The National Debt - How Bad Is It and Who's Fault Is It?

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Savarel
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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby Savarel » Wed Aug 01, 2012 4:07 pm

In modern times China has shown no evidence of being imperialistic


Not 100% true. The Chinese government has claimed a huge swath of the south pacific and the islands therein as its own, including the unfortunate incident involving the Phillipines. China also clearly has aspirations of bringing the island of Taiwan back into the fold, and they have been ruthlessly subjugated the formerly free nation of Tibet for six decades.

Probably not a threat to the United States, as our nuclear arsenal makes it virtually impossible for any nation to invade and subjugate the populace and claim our land as theirs. However, the nations of southeast Asia are certainly a little skittish about the future.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby DoingHomework » Wed Aug 01, 2012 4:36 pm

Savarel wrote:
In modern times China has shown no evidence of being imperialistic


Not 100% true. The Chinese government has claimed a huge swath of the south pacific and the islands therein as its own, including the unfortunate incident involving the Phillipines. China also clearly has aspirations of bringing the island of Taiwan back into the fold, and they have been ruthlessly subjugated the formerly free nation of Tibet for six decades.

Probably not a threat to the United States, as our nuclear arsenal makes it virtually impossible for any nation to invade and subjugate the populace and claim our land as theirs. However, the nations of southeast Asia are certainly a little skittish about the future.


Good points. And they hold Macau and a few other islands as well. But I believe they have restricted their "aggression," as bad as it has been in many cases, to areas it considers part of China (such as Tibet). There were some unfortunate atrocities associated with the Chinese during WWII as well, in Singapore, for example. But my point was that China has not invaded a neighbor in a very long time. The rest of us were using (at least metaphorically) sticks and stone tools at the time. And some of that fighting amongst themselves was pretty brutal.

I don't see any reason why China would invade Laos, Cambodia, Thailand, N or S Korea, Vietnam, or Japan. I just don't see what would be in it for them. I believe they supported (North) Vietnam against us, but let's see, who was the imperialist? China clearly has the military capability to be a threat. But I think they are far smarter than that.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby DoingHomework » Wed Aug 01, 2012 4:38 pm

VinTek wrote:
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.


But you'd have the tux for the fundraisers, at least parts of it.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby bpgui » Wed Aug 01, 2012 5:05 pm

DoingHomework wrote:
VinTek wrote:
DoingHomework wrote: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.


But you'd have the tux for the fundraisers, at least parts of it.

I think I'd vote for a stripper running for office. It be good to get some intelligent people in there. And from our experience on "mancation" laat weekend, most strippers are smarter than our elected officials.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby VinTek » Wed Aug 01, 2012 6:13 pm

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

But you'd have the tux for the fundraisers, at least parts of it.

I think I'd vote for a stripper running for office. It be good to get some intelligent people in there. And from our experience on "mancation" laat weekend, most strippers are smarter than our elected officials.

Unfortunately the traditional way of collecting funds in that line limits the amounts that can be collected for space reasons.

DoingHomework
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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby DoingHomework » Thu Aug 02, 2012 6:45 am

bpgui wrote:I think I'd vote for a stripper running for office. It be good to get some intelligent people in there. And from our experience on "mancation" laat weekend, most strippers are smarter than our elected officials.


There's a story or two in there somewhere...

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby bpgui » Thu Aug 02, 2012 7:21 am

DoingHomework wrote:
bpgui wrote:I think I'd vote for a stripper running for office. It be good to get some intelligent people in there. And from our experience on "mancation" laat weekend, most strippers are smarter than our elected officials.


There's a story or two in there somewhere...

That there is. Perhaps for another thread.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby VinTek » Thu Aug 02, 2012 7:30 am

And dragging this thread back to the deficit...

Interestingly enough, the CBO (Congressional Budget Office) has determined that the Affordable Care Act will cut the deficit. You can read about it without spin directly from their site. It's kind of dry reading, but something finance geeks like me eat up.

Now folks, let's not drag this thread into another debate about the merits of the ACA itself. If you want to talk about it, let's confine the discussion to how it relates to the deficit. We can revisit Obamacare via a new thread. That's something I'm contemplating because I want to dispel some of the FUD on the original Obamacare thread.

Edit: Changed the name of the law to from Affordable Healthcare Act to it's real name: Affordable Care Act.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby DoingHomework » Thu Aug 02, 2012 9:53 am

VinTek wrote:And dragging this thread back to the deficit...


Um...do we need to review the difference between the debt and the deficit again? See the title of your thread.

Although there have been good points made on both sides in this thread and elsewhere, the simple fact is that an accumulating debt means we are living beyond our means. At times, such as right now when we are trying to stimulate the economy, this makes sense. I believe having some debt also makes sense when the economy and/or population is growing because it is usually necessary to fund long term projects, much like a mortgage is necessary for most individuals in order to buy a home.

But when carrying a huge debt becomes the norm, I think there is a problem. We could quibble about how to measure it (% of GDP, adjustments for GDP and population growth, etc.) but I'm not sure there is really anyone serious out there who is arguing that the long term policy of any country should be to carry massive debt.

So the question becomes...what are we will to do/sacrifice/etc. to eliminate the deficit so that we are making progress on the debt?

I personally think the "plan" pointed to by Vintek on several occasions, which was bipartisan both in its construction and rejection, would be a good start. But until we make some truly fundamental choices about the future role of the US in the world, we won't make any serious progress.

I think we can actually succeed under some very diverse choices - maintain superpower/world police status or not, come into the modern world regarding social programs or not, etc. - but until we actually make those choices, I don't see an chance of getting unstuck from the place we are now.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby VinTek » Thu Aug 02, 2012 11:07 am

DoingHomework wrote:
VinTek wrote:And dragging this thread back to the deficit...

Um...do we need to review the difference between the debt and the deficit again? See the title of your thread.

Right. I stand corrected.

DoingHomework wrote:Although there have been good points made on both sides in this thread and elsewhere, the simple fact is that an accumulating debt means we are living beyond our means. At times, such as right now when we are trying to stimulate the economy, this makes sense. I believe having some debt also makes sense when the economy and/or population is growing because it is usually necessary to fund long term projects, much like a mortgage is necessary for most individuals in order to buy a home.

But when carrying a huge debt becomes the norm, I think there is a problem. We could quibble about how to measure it (% of GDP, adjustments for GDP and population growth, etc.) but I'm not sure there is really anyone serious out there who is arguing that the long term policy of any country should be to carry massive debt.

So the question becomes...what are we will to do/sacrifice/etc. to eliminate the deficit so that we are making progress on the debt?

I personally think the "plan" pointed to by Vintek on several occasions, which was bipartisan both in its construction and rejection, would be a good start. But until we make some truly fundamental choices about the future role of the US in the world, we won't make any serious progress.

I think we can actually succeed under some very diverse choices - maintain superpower/world police status or not, come into the modern world regarding social programs or not, etc. - but until we actually make those choices, I don't see an chance of getting unstuck from the place we are now.

Elimination of the debt was a very real concern in the late 90s. Remember that time? The debt was going down so fast that it was projected to be eliminated in 2012. One problem is that if there's no national debt, then there are no US Treasury Bonds. NPR found a secret study on this problem that was written in 2000. They did a piece on that document in October last year. The document in its entirety is linked there if you want to read it.

The article says the following about paying off the debt:
This was seen in many ways as good thing. But it also posed risks. If the U.S. paid off its debt there would be no more U.S. Treasury bonds in the world.

"It was a huge issue ... for not just the U.S. economy, but the global economy," says Diane Lim Rogers, an economist in the Clinton administration.

The U.S. borrows money by selling bonds. So the end of debt would mean the end of Treasury bonds.

But the U.S. has been issuing bonds for so long, and the bonds are seen as so safe, that much of the world has come to depend on them. The U.S. Treasury bond is a pillar of the global economy.

Banks buy hundreds of billions of dollars' worth, because they're a safe place to park money.

Mortgage rates are tied to the interest rate on U.S. treasury bonds.

The Federal Reserve — our central bank — buys and sells Treasury bonds all the time, in an effort to keep the economy on track.

If Treasury bonds disappeared, would the world unravel? Would it adjust somehow?

"I probably thought about this piece easily 16 hours a day, and it took me a long time to even start writing it," says Jason Seligman, the economist who wrote most of the report.

It was a strange, science-fictiony question.

"What would it look like to be in a United States without debt?" Seligman says. "What would life look like in those United States?"

Yes, there were ways for the world to adjust. But certain things got really tricky.

For example: What do you do with the money that comes out of people's paychecks for Social Security? Now, a lot of that money gets invested in –- you guessed it — Treasury bonds. If there are no Treasury bonds, what do you invest it in? Stocks? Which stocks? Who picks?

In the end, Seligman concluded it was a good idea to pay down the debt — but not to pay it off entirely.

"There's such a thing as too much debt," he says. "But also such a thing, perhaps, as too little."

Now I happen to be a finance geek, not a policy wonk. I don't know enough to intelligently agree or disagree with the study. But I do caution that we should always be careful what we wish for. Unintended consequences are almost a given when it comes to government policy. The trick is trying to figure out if the risks of inaction outweighs the risks of action.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby DoingHomework » Thu Aug 02, 2012 12:35 pm

I read the article but not the full report. It was an interesting and valid concern. But lets not forget that the USG DID stop selling 30 year bonds for 5 years. There were predictions of major problems but they never materialized.

One major issue is that many organizations like pension funds and insurance companies are REQUIRED to hold a certain fraction of assets in US Treasuries. So if there are no Treasuries they can't comply with their mandate. Of course mandates can be changed.

So, I think it is naive and ignoring the recent past to try to argue that we can never be in the situation of being debt free. But I also think that most of the issue that come up from not having Treasuries can be resolved in other ways. But there are risks with some of those. (Mortgages began to be indexed to LIBOR for example...how can the free market be wrong? Then look what happened.) I also think if we ever got into a situation where we were in danger of being truly debt free, we could still issue bonds as a mechanism for stability. We might not issue long bonds but we could keep the shorter issues for financial purposes.

My overall take on that whole issue is that it would be a good problem to have and would be entirely manageable.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby VinTek » Thu Aug 02, 2012 12:53 pm

DoingHomework wrote:My overall take on that whole issue is that it would be a good problem to have and would be entirely manageable.

I think you may be right, but I also think it's not something we'll have to worry about for a very long time. Until then, I'm content just to aim for a sizable reduction.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby VinTek » Mon Aug 06, 2012 8:58 am

New info:

According to a BusinessWeek article last week, The Fiscal Cliff We All Saw Coming, see the following:

The bottom line: The fiscal crisis shouldn’t come as a surprise: The Bush tax cuts had an expiration date because Congress knew they’d lead to big deficits.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby DoingHomework » Mon Aug 06, 2012 9:17 am

VinTek wrote:New info:

According to a BusinessWeek article last week, The Fiscal Cliff We All Saw Coming, see the following:

The bottom line: The fiscal crisis shouldn’t come as a surprise: The Bush tax cuts had an expiration date because Congress knew they’d lead to big deficits.


Yeah, that is no surprise. The tax cuts were supposed to stimulate the economy after the tech bubble burst. I actually think that they did, at least from the low level it would have been at, and what we are seeing now is just the inevitable reckoning. In other words, the Bush tax cuts only prolonged the onset of the pain. I don't actually think they were all bad, but I think that extending them now will only have marginal effect. But NOT extending them could be very bad. We've got to get out of this mess before we cut spending or raise taxes.

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Re: The National Debt - How Bad Is It and Who's Fault Is It?

Postby VinTek » Mon Aug 06, 2012 9:35 am

DoingHomework wrote:Yeah, that is no surprise. The tax cuts were supposed to stimulate the economy after the tech bubble burst. I actually think that they did, at least from the low level it would have been at, and what we are seeing now is just the inevitable reckoning. In other words, the Bush tax cuts only prolonged the onset of the pain. I don't actually think they were all bad, but I think that extending them now will only have marginal effect. But NOT extending them could be very bad. We've got to get out of this mess before we cut spending or raise taxes.

I agree with you. We're probably at a tipping point. This slow recovery we're going through seems very fragile.

Something just occurred to me. The Dems believe in stimulus spending so that money can trickle down to working folks via jobs. The GOP believes in cutting taxes for rich folks so that the money can trickle down to working folks via jobs. So both sides are arguing for the same thing; the only difference is the place from which the trickles down. Yet both sides argue vehemently that the other side is wrong. We live in a very strange society.


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