If we’re serious 052325
About the national debt, think of it like a mortgage
Since 1835, the federal government has taken out a mortgage on the entire United States and, as the country and the population have grown, so the debt has grown with it. Those of us who have mortgages, car loans, credit card balances or other forms of debt know the obligations that come with the money. Among them are the requirement for regular, timely repayment and the penalty for failing in that is higher interest rates on future loans and tougher qualifying questions when loans are sought. The difference between those of us who owe money, and the federal government is that the government owes a lot of money to itself and is always willing to loan itself more, with or without reasonable security or expectation of repayment. Moody’s has just reduced their rating on U.S. government debt based on questions about repayment mostly because the Congress has shown no interest in or concern for doing so.
Any borrowing that we do as private individuals or as business entities has two essential components, Principal and Interest, and every time we make a payment the outstanding balance of the loan is reduced by the amount of the Principal component. The future Interest component is also reduced as the balance owing decreases. Each successful payment improves our financial stability and increases our net assets thereby making our financial future brighter. The government, however, hasn’t made a principal payment since Bill Clinton was President and the four payments made between 1998 and 2001 totaled only $453 billion, hardly a drop in the $36 trillion dollar bucket that is our national debt. Right now, U.S. debt is 123% of our Gross Domestic Product (GDP) and it is secured only by the “full faith and credit” of the U.S. government, an increasingly dubious asset. Any of us who owed that much compared to our income would look for additional resources to help pay it off; a second job, different investments, cutting back on expenses like entertainment, vacations, etc. so that we can make the essential payments for shelter, food, clothing, health care, and transportation for our families.
The House has just passed a bill that cuts those essentials for millions of people but leaves untouched a huge residual asset which is the income of people who make over $400,000 annually. Simply allowing the 2017 tax cuts for the two highest income brackets would reduce future deficits by $450 billion every year. Removing the income cap on Social Security tax would add another $200 billion roughly to that reduction as well as providing much needed security for current and future recipients. The combination, especially if accompanied by a sensible assessment of current spending programs and policies like subsidies for major corporations in the fossil fuel, agriculture, defense, and pharmaceutical industries, would largely resolve the concerns expressed by Moody’s, Fitch, and Standard & Poor’s and result in reduced interest rates on future debt. All of this strengthens the overall economy, making our income go further, and enabling us to help those in need, both here and abroad.
To trade away that goal and the accompanying benefits for all Americans in exchange for growing wealth for a very few that accomplishes nothing positive is, at best, senseless, and, at worst, actively evil. It’s time that we insist that each of our legislators declare publicly where they stand and encourage those who favor growing the debt to retire by voting for their opponents in the next election.
When you can print your own money, our debt is not like a mortgage.
Instead our debt is part of the engine that drives the global financial system.
As long as our GDP grows faster than our debt, all is well.
Here's a little interest rate example of how you can grow down the debt.
Let's assume that the GDP grows at an aggressive 3% a year and an inflation rate of 2%. As long as our debt grows at less the 3%, debt as a percentage of the GDP goes down.
When that has happened in the past (Obama administration), interest rates fell below the rate of inflation. Which meant that investors were in fact paying the US to hold their money securely for 10 years.
Keynes basically said during tough times, the government should spend money to support the economy. During good times, the government should reduce spending and raise taxes in order to drive down the debt-to-GDP ratio and give us some flexibility during the next recession.
Unfortunately Republican presidents inevitably REDUCE taxes during boom times which only makes the next downturn that much more difficult.
Dave,
What you just said would be what a "fiscal conservative" would applaud. There is nothing "conservative" about the MAGA clowns in the House of Representatives. The Oligarchs have bought them their elections and now they will pay them back with OUR money. I call it fraud.
The only silver lining I see in this travesty is that it is such a transparent transfer of wealth from most Americans to the ridiculously already rich. This is the basis for "class warfare". Most of us against them. THIS is a "Let them eat cake" moment!
I believe the backlash from this will reverberate for decades and the "Republicans" will lose control for several cycles. Ya don't pay for bonuses to the rich with money from Medicaid and Medicare. It is more than cruel. It is political suicide.
As to elections being undermined, recent rulings in Michigan are an example of how the courts are holding sacred the states right to conduct Federal Elections. 2026 will be a figurative GOP bloodbath - self inflicted.
86 47
86 MAGA
86 Oligarchs