Great Analogy of the US National Debt

I've never seen a better analogy of the US national debt and how Congress is addressing it.

[ame="http://www.youtube.com/watch?v=Li0no7O9zmE&feature=player_embedded"]DEBT LIMIT - A GUIDE TO AMERICAN FEDERAL DEBT MADE EASY. - YouTube[/ame]

The debt to income ratio of the United States, based upon disposable revenue, is about 10:1 or over 1000% percent. When Congress raises the debt limit it is literally asking our children to sign on the dotted line to assume responsibility for our irresponsible spending today. Congress will not raise taxes and cut expendatures to where we have a balanced budget and is literaly signing on the dotted line obligating our children to pay.

Of note this action by Congress would be illegal under contract law in the private sector as our children are not of legal age to engage in a contractual obligation.

 

"There ya go man. Keep as cool as you can. Face piles of trials with smiles. It riles them to believe that you perceive the web they weave. And keep on thinking free."- Moody Blues 1972

 

Yet, congress has no problem borrowing money that todays children will pay back.

Taxation without representation.

 

This is of course the point.

We can accept that there will be times when the government must borrow but that debt needs to be retired so that it doesn't impose a tax burden on future generations. That was generally how the US operated until the 1930's although we've never actually had a zero debt in the US. Technically we're still paying for the American Revolution because a very, very small amount of debt was never paid off related to it.

In the 1930's things changed with Social Security. This legislation basically obligated all future generations to pay taxes to financially support the prior generations in their retirement years. Additionally the FDR adminstration borrowed all of the money (gold) from the American People under the Emergency Banking Act during the Great Depression and even though that act was repealed in 1974 the borrowed money has not been repaid to the American People.

Then came WW II and obviously the US government needed to borrow to fund it's world-wide military involvement. We paid down some of that debt but then along comes the Vietnam War which also created debt that has not been paid off.

On top of that in the 1960's under LBJ we created Medicare that, similiar to Social Security, obligated our children to pay for the health care of retirees.

The debt, or obligation of our children, has continued to rise and that increase is accellerating rapidly these days. It basically doubled under former President Bush and now is skyrocketing under President Obama and Congress continues to feed this imposition of debt on our Children. Neither Republicans or Democrats seem to really care. Not one "balanced budget" is being offered by anyone in Congress for 2013 today.

The debt and resultant tax obligations being imposed on our children is simply unsustainable. If, for example, interest rates soar to the early 1980's rate the entire general taxation of the United States. It's going to happen and our children won't be able to afford it and the entire United States is going to go bankrupt.

 

State and local public workers is ~16,581,617
Federal civilian workers is ~3,000,000
Federal military personnel is ~1,500,000

Total US public workers is ~21,081,617

If we assume we have ~140 million American workers today, and ignore that many don't pay full taxes, we have about 6.6 private workers for each public worker. But since our taxes really aren't paying for the government which we demand it's kind of a moot point.

A better metric to look at is government spending per capita. In constant 2005 dollars, in 1960 our government was spending about $2000 per citizen. Today our government is spending about $12,258 per citizen, for every man, woman and child!

Question; How many Americans does anyone know who can afford to pay the federal government $12,258 in taxation per year? How many families of four are paying $49,000 per year in federal taxes?

If most all people that you know are not paying this level of taxes, then this alone explains how idiotic and stupid and ignorant and arrogant Americans are regarding fiscal responsibility...

 

The issue is much more simple. The government is spending more than revenues and neither Democrats or Republicans are addressing that fact. Not a single dime of spending is being reduced by either party in Congress. At best we have limitations being imposed on future increases in spending and they are insignificant.

We need a combination of two things. We need actual spending cuts such as eliminating entire budgets and significant reductions in others but that's only 1/2 of the equation. We also need tax increases to not only balance the budget but to create a surplus to pay off the national debt.

The Republicans which control the House of Representatives where spending and revenue bills originate are not addressing this and are promoting the bankruptcy of our country. They need to send an omibus spending and REVENUE bill to the Senate. They need to propose cuts but also address REVENUE with tax increases that reflect a balanced budget. They need to freeze the national debt and legislate that it must start being reduced over the next five years AND PROVIDE THE LEGISLATION TO ACCOMPLISH THAT!

That all has to originate in the House of Representatives and it is controlled by the Republicans. So where are the tax increases necessary? The Republicans refuse to balance the budget and they are just as bad as the Democrats.

When are Americans going to wake up? It's time to stop voting for Republicans and Democrats. They are not a part of the solution but are the cause of the Problem.

 

Actually, it is required that each year, by a certain time, the PRESIDENT must submit a detailed budget to Congress.

House and Senate budget committees then consider the budget resolution...

 

And often ignore the President anyway.

Here's the problem. Regardless of any spending proposals we're still having trillion dollar deficits and the House is responsible for generating legislation to fund our government. The HOUSE, based upon appropriations by Congress, should be addressing the necessary increases in taxes to pay for everything that Congress approves spending on.

How long has it been since members of the House have proposed the taxes required to fund the expendatures? While the combined Congress can spend money only the House can address initiate Revenue measures such as raising taxes. It was the House that extended the Bush era tax cuts which have cost our children $740 billion in the last two years alone.

 

It would be interesting to know the exact expenditures per year that are directly related to emergency economic stimulus spending?

Whether all of us agree or not to government stimulus, if we at least take this out of the budget equation, how much deficit spending does this leave?

I can cut the government some slack for emergency stimulus spending, but beyond this, if there remains deficit spending, then this truly defines the recklessness on behalf of Congress and Obama regarding fiscal responsibility.

At a minimum, sans the stimulus expenditures, taxes should be increased to balance this portion of the budget...

 

also Obama included the war costs, Bush hid them

so all things being equal that would need to be removed as well

we also have to remember a down economy is expected to be temporary, so while gov may receive less taxes for that time, the expectation is it will rise again when the economy improves thus the reason for stimulates

the biggest problem with Bush and Obama is that neither have successfully addressed foreign outsourcing

 

Excluding the extension on unemployment benefits there were no recorded expendatures for stimulus spending in 2011 and we had a $1.2 trillion deficit.

 

The problem is the voter doesn't have enough skin in the game.

GDP is ~$14T, 10% would be $1.4T, enough for SSI & Medicare.

If you want the politicians to fix the budget, force a balanced budget and make anything above 10% of GDP a flat tax, with no lower limit. That spreads the pain enough that the voter would hold the politicians feet to the fire.

 

I agree with spending cuts but, not tax increases. All that will happen with tax increases is that the wealthy will circumvent them while the average Joe will pay more.

Besides, we got into this mess with government meddling in the private sector, what makes anyone think that giving them more of our hard-earned money will do anything more than line politicians pockets?

 

SSI/Medicare are funded with dedicated FICA/Payroll taxes and have not contributed to the national debt. They both face future shortfalls but currently are in the "black" having collected more revenues than expendatures.

Questions were raised in another thread as to whether the GDP is actually being calculated correctly or if the government is inflating the numbers for political purposes. The GDP is supposed to be a measurement of new goods and services produced during the year and when addressing a consumption tax (with prebates) that only taxes new goods and services we found elements in the calculation of the GDP that indicated the US GDP was less than what it should be. For example the resale of unimproved real estate should not be included because land is never new and cannot be "produced" or considered for a consumption tax. It would not be taxable but the resale of unimproved real estate is counted as a component of the GDP.

We can make all sorts of "conditions" related to taxation which provides rule but the real point is that none of them are being applied when we have 40 cents out of every dollar being borrowed. Whatever the solution it is going to require increased taxation. The Democrats call for raising the taxes on high income workers but they cannot make up that 40% shortfall so the Democrats are not calling for enough of an increase. The Republicans refuse to raise any taxes but they can't cut enough spending to balance the budget.

Both Democrats and Republicans have to not only balance the budget but also create a surplus that will pay off the national debt. My criteria would be that their goal needs to be to reach a zero national debt in 10 years. That means not only a surplus budget but a $15 trillion surplus budget. That would require over doubling the general tax revenues (i.e. taxes) starting today.

 

I don't care about what Bush did. I only care about what Obama is doing today and tomorrow.

How many billion$ in government expenditures are pure deficit spending that has nothing to do with so-called emergency stimulus? Whatever this number might be, there is no excuse for this reckless spending other than arrogance and greed...

 

I view an extension of unemployment as economic stimulus. Yes it helps the individual but the primary reason is to prop up the economy.

So...in 2011 there was no national emergency or critical nature driving $1.2 trillion in deficit spending?

The total federal revenue for the past 3-4 years has been kind of steady and forecasted. The collective we had a choice to reduce spending in line with forecasted revenue or to just continue non-emergency deficit spending.

Therefore, all of this deficit spending was voluntary. More precisely politically driven with zero concern about deficits and debt...

 

Just like the senseless wars in the Middle East...Americans were told to go shopping.

I've advocated in many threads that every American should be required to pay some amount of federal taxes...even if it's only $50. If they were required to write a check for $50 and send it to the government by July 4th of each year, suddenly more Americans will speak up.

But you are 100% correct; too many Americans have no skin in the game...

 

In bold above is a meaningless statement since the wealthy are already paying 85% of the personal federal income taxes. Obviously the wealthy are failing at 'circumventing' paying taxes!

It would be stupid to increase taxes unless in parallel there is a cap on spending which is indexed to some metric. If we don't control their spending...they will just spend more and more and more and more and more...

 

Well, it's not as stupid as it could be because the lowered FICA/Payroll revenues are being replaced with general revenues.... where we already have a trillion dollar plus shortfall in revenues.

 

It's still stupid!

The only reason this was done is because FICA is required to be paid by all workers while federal income taxes are not. It was a convenient place where the government can give every worker some extra money.

In the end either the taxpayers pay for it or it is more deficit spending...

 

I do have to agree that it was really stupid. Workers are not the one's that need more money. The unemployed and retirees that aren't working need more money. The FED has been artificially suppressing interest rates and tens of millions of retirees with money in T-bills have lost billions of dollars in interest payments which would have feed the economy speeding up the recovery BUT OH NO!!! That wouldn't have benefited the Federal Reserve that exists solely to screw the American People.

 

It's kind of interesting in all of this stimulus and government hand out that the retired have been somewhat ignored. Especially considering that these people are ardent voters!

But if we provide more cash to the retired, this just takes the cash out of the hands of the taxpayers, unless it's all deficit spending, which takes the cash from our kids and grand-kids.

Regarding those interest rates, it is stupid to keep those rates so low! If the rates were 5% this would not effect those seeking loans but would positively effect all of those with interest income...