National Debt Thread

[Max Power]

http://zfacts.com/p/318.html

Hmmm

 

[Annie]

So Bush, after the economic bullet of 9/11, then waging war since, has a project defict about equal with Clinton's high? Wow! Staggering.

 

[Annie]

Let's hope this comes to pass. Links at site:

http://www.captainsquartersblog.com/mt/archives/005621.php

October 17, 2005
Conservative Ire May Provoke Spending Cuts

In a development that will certainly please conservatives who look at the growth in federal government and wonder which party has won the past few elections, the House has begun to turn towards budget reductions and the reduction in federal growth that has long been the GOP standard. In fact, Operation Offset, launched by Rep. Mike Pence, has stirred interest largely due to Tom DeLay's contention that no further fat could be found in a federal budget that eats up a higher percentage of the nation's GDP than it ever did during WWII:

Beginning this week, the House GOP lawmakers will take steps to cut as much as $50 billion from the fiscal 2006 budget for health care for the poor, food stamps and farm supports, as well as considering across-the-board cuts in other programs. Only last month, then-House Majority Leader Tom DeLay (Tex.) and other GOP leaders quashed demands within their party for budget cuts to pay for the soaring cost of hurricane relief.

DeLay told a packed room of reporters on Sept. 13 that 11 years of Republican rule had already pared down the federal budget "pretty good." If lawmakers had suggestions for cuts, DeLay said he would listen, but he was not offering anything up.

But faced with a revolt among many conservatives sharply critical of him for resisting spending cuts, DeLay three weeks later told a closed meeting of the House Republican Conference, "I failed you," according to a number of House members and GOP aides. Then, in a nod to the most hard-core conservatives, DeLay volunteered, "You guys filled a void in the leadership."

The abrupt shift reflects a changed political dynamic in the House in which a faction of fiscal conservatives -- known as the Republican Study Committee, or RSC -- has gained the upper hand because of DeLay's criminal indictment in Texas, widespread criticism of the Republicans' handling of Hurricane Katrina, and uncertainty over the future of the leadership, according to lawmakers and aides.

DeLay's comments stirred a conservative movement that had laid dormant for several years. Most conservatives seemed willing to remain patient with the President as long as he needed to fight the war on terror and to fill empty appellate court seats. Grumblings among deficit hawks had been heard going back to the first couple of years of Bush's tenure in office but quickly silenced in the attacks on 9/11. That should have been first couple of months of Bush's tenure in office...

Now, however, a series of missteps by the executive branch has made the RSC indispensable once again. First came Katrina, in the midst of an economic expansion triggered by tax cuts. The apparent abandonment of the cuts, as well as the odd choice of Harriet Miers to the Supreme Court, has re-energized the conservative movement within the GOP. (I'd say that this and the above colored text, covers myself pretty well...)Tom DeLay got far more humbled by Pence than anything Ronnie Earle filed against him, and while he's temporarily sidelined, he can't afford to be outspent or outgunned by other, more palatable conservatives. DeLay needs to re-establish some spending hawk credibility all over again when he comes back if he wants his old position back.

George Bush and Tom DeLay have given the conservatives a dual shot in the arm. Operation Offset also has the benefit of working quite well with the Porkbusters operation in the blogosphere -- in fact, they appeared made for one another. Expect this to become a a larger factor in national politics from this point forward.
Posted by Captain Ed at October 17, 2005 06:58 AM

 

[Max Power]

So Bush, after the economic bullet of 9/11, then waging war since, has a project defict about equal with Clinton's high? Wow! Staggering.

Umm, no.

Do you know the difference between a deficit and a debt?

 

[Max Power]

Let's hope this comes to pass. Links at site:

http://www.captainsquartersblog.com/mt/archives/005621.php

That might as well be an Onion article.

IMO, the only real way to cut spending is to set up a partisan deadlock, like we enjoyed from 1994-2000.

 

[Toro]

So Bush, after the economic bullet of 9/11, then waging war since, has a project defict about equal with Clinton's high? Wow! Staggering.

What's staggering is that in every war the US fought that I am aware of, taxes went up to pay at least partly for the war. In this war, taxes have fallen, and far more than were needed to stimulate the economy.

Bush is hardly a conservative. Discretionary, non-defense spending has risen faster than it ever did under Slick Willie and the man has never vetoed a single bill.

 

[Annie]

That might as well be an Onion article.

IMO, the only real way to cut spending is to set up a partisan deadlock, like we enjoyed from 1994-2000.

Wrong. There comes times when it is good to have a party in power and opposition braying loudly enough to keep the public informed. It's true for whichever party we are speaking of, there has been too much deadlock for too long. However, this administration has blown it and perhaps the opposition party will become the majority eventually because of it.

BTW, rather than raise my post count, go ahead and give your economics lesson on your chart.

 

[Max Power]

BTW, rather than raise my post count, go ahead and give your economics lesson on your chart.

Well, the deficit is simply the money spent by the government less the income.

The debt is how much money is owed by the government... so if you add up all of our deficits and surpluses (and factor in interest), you will get the debt.

The chart shows the debt as a percentage of GDP.
Basically, every president after WW2 except Reagan, Bush, and Bush, decreased the debt.

 

[Annie]

Well, the deficit is simply the money spent by the government less the income.

The debt is how much money is owed by the government... so if you add up all of our deficits and surpluses (and factor in interest), you will get the debt.

The chart shows the debt as a percentage of GDP.
Basically, every president after WW2 except Reagan, Bush, and Bush, decreased the debt.

Can you have deficits and surpluses? I mean concurrently?

Comparing 1950's-1960's to 1970's-2000's just doesn't make sense to me-but econ was not my strong suit. Just seems the post war economic engine, with the blip caused by rehiring/retooling, made growth inevitable.

Now, Carter dealt with the gas problem from OPEC, as well as the malaise brought on by his handling of domestic and foreign affairs-so I guess his military cuts really were big. Again,

I'm not sure if I'm looking at the right points, so I'll wait and see what you have to say.

 

[Max Power]

Can you have deficits and surpluses? I mean concurrently?

Comparing 1950's-1960's to 1970's-2000's just doesn't make sense to me-but econ was not my strong suit. Just seems the post war economic engine, with the blip caused by rehiring/retooling, made growth inevitable.

Now, Carter dealt with the gas problem from OPEC, as well as the malaise brought on by his handling of domestic and foreign affairs-so I guess his military cuts really were big. Again,

I'm not sure if I'm looking at the right points, so I'll wait and see what you have to say.

You can't have deficits and surpluses concurrently. A surplus of $1 is equivalent to a deficit of $-1 and the other way around.
Of course, even if we run a surplus (as we did a few years ago), this doesn't necessarily mean the debt goes down, because there is interest charged on the debt. So, it IS possible to have a surplus AND become deeper in debt.

Now back to the graph.
It's as a percentage of GDP.
This is a fair comparison, because owing $10,000 if you make $15,000 per year is worse than owing $20,000 if you make $200,000.

So, for example, during the Clinton years, the national debt increased... but the GDP increased by (significantly) more.

 

[Annie]

You can't have deficits and surpluses concurrently. A surplus of $1 is equivalent to a deficit of $-1 and the other way around.
Of course, even if we run a surplus (as we did a few years ago), this doesn't necessarily mean the debt goes down, because there is interest charged on the debt. So, it IS possible to have a surplus AND become deeper in debt.

Now back to the graph.
It's as a percentage of GDP.
This is a fair comparison, because owing $10,000 if you make $15,000 per year is worse than owing $20,000 if you make $200,000.

So, for example, during the Clinton years, the national debt increased... but the GDP increased by (significantly) more.

Interesting, however I'm kinda confused how JFK, who cut taxes; LBJ who spent not only on Vietnam, but also on War On Poverty, had such a dramatic decline. Is there something else going on OTHER THAN an economy expanding faster than spending can-even when excessive?

 

[ScreamingEagle]

http://zfacts.com/p/318.html

Hmmm

Debt is not necessarily a bad thing as many politicos like to imply.

Most economists are not concerned with national debt as long as the economy is growing faster than the debt.

In recent years our economy has not been growing as fast as it should. The economy is becoming more sluggish as the government takes over more of the economy and less is being produced by the private sector. We need to have less government spending and more private investment.

 

[Annie]

Debt is not necessarily a bad thing as many politicos like to imply.

Most economists are not concerned with national debt as long as the economy is growing faster than the debt.

In recent years our economy has not been growing as fast as it should. The economy is becoming more sluggish as the government takes over more of the economy and less is being produced by the private sector. We need to have less government spending and more private investment.

I am assuming that was my question to Max, our econ expert. (BTW Max, your credentials?) Nonetheless, my gut is with you Screaming Eagle. Seems if the gov't cuts spending and taxes, the economy can grow to more than make up the shortfall?

 

[Toro]

There's nothing wrong with debt if its used properly. Using it as a counter-cyclical stabilizer is good policy. But that doesn't necessarily mean more government spending. Cutting taxes is usually a better way IMHO. Also, using debt for capital projects is smart. Corporations do not use 100% equity to finance capital expenditures. Consumers certainly don't, i.e. the house you bought. So why would it be different for governments?

What matters is the level of debt, is the debt going up or down at what particular time, what is it being used for, the structure of the debt, the level of interest rates, and the changes in interest payments.

 

[Hagbard Celine]

Don't we have to float a certain amount of debt in order to keep the dollar at a high global value?

 

[Toro]

Its easier to control monetary policy with government debt. But generally, the less government debt there is, the better it is for the currency.

 

[gonegolfin]

Its easier to control monetary policy with government debt. But generally, the less government debt there is, the better it is for the currency.

What many people fail to realize is that there would be no monetary policy without debt. This is because there would be no money supply. Our monetary system is so screwed up (not backed by tangible assets) that if there was no debt, there would be no money in circulation.

Which is why I typically find it amusing that so much time is spent debating taxes. Certainly, I agree that lower taxes are better for the economy and for growth. But this is not the only lever for revenue generation at the government's disposal. I would argue that in many years it is not the principal lever. Meanwhile, it is the most visible one and is less apt to spiral completely out of control. Our government (in cooperation with the Federal Reserve - or should I say in "collusion" with) can manufacture as much money as it desires, but this falls outside the radar of immediate accountability. This is the tax that people should be more concerned with and is the reason why the dollar is weakening. And yes, both parties are equally guilty (have been for years).

As for whether there are any fiscal conservatives left, I fear there are none.

Brian

 

[Toro]

What many people fail to realize is that there would be no monetary policy without debt. This is because there would be no money supply. Our monetary system is so screwed up (not backed by tangible assets) that if there was no debt, there would be no money in circulation.

You don't need debt for the money supply. You need reserves deposited at various federal reserve banks around the country in exchange for currency backed by the US government. This is already required by law. The government controls the money supply by decreasing or increasing the rate of interest paid at the Fed window, or by altering the reserve requirements. That's one way the Fed controls the money supply and interest rates today.

 

[gonegolfin]

You don't need debt for the money supply. You need reserves deposited at various federal reserve banks around the country in exchange for currency backed by the US government. This is already required by law. The government controls the money supply by decreasing or increasing the rate of interest paid at the Fed window, or by altering the reserve requirements. That's one way the Fed controls the money supply and interest rates today.

No, you are incorrect. The way this country's money and banking system is set up, the money supply is all about and only about debt (public and private). Let me put this another way ... If all of the debts of this country (public and private) were paid, there would be no money supply! Every single dollar in existence (checkbook or currency form) is debt owed by someone to someone. Very unlike a money supply that is fully (100%) backed by a tangible commodity such as gold or silver.

I am fully aware of how the government and banking cartel fraudulently controls the money supply. And the U.S. backing of the money supply (tangible assets such as gold) is at a historic low of less than 1% of the total money supply. This means that there is practically nothing backing our money supply or the value of the dollar except the full faith and credit of the US Government (which means they will inflate the money supply whenever they need to meet debt obligations). That is, our monetary system is purely fiat, through and through.

BTW, there are many more ways that the government controls the money supply than by increasing/decreasing the rate of interest paid at the Fed's discount window, by altering the commercial bank reserve requirements (which are not really 10%), or by adjusting the overnight lending rate. These are just the most obvious to the average citizen.

Brian

 

[ScreamingEagle]

No, you are incorrect. The way this country's money and banking system is set up, the money supply is all about and only about debt (public and private). Let me put this another way ... If all of the debts of this country (public and private) were paid, there would be no money supply! Every single dollar in existence (checkbook or currency form) is debt owed by someone to someone. Very unlike a money supply that is fully (100%) backed by a tangible commodity such as gold or silver.

I am fully aware of how the government and banking cartel fraudulently controls the money supply. And the U.S. backing of the money supply (tangible assets such as gold) is at a historic low of less than 1% of the total money supply. This means that there is practically nothing backing our money supply or the value of the dollar except the full faith and credit of the US Government (which means they will inflate the money supply whenever they need to meet debt obligations). That is, our monetary system is purely fiat, through and through.

BTW, there are many more ways that the government controls the money supply than by increasing/decreasing the rate of interest paid at the Fed's discount window, by altering the commercial bank reserve requirements (which are not really 10%), or by adjusting the overnight lending rate. These are just the most obvious to the average citizen.

Brian

So true, we have no built-in safety guards such as a gold standard as in the past. And although as you say there are other ways that the government can modify the system, do you really think our "monetary system" will be enough to head off the gathering storm?

Debt is OK as long as we can support it and we are making enough money. However, it is a relative thing. At some point we reach our spending limits because we cannot support the debt payments and that is when all hell breaks loose.

Roughly half of the almost 8 trillion debt is owed to the public in the form of Treasury Bonds and T-Bills. About half of that (or 25% of the total debt) is owed to foreigners. Foreigners buy our government securities in order to get a good return plus it prevents currency busts in their own countries. Foreign interests are huge in the U.S. because of the trade deficit - global economy.

(Roughly the other half of the government debt is owed to trust funds - of which Social Security is the great biggie - and full of unmarketable IOUs thus making Enron look like peanuts by comparison.)

When the U.S. prints more money to cover our debt obligations it may temporarily help but it could lead to further inflation and devaluation of the dollar. Devaluation will also happen when we can't afford to spend anymore. When the dollar falls that means returns are not as good and investors both foreign and domestic disappear which means investment funds dry up, less business startups, less production, and so on, and the spiral heads downward. Some think we are looking at upcoming worldwide recession. This is not just because of our government debt but it is endemic to the overall problem.