Debt prevents us from realizing either side's vision

[vash1012]

Will America Ever Pay Off Its Debt? | Ronald Cooke | FINANCIAL SENSE

I found this article interesting. Curious what others think about it. The main conclusion I got from the explanation of our debt situation is that we are not going to be able to realize either side's ultimate vision for where they want this country to go. We are in a situation where we couldn't, even if we wanted to, lower the overall tax burden if we ever hope to pay down debt. We are also in a situation where, even if we wanted to, we couldn't raise taxes enough to start paying off our debt while increasing the size of the federal government enough to support some of the more generous and broad social models of some European countries. According to that article, we would have to increase our budget by 25% to pay off our debts over the next 20 years (starting in 2018). This is also assuming that this budget was fully funded so we not only have to make up the current budget deficit we already have but we'd have to raise another 25% on top of that. This is TRILLIONS of dollars. The only way to do that is to significantly raise the tax burden or significantly reduce government spending or some combination of both. There is absolutely ZERO chance we can reduce OVERALL tax burden for many years to come. I also don't see anyway we can increase the scope of the federal government with large new social programs without increasing taxes to far beyond what the public is willing to pay (seeing as they are unwilling to pay for what they are already getting).

 

[66gardeners]

As we speak we are paying millions of dollars to purchase helicopters for Afghanistan from a foreign country.

U.S. watchdog raps Pentagon for buying aircraft for Afghan unit | Reuters

The watchdog - the Special Inspector General for Afghanistan Reconstruction - urged the Pentagon to suspend the $553 million Russian arms deal as well as a $218 million contract for 18 planes from a U.S. firm until plans were in place to fully recruit and train the Afghan special forces unit.

The Pentagon was already under fire for agreeing this month to buy 30 additional Mi-17 helicopters from the Russian arms dealer, Rosoboronexport. That company is a major supplier of weapons to Syrian President Bashar al-Assad, who is battling rebels trying to overthrow his government

I find it curious that the tea party people see no problem with this type of ridiculous spending.

 

[vash1012]

As we speak we are paying millions of dollars to purchase helicopters for Afghanistan from a foreign country.

U.S. watchdog raps Pentagon for buying aircraft for Afghan unit | Reuters

The watchdog - the Special Inspector General for Afghanistan Reconstruction - urged the Pentagon to suspend the $553 million Russian arms deal as well as a $218 million contract for 18 planes from a U.S. firm until plans were in place to fully recruit and train the Afghan special forces unit.

The Pentagon was already under fire for agreeing this month to buy 30 additional Mi-17 helicopters from the Russian arms dealer, Rosoboronexport. That company is a major supplier of weapons to Syrian President Bashar al-Assad, who is battling rebels trying to overthrow his government

I find it curious that the tea party people see no problem with this type of ridiculous spending.

Military spending efficiency should clearly be one of our top priorities in the years to come. Theres way too many cooks in that kitchen all trying to keep their units/bases/ports/contracts fully funded.

 

[66gardeners]

Military spending efficiency should clearly be one of our top priorities in the years to come. Theres way too many cooks in that kitchen all trying to keep their units/bases/ports/contracts fully funded.

There is so much money being inefficiently spent by the military that I believe stopping it would solve the debt problem.

 

[iacardsfan]

Interesting yet scary read. The debt is a problem, a very serious one. That's why I am hoping that Governor Bob McDonnell will run for President in 2016, he turned VA's 4 billion dollar deficit into a surplus in just two years while not directly raising taxes and seeing the unemployment rate down around 5%.

 

[ttwtt78640]

A plan to reduce the debt, not often discussed, is to "freeze" the current social program benefits and simply allow inflation to do the job. It is insane to allow federal social "safety net" program benefits to exceed the value of a full time job at the minimum wage. The federal minimum wage has not been increased since 2009 yet the federal poverty rate and social program payouts have been increased.

 

[rabbitcaebannog]

From the article: "America will never “pay off” its load of federal debt."

How do you pay off debt that is mostly future assets to the American public?

 

[vash1012]

From the article: "America will never “pay off” its load of federal debt."

How do you pay off debt that is mostly future assets to the American public?

I don't believe the future obligations are included in our publicly held debt. Future unfunded obligations from social security and medicare can be "paid off" or reduced by reforms to the programs. The debt itself has to actually be paid.

 

[rabbitcaebannog]

I agree with you but the author of the article you posted sure seems to indulge in some peculiar solutions including "a reduction of Social Security, Medicare, Medicaid and other health and retirement benefits to hold the line on further indebtedness".

 

[vash1012]

I agree with you but the author of the article you posted sure seems to indulge in some peculiar solutions including "a reduction of Social Security, Medicare, Medicaid and other health and retirement benefits to hold the line on further indebtedness".

Well, as he points out, Social Security and Medicare trusts buy treasury bonds from the treasury in order to "loan" it money (and also to act as an investment I suppose). With the SS and Medicare expenditures set to increase significantly over the next few years, they will no longer be able to use the funds in their trusts to buy treasury bonds and may even need to start getting some of the money they loaned the treasury back which will lead to larger deficits and higher interest payments as a percentage of GDP down the road. If we reform SS and Medicare to delay their needing to do that AND to eventually prevent them from needing to use general funds to fund their programs, we'll have an easier time paying off debt.

 

[AlabamaPaul]

Well, as he points out, Social Security and Medicare trusts buy treasury bonds from the treasury in order to "loan" it money (and also to act as an investment I suppose). With the SS and Medicare expenditures set to increase significantly over the next few years, they will no longer be able to use the funds in their trusts to buy treasury bonds and may even need to start getting some of the money they loaned the treasury back which will lead to larger deficits and higher interest payments as a percentage of GDP down the road. If we reform SS and Medicare to delay their needing to do that AND to eventually prevent them from needing to use general funds to fund their programs, we'll have an easier time paying off debt.

Why should the debt be "paid off"?

 

[CanadaJohn]

I find it curious that the tea party people see no problem with this type of ridiculous spending.

I'm curious - can you name a few or any of the Tea Party people who "see no problem with this type of ridiculous spending"?

 

[vash1012]

Why should the debt be "paid off"?

Is that a serious question? Because we have to pay interest on it. Do you think we can seriously stay 17 trillion dollars in debt for ever? By the time we get around to balancing the budget, itll be ~24 trillion. That means we'll be spending ~750 billion a year in interest alone. I understand its much more likely that we will pay it down some than pay it off, but we still have to attain a true budget surplus including the interest payments to do so or do you think can just pay the interest on them until they all mature without ever running any sustained budget deficits again?

 

[AlabamaPaul]

Is that a serious question? Because we have to pay interest on it. Do you think we can seriously stay 17 trillion dollars in debt for ever? By the time we get around to balancing the budget, itll be ~24 trillion. That means we'll be spending ~750 billion a year in interest alone. I understand its much more likely that we will pay it down some than pay it off, but we still have to attain a true budget surplus including the interest payments to do so or do you think can just pay the interest on them until they all mature without ever running any sustained budget deficits again?

Yes, the question was serious. Tell me what obligation the government cannot meet since it has a monopoly on the currency in which its debt is denominated. Can profligate spending ruin the economy, sure, but that issue has nothing to do with debt repayment...

 

[Gimmesometruth]

Well, as he points out, Social Security and Medicare trusts buy treasury bonds from the treasury in order to "loan" it money (and also to act as an investment I suppose). With the SS and Medicare expenditures set to increase significantly over the next few years, they will no longer be able to use the funds in their trusts to buy treasury bonds and may even need to start getting some of the money they loaned the treasury back which will lead to larger deficits and higher interest payments as a percentage of GDP down the road. If we reform SS and Medicare to delay their needing to do that AND to eventually prevent them from needing to use general funds to fund their programs, we'll have an easier time paying off debt.

That "down the road" time frame is @ 20 years, we have already started to get a lowered rate of change in medical costs ....and very small changes in rates will keep SS solvent once we get past the boomer bump.

The issue that is not emphasized is the discretionary side, this is where the problem is as far as spending goes...but even that ignores the main problem, that the debt is being created primarily from reduced revenues.....because of depressed demand.

Demand is the base issue.

 

[AlabamaPaul]

That "down the road" time frame is @ 20 years, we have already started to get a lowered rate of change in medical costs ....and very small changes in rates will keep SS solvent once we get past the boomer bump.

The issue that is not emphasized is the discretionary side, this is where the problem is as far as spending goes...but even that ignores the main problem, that the debt is being created primarily from reduced revenues.....because of depressed demand.

Demand is the base issue.

The budget/spending issues are on the entitlement side, not the discretionary side. The entirety of the deficit/debt over the past 50 years has been caused by entitlements that were not given a specific source of funding...

 

[vash1012]

Yes, the question was serious. Tell me what obligation the government cannot meet since it has a monopoly on the currency in which its debt is denominated. Can profligate spending ruin the economy, sure, but that issue has nothing to do with debt repayment...

The obligation it cannot meet would be the one it has to its citizens if it were to try to manipulate its currency sufficiently to get out of debt. The issue of government debt repayment includes the issue of controlling inflation so that you don't destroy the wealth of your country in order to repay debt.

 

[AlabamaPaul]

The obligation it cannot meet would be the one it has to its citizens if it were to try to manipulate its currency sufficiently to get out of debt. The issue of government debt repayment includes the issue of controlling inflation so that you don't destroy the wealth of your country in order to repay debt.

The issue relates to spending in areas the produce no return. Yes, inflation is a very real concern because much of the government's current spending is done in areas that produce nothing...

 

[vash1012]

That "down the road" time frame is @ 20 years, we have already started to get a lowered rate of change in medical costs ....and very small changes in rates will keep SS solvent once we get past the boomer bump.

The issue that is not emphasized is the discretionary side, this is where the problem is as far as spending goes...but even that ignores the main problem, that the debt is being created primarily from reduced revenues.....because of depressed demand.

Demand is the base issue.

We ran budget deficits in the early 2000's when the economy was starting on its bubble boom. Is that a demand problem?

 

[vash1012]

The issue relates to spending in areas the produce no return. Yes, inflation is a very real concern because much of the government's current spending is done in areas that produce nothing...

Could you be more specific which areas you are saying produce no return? Are you referring to interest payments?

 

[AlabamaPaul]

We ran budget deficits in the early 2000's when the economy was starting on its bubble boom. Is that a demand problem?

There has not been a truly balanced budgeted where the debt has been reduced since Eisenhower. What's your point?

 

[AlabamaPaul]

Could you be more specific which areas you are saying produce no return? Are you referring to interest payments?

The entire entitlement area of government spending...

 

[Gimmesometruth]

The budget/spending issues are on the entitlement side, not the discretionary side. The entirety of the deficit/debt over the past 50 years has been caused by entitlements that were not given a specific source of funding...

Thats funny since even the OP was honest enough to note that FICA has been a funding source for discretionary spending.

 

[AlabamaPaul]

Thats funny since even the OP was honest enough to note that FICA has been a funding source for discretionary spending.

FICA funds two programs and two programs only. That the government has chosen to spend any surpluses in other areas does not change the fact that the current debt is approximately equal to the nation's entitlement spending that occurred over the past 50 years or so...

 

[Gimmesometruth]

We ran budget deficits in the early 2000's when the economy was starting on its bubble boom. Is that a demand problem?

Actually, we were experiencing a recession in 2001 and spending increased while revenues declined as a percentage of GDP....due to the Bush tax cuts.....so yes, part of the problem was a demand component. The RE bubble was credit driven.