Posted on 07/30/2011 12:15:23 PM PDT by lbryce
In case you havent noticed, Washington is currently consumed in an acrimonious debate over whether to raise the debt ceiling. There is no agreement about whether to do so or how, but both parties appear to accept the logic that the United States is suffering from an unacceptably high level of government debt and that further debt will doom the U.S. to generations of decline. Judging by polling data, large swaths of the country agree. Nonetheless, that consensus is wrong.
The Republicans have generally been most vocal on this score. Eric Cantor, the House Majority Leader and a major player in the negotiations, has said,
The government is a fiscal train wreck. It is over $14 trillion in debt and borrows nearly 40 cents of every dollar that it spends. Before us lie two divergent paths: one defined by crushing debt, slow growth and diminished opportunity; and one defined by achievement, innovation and American leadership. We stand at a crossroads. If we are to leave our children a nation that offers everyone a fair shot at earning their success, we must take the later path House Republicans have taken an honest, responsible approach to confront the debt crisis facing our nation.
Yet even President Obama believes further debt is untenable and has pledged to cut spending by trillions of dollars in the coming years.
What neither side seems to recognize or at least acknowledge is that what matters about the debt isnt the dollar amount per se, but how much it costs us to service it. And by that measure, the debt isnt nearly as big a problem as its being made out to be.
(Excerpt) Read more at moneyland.time.com ...
This is typical of the left. I have seen some of this argument by lefties on TV in the past. It shows that they really aren't that bright.
But...to use an analogy...a family with credit cards. To service your debts...you have interest payments. As you rack up your debt...you pay more in interest. As you continue to rack up debts...they raise your interest rates. Eventually...you declare bankruptcy.
Same with the US. Its a feedback loop. Higher debt...more spent on interest...rack up more debt...higher interest payment. Eventually the credit agencies jack up your interest payments and now you have an even HIGHER payment each month...until one month...you default on the payment.
This guy is a moron.
Here is a good illustration of our problem.
Ten Thousand Dollars in $100 bills
One Million Dollars in $100 bills
One Hundred Million Dollars in $100 bills
One Billion Dollars in $100 bills
One Trillion Dollars in $100 bills
Notice those pallets are double stacked so each layer is $500 Billion in $100 bills.
So because the amount we spend to service the debt is only 250 billion that makes it Ok to get in more debt??? Okey Dokey Just wait until interest goes up and see how much it costs to service the debt
The U.S. has a large economy (slightly larger than that debt number). And, crucially, we have very low interest rates
Earth to dumbass who wrote this bilge.....no country in the history of the world that has a debt larger than their GDP survives very long without a major lowering of their standard of living
What do you think of Roubini's observation that U.S. external debt, at roughly $4 trillion, is less than 25% of GDP? The same goes for the Japanese and the Italians. They owe a lot to themselves, but not to others.
It's sort of like owing your dad money. I can see how this can cause other problems such as malinvestment and disintermediation, but I'm wrestling with how we can 'drown'.
This does not avoid the future problem of Boomer care and pensions, the source of the $114 trillion problem.
So let's borrow more to pay the credit card bills we already owe! The Obama administration is trying to destroy this country from within!
As of June 29, 2011, the total U.S. national debt outstanding has reached $14.46 trillion dollars.
Two years ago the U.S. national debt hit $11 trillion dollars as of March, 2009.
Below is an image showing what the 2009 U.S. national debt of $11 trillion dollars looks like in $100 dollar bills.
Ten pallets loaded with $100 dollar bills contain $1 billion dollars.
Each layer of pallets in this image contains 5,000 pallets (50 wide by 100 deep).
Each layer of 5,000 pallets of $100 dollar bills equals $500 billon dollars.
Two layers of pallets contain 10,000 pallets holding a total of $1 trillion dollars.
As of June 29, 2011, the total U.S. national debt outstanding has reached $14.46 trillion dollars.
That represents about 98.6% of calendar year 2010's annual gross domestic product (GDP) of $14.66 trillion dollars.
To visualize that amount, imagine 7 more layers, each with 5,000 pallets, sitting on top of the pile in the image below.
Current debt per taxpayer: $116,000.
The silly ignorant author is essentially arguing that
(a) our current low interest rates have meant low rates on the new debt the treasury issues and lower total cost on servicing our debt
and therefor
(b) we can afford to have an extraordinarily high level of date, because we are presently getting it on the cheap.
He ignores two facts, which will coincide with each other in time:
(a) the present interest rates are not just historically low, they are an artificial contrivance attempting to “stimulate” the economy, and they are creating built-in expansion of inflation, which will increasingly show itself in the next few years, and result in a correction with higher interest rates; which
(b) will be happening just as the need to pay for the Social Security trust fund’s IOU starts increasing dramatically as well.
Which is why, regardless of this silly author, the debt ceiling issue is an issue to be addressed today, before the perfect storm of much higher interest rates and massively more debt financing needs (paying for the SS trust fund IOUs) hits us.
We cannot continue with Obama’s dramatic increases in discretionary spending, and the additional debt and taxes he has been willing to acquire for that spending, AND prepare to handle the IOUs coming due in the entitlement programs.
Yes, there will have to be some “cost reductions” figured someway, with respect to Social Security and Medicare. No amount of possible cost reductions alone, in those programs alone, can prevent both higher taxes and higher debt, unless discretionary spending is cut back, eliminating every new program and entitlement added by Obama, and eliminating everything not related to the small government limited role that the Federal government should have.
Then, we can save Social Security and Medicare at an “as is” level for some portion (oldest portion) of the population, and have the financial room to prepare step-down transitions to private programs for everyone not yet retired, with complete transition to such programs for everyone just now entering the work force.
Unbridled discretionary spending will devour our ability to get out of (pay for getting out of) the historic, long-time building financial mess that has been left to us in the current entitlement programs.
Oops - Current debt per taxpayer: $130,116.
Well, whenever the debt is discussed, completed with that ever-changing digital display.... how is it we never get figures on REVENUE???
Isn’t REVENUE pouring into the Treasury as we speak??
Simple-minded I know, but why are we only hearing about DEBT and not REVENUE??
I have wondered also just how “dire” the economy is....
True, but very short sighted. Under Clinton, the maturity of the debt was sharply reduced to lower carrying costs. If interest rates go up, servicing the debt will choke us... it will become the major expense in the budget. It is asinine to consider that current interest rates, at a 30 year low, will continue to stay low as the absolute level of the debt climbs.
As the debt climbs, the economy becomes more susceptible to accidents. This is the message of the Rogoff-Reinhart study encapsulated in their book "This Time is Different."
Just because you set up a blog doesn't mean you know jack squat. This Zach idiot is a perfect case in point.
The point is that we are rapidly coming to the circumstance when we will not be able to make the minimum payment on our debt. If those overseas getting American dollars for their exports decided to buy our bonds then that has little to do with our ability to make the minimum payment.
We don’t owe our ‘Dad’ money. We owe banks and individual bond holders money. Our entire monetary system, including trillions in paper denominated retirement savings, is based upon US bonds being worth what we say they are worth.
Look at how much debt the Fed holds. Then pull out a dollar bill and read what is says front, top and center, “Federal Reserve Note”. It’s not a “dollar”. It’s a zero interest bearing bank note. If that note becomes worthless then that is the end of oil coming into this country, gasoline being refined and trucks coming to our grocery stores with food. We go to a barter economy. Those that cant work, the old, the sick and the young, become dependent on those who can find work and there will only be a fraction of today’s working people still employed.
It’s hard to keep up.
Because the deficit is the difference between revenue and spending and that cumulative difference requires us to make debt payments. We are getting to the point where we will not be able to make those debt payments. We could raise taxes and although it would be a drag on this country, it wouldn’t be the end of this country. If we continue with the Washington compromise being Republicans get their low taxes and the Democrats get their high spending, it will be the literal ruin of this country.
Lets also assume that we decide not to inflate our way out of it
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What if they decide to QE3 their way out of it. Just printing the 130 billion for August for example. Surely that wouldn’t be to much.
Of course the Communist Chinese wouldn’t be happy.
(Tariffs anyone?)
I’d like to see this Debt Ceiling Frozen at 14T. Let the Goverment print the money to cover the difference every month. Heck they will continue to print as much money as they want, whenever the want, whether we increase the ceiling or not....so I say Freeze the Ceiling and thus save US from another 2 or 3 Trillion dollar increase in our debt.
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