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National Debt -- How much is too much?

galenrox

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Iriemon said:
You have to look at both the level of debt in conjunction with a defict. If there was no debt, a deficit for any given year is not necessarily terrible or even bad -- in a rescission there is an argument that tax cuts/additional spending helps the economy get back into gear.

However, if you have a large debt and a good economy, deficits are not helpful and just add to the debt burden. Ultimately, it is the debt that burdens the nation. The $325 interest expense in 2004 was not because of the deficit -- that was the interest the Govt had to pay because of its large debt. The fact that we are vulnerable to China and Japan is not because of a deficit in any given year, but because we owe those countries hundreds of billions because of continued deficits over a period of many years.
That is true, but you also have to acknowledge that, at least for my entire lifetime we've been trillions of dollars in debt, so that level of debt is to be assumed.
The fact is debt at a certain degree bogs down the economy due to interest payments, but the defecit is what hurts our currency. The fact is domestically the actual economic indicators aren't so bad, i.e. inflation low, relatively low unemployment, but the fact is with our defecit we are just falling deeper and deeper into the little hole we've dug for ourselves, and a good domestic economy doesn't mean all that much, considering our trade defecit.
 

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galenrox said:
That is true, but you also have to acknowledge that, at least for my entire lifetime we've been trillions of dollars in debt, so that level of debt is to be assumed.
The fact is debt at a certain degree bogs down the economy due to interest payments, but the defecit is what hurts our currency. The fact is domestically the actual economic indicators aren't so bad, i.e. inflation low, relatively low unemployment, but the fact is with our defecit we are just falling deeper and deeper into the little hole we've dug for ourselves, and a good domestic economy doesn't mean all that much, considering our trade defecit.

Are you talking about trade deficits or budget deficits?
 

galenrox

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Iriemon said:
Are you talking about trade deficits or budget deficits?
both, seperately. Budget defecits and trade defecits, in combination with the debt, which is now assumed, is what hurts the currency. It's hard cause the budget and trade defecits have been so attrocious under Bush that it's hard to tell which of them is hurting us the worst.
 

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A lot of people get focused on the total debt. Otherwise, they wonder how much total debt is too much. That focus is a bit misguided. The reason being is that in the global economy, there is plenty of money out there to float our debt. The real problem is in the costs of servicing that debt. The more that is spent servicing debt, the less that can be spent on any other function of government. For example, right now it costs the government about 23 cents on the dollar to service debt. The more we borrow, the higher the costs of serving that debt, which only means we have to borrow more. What can happen is that it can eventually be crippling to the economy to service the national debt. At the rate we are going, in ten years, it could be that it could costs as much as 50 cents on the tax dollar to service debt.

What a lot of people don’t seem to get is that you cannot just pay down the national debt. The government pays it down as the debt come due. The whole point to balanced budgets and budget surpluses is to not to have to borrow more money and to be able to service debt as it comes due without incurring additional debt.

The point in all of this is that the debt itself is not so bad, the problem is the costs of servicing it.
 

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SouthernDemocrat said:
A lot of people get focused on the total debt. Otherwise, they wonder how much total debt is too much. That focus is a bit misguided. The reason being is that in the global economy, there is plenty of money out there to float our debt. The real problem is in the costs of servicing that debt. The more that is spent servicing debt, the less that can be spent on any other function of government. For example, right now it costs the government about 23 cents on the dollar to service debt. The more we borrow, the higher the costs of serving that debt, which only means we have to borrow more. What can happen is that it can eventually be crippling to the economy to service the national debt. At the rate we are going, in ten years, it could be that it could costs as much as 50 cents on the tax dollar to service debt.

What a lot of people don’t seem to get is that you cannot just pay down the national debt. The government pays it down as the debt come due. The whole point to balanced budgets and budget surpluses is to not to have to borrow more money and to be able to service debt as it comes due without incurring additional debt.

The point in all of this is that the debt itself is not so bad, the problem is the costs of servicing it.

What's the difference? The cost of servicing it makes it bad. Aside from that, it is bad because it makes us somewhat vulnerable to nations like China and Japan to whom we owe hundreds of billions. If they stopped lending, I'm not sure that wouldn't have an impact.

Also, you have to look at debt in terms of future obligations. If I owe 4x my income with no other obligations, that might be OK. If I owe 4x my income but I have 4 kids starting college in the next few years, and a couple elderly parents I have to help support, that level of debt can be a serious problem.

This country has huge fiscal obligations coming up with the aging of the baby boomers. A level of debt that might not have been a problem in 1980 is a much more serious problem now.
 

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Don't worry about debts be American dang
the green back will be par with the looney
and keep your debt
then canadians will make 15% - 30% more per week then you and it will be par

keep it up push it over the 400 billion come on be AMERICAN DANG!

its the american way you are buying the american dream for every American
with your debt
the american dream of course
man on the moon but no medicare
huge army bristling with the latest war tech but 1 in 4 americans below the poverty line
war on IRAQ no money for levees

its a nightmare not a dream
yuo all have a piece of the american dream
 

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It was Alexander Hamilton that once said, "A Nation must never default on its debts." So I suppose we should try to pay them off. But realistically, I don't think we're in the financial state to do that right now and we probably won't be for at least another 50 years.

But then again, Alexander Hamilton also said that a national debt would be a blessing for a country. I'm not an economist so I can't really say for sure. But I do believe that we won't be able to pay off a large chunk of the debt for many more years to come. We just have to many other expenses, the money has to go other places.
 

galenrox

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George_Washington said:
It was Alexander Hamilton that once said, "A Nation must never default on its debts." So I suppose we should try to pay them off. But realistically, I don't think we're in the financial state to do that right now and we probably won't be for at least another 50 years.

But then again, Alexander Hamilton also said that a national debt would be a blessing for a country. I'm not an economist so I can't really say for sure. But I do believe that we won't be able to pay off a large chunk of the debt for many more years to come. We just have to many other expenses, the money has to go other places.
Hamilton was a brilliant man, but he was a bit of an ideologue.
A national debt is a good thing because it means you're using the funds neccisary to maximize your nation's potential.
But yeah, we're in pretty dire straights right now, namely because the neoconservative economics plans were obviously written by retarded chimpanzees.
Up until 2003 cutting the defecit wouldn't have been that paramount of a task, it would've taken cut backs and intelligence, and definately no tax cuts any time soon, but it was possible.
Now it's gonna take a long time.
We simply can't afford what we're doing. With the billions and billions spent in Iraq and the hundreds of billions of dollars it's gonna take to repair New Orleans, compounded by the fact that some retards in congress think the solution to this problem is tax cuts for the rich.
And we can't pay back the debt while we're in this big of a defecit. Think about it, let's say hypothetically you make $2000 a month. You then proceed to borrow an extra $1500 a month. If you're spending $3300 a month, and $200 towards interest, there's simply no way to pay back the debt. We could hypothetically borrow more to pay back our debt, but for all practical purposes that's the same as paying a credit card bill with a credit card, it really doesn't do any good.
And the idea behind the tax cuts is that if the rich have more money, they'll provide more higher paying jobs, thus more tax revenue. This simply won't work. For one, the federal reserve's current position right now is curttailing growth, by raising interest rates, cause our economy is technically booming, and any other growth would lead to massive inflation. The other reason this wouldn't work is because of outsourcing, the money can't trickle down and create tax revenue when all of this money goes right out to China as soon as the rich get it.
So yeah, pretty much, until the American public stop electing retards, we're pretty well screwed.
 

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hey, whats your take on greenspan.
 
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Galen, the wealthy get more back in tax cuts because they pay more in taxes...theres even an additional tax for the wealthy. It's called the Luxury Tax. Everyone got money back from the tax cuts. I do agree that the "trickle-down effect" doesn't work. The insanely wealthy would rather buy $50,000 shower curtains than raise salaries and provide well paying jobs.
 

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Napoleon's Nightingale said:
Galen, the wealthy get more back in tax cuts because they pay more in taxes...theres even an additional tax for the wealthy. It's called the Luxury Tax. Everyone got money back from the tax cuts. I do agree that the "trickle-down effect" doesn't work. The insanely wealthy would rather buy $50,000 shower curtains than raise salaries and provide well paying jobs.


Yeah but think about it. Suppose they do go buy $50,000 shower curtains. Then it helps the company that sells them and might allow them to hire more workers, thereby helping lower the unemployment rate.
 
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George_Washington said:
Yeah but think about it. Suppose they do go buy $50,000 shower curtains. Then it helps the company that sells them and might allow them to hire more workers, thereby helping lower the unemployment rate.

Assuming that the owners of the company decide to doll out the money instead of pocketing it. It doesn't matter if the unemployment rate goes down if the jobs are temporary and poor paying. That is the dilemna the republicans won't face. They love to claim that they've created jobs but don't tell anyone that most of the jobs are temporary and low paying. Besides, we've seen the job market being exported to foreign workers instead of Americans because the companies know that it's cheaper to hire a foreign worker than an American citizen.
 

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Napoleon's Nightingale said:
Assuming that the owners of the company decide to doll out the money instead of pocketing it. It doesn't matter if the unemployment rate goes down if the jobs are temporary and poor paying. That is the dilemna the republicans won't face. They love to claim that they've created jobs but don't tell anyone that most of the jobs are temporary and low paying. Besides, we've seen the job market being exported to foreign workers instead of Americans because the companies know that it's cheaper to hire a foreign worker than an American citizen.

Well suppose the owners of the company go buy a $50,000 yacht. Then it helps the yacht company, which also might help the workers in return.

I agree that we should be careful that jobs aren't too low paying but people are also free to go to college and thus earn a higher income.

Also, keep in mind that if companies pay their workers too low a wage, the quality of the product will suffer and the company will lose money anyway.
 
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George_Washington said:
Well suppose the owners of the company go buy a $50,000 yacht. Then it helps the yacht company, which also might help the workers in return.

I agree that we should be careful that jobs aren't too low paying but people are also free to go to college and thus earn a higher income.

Also, keep in mind that if companies pay their workers too low a wage, the quality of the product will suffer and the company will lose money anyway.

Might is the key word. It's not worth the gamble especially while our national deficit is through the roof and the government keeps handing out billions of dollars in IOUs left and right. People aren't completely "free" to go to college..college costs money and scholarships aren't open to everyone not to mention the ridiculous affirimative action policy the colleges and universites have. Colleges and Universities don't take an applicants academic reccord into consideration anymore..now its about meeting a racial quota and how many zeros daddy can pencil in on a check. Most college students are up to their eyeballs in debt by the time they graduate. Even if graduates get a well paying job alot of that money is spent paying back the loans. It might not neccessarily cause the quality of the product to suffer..especially when the primary work force is overseas. Just look at McDonalds..it's a minimum wage job but their burgers are still tasty :lol:
 

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Napoleon's Nightingale said:
Might is the key word. It's not worth the gamble especially while our national deficit is through the roof and the government keeps handing out billions of dollars in IOUs left and right. People aren't completely "free" to go to college..college costs money and scholarships aren't open to everyone not to mention the ridiculous affirimative action policy the colleges and universites have. Colleges and Universities don't take an applicants academic reccord into consideration anymore..now its about meeting a racial quota and how many zeros daddy can pencil in on a check. Most college students are up to their eyeballs in debt by the time they graduate. Even if graduates get a well paying job alot of that money is spent paying back the loans. It might not neccessarily cause the quality of the product to suffer..especially when the primary work force is overseas. Just look at McDonalds..it's a minimum wage job but their burgers are still tasty :lol:

Well, I agree we should pay off the national debt but I still think we should still believe in free market economics. To an extent, anyway.
 

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George_Washington said:
It was Alexander Hamilton that once said, "A Nation must never default on its debts." So I suppose we should try to pay them off. But realistically, I don't think we're in the financial state to do that right now and we probably won't be for at least another 50 years.

But then again, Alexander Hamilton also said that a national debt would be a blessing for a country. I'm not an economist so I can't really say for sure. But I do believe that we won't be able to pay off a large chunk of the debt for many more years to come. We just have to many other expenses, the money has to go other places.

Gee we were in the financial shape to start paying off the debt in 2000. In fact, in that year, the Govt paid the debt down by $116 billion.

It will take us another 50 years, or never, as long as we have fiscally irresponsible people in charge of our Government like we do now.

It is not just a matter of expenses. It is a matter of expenses relative to tax revenues. We could cut expenses 50%, but if we cut tax revenues 50 we will have the same problem. Conversely, we could increase revenues as well. Or do both.

But you are correct in way -- if we take our best year ever, in terms of paying down the debt (2000), as the benchmark it would take 68 years to pay off the current level of debt
 
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George_Washington said:
Yeah but think about it. Suppose they do go buy $50,000 shower curtains. Then it helps the company that sells them and might allow them to hire more workers, thereby helping lower the unemployment rate.

Taxes on the wealthy were increased in 93. We had in this country phenonemal job growth 93-2000. Taxes on the wealthy were slashed in 00-03. (Taxes the working poor pay were not cut at all.) Job creation has been basically non-existent in 00-05. This despite the fact that the economy has grown about 25% (in actual dollars) during this time frame.

The theory that cutting taxes on the wealthy creates jobs, as an absolute proposition, has proved to be utterly false.
 

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George_Washington said:
Well, I agree we should pay off the national debt but I still think we should still believe in free market economics. To an extent, anyway.

Paying down the debt has nothing to do with free market economics.

It has to do with fiscal (and moral) responsibility. Something completely lacking with our current crop of leaders.
 

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Iriemon said:
Taxes on the wealthy were increased in 93. We had in this country phenonemal job growth 93-2000. Taxes on the wealthy were slashed in 00-03. (Taxes the working poor pay were not cut at all.) Job creation has been basically non-existent in 00-05. This despite the fact that the economy has grown about 25% (in actual dollars) during this time frame.

The theory that cutting taxes on the wealthy creates jobs, as an absolute proposition, has proved to be utterly false.

No, it hasn't because the job growth of 93-2000 wasn't caused by increased taxes or by anything the government did. It was caused by the computer revolution and Silicon Valley. The reason why the tax cuts of 00-03 didn't have as huge an impact as they did back in the 80's was due to a natural slowing down process of the economy, hence a natural recession. There's no way to eliminate the economic cycle. However, the economic cycle would be locked into a stagnate position if we were to stop working with free market economics.
 

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Iriemon said:
Paying down the debt has nothing to do with free market economics.

It has to do with fiscal (and moral) responsibility. Something completely lacking with our current crop of leaders.

We can pay down the debt by believing in the free market system and by cutting expenses.
 

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George_Washington said:
We can pay down the debt by believing in the free market system and by cutting expenses.

True as a theoretical matter. But in 2004 spending was $2.3 trillion. The Govt borrowed $600 billion. Therefore you would have to cut spending across the board by 25%. That is just not political feasible, and not even possible because you can't cut interest expense, which was $320 billion in 2004.

We aren't going to balance the budgets just by cutting spending. The politicians don't have the guts to do that, and that is when Republicans hold the power.

On the other hand, the economy did just fine in the 90s with a 39% tax rate. Returning taxes to the levels there were at in the 90s would produce roughly $400 billion a year in extra revenues. Wouldn't completely solve the problem but that would go a long way to help.

We won't solve the problem with just cutting spending or just raising taxes. People must be willing to compromise and do both. But I see little willingness to do this. After all, we are the pass the buck generation.
 

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George_Washington said:
No, it hasn't because the job growth of 93-2000 wasn't caused by increased taxes or by anything the government did. It was caused by the computer revolution and Silicon Valley. The reason why the tax cuts of 00-03 didn't have as huge an impact as they did back in the 80's was due to a natural slowing down process of the economy, hence a natural recession. There's no way to eliminate the economic cycle. However, the economic cycle would be locked into a stagnate position if we were to stop working with free market economics.

You are exactly right. Job creation is related to a lot of things. Tax cuts for the wealthy have had no significant impact.

You are also correct that the tax cuts in 01-03 have not produced the economic growth that proponents promised. Instead they have produced massive deficits.

I am certainly not proposing we eliminate free market economics. Just that the government raise enough revenues to cover its spending, and that it not spend more than the revenues it raises.
 
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Iriemon said:
True as a theoretical matter. But in 2004 spending was $2.3 trillion. The Govt borrowed $600 billion. Therefore you would have to cut spending across the board by 25%. That is just not political feasible, and not even possible because you can't cut interest expense, which was $320 billion in 2004.

We aren't going to balance the budgets just by cutting spending. The politicians don't have the guts to do that, and that is when Republicans hold the power.

On the other hand, the economy did just fine in the 90s with a 39% tax rate. Returning taxes to the levels there were at in the 90s would produce roughly $400 billion a year in extra revenues. Wouldn't completely solve the problem but that would go a long way to help.

We won't solve the problem with just cutting spending or just raising taxes. People must be willing to compromise and do both. But I see little willingness to do this. After all, we are the pass the buck generation.

Raising taxes will never solve the budget problem. The politicians will always find ways to spend the additional money. Our national taxes were something on the order of $1.8 trillion last year. As I recall our national budget didn't even exceed $100 billion until about 1966.

Any rational person knows that if the political will was there, the budget deficit could be closed immediately. We hardly need to spend $260 million to build a bridge to nowhere as we have proposed in Alaska.

This is why our founding fathers did not believe the riff-raff ought to have the vote. And the senate was to be appointed instead of elected. I could go on and on but I'll leave it there.

The nation is virtually ungovernable. It is probably about time we consider a new constitutional convention to clean things up.
 

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Iriemon said:
We won't solve the problem with just cutting spending or just raising taxes. People must be willing to compromise and do both. But I see little willingness to do this. After all, we are the pass the buck generation.

Agreed. The problem requires more out of us than that.
 

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Missouri Mule said:
Raising taxes will never solve the budget problem. The politicians will always find ways to spend the additional money.

The 1990s proved your statement is incorrect. Taxes were raised in 1993 from 31% top rate to 39%. That combined with a growing economy increased revenues. Spending increased too, but the leaders of that time kept spending increases moderate, increasing less than 3% a year, less than the revenue growth. The politicians did not spend the additional money. By 2000 the budget was balanced, we had a $100 billion surplus, and a two trillion dollar surplus was forcast for the next decade, with which we could have halved the Govt debt.

Instead of using that surplus, we got tax cuts for the wealthy and an Iraq war. And another $2.3 trillion more in debt.

Any rational person knows that if the political will was there, the budget deficit could be closed immediately. We hardly need to spend $260 million to build a bridge to nowhere as we have proposed in Alaska.

Which is exactly why those now in power must be removed as soon as possible. Write your representatives. Vote against whoever is not willing to do what it takes to restore fiscal responsibility.

This is why our founding fathers did not believe the riff-raff ought to have the vote.

Our founding fathers did not believe this, which is why we have an elected form of government.

And the senate was to be appointed instead of elected. I could go on and on but I'll leave it there.

The nation is virtually ungovernable. It is probably about time we consider a new constitutional convention to clean things up.

I disagree that such radical surgery is necessary. We just need to get the message to our politicians to stop borrowing from our kids.
 
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