Is fixing the debt problem really that complicated?

[ThatRobGuy]

...okay, maybe I'm undersimplifying it. But, in any personal experience I've had, to pay off debt (whether it be a student loan, car, etc...) you'd use the following logic.

I owe X amount of dollars. I make Y amount of dollars. I spend Z amount of dollars.

If I want to pay off X, and Y hasn't changed, I have to make a cuts to Z to accomodate it. I've heard both political parties make claims to be able to do this without cutting Z, and some cases people claim it can be done without increasing Y. Am I crazy or is that impossible?


I've come up with a few simple plans that could address the debt crisis and wanted to get some outside input to see if I'm off-base.

Our GNI (Gross National Income)
Apprx: $14.5 trillion

Our current Debt:
Apprx: $13.5-$14.7 trillion (depending on which source you go to)


My plan would involve creating a separate tax (and please try not to cringe too much when you hear the 'T' word ) where the money gained through it can NOT be spent on other things, and can NOT be borrowed again, and MUST be kept isolated from the rest of the government finances.

It would involve paying $750/year on every $50,000 earned. (for both the private and business sectors)

If the GNI estimations are accurate, this would end up being approximately $218 billion dollars we could put in this isolated account which would hit the $14.5 trillion total in approximately 66 years. Since we've spent 100 years getting into this mess by letting the debt run wild, reducing it in a little over half them time isn't so bad.

How this would impact people?

Yearly income: Cost per year:
$40,000 $600
$60,000 $900
$100,000 $1,500
$1,000,000 $15,000

I think these sacrifices are completely reasonable for the income levels.

For the person who makes $40,000, that works out to about $11/week. (Most people spend more than that on eating out, drinks, and cigarettes). In most cases for people making 40k, the tax return would more than cover that obligation so there would be no impact on week to week spending.

and as far a CEO making $10million a year, I don't think anyone would feel pity toward them for having to pony up $150K (if they don't think it's fair, I'll trade spots with them )

What do you guys think?

 

[MorkandMindy]

Is fixing the debt problem really that complicated?

Yes

The National debt was minimal during the J F K Presidency, the Vietnam War got it back up to a sizable amount, but

it was in the Reagan Presidency that the National Debt began to soar due to enormously increased government spending which was partly to stimulate the economy.

Of course that is something you are supposed to do only if there is a problem, not just to get popular and then pass the debt on
to the next administration.

But as long as the attention can be distracted onto complaining about the Democrats then most Republicans will fail to notice that their party has been associated with growth in the government budget and with running up debts because most Republicans want the exact opposite.

Extra cheesy graph:

 

[MorkandMindy]

I forgot to mention that existing obligations will push the National Debt up a lot more and that the National Debt is growing in Real terms per capita, not shrinking, so that has to be stopped as well as starting to pay it back.

 

[MorkandMindy]

Those who hold US debt want to see moves to pay off that debt whereas recent and current plans call for continuing to increase it.

Everyone wants the golden age the US experienced in the 1950s where anyone with about the right number of arms / legs / heads got a job by going to one interview, every company was hiring and it was an employees market. So everyone wants to use all the natural resources that can be accessed and spend all the money and run up debts for the next generation to deal with.

In simple terms, we are going the exact opposite direction to paying off the debt.

 

[MorkandMindy]

It is possible that something will come up, such as the huge spoils of war that made the 1950s possible without running up debts, or the Reagan boom which was achieved by running up debts,

but something, some amazing free source of energy the US could then supply to the rest of the World.

and there are candidates, maybe

1. Build thorium reactors. The problem with this hope is the US is not as far as I know in the game at all whereas more forward thinking nations such as India and China are.

2. Seed the Gulf of Mexico and use that to produce large amounts of algae which can be used as food and fuel.

So there is hope and it would be a really good idea if the US stopped wasting so much energy and got on with moving into the future.

 

[ThatRobGuy]

One thing I didn't mention in my OP, that I think needs to be addressed is the foreign aid.

I do find it odd that we donate money to nations that have more money than we do. (That would be like the Salvation Army sending Ted Turner a check)

One example I saw was that we give Ethiopia $18mil a year (who legitimately need the help, so I'm okay with that), but then we turn around and give South Africa (the most diamond-rich nation on the planet) $330mil a year.

I think that's another avenue we need to look down to clean this mess up.

 

[ThatRobGuy]

Yes

The National debt was minimal during the J F K Presidency, the Vietnam War got it back up to a sizable amount, but it was in the Reagan Presidency that the National Debt began to soar due to enormously increased government spending which was partly to stimulate the economy.

I almost brought that up but I got a severe written lashing by some last time I tried to suggest that RR might not have been as good as most conservatives would like to think.

 

[MorkandMindy]

One thing I didn't mention in my OP, that I think needs to be addressed is the foreign aid.

I do find it odd that we donate money to nations that have more money than we do. (That would be like the Salvation Army sending Ted Turner a check)

One example I saw was that we give Ethiopia $18mil a year (who legitimately need the help, so I'm okay with that), but then we turn around and give South Africa (the most diamond-rich nation on the planet) $330mil a year.

I think that's another avenue we need to look down to clean this mess up.

One possible thing to consider when exploring this avenue is the possibility that US foreign aid is mainly not charity but actually military aid, supporting nations allied with us, supplying weapons to countries while not requiring payment for them - treating them like our own military - and supporting regimes that sell us oil under amazingly good terms, basically helping our own oil corporations. It would also be worth ascertaining how much 'overseas aid' is military equipment. Even the trucks sent to countries are often mainly to allow armed men to more effectively clear regions of people. It has been commented that when armed men attack you can run but when they come on trucks you can't.


This then also leads into the interesting question of whether Standard Oil is America's biggest (though officially split up) oil company, or whether the US is Standard Oil's host nation.


.

 

[Chris7]

@Morkandmindy:

Something the chart does not account for is the branch of government that actually deals with balancing the budget and passing spending bills, etc... And I'm pretty sure that during the Clinton era (for instance) that Republicans were in pretty nice control in the legislative branch. In addition (and no fault of your own), the chart does not show the spending under a super-majority liberal run legislative branch with a spend-happy socialistic democrat in office.

Just saying

 

[OldWiseGuy]

Yes

The National debt was minimal during the J F K Presidency, the Vietnam War got it back up to a sizable amount, but

it was in the Reagan Presidency that the National Debt began to soar due to enormously increased government spending which was partly to stimulate the economy.

Of course that is something you are supposed to do only if there is a problem, not just to get popular and then pass the debt on
to the next administration.

But as long as the attention can be distracted onto complaining about the Democrats then most Republicans will fail to notice that their party has been associated with growth in the government budget and with running up debts because most Republicans want the exact opposite.

Extra cheesy graph:

But who controlled the Congress, and did anything unusual (9/11) happen during these years?

 

[MorkandMindy]

@Morkandmindy:

Something the chart does not account for is the branch of government that actually deals with balancing the budget and passing spending bills, etc... And I'm pretty sure that during the Clinton era (for instance) that Republicans were in pretty nice control in the legislative branch. In addition (and no fault of your own), the chart does not show the spending under a super-majority liberal run legislative branch with a spend-happy socialistic democrat in office.

Just saying

But who controlled the Congress, and did anything unusual (9/11) happen during these years?

Sorry about that; I did say it was an extra cheesy graph.


The point I was making was that the National Debt is growing and not shrinking.


But I wouldn't believe claims by Republicans that they are good for the economy. Spending a fortune on wars and making lots of enemies and handing a fortune out to the banks is not responsible finance.

That isn't to say when Obama does it that suddenly becomes right, no it is every bit as wrong when Obama does it as when a Republican does it.

But the banks and oil companies and big Pharma and big companies fund Presidential campaigns so you are bound to get Presidents who favor the rich over the poor, the Republicans can just be a lot more open about it.

 

[OldWiseGuy]

Sorry about that; I did say it was an extra cheesy graph.


The point I was making was that the National Debt is growing and not shrinking.


But I wouldn't believe claims by Republicans that they are good for the economy. Spending a fortune on wars and making lots of enemies and handing a fortune out to the banks is not responsible finance.

That isn't to say when Obama does it that suddenly becomes right, no it is every bit as wrong when Obama does it as when a Republican does it.

But the banks and oil companies and big Pharma and big companies fund Presidential campaigns so you are bound to get Presidents who favor the rich over the poor, the Republicans can just be a lot more open about it.

I think an honest look at the problem is in order. For example let's begin by determining how many people who earn below the 'poverty level' are actually living in 'poverty'. I don't believe it's helpful to automatically assume, for the purpose of policy or politics, that 'poverty level income' translates to 'living in poverty' (almost every media report conflates these, whether liberal or conservative).

As a young single man I earned poverty level pay for years but because I lived with roomates, cooked at home a lot, and often used public transportation, walked, or bummed rides I had plenty of spending money. In one apartment I shared with friends no one had a tv for the two years we lived together (I did have a hi-fi record player). No one cared, we were out and about having a blast.

 

[abysmul]

It's really easy to deal with debt: reduce spending, pay more on the actual amount owed.

 

[Jeffwhosoever]

Become pro-business and have government get out of the way, and our national talent will solve the problem by reducing unemployment, increasing revenue w/o a tax increase, and drive down debt as an artifact. Nearly all the S&P 500 CEOs had the same basic message. It sure worked for Bill Clinton.

 

[heymikey80]

It would involve paying $750/year on every $50,000 earned. (for both the private and business sectors)

* * *
How this would impact people?

Yearly income: Cost per year:
$40,000 $600
$60,000 $900
$100,000 $1,500
$1,000,000 $15,000

I think these sacrifices are completely reasonable for the income levels.

For the person who makes $40,000, that works out to about $11/week. (Most people spend more than that on eating out, drinks, and cigarettes). In most cases for people making 40k, the tax return would more than cover that obligation so there would be no impact on week to week spending.

and as far a CEO making $10million a year, I don't think anyone would feel pity toward them for having to pony up $150K (if they don't think it's fair, I'll trade spots with them )

What do you guys think?

Here's the way this will play out -- mapping it to the current Income Tax amendment's history.

First it'll be represented as a minor amount (which ... well, you've already done). However, that minor amount will put a number of people underwater. They're already in debt up to their eyeballs (to grab a cheesy commercial), with no prospects of actually getting an unsecured loan.

They'll have to sell their houses (like my next door neighbor), sending the housing market into a further tailspin. The lack of fiscal resources will push people to trying to acquire more jobs or better-paying jobs, or make them more dependent on the existing welfare entitlements, increasing the cost of those items.

Squeezed between increasing costs of entitlements and losing their next election, politicians will go after more money. They'll concentrate on, "this is just for the truly rich" -- but the numbers will tell differently. It'll turn out that the average Joe is considered "truly rich" by the government.

So the tax will be increased in an ever-increasing spiral of spending on entitlements, and increased taxes to pay for it.

Keep in mind, it was a paltry, paltry $300 average refund that slowly backed us out of the economic nosedive in 2001. We're intending to double-reverse that. It'll have a huge impact on the economy as well: that's $218 B that didn't circulate into the real economy, but went solely to paying off debt.

Here's a more informative image from Wikipedia:

http://en.wikipedia.org/wiki/File:U...ngress_Control_and_Presidents_Highlighted.png

 

[OldWiseGuy]

The trade deficit must be addressed at once. All the medicine and surgeries in the world won't help if the patient is bleeding to death. We hemmorage $400 Billion each year to the global economy, and it doesn't come back in trade, but in loans.

 

[Saving Hawaii]

It's really easy to deal with debt: reduce spending, pay more on the actual amount owed.

Here's my question: If GDP = C + I + G + (X - M), how do we expect the economy to recovery if G is moving ↓ (because the government is trying to pay down its debt), if C is moving ↓ (because households are trying to pay off their debt). I isn't going to move ↑ unless C is expected to do the same. (X - M) isn't going to move ↑ without currency depreciation that makes US exports more competitive and that isn't tolerable within a political paradigm where strong dollar = good.

How exactly is everybody supposed to simultaneously pay off their debts without decimating GDP?