Balance The Budget & Pay Off The Debt, Where Is A Legit Plan?

[cb7010]

If we just "balance" the budget, then we would have no money left over to pay down the principal on the accumulated national debt. So, don't we actually have to have a plan to run the budget at a surplus in order to have extra money to pay off the debt?

With all the grandstanding and bickering that I see on TV; I am entirely bewildered that the competing parties/sides aren't even talking about actually paying off the debt. Both competing plans that are being discussed still lead to ongoing deficits and large increases in the national debt.

So, does anybody really think it is a good idea to allow the federal government to keep operating in the red? And, can anyone tell me exactly when we will be a debt free nation?

To a certain extent, those are rhetorical questions; but, how do we all let these politicians hoodwink us like this? They've overpromised, overspent, wasted, been inefficient, and mostly bankrupt our country. I, for one, demand to see a concrete plan to show how we are going to get out of this hole and, to date, I am extremely disappointed. Somebody please take their credit card away!

 

[Texas Proud]

Good luck with that....

 

[rescueme]

Good luck with that....

+1 ...

To go beyond that response would probably get me in trouble, for being a "political post", so I'll just shut my mouth ...

 

[Midpack]

So, does anybody really think it is a good idea to allow the federal government to keep operating in the red? And, can anyone tell me exactly when we will be a debt free nation?

To a certain extent, those are rhetorical questions; but, how do we all let these politicians hoodwink us like this? They've overpromised, overspent, wasted, been inefficient, and mostly bankrupt our country. I, for one, demand to see a concrete plan to show how we are going to get out of this hole and, to date, I am extremely disappointed. Somebody please take their credit card away!

When are you running for office, the incumbents all seem to be finding it more difficult than you do? We get what we deserve, we've elected them all as long as we've been of voting age...

 

[BigNick]

All politicians, regardless of what platform they are elected on, eventually discover that the best way to be re-elected - apart from good old-fashioned vote-rigging - is to bribe people with their own money.

Even the Teabaggers will eventually get round to this; they're just taking a little more time to sell out than everyone else.

 

[ERD50]

So, does anybody really think it is a good idea to allow the federal government to keep operating in the red? And, can anyone tell me exactly when we will be a debt free nation?

While it goes against my personal way of thinking, but I do believe one can make a case for the feds operating (somewhat) in the red, long term.

First, consider what we would do if we had a surplus. I think it would be reasonable for people to be wondering, "why are you taking more money in taxes from me, when you have more than enough already? I can make good use of that money to feed my kids, invest in new business, etc".

Second, if the borrowed money is being used wisely (OK, I guess I should stop now ), it can make good sense to borrow to invest in the future. If some big infrastructure plan provides a 30 year benefit, I don;t see a problem going into debt to pay for that over thirty years. You could use this to 'level load' the budget. But realistically, it seems the fed budget is so big that we ought to be able to average out these expenditures and there should not be much leveling required. You just do them year after year and pay year after year.

But the debt should be relatively small, and pay it down in good times, and let it grow a bit in bad times.

Just my 2 cents.


-ERD50

 

[Midpack]

All politicians, regardless of what platform they are elected on, eventually discover that the best way to be re-elected - is to bribe people with their own money.

Exactly. We elect/re-elect 'our guy' for bringing home the pork but everyone else's representatives are crooked for doing the same thing. The height of hypocrisy, 'we get what we deserve.' There have been a few people who have run on platforms of doing the right thing, none have had a real chance of being elected - so far...

 

[samclem]

While it goes against my personal way of thinking, but I do believe one can make a case for the feds operating (somewhat) in the red, long term.

First, consider what we would do if we had a surplus. I think it would be reasonable for people to be wondering, "why are you taking more money in taxes from me, when you have more than enough already? I can make good use of that money to feed my kids, invest in new business, etc".

That would be very healthy for folks to think that way. Unfortunately, there's no incentive to think that way if you, personally, don't pay any income taxes. Similarly, if you are a net beneficiary of government spending.

Second, if the borrowed money is being used wisely (OK, I guess I should stop now ), it can make good sense to borrow to invest in the future. If some big infrastructure plan provides a 30 year benefit, I don;t see a problem going into debt to pay for that over thirty years. You could use this to 'level load' the budget.

Yep, there are some government "investments" that have a net positive economic impact (Interstate highways, etc) but their number is so few and the "investment" euphemism so overused to whitewash every type of government spending ("this investment in public art benefits everyone" etc), that it would be less dangerous to just throw away this tool than to leave it around the shop and allow some do-gooder to cause ongoing fiscal damage.

The most rational case for deficit spending is for bona fide national emergencies (disasters, defense, etc). Even so, we could largely self-insure for these things, like many states do. $50-$100 billion ought to be enough to handle any immediate contingencies while we have a bake sale or bond drive to cover ongoing expenses.

OTOH, that $50-$100B would be a very big "plum", and I'll bet all kinds of energencies would pop up that cried out for its use ("We're cutting meals-on-wheels to indigent seniors while the government is sitting on $100B that is doing nothing!!")

 

[Hamlet]

Ultimately I believe that this should be the big lesson from this crisis. If you are deficit spending when times are good, that is a disaster when times become bad, because you no longer have the flexibility to borrow money without risking long term problems.

Taxes should go up in boom times (and spending down), so that when the bad times come you are in a better position to deal with the deficit spending that comes naturally in a recession, when spending goes up and taxes should go down.

We've been juicing the economy for nearly 30 years, and now we must pay the price for that.

First, consider what we would do if we had a surplus. I think it would be reasonable for people to be wondering, "why are you taking more money in taxes from me, when you have more than enough already? I can make good use of that money to feed my kids, invest in new business, etc".

 

[Alan]

Taxes should go up in boom times (and spending down), so that when the bad times come you are in a better position to deal with the deficit spending that comes naturally in a recession, when spending goes up and taxes should go down.

The renowned economist John Maynard Keynes has been saying that since the 1930's but the politicians have not yet figured it out. (they are good at the spending bit in the bad times )

 

[samclem]

(they are good at the spending bit in the bad times )

And the good times.

What we need is some type of system to cause cost/benefit tradeoff analysis to occur at the level of those who are paying the bills.

A modest proposal:

1) Revamp the income tax system so everyone with income pays. We could make it progressive, eliminate all deductions and brackets: Just a simple formula that increases rates with income. At the very lowest levels, taxes would be extremely low (a person who with $18K in earnings might pay, say, $100 per year)

2) Before every vote on new spending, every taxpayer gets an e-gram noting his personal share of the bill, based on what he/she paid in taxes last year.

I wouldn't g any closer to "direct democracy" than this (i.e. you couldn't opt out, etc).

 

[Purron]

All politicians, regardless of what platform they are elected on, eventually discover that the best way to be re-elected - apart from good old-fashioned vote-rigging - is to bribe people with their own money.

At least this behavior inspired some awesome music.

‪Cream - Politician‬‏ - YouTube

 

[Tadpole]

I have been pondering the literal statement that the US government should have NO debt. I am not so clever as the rest of you in imagining that world. You know, the world where the US issued no bonds or securities. A world where there could be no emergency response to anything since the day to day revenue flow was determinate of the expenditures.

Is this a proposal to change our government to one that operates from a sovereign wealth fund? That makes me ponder further a US that needs to amass sovereign wealth. How would our system need to change to accomplish this?

I know that people say it is a "small government" model. Even so, how do reserves get built to even the flow of money? (Analogy - small business short term borrowing to meet payroll to even out collections.)

Straighten out my poor aching head on how we would need to change the operation of the entire society, individuals, businesses, common welfare defense and investments, financial liquidities, governmental liquidities, low risk savings, etc. under a "NO debt" regime. ERD50 gives a good example - do we just quit making long term investments in future infrastructure needs of the country? If we have a recession, how do we make the revenue adjustment align with the revenue downturn?

One thing is certain, the US role in the global economy would change dramatically. The world itself might change.

I have to assume NO debt is just a talking point for manageable debt. I can support the concept but how is it measured? Does it fluctuate wildly with the economic cycle or is it more sane like ERD50's description which exploits to up cycles to save room for the down cycles, making room for investment? Come to think of it - what constitutes a good investment by government?

 

[winger]

That would be very healthy for folks to think that way. Unfortunately, there's no incentive to think that way if you, personally, don't pay any taxes.

Who in America doesn't pay any taxes? I can't buy a gallon of gas, or a hamburger without paying taxes.

Please explain.

 

[samclem]

Who in America doesn't pay any taxes? I can't buy a gallon of gas, or a hamburger without paying taxes.

Please explain.

Federal income taxes, sorry. Your (well worn) point is taken, buy yourself a burger as a reward. I fixed the original post.

 

[Texas Proud]

I have been pondering the literal statement that the US government should have NO debt. I am not so clever as the rest of you in imagining that world. You know, the world where the US issued no bonds or securities. A world where there could be no emergency response to anything since the day to day revenue flow was determinate of the expenditures.

Is this a proposal to change our government to one that operates from a sovereign wealth fund? That makes me ponder further a US that needs to amass sovereign wealth. How would our system need to change to accomplish this?

I know that people say it is a "small government" model. Even so, how do reserves get built to even the flow of money? (Analogy - small business short term borrowing to meet payroll to even out collections.)

Straighten out my poor aching head on how we would need to change the operation of the entire society, individuals, businesses, common welfare defense and investments, financial liquidities, governmental liquidities, low risk savings, etc. under a "NO debt" regime. ERD50 gives a good example - do we just quit making long term investments in future infrastructure needs of the country? If we have a recession, how do we make the revenue adjustment align with the revenue downturn?

One thing is certain, the US role in the global economy would change dramatically. The world itself might change.

I have to assume NO debt is just a talking point for manageable debt. I can support the concept but how is it measured? Does it fluctuate wildly with the economic cycle or is it more sane like ERD50's description which exploits to up cycles to save room for the down cycles, making room for investment? Come to think of it - what constitutes a good investment by government?

Just a couple of points... there is not requirement that the gvmt does not issue bonds even if there is 'no debt'... as long as they have cash laying around to pay off that debt they can issue debt and be at a net of no debt (sure, this is a stretch on the term no debt, just trying to show that there could be a method to get it done)...

Also, the federal gvmt is a bit different than almost anything else... its budget is so big that you could make capital expenditures an expense item and not worry about how long it lasts.... IOW, they will be building roads and buildings and airplanes and ships etc. year after year replacing the ones that are getting old... it is not like you are me who buys one house and we are done... or one car for 10 years and we are done... they by thousands of cars a year...., year after year...

 

[haha]

Who in America doesn't pay any taxes? I can't buy a gallon of gas, or a hamburger without paying taxes.

Please explain.

I think anyone who is intelligent enough to be considering ER understands the difference between gasoline tax, SS tax, use taxes, etc., and the US federal income tax.

Robin Hood and his gang of brigands can vote for a more steeply progressive FIT, which will in no way touch their outflow, but very likely will improve their inflow. It is completely non-comparable to gasoline tax. And I think everyone understands this.

Ha

 

[winger]

I think anyone who is intelligent enough to be considering ER understands the difference between gasoline tax, SS tax, use taxes, etc., and the US federal income tax.Ha

Sorry, Ha, but it wasn't me that was dishonest. It's obvious that the American people will believe anything, if it said often enough. Death Panels. Trickle Down. WMD's. Social Security. Guaranteed Pension.

Facts matter. This originally was a story that 45+% of Americans don't owe any FIT at the end of they year. Since that didn't spark the outcry some wanted, the wording is now "taxes". And it's a lie.

IMO, it shows how badly our financial system is failing when nearly half of our citizens don't make enough money to pay FIT. And- we won't fix it on the backs of the poor. That's not where the money is.

 

[Tadpole]

as long as they have cash laying

Huh Cash laying around? How, where

 

[haha]

Sorry, Ha, but it wasn't me that was dishonest. It's obvious that the American people will believe anything, if it said often enough. Death Panels. Trickle Down. WMD's. Social Security. Guaranteed Pension.

Facts matter. This originally was a story that 45+% of Americans don't owe any FIT at the end of they year. Since that didn't spark the outcry some wanted, the wording is now "taxes". And it's a lie.

IMO, it shows how badly our financial system is failing when nearly half of our citizens don't make enough money to pay FIT. And- we won't fix it on the backs of the poor. That's not where the money is.

Well, I see your point, but I always bow out of political debates early, so perhaps someone else will want to follow up on this but it won't be me because in watching political debates on this forum over the years, I have yet to see anything resolved!

Ha

 

[Ed_The_Gypsy]

Good luck with that....

+1

 

[HFWR]

...I have yet to see anything resolved!

Ha

Much like real life...

 

[Independent]

I'll try to get back to the OP:

If we just "balance" the budget, then we would have no money left over to pay down the principal on the accumulated national debt. So, don't we actually have to have a plan to run the budget at a surplus in order to have extra money to pay off the debt?

With all the grandstanding and bickering that I see on TV; I am entirely bewildered that the competing parties/sides aren't even talking about actually paying off the debt. Both competing plans that are being discussed still lead to ongoing deficits and large increases in the national debt.

So, does anybody really think it is a good idea to allow the federal government to keep operating in the red? And, can anyone tell me exactly when we will be a debt free nation?

I understand that you are trying to distinguish between annual deficits and accumulated debt, but I'm not sure what you mean by "operating in the red".

The "deficit" we normally hear about is the net of this year's cash spending and taxes, where spending includes interest on the debt. So if we got to the point where we had no annual deficit, we would freeze the nominal amount of the debt. If the nominal economy grows (due to number of workers, productivity, or inflation), then debt as a percent of the GDP decreases. If interest rates are stable, then the burden of paying interest on the outstanding debt decreases.

That's essentially what we did from 1945 to about 1980 - years when the federal gov't usually ran a deficit, but the debt as a percent of the GDP kept decreasing.

I agree that it's frustrating that nobody in DC is actually willing to make the decision to balance annual budgets (there appear to be many versions of "let's make future politicians do that"), and I think every democracy should. However, I don't know that it's necessary to go the next mile and pay off the outstanding debt.

 

[Lancelot]

Exactly. We elect/re-elect 'our guy' for bringing home the pork but everyone else's representatives are crooked for doing the same thing. The height of hypocrisy, 'we get what we deserve.' There have been a few people who have run on platforms of doing the right thing, none have had a real chance of being elected - so far...

I agree. We like to blame others for our own selfishness

 

[Texas Proud]

Sorry, Ha, but it wasn't me that was dishonest. It's obvious that the American people will believe anything, if it said often enough. Death Panels. Trickle Down. WMD's. Social Security. Guaranteed Pension.

Facts matter. This originally was a story that 45+% of Americans don't owe any FIT at the end of they year. Since that didn't spark the outcry some wanted, the wording is now "taxes". And it's a lie.

IMO, it shows how badly our financial system is failing when nearly half of our citizens don't make enough money to pay FIT. And- we won't fix it on the backs of the poor. That's not where the money is.

Usually when you start a thread about income taxes... and then later refer to them at just taxes... the meaning is the same... now, if people were throwing around a bunch of different type of taxes then I would tend to agree that the actual one matters...

As an example.... I if I say 'in America we believe blah blah blah'.... what would you think right off the bat You would think USA.... but, we live in North America... so you could mean any of the countries in North America... but hey, there is Central America and South America... so you could be talking about the Western Hemisphere....

So when someone starts with income taxes and someone else just refers to taxes I assume they are talking about the same thing...