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ETpro's avatar

Paying down the National Debt -- here's my thoughts. Any better ideas?

Asked by ETpro (34550points) February 15th, 2011

I’m an old man now, and I have no fantasies of ever running for office, not even for dog catcher. So I am going to tell you young people some politically incorrect facts that you don’t want to hear, but you jolly well better listen, because you need to know these facts. NOW HEAR THIS:

We are in for some serious hard times. The current National Debt is thanks to Reaganomics, as the chart here clearly illustrates. Let’s not lay it all at Obama’s feet. There’s blame aplenty for Democrats and Republicans—and for We the People who keep voting to get free stuff here and self-financing tax cuts there. But the net result is that we can pay the debt off today. Every man, woman and child in America needs to simply send the IRS a check for $45,527.00 and we will suddenly be debt free—that’s if all the checks are good. Alternatively, every single tax filer can send in a check for $127,675.00 and take care of this.

Here’s the reality, free from all this right vs. left hatefest idiocy that keeps us focused on DOING NOTHING MEANINGFUL about it. We’ve played “don’t tax, just spend” since 1980. Our debt is nearing 100% of our GDP. It was 120% of GDP after WWII, and we paid it down then with taxes as high as 92% on the highest income brackets. But times were different then. The war left the manufacturing capacity of the entire developed world in a shambles, with the exception of the USA. We retooled our war manufacturing and started building cars, ships, refrigerators, bicycles, clothes, shoes—everything the deprived world needed. We sold our goods everywhere. And we paid down the debt.

Today, we don’t have a devastated world that only we can supply. We can either invest in the technologies of the 21st century to get out of this, or just go through a VERY long, very deep depression. We would need to cut spending by over $2 trillion a year to start paying down the national debt. We CANNOT cut spending that deeply without producing a depression that will take decades to resolve.

It is NONSENSE to say cutting $2 trillion in spending would leave that $2 trillion in people’s pockets. Horse manure. Only cutting taxes $2 trillion would do that, and that would make the debt pile up more than twice as fast. It’s time to get real, people. Quit the stupid finger pointing and deal with reality instead of political polemics. If someone has an idea for a painless way out of this, I am all ears.

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29 Answers

phaedryx's avatar

Don’t have time to answer right now, but I thought this article by Scott Adams (the Dilbert guy) was pretty interesting.

CaptainHarley's avatar

@ETpro

I agree wholeheartedly! Great question!

cockswain's avatar

@ETpro I’m sorry, I can’t quite get what your plan is so can’t really tell you if I have a better idea. All I can see is you’re suggesting we invest in new technologies. Could you please clarify?

Dutchess_III's avatar

Following…

ETpro's avatar

@CaptainHarley Thanks.

@cockswain I don’t see how simply cutting spending drastically will get us out of debt. Granted it will keep us from sinking deeper. And yes, the first rule of holes is, “When you find yourself in a hole, stop digging.” But slashing trillions per year in spending right now would lead to a depression, which would lead to drastically reduced revenues, which would lead to further spending cuts and the dwindling spiral. We would eventually default on our bond debt. I don’t know what happens if we do that, but I don’t imagine it’s a good thing.

We need a boom like the Post-War boom to turn the tide on our debt. So while we are reducing targeted spending, we need to invest in R&D and create new, growth markets that will give a boom similar to the one we had after the war. But we are also facing a sustainably problem after a century or more of consumerism. That’s a problem that will derail any boom based on further consumerism and environmental exploitation. I didn’t ask this question hoping to show of “My Answer.” I don’t have the answer. I just am coming to more clearly see the real questions, and how serious the effect if we do not soon find answers to them. That’s why I ask.

Dutchess_III's avatar

I hope I don’t sound ignorant but…wouldn’t cutting down on spending mean the taxes we ARE paying could be put to better use elsewhere?

tranquilsea's avatar

Canada did a great job of paying down our national debt by raising our taxes. They also offloaded a lot of federal responsibilities to the provinces and that had a not so great effect.

It is crazy to me how anyone can expect to lower their taxes and pay down their debt.

TexasDude's avatar

We just need to start WWIII.

…any takers? ~

tranquilsea's avatar

LOL @Fiddle_Playing_Creole_Bastard Like that’s never been done before!

lillycoyote's avatar

We might want to think about THIS.

1.2 trillion dollars is not petty cash, it represents somewhere around 10% of our national debt and it never seems to even get mentioned in these discussions, so I am mentioning it, that is all.

cockswain's avatar

@ETpro I agree that we need lots of innovation and HUGE amounts of exports for a very long time to turn the economy back into something healthy. I think the sudden obsession the right has with the debt/deficit is extremely hypocritical and political, but it has been a very real problem for decades now.

I agree tons of taxing and excessive spending cuts are not the answer. Entitlement and defense spending are the biggest problems, but we can’t have draconian measures that cause ridiculous amounts of harm to citizens who aren’t well-positioned (millions of people). What the hell is the proper role of gov’t anyways? You don’t cut us into a depression just because you think getting a handle on the debt is the greatest problem. That would be stupid and pointless.

I think we need to drastically revamp the entitlement programs, improve education to stimulate future innovation and exports, cut defense to whatever levels the best minds determine to be safe, and keep at it for the next 30 years. Maybe we can start reducing the debt by a few hundred billion each year.

But agreed it is a massive problem with no clear solution. I hate that people think the solutions are to just increase taxes, cut taxes to stimulate job growth (yeah right), or cut so many social programs that our citizens become truly harmed. Sure, we all need to tighten our belts (particularly the upper class), but we need not be harmed in the process.

Great question. Very important topic, and the political rhetoric is so irritating that I oscillate between rage and apathy.

cockswain's avatar

We need to stop being such consumers as a population too. It’s okay to repair things instead of throw them away and get a new one. You don’t need a new phone every year. Your TV is fine. You don’t need to remodel your kitchen because it is “out of date.” We need to save money, reduce credit card debt, and read fucking books. Our self worth and happiness are not tied to our social status and possessions.

LuckyGuy's avatar

I’d start by demanding that people must do something in order to keep collecting public assistance. Disabled? Sure. What can you do? Did I see you driving to the grocery store last week? OK, then you need to take two other people in your neighborhood who can’t drive. Can’t move? Are you watching TV? Fine. Then you will be used as video surveillance to assist store security in your area. Healthy and able bodied but out of work? Do something. It might be collecting trash along the side of the road or raking leaves in the neighborhood. Something. You have to clean the area in front of your home even if the trash is not yours.
Collecting for more than one year? You have to submit a urine sample for drug testing before you get a renewal.

Here’s one that’s guaranteed political suicide. Mandatory DNA testing required before using a hospital for pregnancy related services. The father must be identified or you will be billed in full. No free lunches without it. Pregnant? Don’t know who the father is and can’t afford it? Abortion will be provided free, but not delivery. On crack? You will be jailed for 3 months to detox.
We have to end the cycle. Any other suggestions?

cockswain's avatar

I think the drag the poor and irresponsible cost society is small compared to the cost of unethical white collar behavior. How many crackheads illegitimately collecting $15K-30K annually equal one Bernie Madoff, Ken Lay, or Joe Nacchio? How about the Iraq war and Blackwater? That’s where I envision the big money is wasted, not the poor gaming the system at the bottom.

phaedryx's avatar

Hmm, lets take a look: http://www.nytimes.com/packages/html/newsgraphics/2011/0119-budget/index.html

My off-the-cuff answer:

1. Major tax reform. Get rid of the special provisions, tax cuts, etc. Make it as straightforward and fair as you can.

2. Update/reform medicare and medicaid. I work in the tech field; my wife in the health care field. The things she tells me boggle my mind.

3. Reduce defense spending. The Department of Defense should defend our country, not defend US interests abroad.

4. No more borrowing. If we don’t have the money we don’t spend the money.

5. Focus on paying of the most costly debt first.

6. I like the idea of giving incentives in exchange for increased taxes on the rich.

Dutchess_III's avatar

Well…see about cutting “luxury” from the bottom up? I see things at work that I would cut in a heartbeat if my own household was in trouble….straight down to filling trash bags only halfway full before taking them out…...

cockswain's avatar

How about the top down? I can’t stand the excessive opulence of the upper class.

Garebo's avatar

In my estimation, we have been, and will continue to be in a Great Recession, a kind way of saying a depression.
QE 1 helped pay off the bankers in this country, and in Europe for starters, with little left for us “tools”. More Keynesian Economics will never work, or QE 2 or a QE 3-then what? Austerity, a little late for that now in my estimation, it should have started long time ago when we got off the gold standard and jumped on the full faith of our currency or fiat money.
The idea of this administration recovering the 1.9 trillion dollars of offshore corporate cash, removed from this country due to high corporate taxes, is a grand idea. However, the incentive to me is despicable, give the corporations 5% versus 35% relief,so they will reinvest in their own stock buy-backs, drive the price up and pay off the major shareholders who control the politics in this country. The rest of the money would go to buy treasury’s which is, and is going to continue to be sorely needed.
My solution, which I think could be significant, but never would happen because of greed and self interests- a tax on stock transactions, particularly all flash trades, short term computerized trading that has no regard for the shareholder and long term capital creation.
I think it would raise a ton of money, just even, .001% would be significant.

Dutchess_III's avatar

Excessive is relative @cockswain. It’s excessive for a person grossing $10,000 a year to go to Braums for ice cream more than once a year.

Jaxk's avatar

I suspect we’ve forgotten that we’ve been here before. during the carter years we were told to expect less, save more. We were too far into consumerism and had to change. A few quotes from the Carter Malaise speech.

“As you know, there is a growing disrespect for government and for churches and for schools, the news media, and other institutions. This is not a message of happiness or reassurance, but it is the truth and it is a warning.”

“For the first time in the history of our country a majority of our people believe that the next five years will be worse than the past five years.”

“In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we’ve discovered that owning things and consuming things does not satisfy our longing for meaning. We’ve learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.”

Carter was not my favorite guy but if you want to address the current economic crisis, you have to deal with the same issue Carter tried (unsuccessfully) to deal with, ENERGY. Gas prices are climbing, fast. $4.50 gas broke our back the last time and drove us into recession. Oh sure it wasn’t the only cause but it exposed all the other problems. Many economists are predicting gas over $4.00 by this summer. It appears to be coming even faster. And raising taxes won’t solve the problems but rather exacerbate them.

Oil imports are on the road to totalling $250 billion this year (maybe more). That money comes directly out of our economy and goes overseas. If we exploit our own resources that money would flow back into our own economy which would account for a $500 billion swing.

Not to mention that the price of oil is not tied to the cost of oil but rather to the market price. So if we were to produce our own oil the market prices would drop dramatically. A $1 dollar drop in the price of gas would be the same as an injection of $150 billion into the economy. And it would put that money back into everyone’s pocket.

Open ANWAR, open the oil shale in the Green River basin and elsewhere. Give us a chance and our economy will recover. With a good recovery and some significant cuts we can put us back into sound financial footing. Remember we don’t have to deal with the debt, just the deficit. At $14 trillion the debt is unmanageable and too daunting. But the deficit is $1.6 trillion, we can make a good dent in that. And oil will take care of the rest.

ETpro's avatar

@worriedguy Entitlement spending and defense are the #1 and #2 chucks of the budget. We could eliminate ALL other spending and we would still be running a deficit. So they MUST be attacked. But the workfare proposal you put forward would put people on the dole into jobs that are currently held by paid workers. Sadly, that would make things worse and not better. If we drag ourselves out of the pit we have dug ourselves into, then the idea has great merit. I am a firm believer in each citizen having their pound of flesh in making thigs work, and in realizing there are no free rides. I just don’t see how that addresses our immediate problem. I think it makes it worse.

@Dutchess_III That’s not in any way stupid. Some of the things our government spends on are highly stimulative to the economy, and others are not. If we wish to cut spending while we are trying to climb out of a deep recession, targeting the non-stimulative spending first makes perfect sense. After the economy is back to buzzing, we can move on to cutting spending that does benefit the economy quite directly. But is we cut enough to actually balance the budget right now, any recovery that is underway will be OVER. And without economic recovery, the revenues will continue to sag.

@tranquilsea Thanks for those words to the wise from a neighbor who has already had to deal with this challenge.

@cockswain It certainly makes sense to ask those who draw the most form our society and who can help carry its burden without serious damage to themselves to do their part.

@Jaxk Great answer. For once, we are on the same page. I think we both care dearly about our country, and wan to recover that time when everyone was sure that the nest generation would have more opportunity than ours.

LuckyGuy's avatar

@ETpro Granted there are other big targets. How about taxing the sh*t out of the ExxonMobil exec who took $400M for his retirement package. Or the guy who quit Home Depot for $400M Geez 100 M isn’t enough? Unfortunately there are lots of other examples. 400M here, 400M there adds up! Definitely put them on the list.

But I contend that a single crack head on the dole costs way more than society realizes. Let’s look at the costs: Welfare assistance check $14,000 per year to sit home doing nothing. Cost 14,000.
But what does the guy do all day? The habit costs $100–300 per day. No job. Gotta steal it.
One break in – kick in door? $400. Break window $100? Steal jewelry, original cost $800 (+sentimental value) sell for $80. Beat up girl friend for the other $20. Total daily cost including damages = ~1500 per day. x 365 = $500,000. Let’s not forget the police to investigate, the court system to prosecute, lawyers to defend… Read your newspaper or police blotter today. How many robberies were there last week? Add up the true cost not just the value of the item stolen. For example: Someone broke a car window and took $20 of CDs. The loss is not just $20. It cost $450 to fix the window plus a day off from work. Add in the legal system costs. You and I pay for that in increased taxes and increased prices.
The original $14,000 we gave the crack head enabled him to commit other acts costing much more. Reducing it to $13,000 won’t solve it. Something drastic is necessary.
There are a lot of crack heads in the neighborhoods. We need to keep them busy doing something. ( I am just using crack heads as an example – I’m sure you can come up with plenty of others.)

Now consider the costs of just one crack baby over its lifetime -and so it goes.

ETpro's avatar

@worriedguy I hear you regarding the cost of drug addiction. Crack and crystal meth are particularly devastating. Smack isn’t far behind. But what’s the solution to that? You could drug test everyone on welfare (despite the howls of protest that would set off) but if you throw the addict off the welfare list, that’s just $14,000 more s/he’s going to steal per year.

Maybe decriminalization and drug addiction treatment instead of the current war on drugs approach are a more rational solution to that particular facet of the cost of running the USA.

Jaxk's avatar

@worriedguy and @ETpro

A quick look at the welfare spending mat provide some insight into the scope of the problem.

Jaxk's avatar

I find it interesting but not surprising that we feel we can reduce, eliminate or change the Social Security distributions but don’t even consider the same for government pension plans. They both held the same promises except the pensions were much more lucrative. Government pensions are the real ‘sacred cow’ in all this. And very little of that money was actually contributed by the employees.

Garebo's avatar

Best thing this country can do, is get rid of the Fed Ponzi scheme. They own %95 of the congress and the court system, this will end the move to create a corporate fascist government. The Fed is between rock and a hard spot-all they can do is create more money. All Bernanke and others are doing is prolonging the inevitable, complete insolvency. All this as a result of unbridled fraud, theft and criminality by bankers and government or SEC looking the other way, i.e. flash trading, massive naked short trading, insider trading. A government that has killed free market trading, and where banks and brokerages simply cannot lose.
Thank god for the internet and talk radio to expose the rascals.

ETpro's avatar

@Jaxk I am not at all against reviewing welfare to bring it closer to workfare and certainly to weed out thise who are guilty of welfare fraud. We won’t accomplish that by laying off case workers who look for fraud, though.

That thought about government pensions crossed my mind too. The Senators who are so hot to reduce Social Security benefits seem perfectly OK with retiring on $140,000 a year for life, with annual cost of living increases.

@Garebo I do not believe that. Our debt is currently at 93.25% of our GDP. Getting the economy running full steam would substantially reduce that. We hit a maxumum of 120% of our GDP at the end of WWII, and the greatest generation rolled up their sleeves and paid it down. We didn’t do it by giving everybody in the upper inome brackets enormous tax breaks and unlimited tax loopholes, though.

Garebo's avatar

That is what I am saying, capture the trans-corporations that are hiding profits offshore to avoid taxes in this country-huge. That is where the money is, not taxing the 20% that provide the 80%-90%, at least in tax revenues. Fry that, you fry it everyone, they’ll do what any smart wealthy motivated investor would do, go offshore, or lay off more workers.
Please, you don’t really believe these government statistics now, then maybe.
I really believe the structure of this country now is service and small to medium size company’s, especially ag and med, they are the one that need relief from bureaucratic red tape and heavy taxes hitting them from every angle, that needs to be reduced.
That is why the Reagan engine worked despite his crazy defense spending,etc.-but, you only get something when you have give something.

ETpro's avatar

@Garebo I do not understand where you got the impression that I don’t believe government statistics. Of course you have to look carefully at what is actually being reported, but I’ve been citing statistics all along, and will cite a bunch more below.

I’d like to see corporate taxes much lower but no pass-through and no allowance for off-shore sheltering. Losses should apply no later than the operating year after they occurred- no carry over. And losses should not come with LBOs. If you want to lose money, lose your own—don’t buy someone else’s losses then deduct them from your tax. Kill the deduction for interest used for corporate takeovers. We have some of the highest corporate tax rates in the world, but few large companies in the US pay them. More then half of US companies pay NO taxes, and some even get money from the IRS. Here is how corporate tax revenues have declined over the years. I’d like to see our corporate tax rate more in line with nations we must compete with. But I’d like to see that rate paid by all, not just the little guys who haven’t the financial reach to game the system.

As to the tremendous success of Reagan’s Voodoo Economics, of course you get a bounce in economic activity when you slash the top tax rate from 70% to 28%. We;d get even more if we went to a 100% negative tax, where the government writes you a check for however much you declare in annual income each year. But we also got a massive spike in debt. Reagan tripled the national debt in his eight years, and put us on the road to the debt monster we are facing today. Compare the WWII and postwar boom to Reagan’s boom. Reagan pales in comparison. Look here and scale about halfway down to the headline, “The Present Danger.”

And Reagan only generated 16 million jobs. Bill Clinton created more jobs in his 8 years than Reagan, Bush 41 and Bush 43 combined. And he was paying down the national debt while doing it. All three Republican “fiscal conservatives” were running it up as fast as a runaway freight train.

When we pegged taxes at 90% or more (it varied by year as shown here) on income over $400,000 to finance WWII and then pay down its crushing debt (120% of GDP) wealthy people didn’t run for tax havens. $400 grand was a great deal of money in 1945. The millionaires got to keep most of their first $400K. The high rate just kicked in on money over that. That’s still how taxation works today, as I am sure you are aware.

Billionaires today pay effective tax rates lower than the average working stiff. If some would hightail it to Haiti where the tax rate is just 2% flat tax, I say good riddance. Any billionaire that can’t handle paying as much as an office secretary in tax percentage is the sort of selfish, greedy Scrooge we would be better off without. Let’s get this country back to making things and people making money, and we can make some new billionaires to replace the scumbags who want it all.

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