US Debt, and How Did We Get There

[Ame®icano]

Over the past century or so, the US of A accumulated $23.2 Trillion of debt.

We all know that debt can be created by excessive spending, deep tax cuts or combination of two.

Both parties pointing fingers at each other and saying they're one to blame. Most of websites that comment on debt are biased to the point that you cant trust pretty much any of them. Since numbers don't lie, I thought, what if I look at the raw data, along with historical events, and come to conclusion on my own, and I'll try to lay it out as it come. By doing so I learned a lot about how did we get into this mess, and as libertarian I re-affirmed many of the previous beliefs.

Watch this short video about US debt.



U.S. Debt Increase by Fiscal Year (by President) Since 1914

One of the numbers that jumps out is $1.9T spent between 2001-2017 on "war on terror". In the same time period US rose from $5.8T to $20.2T, or total of $14.4T. If we subtract $1.9T spent on war on terror, that leaves us with $12.5T that is unaccounted for, or spent on "other things".

The federal budget is a public document, most of us don't read it because it's hundred pages long, even people who vote on it, probably don't read it most of the time. In that time period, two years grab attention, 2009 and 2010, when stimulus passed, along with ACA. Those are also years when Barry and Democrats held WH and Congress. Why is that important, I'll try to explain in one of following posts.

Although we keep hearing that we racking debt because of military and wars, during those two years, spending on military according to budget was relatively small, $636B and $666B. Comparing to that, $700B went to Department of Treasury, $726B went to Social Security, $796B given to Department of HHS.

We've been also told that $700B was spent on financial bailouts, later that number they "adjusted to $1T, but it's much much worse than that.

Numbers don't lie. GAO-Federal Reserve System

Total money given to all banks was $16.1 trillion.

Out of those $16.1T some money has been already paid out, around $4.6T, that brings us to debt increase of $11.5T. That's $11.5 trillion owed by the government to the banks. For what reason? Because they asked for it. I know $11.5T is not $12.5T from the top of topic, but we're getting closer.

It does NOT matter who is the president now, or in next twenty or thirty years, what laws are passed and by whom, and no matter how much people try to put in savings, or 401k, or pay in taxes, our debt will be $11.5T plus interest, because "we owe it" to the banks.

That also is not worse of our problems.

(To be continued.)

 

[BuckToothMoron]

Good post. I’ve seen the raw data. Entitlement spending and interest on the debt are the 2 most problematic budget line items relative to the debt.

Entitlement spending is in large chunks unfounded into the future which will automatically add to the debt.

Currently we are at historically low interest on debt, but when and if interest rates rise (they will at some point), the interest on the debt could be equal to what we currently spend on defense spending, which is the largest discretionary line item in the budget.

Until entitlement spending is addressed, the debt will generally increase except during short periods of exceptional growth, like growth over 5%.

 

[Toddsterpatriot]

Over the past century or so, the US of A accumulated $23.2 Trillion of debt.

We all know that debt can be created by excessive spending, deep tax cuts or combination of two.

Both parties pointing fingers at each other and saying they're one to blame. Most of websites that comment on debt are biased to the point that you cant trust pretty much any of them. Since numbers don't lie, I thought, what if I look at the raw data, along with historical events, and come to conclusion on my own, and I'll try to lay it out as it come. By doing so I learned a lot about how did we get into this mess, and as libertarian I re-affirmed many of the previous beliefs.

Watch this short video about US debt.



U.S. Debt Increase by Fiscal Year (by President) Since 1914

One of the numbers that jumps out is $1.9T spent between 2001-2017 on "war on terror". In the same time period US rose from $5.8T to $20.2T, or total of $14.4T. If we subtract $1.9T spent on war on terror, that leaves us with $12.5T that is unaccounted for, or spent on "other things".

The federal budget is a public document, most of us don't read it because it's hundred pages long, even people who vote on it, probably don't read it most of the time. In that time period, two years grab attention, 2009 and 2010, when stimulus passed, along with ACA. Those are also years when Barry and Democrats held WH and Congress. Why is that important, I'll try to explain in one of following posts.

Although we keep hearing that we racking debt because of military and wars, during those two years, spending on military according to budget was relatively small, $636B and $666B. Comparing to that, $700B went to Department of Treasury, $726B went to Social Security, $796B given to Department of HHS.

We've been also told that $700B was spent on financial bailouts, later that number they "adjusted to $1T, but it's much much worse than that.

Numbers don't lie. GAO-Federal Reserve System

Total money given to all banks was $16.1 trillion.

Out of those $16.1T some money has been already paid out, around $4.6T, that brings us to debt increase of $11.5T. That's $11.5 trillion owed by the government to the banks. For what reason? Because they asked for it. I know $11.5T is not $12.5T from the top of topic, but we're getting closer.

It does NOT matter who is the president now, or in next twenty or thirty years, what laws are passed and by whom, and no matter how much people try to put in savings, or 401k, or pay in taxes, our debt will be $11.5T plus interest, because "we owe it" to the banks.

That also is not worse of our problems.

(To be continued.)

We've been also told that $700B was spent on financial bailouts, later that number they "adjusted to $1T, but it's much much worse than that.

It really isn't. TARP was profitable, even with the $30 billion in handouts for mortgage refis.

Total money given to all banks was $16.1 trillion.

The Fed didn't give money to the banks. Or to anyone else.
Not sure what page you got this figure from.

Out of those $16.1T some money has been already paid out, around $4.6T

Not sure where you got $4.6 trillion either.

that brings us to debt increase of $11.5T. That's $11.5 trillion owed by the government to the banks.

This wasn't money lent by the Fed to the government, why would it be owed to the banks? Let alone by the government?

For what reason? Because they asked for it. I know $11.5T is not $12.5T from the top of topic, but we're getting closer.​

You're not getting closer, you're in the wrong stadium, all the way across town.

The numbers you're looking at were loans from the Fed to the banks, Loans that were fully collateralized and long ago repaid, with interest. This operation did not increase our debt by $11.5 trillion but actually shrank it by the millions in interest collected and turned over to the US treasury.​

 

[Ame®icano]

Continued...

The US budget consist of two parts, discretionary and mandatory. "Discretionary" spending is about 1/4 of our budget, rest (most) of money goes to "mandatory" spending.

Mandatory spending is 100% welfare and includes: Social Security, SNAP, TANF, medicare, medicaid, unemployment, earned income tax credits, child tax credits, etc. I could never get over it, that welfare is "mandatory" and defending our sovereignty is "discretionary, but it causes me to realize that well over two thirds of all our spending, and potentially 100% of our debt, was due to welfare programs.

So, how do we get the budget?

President send budget to Congress, and they have right to modify everything before voting on it. The budget they pass can look noting like what they receive from President. Once House and Senate vote on budget, they send it to President for approval. President can veto it, and if he does, it goes back to Congress who can overrule him with two thirds of vote.

That means that 2/3 of the Congress have the deciding vote on the budget, and all written above is kinda introduction to the why I opened this thread. Shall we begin?

In the first post I provided the link to US Debt by President by Dollar and Percentage from 1914 to today. There is another interesting link with historical tables in form of spreadsheets, that help me to combine several different tables into one. The data I was looking was: year, amount of debt, value of dollar, change in debt adjusted to inflation, which party had majority (or supermajority) in House and Senate, and party of the President. What is interesting, all that data is available to everyone, you just need to look for it.

Our debt is accumulated over past 100+ years, and that is only about 100+ samples to work with, so it's not ideal but can provide rough picture, and conclusion is that:

Statistically, the House and President are insignificant. The Senate has over 90% of the power determining the budget.
Statistically, under Republican Senate, the debt falls 1.5% (adjusted to inflation).
Statistically, under Democratic Senate, the debt rises 7.9% (also inflation adjusted).
Statistically, under split Senate (no party has super majority), it's just as bad as Democratic Senate, the debt rises 7.7%.

To any Republican, this would make sense, since almost all of the debt is caused by social(ist) welfare programs. By looking at just data, without Republican supermajority in Senate, the debt always rises, and that has been true for the last 100+ years, and last time that happen was in 1930's.

We've been told over and over, and screams and outrage over crisis of "Republican controlled Congress"... but in reality, Republicans haven't controlled anything for 90 years!

To be continued...

 

[TDontTouchMyCigars]

Free stuff!

 

[CrusaderFrank]

Thanks, Obama!

 

[Ridgerunner]

US Debt, and How Did We Get There

I know, I know...

435 drunken Sailors who work in D.C. …

 

[Toddsterpatriot]

US Debt, and How Did We Get There

I know, I know...

435 drunken Sailors who work in D.C. …

536...…….

 

[froggy]

Over the past century or so, the US of A accumulated $23.2 Trillion of debt.

We all know that debt can be created by excessive spending, deep tax cuts or combination of two.

Both parties pointing fingers at each other and saying they're one to blame. Most of websites that comment on debt are biased to the point that you cant trust pretty much any of them. Since numbers don't lie, I thought, what if I look at the raw data, along with historical events, and come to conclusion on my own, and I'll try to lay it out as it come. By doing so I learned a lot about how did we get into this mess, and as libertarian I re-affirmed many of the previous beliefs.

Watch this short video about US debt.



U.S. Debt Increase by Fiscal Year (by President) Since 1914

One of the numbers that jumps out is $1.9T spent between 2001-2017 on "war on terror". In the same time period US rose from $5.8T to $20.2T, or total of $14.4T. If we subtract $1.9T spent on war on terror, that leaves us with $12.5T that is unaccounted for, or spent on "other things".

The federal budget is a public document, most of us don't read it because it's hundred pages long, even people who vote on it, probably don't read it most of the time. In that time period, two years grab attention, 2009 and 2010, when stimulus passed, along with ACA. Those are also years when Barry and Democrats held WH and Congress. Why is that important, I'll try to explain in one of following posts.

Although we keep hearing that we racking debt because of military and wars, during those two years, spending on military according to budget was relatively small, $636B and $666B. Comparing to that, $700B went to Department of Treasury, $726B went to Social Security, $796B given to Department of HHS.

We've been also told that $700B was spent on financial bailouts, later that number they "adjusted to $1T, but it's much much worse than that.

Numbers don't lie. GAO-Federal Reserve System

Total money given to all banks was $16.1 trillion.

Out of those $16.1T some money has been already paid out, around $4.6T, that brings us to debt increase of $11.5T. That's $11.5 trillion owed by the government to the banks. For what reason? Because they asked for it. I know $11.5T is not $12.5T from the top of topic, but we're getting closer.

It does NOT matter who is the president now, or in next twenty or thirty years, what laws are passed and by whom, and no matter how much people try to put in savings, or 401k, or pay in taxes, our debt will be $11.5T plus interest, because "we owe it" to the banks.

That also is not worse of our problems.

(To be continued.)

By sending too much money overseas and forgiving the debt

 

[Ridgerunner]

US Debt, and How Did We Get There

I know, I know...

435 drunken Sailors who work in D.C. …

536...…….

Without the 435, the remaining 101 don't have any allowance...

Power of the Purse

“All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.”
— U.S. Constitution, Article I, section 7, clause 1

 

[Toddsterpatriot]

US Debt, and How Did We Get There

I know, I know...

435 drunken Sailors who work in D.C. …

536...…….

Without the 435, the remaining 101 don't have any allowance...

Power of the Purse

“All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.”
— U.S. Constitution, Article I, section 7, clause 1

435 drunkards could be stopped by 100 Senators and 1 President.

 

[Ridgerunner]

435 drunkards could be stopped by 100 Senators and 1 President.

And sometimes they are, when it fit the needs of the Senate and the Executive Branch... Just not often enough...

 

[Ame®icano]

US Debt, and How Did We Get There

I know, I know...

435 drunken Sailors who work in D.C. …

It's more like 100 drunken sailors, as I presented earlier.

So what happened in 1930's? We all know about Great Depression. But what do we know about it exactly? Depression was officially over by March 1933, but there are other things that happened right after... Google search with that question turns up articles with rather haunting titles...

Bankruptcys Of Major Countries In The World

Yes, US declared bankruptcy in 1933, and it's been explained the best by Rep. James Traficant, Jr. (Ohio) addressing the House:

It is an established fact that the United States Federal Government has been dissolved by the Emergency Banking Act, March 9. 1933. 48 Stat. 1. Public Law 89-719: declared by President Roosevelt, being bankrupt and insolvent. HJR 192, 73rd Congressional session, June 5, 1933 – Joint Resolution to Suspend the Gold Standard and Abrogate the Gold Clause dissolved the Sovereign Authority of the United States and the official capacities of all United States Governmental Offices, Officers, and Departments and is further evidence that the United States Federal Government exists today in name only.

The receivers of the United States Bankruptcy are the International Bankers, via the United Nations, the World Bank and the International Monetary Fund. All United States Offices, Officials, and Departments are now operating within a de facto status in name only under Emergency War Powers. With the Constitutional Republican form of Government now dissolved, the receivers of the Bankruptcy have adopted a new form of government for the United States. This new form of government is known as a Democracy, being an established Socialist/Communist order under a new governor for America.

How was this even possible? Although Woodrow Wilson increased debt over 700% (From Taft's 2.9 billion, to $24 billion), the next two presidents Harding and Coolidge decreased $1 billion in debt each year of their presidencies and Hoover another $1 billion in his first year. Even Hoover added $6 billion during the Great Depression, we still had lower debt than during Wilson?

But Emergency Banking Act didn't declared Bankruptcy directly. Bankruptcy was actually declared by FDR's executive orders 6073, 6102, 6111, and 6260.

EO 6073 - Allows banks to reopen under condition that they cannot give out gold coins, gold bullions, gold certificates, and that currency may only be given out if is to be used, not hoarded.

EO 6102 - All US citizens turn in their gold, with the exception of gold needed for industrial purposes, gold held by foreign banks, and a $100 per person allotment of gold that individuals may keep for personal reasons.

EO 6111 - Specified how citizens must turn in their gold, and prohibited transporting gold to other countries.

EO 6260 - Reminder that you can't hoard gold or export it to other countries.

To be continued...

 

[Ame®icano]

The New Deal" drove up our nation's debt (relatively) more than any law before or since. The only thing that ever increased our debt more was war itself. Our debt increased roughly 20% year on year from 1932 to 1936. Obviously this had many Americans fed up with Democrats, and they were ready to kick them out of power, but conveniently for them war started.

World War II had mandatory conscription. They utilized draft and forced people to join. However, WWII did something weird that you don't normally see with conscription. They banned anyone from joining military voluntarily. The argument was, that reason for that was to "provide protection for the nation's home front manpower pool". That means that every single person who went to die in war was selected by the government, and was not a volunteer. Every single one. What's the end game?

Since mood was already swinging away from Democrats, now suppose for just an instant that the majority (not ((% or even close to that, let's say 55%, enough to swing the elections) of people sent to war were conservatives, or just people who were against the "new deal". Then factor in that "conscientious objectors" (at the time mostly liberals) were either allowed to decline the draft or were given peaceful office jobs.

World war II was carefully orchestrated effort to get rid of opposition (Republican party) and ensure they could never rise to power again. It was truth back then, just as is truth now with open borders, amnesty, DACA, massive social programs designed to buy votes. This is current truth of our nation. All of the good guys were sent to die in massive genocide, obscured under the pretext of war, and ever since then, the socialist-controlled Democrat(ic) party has been ballooning the debt higher and higher. And yet, despite doomsday predictions and fear and paranoia, no matter how high the debt gets (trillions upon trillions) the world hasn't collapsed... Why?

The size of the debt doesn't mean anything. None of these numbers mean anything.

In 1938 the first minimum wage was established at 25 cents per hour. At the time, the loaf of bread cost 8.6 cents. This means for one hour of work, you could buy 3 loaves of bread. In 2019, the minimum wage is 7.25 per hour. Currently a loaf of bread cost on average $2.37. That means for one hour of work, you can buy 3 loaves of bread.

Nothing has changed, inflation has increased in numbers, but equation is still 1 hour for 3 loaves.

The same is true for our debt. It almost doesn't mean anything. If we paid off the debt, nothing would change. If we keep amassing debt, nothing will change. Because at the end of the day, the debt isn't taken into account when funding government projects, and the debt has no effect on your day to day life. So why does it keep going up even if it doesn't matter? What's the net effect? Why do Democrats keep ballooning the debt, and does it actually affect your life?

To understand this, you need to look at who we actually owe the debt to: Banks. Well, to "investors", but that's just investment banks with a fancy title.

To be continued...

 

[Ame®icano]

Note: Interest rate is rounded for easier understanding.

Banking is simple. Person A deposits to a bank $100. The bank loans $50 of person A's money to person B. A year later, person B pays back the $50 with 10% interest, so bank now has $105. The bank then gives person A $102 (2% interest), as a thank you for letting them borrow the money, and the bank keeps $3 as profit.

It get weird when Federal Reserve gets involved.

The Federal Reserve can give bank a "loan" of $100 at 5% interest. The bank can then turn around and re-loan that money to person B at 10% interest. So long as the Federal Reserve interest rate is lower than the rate they charge to person B, the bank can do this infinitely. In this way, Federal Reserve replaces person A.

Beside, the bank can chose to buy government/Treasury bonds that pay 10% interest. So long as the bank is making 10% interest on their loans, they don't care who they loan the money to. In fact, the government/Treasury is bigger and has more money than person B, so they're more likely to pay it back. This means that they're more likely to lend to government/Treasury, that in this case replaces person B.

If person A and person B are unnecessary, then banks can keep making money by borrowing money without ever involving citizens and without ever actually creating economic value. By borrowing money from the Federal Reserve and lending it back to government/Treasury in the form of bonds, banks keep siphoning off tax dollars without actually doing anything.

If Federal Reserve keep lending more money to banks that keep borrowing money to government/Treasury, the government will keep owing more. The solution is to print more money to pay back money that is borrowed. It is not exaggeration, that has been happening for the past 100 years. This alone is the cause of inflation, that occurs when more money is printed, the existing money gets devalued.

This is part where it gets bad. Because if there is an inflation, a dollar today will be worth less tomorrow. This means if you borrow a dollar from someone today, you'll have to pay them back more than a dollar tomorrow. It also means if you work hard to earn two dollars today, and spend one dollar each day, then tomorrow's dollar wont be worth as much as today dollar was.

Few posts above I mentioned cost of loaf of bread, and that "inflation doesn't matter". One hour of work equal 3 loafs of bread. If you do one hour of work and wait for a year, that money will only get you two loaves of bread. Wait two years and will get you one loaf. The only way to keep getting fed is to keep working. Again... the only way to keep getting fed is to keep working. That is the goal. You can't save enough money, you can't pay off your loans, you can't pay back your debts, you can't earn enough to retire. You will always have to work, and that is an infinite labor cycle to keep people working.

To be continued...

 

[Toddsterpatriot]

Note: Interest rate is rounded for easier understanding.

Banking is simple. Person A deposits to a bank $100. The bank loans $50 of person A's money to person B. A year later, person B pays back the $50 with 10% interest, so bank now has $105. The bank then gives person A $102 (2% interest), as a thank you for letting them borrow the money, and the bank keeps $3 as profit.

It get weird when Federal Reserve gets involved.

The Federal Reserve can give bank a "loan" of $100 at 5% interest. The bank can then turn around and re-loan that money to person B at 10% interest. So long as the Federal Reserve interest rate is lower than the rate they charge to person B, the bank can do this infinitely. In this way, Federal Reserve replaces person A.

Beside, the bank can chose to buy government/Treasury bonds that pay 10% interest. So long as the bank is making 10% interest on their loans, they don't care who they loan the money to. In fact, the government/Treasury is bigger and has more money than person B, so they're more likely to pay it back. This means that they're more likely to lend to government/Treasury, that in this case replaces person B.

If person A and person B are unnecessary, then banks can keep making money by borrowing money without ever involving citizens and without ever actually creating economic value. By borrowing money from the Federal Reserve and lending it back to government/Treasury in the form of bonds, banks keep siphoning off tax dollars without actually doing anything.

If Federal Reserve keep lending more money to banks that keep borrowing money to government/Treasury, the government will keep owing more. The solution is to print more money to pay back money that is borrowed. It is not exaggeration, that has been happening for the past 100 years. This alone is the cause of inflation, that occurs when more money is printed, the existing money gets devalued.

This is part where it gets bad. Because if there is an inflation, a dollar today will be worth less tomorrow. This means if you borrow a dollar from someone today, you'll have to pay them back more than a dollar tomorrow. It also means if you work hard to earn two dollars today, and spend one dollar each day, then tomorrow's dollar wont be worth as much as today dollar was.

Few posts above I mentioned cost of loaf of bread, and that "inflation doesn't matter". One hour of work equal 3 loafs of bread. If you do one hour of work and wait for a year, that money will only get you two loaves of bread. Wait two years and will get you one loaf. The only way to keep getting fed is to keep working. Again... the only way to keep getting fed is to keep working. That is the goal. You can't save enough money, you can't pay off your loans, you can't pay back your debts, you can't earn enough to retire. You will always have to work, and that is an infinite labor cycle to keep people working.

To be continued...

The Federal Reserve can give bank a "loan" of $100 at 5% interest. The bank can then turn around and re-loan that money to person B at 10% interest. So long as the Federal Reserve interest rate is lower than the rate they charge to person B, the bank can do this infinitely.

Except loans at the Discount Window are overnight loans, and need to be repaid the next day.
Borrowing overnight to lend long-term is a dangerous business model.

Beside, the bank can chose to buy government/Treasury bonds that pay 10% interest.

Borrowing overnight to buy bonds is also dangerous. Look how it worked for Lehman.

By borrowing money from the Federal Reserve and lending it back to government/Treasury in the form of bonds, banks keep siphoning off tax dollars without actually doing anything.

Your idea is so good, banks are currently borrowing $6 million at the Discount Window.

To be continued...

When you find the flaw in your idea, you should definitely continue.