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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 12:22 pm 
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kombat wrote:
In Canada, $0.25 of every federal income tax dollar collected is spent just paying the interest on our national debt. That's crazy! Who would run their own household budget that way? Where 25% of your income is sucked up just paying the interest on your outstanding debt?

Ok. My first response was going to be something funny like, "Oh stop bragging about how good shape Canada's finances are in" But then I looked and found the following:

Interest paid on US nation debt for FY 2012 = $375,867,511,477.84 (Source is US Treasury)
US federal spending for FY 2012 = $3.6 trillion. (Source is Wikipedia...yeah, I know)

That means we spend about 10% of spending on interest. That doesn't seem so bad. And it is decreasing because of Fed actions and falling interest rates. Amazingly, it is plausible that we could start making money off this if interest rates go negative as they have in some countries.

But even with Canada's figure and your analogy to household budgets, spending 25% on debt service is not as horrible as it seems. Many people spend 30% or more on mortgage interest alone. Perhaps that is irresponsible, but it is common. And few households have the borrowing capacity of the US. There is no shortage of people willing to lend us money. People might actually be paying for the privilege of having the USG hold their money right now. Of course that could change. But the USG still has the unlimited power to tax and it controls the printing presses. I know of no households with those resources available as a backup plan.

So, while I agree that things are getting out of hand, I think you need to have a little perspective before getting too excited about big numbers.


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 12:36 pm 

Joined: Tue Oct 23, 2007 7:07 am
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kombat wrote:
VinTek wrote:
Hence the need for a comparison to GDP -- it makes the number meaningful. You really need to take a quickie course in economics.


All right, fair enough, I never claimed to be an economic expert, nor an expert in the history of national debts in our respective countries. All I know is that as a taxpayer, the debt has been steadily increasing faster than inflation, and when rates start to rise, we're in serious trouble. In Canada, $0.25 of every federal income tax dollar collected is spent just paying the interest on our national debt. That's crazy! Who would run their own household budget that way? Where 25% of your income is sucked up just paying the interest on your outstanding debt?


As DoingHomework has already alluded to, you cannot relate to or compare a government's budget/spending to an individual's. It doesn't work, they are inherently VERY different.


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 12:48 pm 

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Savarel wrote:
During the boom years of the 1990s it was all we could do to balance the budget, no one even seriously considered paying down the actual debt. Which is fine, because if you dont add more to it via deficit spending, it will eventually wind down over time.

Yes, and that's what we did during the Clinton administration. The chart clearly shows the results of that effort.

Savarel wrote:
The debt isnt a huge problem now, but it will certainly become a huge problem if a long term strategic spending plan is not formulated by our government.

Anyone think that plan is coming anytime soon?

http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf already exists but no one is willing to commit political suicide to implement it.


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 12:53 pm 
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VinTek wrote:
The plan already exists but no one is willing to commit political suicide to implement it.


Are you willing to run for Congress?


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 1:01 pm 

Joined: Fri May 04, 2007 8:14 pm
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kombat wrote:
VinTek wrote:
And I'll also point out that the bulk of the nation debt that you're so worried about, in terms of absolute dollars, which you seem to fixate on, was incurred in the years during which Gen X was of voting age.


Right. And who were we voting for? Boomers. How many Gen-X-er's were on the ballot? Close to none. No matter which way we voted (Democrat, Republican, Liberal, Conservative, whatever), they were all Boomers.

Ummm...you're supposed to be voting for people who represent your position. The generation they belong to doesn't have much to do with it. While it's true that most of the candidates were Boomers, I daresay that there was a large number of different political positions that were held.

VinTek wrote:
kombat wrote:
VinTek wrote:
Gen X is the first generation to make a meaningful sacrifice after thousands of years? Are serious? Have you any idea how how you sound? Ever hear of WW2?


Oh come on, VinTek, surely you realize I was referring to sacrifice in the context of climate change in that passage.

Yes, We did rationing (gas, rubber, metal) of all kinds in WW2 for the war effort. We did gas rationing in the 70s during the energy crisis. It seems that the Gen Xers are the ones who don't want to make a sacrifice and cut down any kind of usage for any kind of reason.


That's actually a great point, and made me consider why this makes me mad. When you put it that way, I realized that I don't actually mind making sacrifices if it helps society. I just don't want to be the ONLY one making sacrifices.[/quote]
Wrong approach. And that's the part I don't get. Back in the day, no one said "I'll only do it if my neighbor does." They just did it, because it was for the greater good. Somebody has to start and if you're the only one who makes a sacrifice for the greater good, is that so bad? It's not like we're being asked for martyrdom. It's only some inconvenience and some mild discomfort. I don't think anyone is being asked to turn off the heat in order to conserve fuel when it's 10 below outside. Folks are just being asked to turn their thermostat down and wear a sweater inside the house. But for some folks, that's too much to ask.

kombat wrote:
I can live with raising the retirement age to 67. I understand that money's tight and we've all gotta make sacrifices. What makes me mad is that the people responsible for messing up the budget so badly as to necessitate such a modification are still going to take their money at 65. It's only us poor saps who had nothing to do with running up this debt that are the ones who are going to have to suffer for 2 more years.

I don't blame you for being mad. But again, I have to point out that Gen Xers helped to put those people who messed up the budget into office.

kombat wrote:
I don't mind raising income taxes a little to help fix this mess, so long as a) the taxes are raised evenly, across the board, for EVERYBODY, including that 50% who currently don't pay any net federal income tax at all, and b) the extra money collected is actually used to FIX the problems and pay down debt, and not siphoned off and spent on needless new vote-buying partisan make-work projects.

See the plan I linked to in response to Saverel's post. There is an actual plan that seems like it would work, with pain shared by everyone. But since nobody want to experience any of that pain, it doesn't get passed.


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 1:03 pm 

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DoingHomework wrote:
VinTek wrote:
The plan already exists but no one is willing to commit political suicide to implement it.


Are you willing to run for Congress?

I'm too honest to get elected. And my stint working at Chippendale's would probably torpedo my political chances anyway.


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 1:34 pm 
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VinTek wrote:
kombat wrote:
I can live with raising the retirement age to 67. I understand that money's tight and we've all gotta make sacrifices. What makes me mad is that the people responsible for messing up the budget so badly as to necessitate such a modification are still going to take their money at 65. It's only us poor saps who had nothing to do with running up this debt that are the ones who are going to have to suffer for 2 more years.

I don't blame you for being mad. But again, I have to point out that Gen Xers helped to put those people who messed up the budget into office.


And Gen Xers have also enjoyed the lower taxes that got us into this mess (specifically SS). Remember, those Boomers paid higher tax rates. In 1969 a flower child with a $35000 job (in 2012 dollars) paid about 25% in taxes. The same guy pays about 15% now. A professional making $250k a year (in 2012 terms) pays 35% now but about 60% back then. The numbers are hard to digest I agree, but the point is that those boomers paid through the teeth in taxes until the 1980s. Averaged over their lifetime and adjusted for inflation I doubt they paid less that you do today. I suspect they paid more because I think part of the reason we are in this mess is because taxes are too low to be sustainable. I'm all for low taxes to stimulate growth, but when it's not working and is destroying the national balance sheet, you have to be prepared to cut bait.


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 2:04 pm 
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Not really sure if I'm welcome to the discussion so I'll try to make it short and sweet.

VinTek wrote:
See the plan I linked to in response to Saverel's post. There is an actual plan that seems like it would work, with pain shared by everyone. But since nobody want to experience any of that pain, it doesn't get passed.


I read the plan you mentioned VinTek. China is the largest holder of American debt. That is not a pleasant thought. I agree nobody wants to seriously look at the options proposed. But in theory the problems would get resolved with the plan set forth.

I think you're right it is political suicide.

I also agree that everyone is responsible. There's no use in saying "well it was the previous generations fault." It's our problem. I hope we deal with it in our lifetimes and we don't pass the buck to the next generation.

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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 2:16 pm 

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Eagle wrote:
I also agree that everyone is responsible. There's no use in saying "well it was the previous generations fault." It's our problem. I hope we deal with it in our lifetimes and we don't pass the buck to the next generation.

As mentioned before, I don't think that some measure of debt is undesirable as long as the money is spent wisely and is held to a manageable level. That said, we would certainly need to have balanced budgets for awhile to get to that point.

The thing is, we haven't been without 1835, so having debt is nothing new and certainly can't be pinned on a single generation. The finger-pointing is tiresome. The real question is whether we can elect politicians who have the political will to do what needs to be done.

And I'm not particularly worried about China owning most of our debts. While it's certainly not desirable, having a ready buyer has probably helped keep us from going over the fiscal cliff. And it also bonds them to us. China now has a vested interest in a healthy US economy. They would be badly hurt if we were to default.


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 2:17 pm 
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Eagle wrote:
Not really sure if I'm welcome to the discussion...

I read the plan you mentioned VinTek. China is the largest holder of American debt. That is not a pleasant thought. I agree nobody wants to seriously look at the options proposed. But in theory the problems would get resolved with the plan set forth.


Why not?

Why do you say that China being the largest holder of American debt is not a pleasant thought? I've heard others say that as well but it just makes very little sense to me. Can you explain your basis for saying that?


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 2:30 pm 
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DoingHomework wrote:
Eagle wrote:
Not really sure if I'm welcome to the discussion...


Why not?


Based on the comments at the end of the Obamacare thread... And Vintek's comments at the end of the thread that lead to this one. Perhaps it was just my impression. In any case...

DoingHomework wrote:
Eagle wrote:
I read the plan you mentioned VinTek. China is the largest holder of American debt. That is not a pleasant thought. I agree nobody wants to seriously look at the options proposed. But in theory the problems would get resolved with the plan set forth.


Why do you say that China being the largest holder of American debt is not a pleasant thought? I've heard others say that as well but it just makes very little sense to me. Can you explain your basis for saying that?


"Large debt will put America at risk by exposing it to foreign creditors. They currently own more than half our public debt, and the interest we pay them reduces our own standard of living. The single largest foreign holder of our debt is China, a nation that may not share our country’s aspirations and strategic interests. In a worst-case scenario, investors could lose confidence that our nation is able or willing to repay its loans – possibly triggering a debt crisis that would force the government to implement the most stringent of austerity measures." THE NATIONAL COMMISSION ON FISCAL RESPONSIBILITY AND REFORM - Page 12

China has done what the USSR was never able to accomplish successfully - economic superiority. And the closer we get to China's economy overtaking the U.S. economy the more our lifestyle here in the U.S. will be threatened. My opinion. But how many trillion U.S. dollars does China have in reserves? We're talking very different ideologies between China and the U.S.A.

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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 2:32 pm 
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Well, I see Vintek got to the China-debt question first.

The reality is that China is a huge US trading partner, like it or not. That inevitably leads to very close financial ties. And when one partner maintains a consistent trade imbalance with the other, the only way to absorb the difference is through holding the net importing party's debt.

Now, you could make a case for pressuring China to buy more US goods, but you'd be running into a conundrum. The 'buyers" in China are private companies and individuals. The only way for "China" to force more purchasing of American products is by command...and we don't like that. The other way is for we Americans to stop buying Chinese goods. Depriving American consumers of access to cheap Chinese labor and materials will act like a tax increase here. So, what would you propose?

There are economic policy adjustments they can make like weakening their currency, but that would lead to inflation and they have done too good of a job managing that to cave in to US demands now. The Chinese government could agree to purchase strategic items from the US...but oh yeah, that's banned by the US government. When they've tried, they get shot down. The reality is there is very little they can do besides buying our debt or simply stacking up the dollar bills in a big pile or paving the roads with greenbacks.

Frankly, China has done a phenomenal job of becoming an economic powerhouse. They have a ways to go in many areas especially in terms of human rights and the environment. But I have never understood the rationale people use to argue that China holding US debt is a serious problem. Almost everyone I have ever heard saying that is unable to give a rational answer why they believe that when questioned. They can scream that it is bad but then they get a blank look on their face when asked why.


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 2:39 pm 
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VinTek wrote:
As mentioned before, I don't think that some measure of debt is undesirable as long as the money is spent wisely and is held to a manageable level. That said, we would certainly need to have balanced budgets for awhile to get to that point.


Money spent wisely... A manageable level is needed for sure.

VinTek wrote:
The thing is, we haven't been without 1835, so having debt is nothing new and certainly can't be pinned on a single generation. The finger-pointing is tiresome. The real question is whether we can elect politicians who have the political will to do what needs to be done.


I would hope that elected politicians could foster the change. But I honestly doubt it. I predict a financial crisis (EU maybe?) will trigger the actual change. The issue of the possible sequestration by the U.S. government later this year or early next year? My opinion. :tmi:

VinTek wrote:
And I'm not particularly worried about China owning most of our debts. While it's certainly not desirable, having a ready buyer has probably helped keep us from going over the fiscal cliff. And it also bonds them to us. China now has a vested interest in a healthy US economy. They would be badly hurt if we were to default.


This is actually a good point. China has helped foster the American dream? China having a vested interest in the U.S. economy is good I suppose. China would in fact be hurting (what 2-3 trillion in U.S. dollars in reserves?) if the U.S. were to default. Not sure that is conforting though. That's like saying "Well, if the ship goes down and we drown at least we wouldn't be the only ones dronwing..." :^)

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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 2:48 pm 

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Eagle wrote:
This is actually a good point. China has helped foster the American dream? China having a vested interest in the U.S. economy is good I suppose. China would in fact be hurting (what 2-3 trillion in U.S. dollars in reserves?) if the U.S. were to default. Not sure that is conforting though. That's like saying "Well, if the ship goes down and we drown at least we wouldn't be the only ones dronwing..." :^)

I wouldn't call it fostering the American Dream. More like enabling an addict to continue his addiction. But no matter. It is what it is.

As for your analogy, it's more like Mutual Assured Destruction. Neither one wants the other to go down (and yes, we don't want China to go down, because the loss of its goods would set off an inflationary spiral here that would sink us as well), so each side does what it can to keep the other afloat. Not an ideal situation, but it worked during the Cold War. Nobody went thermonuclear on anyone else.


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 Post subject: Re: The National Debt - How Bad Is It and Who's Fault Is It?
PostPosted: Wed Aug 01, 2012 2:53 pm 
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Eagle wrote:
"Large debt will put America at risk by exposing it to foreign creditors. They currently own more than half our public debt, and the interest we pay them reduces our own standard of living. The single largest foreign holder of our debt is China, a nation that may not share our country’s aspirations and strategic interests. In a worst-case scenario, investors could lose confidence that our nation is able or willing to repay its loans – possibly triggering a debt crisis that would force the government to implement the most stringent of austerity measures." THE NATIONAL COMMISSION ON FISCAL RESPONSIBILITY AND REFORM - Page 12

The interest does cost us. But only because we spent money and presumably gained a past benefit. Some of that debt was racked up in the Iraq war. We could not afford to pay for it yet our leaders deemed it beneficial so we paid for it with debt and are now incurring interest as a result. That's an argument against debt but not against China!

If China loses confidence in our ability to pay our debts, what could it do? Invade? That won't get it paid. The best thing for China to do if it wants to be paid is to HELP us!


Eagle wrote:
China has done what the USSR was never able to accomplish successfully - economic superiority. And the closer we get to China's economy overtaking the U.S. economy the more our lifestyle here in the U.S. will be threatened. My opinion. But how many trillion U.S. dollars does China have in reserves? We're talking very different ideologies between China and the U.S.A.


I think most Chinese people want to live their lives in peace, enjoy time with their families, prosper by working at something they enjoy, and have fun occasionally. Is that really much different than Americans? People are pretty much the same everywhere. (Someone once told me that Chinese men are allowed to have concubines...maybe that is something we should explore here in the name of cultural exchange.)

In modern times China has shown no evidence of being imperialistic like the US, USSR, UK, Germany, France, Spain, Portugal, Holland, or a few other countries. There are no Chinese bases or Chinese colonies spread around the world. History has shown that they've been fairly content to stay within their own borders, fight occasionally among themselves, but mostly leave their neighbors alone. Even the most prominent man made feature in China was defensive.

So I'm not really sure what ideology you are so worried about. China would be pretty far down my list right now of countries that are likely to cause major disruptions to the US in my lifetime.

Specifically, what ideology or characteristic of China do you find so horrifying?


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