Fiscal Nightmare that is our national debt

[clarky07]

More and more of our government scares me every day. lots of people know that social security is a government mandated ponzi scheme, but here is something i recently found out that is just silly. of the massive amounts of debt we auctioned last year, the federal reserve bought about 80% of it. yep, just printing money and trading it between government offices. Yeah that also has the tiny side effect of making all of our money worth less and less.

[Guest 6.8 AR]

Yep, and watch it continue. That's what happens when you give

people in government too much power. They bankrupt you and I,

the people that pay the bills.

[Guest Drewsett]

FDR started this nation's long decline into mediocrity when he took us off of the gold standard. Our currency is only worth the word of the US government that it will be paid. That word is less and less believable with each passing day.

I'm not necessarily saying we need to go back to the gold standard (while I would love it, I just don't see it being feasible), I do think we need to get away from the fractional reserve banking system. I am a finance major....I know investments, money, and banking pretty well...I read SEC 10-K filings for pleasure. Our monetary system is based upon debt that can never be repaid. The government buys money from the federal reserve. They buy it on credit. They pay interest on the "loan". That interest can only be repaid in money...money that is bought from the federal reserve. Money that you pay interest on. So...you can never repay the interest. You continue to increase the amount of debt. That debt becomes new money in the "money supply", because the federal reserve loans out to the banks in the federal reserve system (and so on to the banks we use) the credit notes of the government (and of you and I) ninety percent above what we (or the government) have on deposit.

Why do you think I'm a finance major? It's the ultimate way to make money...sell it.

And because I'm a finance major you see that I fully desire to put myself out of a job....but in all likelihood I don't see it happening.

So at least I'll make enough money between now and when SHTF to hopefully buy plenty of weapons, ammo, and a nice well-stocked hidey-hole in the mountains.

Edited January 24, 2010 by Drewsett

[Guest Alpha Dog]

Everyone, and I mean EVERYONE should read (or listen on CD) to "Atlas Shrugged" by Ayn Rand. Written in 1957. I don't know if she wrote it as a prediction...but, she puts Nostradamus to shame...she is right on target.

[mcurrier]

yep, just printing money and trading it between government offices.

I thought kiting was illegal? I guess that only counts for citizens, not govt.

[Guest mosinon]

The people in charge of this stuff really want to elected and the message "Hey, I'm gonna have to raise taxes and cut services" doesn't get a lot of votes.

Personally, the deficit really bothers me. When I look at the charts I get frustrated that 8% of our dough goes to interest. Hell, I'd take 8% if I could get it! I'm frustrated that medicare and medicaid is 43% of the budget and I'm angry that 20% of our taxes go towards national defense.

I'd be happy to pay extra taxes if they would go to paying off the debt but right now we live in Keynesian nightmare where we spend more money when times are good cause, hey, more money. And then spend even more when times are bad cause hey, the economy needs it.

I can't hold any party to blame on this one, they've both had their chances to rectify the situation and failed miserably.

All that said I recall the Reagan years. The wisdom of econ types back then was that we had spent ourselves so far into debt our grandkids would be paying it off. Surprisingly it looked, for a time, that America would be debt free sometime around 2010. So maybe everyone is wrong this time as well. I hope so. I hate owing money personally and and as a nation. Right now it seems like a death spiral.

[Guest 6.8 AR]

I don't think paying extra taxes is the answer, mosinon. Spending has always been the problem with both sides. When Reagan cut taxes, revenue went up, jobs went up. He never could get Congress to cut spending. Spending was and still is the problem. This

country would prosper if it cut a million or so government jobs. Focusing on the IRS is a good start. Abolishing the income tax and constitutional limits on legislation would do wonders to our budgetary problems. And it is both parties fault.

[Chief07]

The people responsibile for this financial mess should be in jail.

But then again, they write the laws allowing them to do this.

2010 can't come soon enough.

[Raoul]

The people responsibile for this financial mess should be in jail.

But then again, they write the laws allowing them to do this.

2010 can't come soon enough.

Oh yeah, another election will fix the problem.

[Guest 6.8 AR]

Oh yeah, another election will fix the problem.

It can. Enough people get to the ballot box and it will.

There are enough angry people to do the job. They

just have to show resolve. If they don't, we might

have to it the bloody way. No one really wants that.

But if you assume the worst and think it is all lost,

are you ready to start a war or does your cynicism

satisfy you? Not sarcasm, just a question, because if

you believe one won't work, you might be forced into

the other. Involve yourself Any way you can to insure

others decide their fate this year properly. It can make

a difference.

[Raoul]

What I believe is that the 2 party system has failed us. No sarcasm. Neither party is doing anything other than protecting themselves and their ability to soak up dollars in the form of campaign donations, pac money and probably some gratuitous bribes. We have a ruling class that makes laws governing us that they don't even have to follow.

As for enough people voting to make a difference, not a chance. I was an election officer for many years and the pecentage of people who voted was pretty consistently low. No matter which election. Voting is not a right that the majority excercises.

I feel that our only hope is if we can support a third party to split the vote enough to have a say.

Barring that, we may already be screwed. I don't think there's much of a chance that the masses will take to the street. We're already so benumbed by sports, reality TV, legal prescription drug abuse, alcohol and lethargy that we just don't care or have enough energy to act.

I just pray that it's not too late. I do feel hopeless some days. Anyone who watches the news or reads can't help but feel that way. But I also see some hope. The anger of we the people is spreading and maybe, just maybe...there's a chance something good will come of it. But I do not think we can depend on either party to just suddenly begin to do the right thing.

[Guest 6.8 AR]

Ahh, we the people. I'm glad you said that because that's the chance. If we hold the elected's feet to the fire, it will happen. A third party is a wasted effort. Did Ronald Reagan's campaign not affect change? Newt Gingrich used a "Contract with America"

to steer that party back to the right. It worked for awhile. Accountability and platform can steer DC to the right way of doing things. We can make them accountable, too.

Complacency is the problem. Crawling in a hole and letting them run rampant is why

"We the People" are getting angry and it is already showing signs of success. Now isn't the time to be hopeless. It is time to stand up and be heard.

If you really think a third party is the answer, look at all the parties on the ballot for

President, next time you vote. A party needs the right leadership, not a big tent.

Most people in this great country are conservative to a high degree. They are beginning to see it, too. Feeling hopeless won't fix anything. Identify the enemy and

affect change by showing conviction and resolve. It is infectious and shows results.

[StPatrick]

"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money" -Alexis De Tocqueville, "Democracy in America", 1835

My guess is congress figured it out right around when Woodrow Wilson was elected. ~1920 was the time when big labor became a political force, Keynes' economic theories became popular, and the Bolsheviks were successful in a "peoples' " revolution.

[Guest mosinon]

I don't think paying extra taxes is the answer, mosinon. Spending has always been the problem with both sides. When Reagan cut taxes, revenue went up, jobs went up</quote>

I'm not sure that is even remotely true. Revenue stayed pretty much the same. Reagan cut the tax rates but also eliminated a lot of loopholes. I think Reagan spent too much and raised taxes four times.

He never could get Congress to cut spending. Spending was and still is the problem. </quote>

Perhaps. But where are you planning to cut the budget? It can't be welfare, that doesn't really make a difference. And social security is right out. Defense could be a place to start but even if you halve that you don't end up anywhere. You could cut medicaid and medicare, but I don't think people will put up with that. I'm all for the notion that spending is the problem but I don't see a politically viable way to cut spending in a manner that will make a difference.

This

country would prosper if it cut a million or so government jobs. Focusing on the IRS is a good start. Abolishing the income tax and constitutional limits on legislation would do wonders to our budgetary problems. And it is both parties fault.

I really don't see how ignoring constitutional limits would help. I've heard, though not researched, that the ideal tax rate is around twenty percent. This is the rate, I'm told, that maximizes government income and private investment. I have no idea if that number is accurate.

But it doesn't really matter, until people are either willing to pay more taxes or accept less services the deficit remains.

[Guest 6.8 AR]

Well if Reagan didn't cut taxes, how did they go from a marginal rate in the fifties(?)

to a top rate of 36%(?) during his first administration? I plead ignorance on these four tax increases. Wait, I remember one. TEFRA in 1986, limiting capital depreciation, and

stopping ACRS. You can call that a tax increase. I just don't recall others, maybe so.

And, if you recall, he had a Democrat congress most of his time in office. There had to

be deal making with Tom Foley to get anything Reagan wanted done. Soviet Union

vanished because of some of his policies. The economy came back because of some of his policies. Congress wouldn't allow spending to be cut.

There are no other options at this time except to cut broadly everywhere except

defense, and that includes all discretionary spending, bailouts of any nature, anything that allows for any economic redistribution of wealth, and yes healthcare. There is so

much waste alone in bureaucracy that would make a difference. If you look at the big picture and cut some in all categories, it would be a big difference. If you let capitalism flourish without so many Bar... Str..., oops, regulations and unleash the

individual(and get the deadbeats off welfare) it would make a big difference.

Whoever told you about a ideal tax rate is just a Keynes advocate. There is no ideal tax rate to maximize government income and private investment. An income tax by its own design depresses capital investment. The best thing government can do to stimulate the economy is to get out of it's way. And how much is needed for the government? Exactly what it lawfully spends each year, nothing else. Our country has been using other people's money for far too long. Maybe I could have said "Abolishing

the income tax, and requiring the constitutionality check for new legislation before it's

passed". A flat sales tax would be more equitable and everyone would pay it, without

having to have an IRS and their shotguns. Whatever took it's place could certainly be smaller.

Your last sentence sums it up quite well. We are going to have to live within our means, but you won't get there until you start cutting and stop redistributing.

Obama could cut his first budget by almost a trillion dollars and quit playing patty cake

with the money laundering between the Fed and Treasury.

[Guest ab28]

Everyone, and I mean EVERYONE should read (or listen on CD) to "Atlas Shrugged" by Ayn Rand. Written in 1957. I don't know if she wrote it as a prediction...but, she puts Nostradamus to shame...she is right on target.

I read this, and most of her other books. She was a decent writer, but the main char in her novel "We The Living" seemed shallow and materialistic. I don't care what people buy, but most of her books seemed to have a lot of greed and money worship in them. I understand the ideas and some of what she is trying to say, and I agree that I as an individual have the ability to deal with others through reason. With that said, much of Objectivism is a load of BS, and she seems as brainwashed as some of the "communists" she hated.

[clarky07]

I can feel the pain of those saying we can't change things, not enough people vote, both parties suck. I feel the same way a lot of the time. That my friend is not the answer though. Big things don't just happen.

Somebody has to really have a DESIRE for it happen and then the DILIGENCE to MAKE it happen. There are plenty of things that have happened in the last 200+ years in America that people said couldn't be done. Today we live in a society that has landed on the moon. A society where we can have a live video conference with people in China on devices the size of a book. These were not easy things to accomplish, but they happened because somebody thought they could be done and wouldn't rest until they were accomplished.

I'm not suggesting that changing our government is easy, or even that it will happen, but having a defeatist attitude is certainly not the answer. As long as there are people like us that care enough to fight it there is hope.

[Guest mosinon]

Well if Reagan didn't cut taxes, how did they go from a marginal rate in the fifties(?)

to a top rate of 36%(?) during his first administration? I plead ignorance on these four tax increases. Wait, I remember one. TEFRA in 1986, limiting capital depreciation, and

stopping ACRS.

Well, he was a bit trickier than you expect. Whilst the common perception is that Reagan passed out these huge tax cuts that isn't entirely correct. Incomes had grown so many more middlish income people were finding themselves in high tax territory. So Reagan cut the marginal tax rate and also cut a lot of the deductions.

you can add the Deficit Reduction Act and the increase in Social Security to the list.

You can call that a tax increase. I just don't recall others, maybe so.

And, if you recall, he had a Democrat congress most of his time in office. There had to

be deal making with Tom Foley to get anything Reagan wanted done. Soviet Union

vanished because of some of his policies. The economy came back because of some of his policies. Congress wouldn't allow spending to be cut.

That's a problem

There are no other options at this time except to cut broadly everywhere except

defense, and that includes all discretionary spending, bailouts of any nature, anything that allows for any economic redistribution of wealth, and yes healthcare.

Why not defense? When you're running a deficit, and you want to get rid of it (a party that seems to be comprised of two people: you and I) you've got to get to the hard choices.

There is so

much waste alone in bureaucracy that would make a difference. If you look at the big picture and cut some in all categories, it would be a big difference.

I don't see it. I think discretionary spending is too small to make the difference you suggest.

[quote name=6.8 AR;453042If you let capitalism flurish without so many Bar... Str...' date=' oops, regulations and unleash the

individual(and get the deadbeats off welfare) it would make a big difference.[/quote]

Perhaps.

Whoever told you about a ideal tax rate is just a Keynes advocate. There is no ideal tax rate to maximize government income and private investment.

I'm confused. Is that even possible? A curve with no local maximum?

An income tax by its own design depresses capital investment. The best thing government can do to stimulate the economy is to get out of it's way.

That is kind of a keysian thing, the assumption that government has control over the economy

And how much is needed for the government? Exactly what it lawfully spends each year, nothing else. Our country has been using other people's money for far too long. Maybe I could have said "Abolishing

the income tax, and requiring the constitutionality check for new legislation before it's

passed". A flat sales tax would be more equitable and everyone would pay it, without

having to have an IRS and their shotguns. Whatever took it's place could certainly be smaller.

Any tax is necessarily redistributive. A flat tax has some allure but I don't see how it is politically viable.

Your last sentence sums it up quite well. We are going to have to live within our means, but you won't get there until you start cutting and stop redistributing.

Obama could cut his first budget by almost a trillion dollars and quit playing patty cake

with the money laundering between the Fed and Treasury.

The easy thing to think is that it is all spent of languid government employees and so forth but that is a fool's belief. The real problem is that the citizens want X and are willing to pay Y. While I like the new senator from mass he did say the two things he didn't want were higher taxes or medicare cuts. That is right up there with smoking and not wanting cancer.

At the end of the day the biggest problem is that there are no politically viable solutions.

[Guest 6.8 AR]

I don't think you see anything very possible. I'm not writing a thesis or writing

public policy but you pose some kind of argument without a solution or, at best

just throw another argument. If there's no solution to our problem except higher

taxes in your mind, so be it. We're just going to have to disagree on that.

I don't know anything about you or if you paid taxes in the eighties. I bought my

first house in 1982, been paying taxes since about 1973. My recollection of the events are based on experiences and I do recall my income taxes falling as a percentage of income. I also recall the hole Mr. Carter got us into and coming out

of it in the eighties, so yes, I do give Mr. Reagan credit for more than you do.

Whether you see any certain kind of tax policy viable or not, there are many who

will disagree with you on that. You're premise(or Keynes) that government is in control of the economy, is the problem. You might revisit that premise.

There will be hard decisions to make, and one of them will be to get away from Keynesian economics. You can always donate to the Treasury if you wish.

[Guest 6.8 AR]

I read this, and most of her other books. She was a decent writer, but the main char in her novel "We The Living" seemed shallow and materialistic. I don't care what people buy, but most of her books seemed to have a lot of greed and money worship in them. I understand the ideas and some of what she is trying to say, and I agree that I as an individual have the ability to deal with others through reason. With that said, much of Objectivism is a load of BS, and she seems as brainwashed as some of the "communists" she hated.

ab28

What you call greed and money worship in her books is not what she is saying. She places value in the human being's mind by it's creativity. The

value is when the individual has an idea that others have a use for. Now I'm going to have to go and read the book again.

My sig is part of a dialogue between two of the characters in Atlas Shrugged. The other person in that exchange is talking about greed.

[Guest ab28]

ab28

What you call greed and money worship in her books is not what she is saying. She places value in the human being's mind by it's creativity. The

value is when the individual has an idea that others have a use for. Now I'm going to have to go and read the book again.

My sig is part of a dialogue between two of the characters in Atlas Shrugged. The other person in that exchange is talking about greed.

The problem I see with Ayn Rand is she was just as idealistic as these hippie communists running around, only in the other direction. Pure capitalism would result in things like 8 year olds in factories, slavery, and the match factories of the 1800's. There are plenty of greedy people out there who would grind people to dust in exchange for a few more dollars. I am fine with someone profiting on their ideas, but pure capitalism would be a nightmare. It is just as unobtainable as pure socialism. Look at things now, housing is much too expensive, and a major rip off. People making minimum wage can barely make it, everything costs too much. I love the ideals behind pure capitalism, and wish it was obtainable. In that ideal you could have affordable housing for all. I could pay 100 bucks a month for a sleeping cubicle with the bare necessities, but greed would destroy it. I am sure you are familiar with the Industrial Revolution and the environmental and social destruction that came along with it.

You should read "The Sword of Truth" series, by Terry Goodkind. He promotes many of the same ideals, the triumph of the individual over the collective, the rights of an individual mind. It is epic fantasy, but very good.

Edited February 8, 2010 by ab28

[Guest 6.8 AR]

Thanks, I'll look for that one.

[Guest mosinon]

I don't think you see anything very possible. I'm not writing a thesis or writing

public policy but you pose some kind of argument without a solution or, at best

just throw another argument. If there's no solution to our problem except higher

taxes in your mind, so be it.

Hold on now, I didn't say higher taxes were the only option. There are other option. You could cut medicare and medicaid. You could scale back on defense. You could stop federal pensions for those newly hired in. But all those are unpopular things to do.

People wonder why we spend 10 times as much as the next country on our military. Ten friggin times! Let us face the fact that it is a handout to our allies. We spend that much on defense so belgium (for example) doesn't have to. This is international welfare. Check it out. http://static.globalissues.org/i/military/09/country-distribution-2008.png

We're just going to have to disagree on that.

I don't know anything about you or if you paid taxes in the eighties. I bought my

first house in 1982, been paying taxes since about 1973. My recollection of the events are based on experiences and I do recall my income taxes falling as a percentage of income. I also recall the hole Mr. Carter got us into and coming out

of it in the eighties, so yes, I do give Mr. Reagan credit for more than you do.

Whether you see any certain kind of tax policy viable or not, there are many who

will disagree with you on that. You're premise(or Keynes) that government is in control of the economy, is the problem. You might revisit that premise.

There will be hard decisions to make, and one of them will be to get away from Keynesian economics. You can always donate to the Treasury if you wish.

I give Reagan a lot of credit. The easy thing is to say he cut taxes on the rich and everything trickled down. But that is a falsehood. Your example is illustrative of that. Though I will admit I wonder about this Carter hole you speak of. But let us forget about that for now.

The notion that the government is in control of the economy is an interesting one. I, like you, are skeptical of that notion. More disturbing is the idea that the gov't might actually be in control of the economy.

As for the keysian thing, well, that is an economic theory that seems to make sense sometimes and seems to fail others. It worked during the great depression but then the theory failed during the Carter years.

I would submit the theory failed during the Bush years as well. We had massive spending and the economy still went in the crapper. The answer to this was even more spending. Which, oddly, seems to have worked a little.

I'm not saying it makes sense, it doesn't.

All that said finding a trillion dollars to cut out of the budget is hard. Especially if you take defense and medicare off the table.

Were it me in office, I'd undo the prescription drug benefit, cut the crap out of the military, privatize social security sell NASA to the Chinese. I'd also raise taxes, pay off the debt, shrink government and then, onc we were even cut taxes.

But I am a simplistic person