Fix the National Debt


#1

Fix the National DebtThe national debt continues to rise while our leaders struggle to pass a federal budget. Can you do better? Here’s your chance to find out.
The national debt is higher than it has been since just after World War II. And it is rising towards unprecedented – and unsustainable – levels. Learn more about our current path.
The Current National Debt PathThe national debt held by the public (which excludes what the government owes itself) is currently 77% of the economy (measured by Gross Domestic Product–GDP). That is nearly twice the average of the last 50 years of 40% of GDP. And it will continue to grow indefinitely without action. The nonpartisan Congressional Budget Office (CBO) projects that debt will exceed the size of the economy by 2033 and surpass the all-time record of 106% of GDP by 2035. By 2047, debt will be 150% of GDP and still climbing.
The Debt will be fueled by endless annual federal budget deficits (the difference between spending and revenue). The deficit is forecast to top the $1 trillion level by 2023 and remain on an upward path. Bringing spending and revenue more in line, either by reducing spending and/or increasing revenue, will be necessary to improve the fiscal outlook.

High and rising debt will threaten economic growth and the standard of living for all Americans as investment dwindles and the country becomes less competitive. **See why rising debt is a major problem.

**
Changing course will require halting the rise of the debt as a share of the economy in the medium term and reducing the debt toward historical levels in the longer term. See more on the targets.
Why 70% of GDP in 10 Years and why 40% by 2050?The fact is that there is no magic number for the national debt. It is not necessary to pay off the national debt entirely to restore our nation’s fiscal health. In fact, incurring some national debt can be useful in responding quickly to unexpected events such as wars and recessions. However, current debt levels limit this flexibility.
Measuring a nation’s debt as a share of its economy is a common method used by economists to gauge a country’s ability to handle its debt.
We need to establish an ambitious yet attainable fiscal goal and commit as a nation to achieving it. In the near term, we should look to halt the rise in debt as a share of the economy. The debt held by the public is currently 77% of the economy and CBO projects it will rise to 89% by 2027. Bringing the debt down to 70% in that period would mark significant progress in stopping the unsustainable growth of the debt.
Over the longer term, we should aim to bring down our high level of debt closer toward the historical level of around 40% of GDP. Debt at the level will provide ample room to deal with unforeseen developments and crises. For example, debt was below the 40% level just before the Great Recession. It would be much more difficult to confront a similar circumstance with our current level of debt.

This tool illustrates the tough budget trade-offs involved in order to promote an informed conversation on how we can set a sustainable fiscal course.
Can you fix the debt and build a responsible federal budget? Give it a try!

Debtfixer | Committee for a Responsible Federal Budget


#2

I think the moment that I saw IOUSA, it really drove home the problem of the national debt for me. It would be funny if it weren’t so sad. People talk about the problems, but nobody actually does anything… and the debt just grows.


#3

Waiting for the party that used to campaign on reducing spending and the debt to actually do it. They’re in charge now. They did it in the 1990s with a Democrat president. Why can’t they do it now?


#4

They won’t because they CAN’T.

Here is the problem: Obama loosened up requirements and money to the bottom class of people in the US. The result has been catastrophic to the US. Here is why. We are not going to hit our hoped for 3% GDP growth which is what we are depending upon. The reason why is because the non working benefits are so good, so fat there is NO incentive to go to work. Most jobs they qualify for pay between $8-$12 per hr starting out. However total welfare benefits and cash runs $60-$100 k annually for a family of 4 (depending up on what state you live in). Why go to work. Anyone noticed the drug epidemic in the US? Wonder why, when you have nothing to do all day, watching TV gets boring, so you turn to drugs and booze and eat your self into obesity.

We need to reduce the costs of welfare to the point you are forced to go to work to pay your bills and live.


#5

I was hoping ebola would cure some of this.


#6

This idea alone would not fix it and I don’t have any numbers but I would gradually transition Social Security from a retirement program to a safety net:

Freeze the maximum monthly payment. Keep increasing the other monthly payments with the COLA until they hit that maximum level. Eventually (10, 15, 20 years?) inflation will do its dirty work. This will not impact current recipients or those close to retirement and give plenty of time to others to decide their own future.

I would be interested in seeing how the numbers and time frame would work out but I’m not wasting any time trying to figure it out.

I also think Trump’s proposed budget is a big step in the right direction.

Another cultural adjustment would help. We have all of these nifty words for real and imagined discrimination and hatred against particular identity groups e.g. racist, sexist, homophobe etc. We need a word to describe discrimination against taxpayers; something short and understandable. Then we could start to reclaim the political rhetoric and demonize the silent killer: BASELINE BUDGETING…that atrocity that makes small increases into cuts and a spending freeze a massive cut.

repeat after me: Baseline Budgeting is _____ist. Fill in the blank. Get all republicans to repeat it in front of microphones over and over and over. All we need is the proper word.

IDEAS?


#7

SS IS a safety net, nothing else, no one can retire on it. THe MAX payment amount is about $2600 a mo, not exactly retirement level. What to do: Make SS Opt-In with 2 choices.

  1. Safety net program which gives you Medicare at age 65 like it does not and a small monthly payment, as of 2017 its $1360 per mo average and Medicare comes out of that. 2) SS-R, offers the base SS like we have now but in addition it offers a retirement income on top. You elect to contribute additional money to SS and so can your employer as a benefit. The first few thousand would be tax deductible like an IRA, in fact use the same rules as IRA etc already in existence. The Feds would pay a guaranteed rate of say 2% per year but could pay up to 10% per year based upon CPI and other formula inputs like any retirement fund.

Baseline (aka Zero based budgeting) was an approach developed at the Cox School of Business SMU, Dallas, Tx, I studied it and its a good approach. Basically you zero out the budget every year the justify the input to restore it. It works and works well as it makes you look at every program, office, salary etc etc etc. It might be noted that the Feds no longer call it Zero Based Budgeting and the fact that they (Feds) have bastardized it does not make ZBB bad, what the feds have done is the problem. But they will do this with ANY approach they use.


#8

If I understand correctly, the economy is of number one concern. Why? I’m certainly not implying it’s unimportant. I’m just saying that i don’t know enough to understand. Unemployment is at a 16 year low. I realize there’s much more to the issue than the unemployment rate but I’m still hearing mantras of job creation, though that doesn’t seem to be needed. Why are so many still bent on job creation and what other aspects to ‘the economic problem’ are there?


#9

Underemployment:

Almost Half of Workers Are Underemployed | Money


#10

The economy affects everything you do and can do or hope to do.

When it comes to job creation it depends upon who is saying it. When capitalists say it they are talking about selling more product therefore they need to expand their capacity and that comes from profits.

When the govt says it, its talks about Yobs programs, none of which has ever accomplished anything for anyone. There are millions of people who work for the feds and what do they do? They administer stuff, there is no profit in that.

Socialism fails because there is NO PROFIT in it…


#11

Because the jobs being created are shit service level jobs that pay only minimum wage, or very very slightly above. This has long been known… higher paying jobs are vanishing at an alarming rate.


#12

It’s not jobs. It’s about bad economic policy, which is pretty much most of economic policy. The economy doesn’t require policy to function. It requires people not to shoot and defraud each other.


#13

" Most jobs they qualify for pay between $8-$12 per hr starting out. However total welfare benefits and cash runs $60-$100 k annually for a family of 4 (depending up on what state you live in)."

Source?


#14

What about private sector debt at 192% of GDP. Is that a problem given that, historically it’s been below 100% of GDP until the mid 1980’s?

[Edit: Fix link]


#15

That image doesn’t seem to work.

But yes, that is a problem, however, why is it relevant here?

Irresponsible behavior by ordinary people, doesn’t excuse irresponsible behavior by the Government.

Debt traps are highly destructive, and right now, we’re gaming on being a reserve currency to keep from slipping into one.

Reserve currency is a status cryptocurrency, or the IMF drawing rights, or both, could one day strip from us. It’s not a very forward-looking policy. We’re basically lying to people at this point about benefits we won’t be able to pay.


#16

Perhaps it’s not relevant to this particular conversation except that few people seem to discuss it and I’d argue if public sector debt is the flu, private sector debt is cancer.

Having said that, I assume the comment about reserve status has to do with the idea that foreign nations might someday stop purchasing our Treasuries and this would somehow lead to a situation where the government could no longer fund its spending.

Even if that were true…

Foreign nations accumulate our dollars because the foreign private sector wishes to sell us stuff to grow their economies and in turn accumulates our dollars. The majority of the foreign private sector needs to deal in local currencies and therefore must trade US dollars back into the local currency (FOREX). If the nation in question sells us more stuff than we sell them, then naturally there is a trade imbalance. That also means there is a currency imbalance (you seem like a pretty smart cookie, so I apologize if this is review).

The logical conclusion of this arrangement would be a strengthening foreign currency (as the demand for it rose relative to supply) and weakening of the US dollar relative to the nation in question. This would cause the cost of foreign goods to rise and would make manufacturing more attractive here.

Of course, you already know that the foreign governments create new local currecy and use them to ensure that there isn’t a currency imbalance. Some would call this currency manipulation.

As you know dollars do not accumulate interest, thus foreign nations can save dollars and lose money to inflation or they can buy US Treasuries. Of course holding US dollars comes with some risk of currency manipulation, thus foreign nations must hold liquid dollars to defend their own currencies should it become necessary.

So, if nations that run large trade deficits stopped buying Treasuries and instead exchanged US dollars for foreign dollars, say, like in China, the glut of US dollars flowing back would result in a strengthening Renminbi against the US dollar.

This would have the effect of increasing prices or foreign/ Chinese goods. This would obviously create a temporary crisis resulting from a shortage of supply here in the US (it would also result in drastic drop in China’s sales to the US), but it would also make manufacturing here at home more cost effective. Thus this move would create a massive demand here at home for which there is inadequate supply. The US response would be to meet that demand by rebuilding America’s manufacturing sector.

Thus, this would hurt most foreign economies that rely on sales to US consumers and would greatly help the US manufacturing sector.

In the end, the need to sell Treasuries to the US foreign sector would decline as dollars going overseas would decline.

In the end, in the short term, the failure by foreign governments to purchase US Treasuries hurts foreign nations just as much as it hurts us here at home. But in the long run, assuming US private sector businesses could meet the demands of the US consumer (and with automation and immigration there’s no reason to think we can’t) I just don’t see the long term problem.


#17

Here is a question with respect to the “debt fixer” app.

If spending=income (and it does) this means that cuts to spending equal cuts to private sector income, correct?

To cut $4.3 trillion in the deficits/ debt would cut $4.3 trillion in income over the next 10 years.

Basically what you are pitching is austerity.

If the argument is that our grandchildren will have to pay the debt down the road, aren’t you simply asking that they pay for it now?

If your argument is that it will cost more money later, aren’t you forgetting that the things we’re using the money for today are paying for things we need now? If we let maintenance go undone, doesn’t fixing it later cost more money on a logarithmic scale? Like painting a bridge is more cost effective than replacing large parts of its structure because it’s been allowed to rust. Repaving a road is more cost effective than replacing it.

Paying for education have benefits that are hard to put into concrete dollar terms, but failure to fund them has a cost.

All of these things that will have to go unfunded and our grandchildren will have to pay for. You aren’t going to save anyone anything. The costs will all be there, all you will have managed is shifting the costs to the people rather than the government. As per my private debt chart above illustrates, the private sector holds almost twice as much debt as a percent of GDP than does the government. What you are proposing would do little but make this situation worse. Increase private debt will simply lower the private sectors marginal propensity to consume as debt burdens on the private sector increase as a percentage of income.

With respect, you simply haven’t thought this through IMO…


#18

Japan, that’s the problem, a recession that never ends, because the Government manipulates the value of its currency to keep the current economy, and its budget, going.

It completely atomizes the desire to save by the populace (fostering the very credit-dependent private sector you criticize), as they’re are always punished year after year if they choose to save. If they don’t spend now, they don’t get the full benefit of what they’ve earned.

Thus, all that people do is buy into the current economy, and never save to accumulate the capital that can build the future one. So the economy stagnates. For decades.

The only thing worse than a sudden economic downturn, is a downturn forced to occur in slow motion, so that entire generations get ensnared by it.

America’s manufacturing was never destroyed; manufacturing grew year after year. Over 30% since the 1990s.

We simply moved our manufacturing higher up the value chain , producing more complex goods like cars and airplanes, instead of simple, one-off consumables like Clothing Hangers or textiles, which moved to where labor was cheaper.

China is going through the same process right now; manufacturing isn’t falling, but they are seeing lower-valued goods move to countries like Vietnam and Bangladesh, while they focus on trying to produce items of higher-quality. Like robotics. Or even just higher-class apparel.

We’ve already been through this: The Government only spends money it borrows from the Private sector (or foreigners). Ergo, It only borrows money that pre-exists, through bonds, which are not the same as loans.

So you’re not creating new income, you’re just appropriating income from the private sector, to spend on things Government wants.

You can talk, if you want, about the merits of if we ran under a neo-chartalism system, where Government would be creating new income as you claim, but currently it doesn’t.


#19

We’ve already been through this: The Government only spends money it borrows from the Private sector (or foreigners). Ergo, It only borrows money that pre-exists, through bonds, which are not the same as loans.

So you’re not creating new income, you’re just appropriating income from the private sector, to spend on things Government wants.

You can talk, if you want, about the merits of if we ran under a neo-chartalism system, where Government would be creating new income as you claim, but currently it doesn’t.

So where does the private sector get all the money the government borrows again?

And one more question.

The deficit represents the difference between what the government collects and what it spends, is that not new money creation?


#20

Most private sector money starts out, and largely exists, as inside bank money. IOUs by banks to other people/entities for USD.

A very small supply is also directly translated from mineral mining.

No, because it only spends what it first borrows. The Federal Reserve isn’t printing new money for the Government to spend, so borrowing is its only choice if its going to spend more than what it gathers in taxes and fees.