.
At the end of three years in this scenario, you have $2000. What happened? The government stole your savings and then taxed you to pay it back. And guess what? The company never got to buy its computers, so it suffered from lack of investment. Welcome to the world of national debt.
Um. So people who buy bonds from the USG will be charged an additional tax for the exact value of the bond repayment? Welcome to the world of inaccurate analogies.
And while we all know there is wasted government spending, most government spending is not on bridges to nowhere. Let's say instead that $1000 was used to research a new technology that results in $10000 in new technology injected into the US economy, resulting in $2700 in new taxes. Now the US repays your bond and has money left over to buy other goodies, like fixing those potholes in front of your house.
I simplified the example by using the same person, but the point is that every bond is repaid through higher taxes on US citizens - that's the only way it can possibly be repaid unless we want to sell Alaska back to the Russians. So you buy a bond, your neighbors and your kids pay the interest and principal, and someone else loses out on the possible investment.
Sure, if the US government makes productive investments, then future income will be higher and some of that will be captured in tax receipts. Sounds good to me. Increased education funding would be a great way to accomplish this. Or you can save future costs by funding afterschool programs for kids that reduce crime. I'm all for that. Most government programs realistically range from income redistribution to money down the drain. (i.e. Prescription Drugs is redistribution, bombing Sunnis is a waste).
8 trillion!! i was waiting rub this in my teachers face but he left this year( this is bad!!)
That a LOT OF iPods iPod Shuffles iPod Nanos PowerMacs PowerBooks iBooks iMacs Mac Minis eMac and Mac Severs!
I didn't think we paid teachers that much.
Look at it this way: without the interest payments we're making, we would have an extra $150 billion a year to rebuild New Orleans, or defeat terrorism, or find Osa...I mean, prosecute Saddam.
Saudi Arabia, Japan, China. Do I have all those right? Sigh- I do remember the Clinton years. While I didn't like him at the time, he's looking better and better with each passing day.
As long as we pay the interest, everything's cool. Those interest payments are getting pretty high though - about 15% of our entire budget. And if we hit a recession, nobody's going to say "aww, don't worry about this month's payment".
By the way $8T would pay for more than 100M graduate degrees!
Couldn't the government also fund the process up front through tax revenue and then cut taxes once the economy grew? Wouldn't the benefit be comparable, with less risk? The borrow and hope for economic growth can work and should be an option but not borrowing and then passing the benefit on as future tax cuts seems like a safer bet since the economy hinges on so many other variables that make it nearly impossible to predict future growth. Which is what helped get us into this mess to begin with.
Sort of, but that means raising taxes. The government borrows money when it doesn't have enough to do everything that it wants. Think of another example. "Development:"
Poor country x doesn't have enough money from tax revenue to pay for education, or improved health care. In theory, the benefits of education will be a more productive workforce that will generate higher tax revenues. So country x borrows that money and hopes to pay it off. It works well as long as the money is well and realistically invested. If it lines the pockets of corrupt leaders and cronies, the country ends up poorer and in a debt trap. Country x can't just fund the project through taxes now though because it doesn't have the revenues.
Same with the US. We don't have the revenues right now to pay for everything we want to do (because Bush cut taxes). So we either borrow or raise taxes back up. I imagine we'd both argue for raising taxes, but that doesn't mean that borrowing is necessarily bad. It's better to borrow some years and run a surplus other years than to constantly adjust the tax system.