$10 Trillion More Debt

[TomAiello]

http://money.cnn.com/2010/03/05/news/economy/cbo_obama_budget/index.htm?hpt=T2

NEW YORK (CNNMoney.com) -- If President Obama's 2011 budget were put into effect as proposed, the U.S. federal government would add an estimated $9.8 trillion to the country's accrued debt over the next decade, according to a preliminary analysis from the Congressional Budget Office.

Of that amount, an estimated $5.6 trillion will be in interest alone.

By 2020, the agency estimates debt held by the public would reach $20.3 trillion, or 90% of GDP. That's up from 53% of GDP in 2009.

Research done by economists Kenneth Rogoff and Carmen Reinhart has shown that such high levels of debt can cause a drag on economic growth.

The CBO cited two big contributors to the jump in debt.

One is the president's proposal to extend the 2001 and 2003 tax cuts for the majority of Americans. The other is the proposal to protect middle- and upper-middle-income families from having to pay the Alternative Minimum Tax (AMT).

Together those proposals would cost $3 trillion between 2011 and 2020.

"It points out the unwillingness of the administration to raise the revenues to pay for the size of government being proposed," said Robert Bixby, executive director of the Concord Coalition, a deficit watchdog group.

If Congress doesn't act, all of the Bush tax cuts are slated to expire at the end of this year and there will be no protection from the AMT.

But current law is not politically realistic, many say. That's why the administration prefers to compare the cost of its proposals to what lawmakers are likely to do -- namely, extend tax cuts and fix the AMT.

Hence, the White House Budget Office estimates that under the president's proposals, $8.5 trillion would be added to the country's accrued debt over the next decade, or $1.3 trillion less than the CBO estimate.

Either scenario is unsustainable, Bixby said.

The administration has also called the budget trajectory unsustainable and the president has created a fiscal advisory commission to recommend ways lawmakers can get annual deficits down to 3% of GDP by 2015.

That's well below where it would be under the president's budget, according to estimates from both the CBO and the White House. And while his proposals would chip away at deficits in the next few years, they start to climb again thereafter. By 2020, the annual deficit as a percentage of GDP will be 5.6%, according to the CBO. The White House estimates it will be 4.2%.

But there is no guarantee the fiscal commission's recommendations will be adopted by lawmakers.

The CBO notes that its estimates incorporate the Administration's revenue and spending assumptions for policies such as health reform and climate change, because the agency didn't have sufficient details from the White House about those policies to do its own analysis.

A full analysis of the president's budget will be published later in the month, the CBO said.

[SDDuc996]

I read that on Drudge.

Is there no end to his/their BS?

[DSM]

"Hence, the White House Budget Office estimates that under the president's proposals, $8.5 trillion would be added to the country's accrued debt over the next decade, or $1.3 trillion less than the CBO estimate."



I like how they try and church it up.  Oh no, you've got it wrong, it's a whole trillion dollars less. 

Seriously?

[Merlin]

Poor is Poor, whether by $1 or $100 you are still "Broke"! 

[TomAiello]

http://money.cnn.com/2010/03/05/news/economy/cbo_obama_budget/index.htm?hpt=T2

Of that amount, an estimated $5.6 trillion will be in interest alone.

Compare this with the $1.8 trillion collected in gross income tax (source), both corporate and personal (and remember that the gross numbers are noticeably higher than the actual revenue available).

Anybody see a problem, here?

[Sean K.]

http://money.cnn.com/2010/03/05/news/economy/cbo_obama_budget/index.htm?hpt=T2

Of that amount, an estimated $5.6 trillion will be in interest alone.

Compare this with the $1.8 trillion collected in gross income tax (source), both corporate and personal (and remember that the gross numbers are noticeably higher than the actual revenue available).

Anybody see a problem, here?

Sorta goes back to what we were talking about with the Grace Commission Report, huh?

Sean

[TexasChris]

no no no, there's a huge difference between interest and In-terest which is actually a term found in the legal mechanism declaration against in-terest; or a statment which at the time of its making was so contrary to the declarant's pecuniary, proprietary, or penal interest that a reasonable person would not have made the statement unless he or she believed it to be true.

I'm not trying to be a dick here, but it is a very complex system.

[EricCartmann]

Right now the U.S. National debt is at 12 trillion.. that equates to about $40,400 of debt for every man, woman, child, and infant!

Did you guys know that you are $40,400 more in debt than you thought you were?

Check out this clock, it is eye opening:  http://www.usdebtclock.org/

[MickeyC]

no no no, there's a huge difference between interest and In-terest which is actually a term found in the legal mechanism declaration against in-terest; or a statment which at the time of its making was so contrary to the declarant's pecuniary, proprietary, or penal interest that a reasonable person would not have made the statement unless he or she believed it to be true.

I'm not trying to be a dick here, but it is a very complex system.

Can you explain that definition some more? My understanding is that interest means one of two things:

A: A fee charged for borrowing money form someone else, usually described as a percentage of the whole paid over time, usually calculated as a percentage of the whole per time unit. i.e. 5% per year calculated daily, weekly, monthly or annually.

b: A share of an entity, be it physical, intellectual oe some other property or a an emotional attachment. Examples would be, shared rights to a patent, rights to passage accross land, an interest in someone's welfare etc...

[TomAiello]

A: A fee charged for borrowing money form someone else, usually described as a percentage of the whole paid over time, usually calculated as a percentage of the whole per time unit. i.e. 5% per year calculated daily, weekly, monthly or annually.

So as long as you are selling bonds, and not "borrowing money," there is no interest?

[Sean K.]

no no no, there's a huge difference between interest and In-terest which is actually a term found in the legal mechanism declaration against in-terest; or a statment which at the time of its making was so contrary to the declarant's pecuniary, proprietary, or penal interest that a reasonable person would not have made the statement unless he or she believed it to be true.

I'm not trying to be a dick here, but it is a very complex system.

You're not being a dick at all....I'm just not sure I'm following.

Sean

[XCRFan]

One is the president's proposal to extend the 2001 and 2003 tax cuts for the majority of Americans.

Ok so let me see if I get this correct.  If I have $10,000 in debt and I received a pay cut form my salary, how does that $10k increase?  It doesn't.  I am still in debt of $10k, but I just don't have as much money to pay off that debt.  

Cutting taxes does not increase debt.  This is an argument used by those who are in favor of increasing taxes to scare the public into accepting the tax increases.  It is a fear tactic.  Just like BHO stated that if we do not pass HCR "now" then the America will go bankrupt.  But here we are over a year later and somehow we have not collapsed.  I wonder what miracle saved us?  Wow, how we came away from that near death event completely fine, is beyond my understanding.  


The ONLY way debt can be paid off, is by reducing taxes on both corporations, capitol gains, and income which will create more jobs and encourage spending, while cutting the government spending across the entire board by 50%.  Pull the troops back home on all fronts, including bases in Japan, Germany, Italy, France, UK, ad the rest, etc.  Eliminate all welfare immediately for those who have been on it for more than one year.  Reduce medicare by 80%.  Nobody is entitled to healthcare.  It is NOT in the Constitution at all.  Neither is welfare, neither is 90% of all government spending... enough ranting.  

As Ben Franklin once said:  "People get the government they deserve."

Bastards - They should all be ousted and replaced with people who can only serve two terms.  I know many may be thinking that they should only be allowed to serve one term.  The problem with that is, they do not have to worry about getting re-elected.  So they will lie even more because once they are in they are in and do not have to worry about representing the people and they can do just what the party wants them to do and not the people's will.  

So on the opposite side of the argument, leave it the way it is and make them work for the people, by electing those who do not do the will of the people out of office thereby sending a message to the others that they too will be outed if they get out of shape.  

This leads us back to good ol' Ben; "The people get the government they deserve."

So in conclusion... we are all screwed.

[MickeyC]

A: A fee charged for borrowing money form someone else, usually described as a percentage of the whole paid over time, usually calculated as a percentage of the whole per time unit. i.e. 5% per year calculated daily, weekly, monthly or annually.

So as long as you are selling bonds, and not "borrowing money," there is no interest?

Usually there is interest, but your comment seems to be taken from an earlier thread about T-bills and the Fed.

In the context of that thread, the Fed still doesn't lend the government money directly. Also the bulk of any interest rate owed T-bills that are bought by the Fed is returned to the government making it a very cheap debt to service.

[TomAiello]

Cutting taxes does not increase debt.  This is an argument used by those who are in favor of increasing taxes to scare the public into accepting the tax increases.  It is a fear tactic.

Absolutely, and President Obama is throwing it at us with all his rhetorical power.

"Ooops, now that I spent all this money, I'm going to have to raise taxes, or we'll be increasing debt.  You want to be fiscally responsible don't you?  The only way to do that is to raise taxes, because we've already spent all this money..." 

[TomAiello]

Also the bulk of any interest rate owed T-bills that are bought by the Fed is returned to the government making it a very cheap debt to service.

Carrying debt on which the interest payments ($5.6 Trillion) exceed our income ($1.8 Trillion) by a bit more than 3 times is "very cheap to service"?

God help us if it ever becomes expensive to service, then.

[MickeyC]

One is the president's proposal to extend the 2001 and 2003 tax cuts for the majority of Americans.

Ok so let me see if I get this correct.  If I have $10,000 in debt and I received a pay cut form my salary, how does that $10k increase?  It doesn't.  I am still in debt of $10k, but I just don't have as much money to pay off that debt.  

Cutting taxes does not increase debt.  This is an argument used by those who are in favor of increasing taxes to scare the public into accepting the tax increases.  It is a fear tactic.  Just like BHO stated that if we do not pass HCR "now" then the America will go bankrupt.  But here we are over a year later and somehow we have not collapsed.  I wonder what miracle saved us?  Wow, how we came away from that near death event completely fine, is beyond my understanding.  

The ONLY way debt can be paid off, is by reducing taxes on both corporations, capitol gains, and income which will create more jobs and encourage spending, while cutting the government spending across the entire board by 50%.  Pull the troops back home on all fronts, including bases in Japan, Germany, Italy, France, UK, and the rest, etc.  Eliminate all welfare immediately for those who have been on it for more than one year.  Reduce medicare by 80%.  Nobody is entitled to healthcare.  It is NOT in the Constitution at all.  Neither is welfare, neither is 90% of all government spending... enough ranting.  

What is debt? Debt is two things, a lump sum owed and interest which affects cash flow.
Government, like people and corporations, reduce debt in two ways.  They either reduce their outflow or they increase their income.
Reducing outflow can be done by renegotiating better rates on the debt, or by cutting costs (spending)
Increasing income is often easier for a company or government as you can sell more product or raise taxes. Raising taxes can be done in three ways. 1) Increase tax rates 2) Introduce new taxes 3)Increase GDP to increase the volume of taxes income collected under existing taxes and at existing tax rates and 4) spend wisely, optimize expenditure efficiencies to free up cashflow.
1 and 2 are easy and 3 is a little more challenging. almost no governments follow option 4, Republican or Democratic. Note that the boom of the 90's followed Clinton tax increases.

Now, to reduce spending you need to understand how that affects an economy. If reducing spending impacts the consumer negatively, then it can have a knock on effect of reducing tax income and leaving you with less money to spend on debt reduction. for example, medicare. Let's imaging we cut medicare by 80%. there are now less doctors and nurses getting salaries and thus not contributing income tax. Less drugs being manufactured and sold, so less sales and corporate tax income.

Also if the government cut medicare by 80% would you not want to stop contributing to medicare in your pay packet, or would you be happy to keep on paying those tax deductions?

Note that almost 80% of the US national debt, and the interest due on that debt  comes from Military spending. Obama's plans are just as ludicrous I agree, and he should not be allowed to spend more. What he should be doing is balancing what income he has and spending more wisely, but typically left wing governments choose option 1 and 2, i.e raising more taxes.

[MickeyC]

It is cheap debt. When you buy a mortgage over 30 years, you pay more than twice the value of the home in interest. Government debt is cheap, as far as debt payments go. I didn't say the policy was smart, only that it was relatively cheap.

$100,000 at 6.55% over 30 years is a total of $224,000
$100,000 at 1.55% over 30 years is a total of $124,000

It's cheap.

Whether it is right is another question.

Stop arguing the math, argue the policy. but understand the efect of wide spread cuts. I mentioned this in another post and the arguments stopped until a new post comes up. 1 in seven workers in the US is a government employee. Lets say you cut 20% of the budget and is was even across all sectors. that would double current unemployment and whack GDP by several billion as those workers then don;t spend salaries etc..

[XCRFan]

Cutting taxes does not increase debt.  This is an argument used by those who are in favor of increasing taxes to scare the public into accepting the tax increases.  It is a fear tactic.

Absolutely, and President Obama is throwing it at us with all his rhetorical power.

"Ooops, now that I spent all this money, I'm going to have to raise taxes, or we'll be increasing debt.  You want to be fiscally responsible don't you.  The only way to do that is to raise taxes, because we've already spent all this money..." 

Actually it is worse.  All the billions in stimulus money that they borrowed, more than half is still sitting in the "bank" if you will.  That is like taking out a $100,000 loan to buy a house and then financing 100% of the $100K home loan afterwards and making interest payment on both and keeping that $100,000 cash sitting there not even earning you any interest, at least not enough to offset the interest you owe on it.  Yes, it does make sense, if you are a politician.  Don't forget, they are smarter than us and the same financial common sense that applies to us, does not apply to them.  Again, that is because we are dummer then they are and they are way much more smarter then we is.  

Also if the government cut medicare by 80% would you not want to stop contributing to medicare in your pay packet, or would you be happy to keep on paying those tax deductions?

Unfortunately, we cannot deduct the tax taken out of our pay checks for medicare.  In fact, I am not aware (off the top of my head at least) of any tax that you can deduct.  

[TomAiello]

But understand the efect of wide spread cuts. I mentioned this in another post and the arguments stopped until a new post comes up. 1 in seven workers in the US is a government employee.

I do understand them.  Would you like me to trot out the pig in the slaughterhouse again?

Just because it's painful doesn't mean it's not necessary.  We're screwed regardless, just by being in this situation.  The question is if you want to be screwed, or if you want to be screwed a whole lot, repeatedly, for the rest of your life, and then see your children and grandchildren also be repeatedly screwed a whole lot.

It'll hurt.  We need to do it anyway.  Saying "but we're screwed, so we need to just keep on getting screwed, and let our kids get screwed too" isn't a solution.  Taking our licks and fixing things--that's a solution.

[MickeyC]

Ok, then cut spending, make spending efficient and raise taxes while creating new jobs for the government cast offs. That needs to happen inside 20 years, without fracturing society.

If you can come up with a way to do that, democratically, then I'm all for it. You can do it in 15 by cutting spending and leaving taxes where they are, but as the population ges, those who have paid for medicare and social security will expect what they paid for, or are you going to rob them on the way?

[XCRFan]

1 in seven workers in the US is a government employee. Lets say you cut 20% of the budget and is was even across all sectors. that would double current unemployment and whack GDP by several billion as those workers then don;t spend salaries etc..

So we keep current spending levels just to keep 1/7th of the workers in this country employed?  So sacrifice the whole for the concerns of a few.  I agree that it would sting at first, but by doing that and reducing taxes at the same time, you create an environment for private sector growth, thereby lowering the unemployment to all time lows.  

Every time we let the government expand because we do not want to put people out of work, there will never be a reduction in the size of the government

[MickeyC]

How is cutting taxes going to create sufficient demand to hire 20M workers? What do you have to support that?

Companies hire workers when demand increases, cutting taxes won't directly stimulate demand to create that many jobs.

Again, I am not justifing the current situation and I'm certaintly not saying allow it to continue but I'm trying to understand the foundation and justification for this 'reset button' mentality because reality simply doesn't support it.

It's also not just the few. Lets say we cut medicare and social security completely. Are you happy that all your payments into those systems are now worthless? What about a fifty year old citizen who has paid into them for decades. You're telling him those payments are now worthless. Wow, more of a bastard then King George. What about current retirees who have not other income, but who paid into the system. what about low income workers who can't afford medical care, do you want them to die on the street? Or would you rather have desparation lead to increased and escalating crime.

Where are the details of your plan, and don't say fair tax as while being a supporter it has as many flaws as benefits.

[TomAiello]

How is cutting taxes going to create sufficient demand to hire 20M workers?

Why is it the business of some guys in DC to make sure I have a job?

Again, I am not justifing the current situation and I'm certaintly not saying allow it to continue but I'm trying to understand the foundation and justification for this 'reset button' mentality because reality simply doesn't support it.

There is no other way out.  "Gradualism" has turned out to be "gradually get deeper into debt."

Lets say we cut medicare and social security completely. Are you happy that all your payments into those systems are now worthless?

Affirmative.  If I no longer have to pay for them, I'm willing to sacrifice everything I've so far paid.  That's also a far larger sacrifice for my family than most, because my wife's income is greatly dependent on Medicare funding.

What about a fifty year old citizen who has paid into them for decades. You're telling him those payments are now worthless.

Yep.  Because he's the one who borrowed all that money I (and my children) are now responsible for repaying.  I don't pity the people who started this mess rolling when I was still in high school.  They've stuck me with a huge debt burden.  Why should I try to make things easier on the people who've screwed me?

What about low income workers who can't afford medical care, do you want them to die on the street?

Ah, yes, the classic "progressive" argument.  "But we can't just abandon people--they'll die in the streets!"  I don't buy it.  Times have been hard before, and people have pulled together to get through it.  There will be hardship--that's inevitable now.  The question is how much hardship, and for how long.


Your argument boils down to "we're sucking on the government teat so hard we can't possibly be weaned--we need to keep going like this because it will hurt too much to fix things."

Well, suck it up, cupcake, fixing a screw up this bad is going to hurt.  There's no way around that.

[XCRmonger]

fuck. He's like a woman in a shoe store. I should know. 

[XCRFan]

What about low income workers who can't afford medical care, do you want them to die on the street?

People will not die on the streets.  No hospital in the entire U.S. (7,569 which is more than ALL of Europe combined) can deny a patient from seeking treatment in an emergency room if the emergency is life threatening.  It doesn't even have to be life threatening really.  If you break an arm, or leg (which may not necessarily be life threatening), etc cannot be denied treatment.

However, I support that law as everyone has the right to life.  But not healthcare.

Someone show me in the Constitution whereby we have the RIGHT to healthcare.  Show me in the Constitution whereby, I have to pay for the livelihood of someone else.  Or where in the Constitution does the government have the power to force me to pay into a savings account that I cannot control or touch until they say so?  What article gives them that power?