Is There Too Much Worry About the Debt? (LOL!)

Time ^ | March 8, 2010 | Zachary Karabell

[Cheap_Hessian]

Judging from the noises emanating from some corners of Washington these days, the federal debt has assumed pride of place as the source of national anxiety. President Obama has called for independent commissions to seek ways to reduce spending. The media are filled with talk of America's path of financial suicide; economists warn that the debt crisis in Greece is a dry run for the cataclysm that awaits America and the world as U.S. deficits and debt balloon.

The numbers are undoubtedly big, running into many trillions of dollars. The percentages are also daunting, with projections of total gross debt reaching 100% of U.S. GDP this year or next and surging every year thereafter. There is bipartisan agreement that the deficits and overall debt are unsustainable. Douglas Holtz-Eakin, a former director of the Congressional Budget Office, has urged policymakers not just to educate the public about the dangers ahead but also "to scare them to death" about the dire prospects if the debt is allowed to continue to grow.

Almost everyone seems to think that these mounting debts are a severe threat to American prosperity. But what if the real problem isn't too much debt but too much anxiety about debt?

Let's take a closer look at the numbers.

[GeronL]

That is pretty rich.

A very stoopid question since our politicians don’t seem concerned at all.

[ronnyquest]

"President Obama has called for independent commissions to seek ways to reduce spending."

Hell, I'll give them some answers for free: stop spending money you don't have, end the Fed, stop printing worthless currency, stop trying to regulate businesses out of business, stop taxing people's incomes, stop funding frivolous government programs, stop mismanaging every department of the federal government, stop expanding the size of the federal government, stop throwing expensive parties at the White House, stop funding independent commissions to seek ways of doing anything not directly related to the powers of government outlined in the Constitution, stop funding with our tax dollars private organizations to which no one would donate if given a choice (ACORN, et al), take away Princess Pelosi's private jet, and give everyone in the federal government, up to and including the president, a pay cut!

[dr_who]

Indeed, though eliminating deficits might seem wise, it could actually be fatal to future prosperity. China is spending hundreds of billions of dollars on infrastructure, while America can hardly repair its bridges. The U.S. has to invest and spend to build a future, to help re-create a workforce, and for now debt is a means to that end — provided Washington shows it can effectively channel that money.

This is total bullshit. The US can't repair its bridges because Obama, congresscritters, and state assemblymen can't refrain from spending the highway money on monkey drug addiction research, trains that never get built and no one rides, and other examples of non-infrastructure. And since when has the government "re-created" a workforce? They keep thinking of new taxes so that they can dump all that cash on public education at all levels and yet standards continue to decline. Washington can't effectively channel any money because it isn't their money in the first place.

[Aevery_Freeman]

At the beginning of 2000, it cost the U.S. government more than 6.5% to borrow money. Now it costs less than 2.5%. That means we can borrow 2½ times as much today for the same cost.

Herein lies the problem. An artificially low interest rate leads to excessive borrowing.

Oh, wait a minute, debt is good or at least no problem. Right?

[Ken H]

At the beginning of 2000, it cost the U.S. government more than 6.5% to borrow money. Now it costs less than 2.5%. That means we can borrow 2½ times as much today for the same cost.

So what happens to the cost of all that extra debt when interest rates rise back to 5%, eh?

[Kozak]

At the beginning of 2000, it cost the U.S. government more than 6.5% to borrow money. Now it costs less than 2.5%. That means we can borrow 2½ times as much today for the same cost.

And we're borrowing about 12 times as much as 2000...

[qwertypie]

Local story just told of a $12 million grant to an Indian reservation for broadband service to 365 homes. Does anybody need another reason?

[Cheap_Hessian]

That will probably be touted as one of the stimulus’s success stories.

[familyop]

The ugly truth that neither side wants to speak of: millions of anti-Second-Amendment VAWA and public education dollars to each of thousands of small communities. But have it your way (all).

No. I’m not worried about the debt at all, because the default ahead will be our chance to redeem ourselves as worthy Americans.

Politics! [Spit.]

[raybbr]

There’s a bunch of FReepers who think the debt is meaningless. They used to post all the time about how “we get stuff and China gets paper”.

[Doe Eyes]

There’s a bunch of FReepers who think the debt is meaningless. They used to post all the time about how “we get stuff and China gets paper”.

Yep, used to joke about it when Bush was running up the debt.

[Cheap_Hessian]

Anybody holding dollar denominated assets is going to get burned... this includes China.

[Cheap_Hessian]

You could blame the Fed. The artificially low interest rates encouraged this highly leveraged environment.

[Doe Eyes]

You could blame the Fed.

Yeah, why blame the Government official actually spending the money?

[Cheap_Hessian]

If interest rates were higher then the government couldn’t spend as much. I can answer without being smug, why can’t you?

[Doe Eyes]

If interest rates were higher then the government couldn’t spend as much.

Ok, without being smug, why is that?