Who is going to pay the debt?

The United States is 16.4 trillion dollars in debt, and is still continuing to spend like there's no tomorrow.

$16,400,000,000,000

That is $52,400 for every man, women, and child in the country!

Some of you still might not think this sounds too bad. Perhaps what you do not realize is that a large segment of the population is low income, and effectively will never be able to contribute anything towards paying down the debt. About 40% of American households earn less than $23,000 per year.

Misguided politicians have hoped that immigration would help solve the problem, but the employment opportunities have not been able to keep pace with the increase in population. Instead, the only jobs available to accomodate the increase have been low paying jobs, and so as the USA takes on a greater number of immigrants the average income per person in the country has been falling. In many instances the incomes of immigrant groups are so low that they are not able to make any net contribution to the tax base. With more people comes more public costs (education for example). The rates of poverty and unemployment are also several times higher amongst immigrant groups. Economists and politicians are falling prey to the fallacy of composition, making the false assumption that the income distribution will continue to hold if more people are added. To think that more immigration is the answer to the debt problem is just another pyramid scheme. Bring in immigrants to pay for everyone else, but who in turn will pay the taxes to take care of the immigrants and their children? Many of these immigrants can barely provide for their own families or save for their own retirement, and will need taxpayer assistance.

Consider a typical family, 1 man, 1 women, 2 children. That is $210,000 dollars of debt per family. I am sure this family has other debts too. The average American household has a mortgage debt of $149,782.

And it is not just the federal government that is in debt. Many of the state governments have debts of their own. The state of California alone has accumulated $612,054,955 of debt.

So the question is how much are middle class families going to be taxed in the future to pay off all this debt? I think before the government spends anymore money, everyone needs to get together and plan for how much additional taxes will be required to pay down the debt at each income level.

Some people seem to be of the mentality that the government can just spend, spend, spend, then let the rich worry about all the debt later somewhere down the line. The problem with this line of reasoning is how do you know it is going to be the rich who will pay this? Perhaps the government will just make drastic cuts to social programs instead. Perhaps it will also be lower middle class people who will face a huge tax burden.

And where exactly do you think all the interest being paid on all this debt is going? Who are the ones who hold all this government debt? If we are just looking at the taxpayer's obligations to pay off the debt, we are only seeing one side of the picture. Will more deficit spending increase inequality?

Sure, the interest rates are low now, but they will not remain that way. It's another fallacy of composition pyramid scheme if you think the government can keep borrowing without it causing interest rates to be driven up. Interest rates on Treasury bonds are now at 0.85 %, and that still requires 6% of the annual federal budget just to pay the interest on the debt every year. What is going to happen when interest rates go back up to 3 to 6% ?

The Federal Reserve is doing all it can to keep interest rates artificially low, but to do this it has to lend out money to whoever wants it at below-market rates. That requires issuing more money, and every year the Federal Reserve keeps interest rates down it is causing inflation. The more inflation there is, the more expensive it becomes for the Federal Reserve to keep interest rates down, because inflation has an upward pressure on the natural market interest rates. So this artificial interest rate manipulation cannot go on forever.

 

A visualization of global debt...

World Debt Explained: Nation’s Debt In $100 Bills
January 31, 2013

 

Makes one wonder why all these countries get into debt in the first place.

 

Well, a tiny part of that interest goes into a few of my investment accounts.

 

Debt allows spending that buys votes without the increase taxes that loses votes. That only lasts so long, but it only has to last until the next election.

When debt became a problem, social spending was high enough that anyone that wanted to cut spending was throwing granny off the cliff. This shifts the problem to greed, and away from debt.

 

They are unable to see this. They just think the problem will be solved with a steady supply of inflation.
It does not work that way.

Inflation drives interest rates up. If the Federal reserve tries to hold interest rates down, they have to keep printing more money to loan out at below-market rates.
Investors will be very reluctant to loan out money at a rate below the rate of inflation. I do not see how the USA will be able to continue to service its debt. Eventually the Treasury bonds will come due, and there will be no one else willing to buy them.

 

Now, this wouldn't hurt so much...



...and do it every year until the National Debt is paid off!

Considering that the top 1% has concentrated among them the 43% of the wealth, being an estimated $44.9 trillion, and the pay toward national debt segment being 40% of this total wealth, being $17.96 trillion, this would go a long way toward paying off the national debt.

 

It isn't as if they have any of that in cash. It is all in the form of things that would have to be sold. If they sell those things, then someone else has to buy them, and the only people rich enough to buy much of them are the people who have them.

Not to mention the fact that a big sale of those things - stocks, real-estate, art, etc. would drive down the value, reducing the wealth significantly and making this money grab dig even deeper into their pockets.

No, your plan is the kind that people like Marx sell in an attempt to make a power grab. They convince people to overthrow the country to loot the rich, then discover that the rich really don't have as much as everyone thought and their money doesn't spread out very well.

 

It isn't "debt" that is the problem, but a lack of a positive multiplier effect in public policy "solutions".

 

our country using basic resources is perfectly capable of housing everyone, feeding everyone, providing for education, work, health care and other things if we did go bankrupt we can ration things we need and take care of our own. it may mean not selling food to other nations and of course resetting our economy from scratch, tucking into our borders and waiting the situation out for many decades thats all. but i would say plan for this now and when they cut off off refuse to repay a penny and withdraw into our nations borders behind our military and nuclear defense. i would think the horror that would do would hobble china and well everyone else eliminating them to. we would likely come out from this stronger than ever when the dust settles.

so lets not do anything and when the time comes refuse to repay and see what happens.

 

Refusing to pay the Debts of the United States is not an option.

 

Probably National Parks would be first on the auction list. Say goodbye to all those forests!

Once you sell a national wilderness to private buyers, it is nearly impossible for the government to ever get it back. All that wilderness area will be gone forever. All thanks to politicians who cannot stop their wild spending sprees in the present time.

 

The problem is that many pension plans have bought up US Treasury debt, so if the government does refuse to pay, many retired people will find that a good portion of their life savings have suddenly evaporated.

 

indago:...

... got a link fer dat graph?

 

Click on the Reply With Quote and you'll see all the addresses.


.

 

You know, this is a very good question.

 

The national debt is like a thirty year mortgage. Consider this, the GDP is currently about the same as the debt, $16Trillion. Over the next thirty years the economy will generate about $500Trillion with zero economic growth. If the economy grows at anything close its long term historical average the GDP will double and cumulative GDP will be over $1,000Trillion.

Tell me again how the US economy cannot afford to pay off the $16Trillion national debt.

 

To pay off $16T in 30 years, with an interest rate of 2%, we would have to put $900B toward the debt, we currently are putting $200B toward the debt. To zero out the debt, we need an additional $1.3T, then an additional $700B to pay down the debt - $2T in total.

The 4% increase on those earning $250K or more, is bringing in $40B, if we increased the tax rate to 90%, we gain an additional $500B. The remaining would need to be paid by the rest of the tax payers - average income is $50K, taxes would need to go up an additional $13.3K, a 27% increase across the board.

At our current rate, in the next 30 years we will take in $65T in taxes, and spend $105T, increasing the debt by $40T.

The current rate won't happen because the next 30 years will see a significant increase in SSI and medicare spending due to the baby boom.

 

In 30yrs a great many of the boomers will be dead. Reagan already planned for the boomers in the 80s when he raised the SSI tax. So don't worry about SSI, it is all good.
And if the economy grows? You haven't included that in your scenario, have you?

 

Since supply side economics is supposed to be supplying us with better governance at lower cost, a positive multiplier effect from any given public policy scheme is what should be helping us pay the Debts of the United States.

 

Can you provide a link that shows SSI is OK?

But even if it is, Medicare isn't fixed, and is scheduled to grow far faster than the economy into the forseeable future. http://budget.senate.gov/democratic...Group_id=09b22c0a-0c73-4536-a8e3-2ebf78883aa6

Also, I didn't include boomers in my calculations - they were bad enough that they didn't need it.

As long as government spending keeps pace with economic growth, it doesn't matter.

The Clinton "balanced Budget was a combination of GDP going up 49% (Tech and Dot.Com boom), and spending only going up 26% (Welfare reform).

Even if we were to balance the budget, to zero out the debt in 30 years requires increasing taxes by $700B (assuming interest rates stay at 2% - big assumption in a growing economy). That is still beyond "taxing the rich @ 90%", and my numbers above assumed the rich did nothing to reduce the amount they pay in taxes - that won't happen.


Before we can even start to reduce the debt, we need to balance the budget. Is there any indication the Democrats will do that by increasing taxes? Their tax on the rich brings in all of $40B a year, about 3% of the deficit. And, they are unwilling to cut anything?

 

How is that working? The Federal government subsidizes health care, and it grows faster than inflation. Government subsidizes education, and it grows faster than inflation.

Looks like the public policy multiplier is much less than 1.

Unsubsidized healthcare (lasik and cosmetic surgery), have dropped in cost relative to inflation.

Looks like the best public policy is for the idiots in government to quit trying to fix it.

 

I believe we would get more efficient public servants if the wealthiest were required to pay war time tax rates, even for a War on Drugs.

 

http://www.sanders.senate.gov/newsroom/news/?id=f63d73c1-81df-4dfb-aac3-730092ed9406
April 23, 2012
A new report on Monday by Social Security trustees showed the retirement program's trust fund has $2.7 trillion in reserves and will grow to $3.06 trillion by 2021, enough to maintain the unbroken record of paying every nickel owed to every beneficiary in full for another two decades.

In 20yrs the boomers will be well into the decline of reducing themselves from the roles.

 

If the Govt collected proportionately the same amount of revenues as it did in 2000 it would have generated 700-800 billion in additional revenues in each of the past three years. And trillions more if you go back to 2001.

So we could reverse the Bush tax cuts and eliminate a big portion of the deficits. Add a 5% surcharge on millionaires to make up for some of the additional debt we've accumulated, since they were the ones who benefitted most from the tax cuts.

Then cut the military back to 2000 proportionate levels. That saves $250 billion a year and we've pretty much balanced the budget. Make SS means tested and remove the cap and that is solved.