National Debt question

Published on September 16, 2004 By drmiler In Politics

Can anyone explain to me how the national debt hurts this country???

Comments (Page 1)

on Sep 16, 2004

The National Debt hurts this country because we must pay an interest on that debt. Therefore, revenue that could go for other things -- military, social programmes, whatever, goes to paying down interest on a debt. It's like if you run up a credit card bill, suddenly a percentage of your income must go to paying the interest on the debt -- and that's money you don't have to spend on other things, like food and other bills, etc. And I'm just talking about INTEREST here, not even the PRINCIPLE. So far, in FY2004, the interest payments on the debt alone have cost the USA $309 billion. That's twice what the war in Iraq has cost us. Without the debt, that's $309 billion that could be in any government programme you choose (or several).

drmiler

on Sep 16, 2004

Reply #1 By: jesusstayscrunchy - 9/16/2004 11:55:57 AM
The National Debt hurts this country because we must pay an interest on that debt. Therefore, revenue that could go for other things -- military, social programmes, whatever, goes to paying down interest on a debt. It's like if you run up a credit card bill, suddenly a percentage of your income must go to paying the interest on the debt -- and that's money you don't have to spend on other things, like food and other bills, etc. And I'm just talking about INTEREST here, not even the PRINCIPLE. So far, in FY2004, the interest payments on the debt alone have cost the USA $309 billion. That's twice what the war in Iraq has cost us. Without the debt, that's $309 billion that could be in any government programme you choose (or several).

Looks like we're "both" operating under misconceptions:

The current debt of $5.7 trillion is 60-plus percent of our
income. Is that a lot? By way of reference—though it is
probably irrelevant—Canada’s debt is 87 percent of its
income. Japan’s is 105 percent.
The annual interest on the publicly held portion ($3.7
trillion) of the national debt is $200 billion. That’s about 2
percent of our national income of $9.5 trillion. Does the
size of the debt make interest rates, now at about 6.5 percent,
unduly high? Probably not. After the U.S.’s experience
with inflation, the 6-percent range is not surprising.
And interest rates came crashing down under Reagan even
as the debt was skyrocketing. So it’s difficult to argue that
lower debt would, by itself, produce lower interest rates.
Is the current level of debt hurting us? Given the huge
success of the U.S. economy, now in its 18th year of expansion—
thank you, Mr. Reagan—that’s an impossible
case to make. Then why do the politicians so furiously
rage to pay off the debt?
The real reason is this: although the current debt is only
2 percent of our national income, it is about 11 percent of
total federal government spending, and a whopping 35
percent of the politicians’ discretionary spending.
Although interest payments are in the non-discretionary
portion of the budget, if that portion could be shrunk,
politicians would have an easier time expanding the discretionary
portion. That means more money for pork.
Some politicians have almost admitted as much when they
have said we should pay down the debt now so that the
government would have borrowing power in the future in
case of an economic downturn—or, of course, some other
need (education, children, the environment—and re-election?).
The politicians don’t care about the debt. They just
want that money for themselves.

MARCH 2000 VOLUME 1, NUMBER 6
PRI
WASHINGTON BULLETIN
Why Washington Wants Less Debt 1
The Tax Revolt Lives 2
Don’t Give Up on Taxes 4
A publication of Pacific Research Institute for Public Policy

drmiler

on Sep 16, 2004

Of course this is "just" their opinion.

jesusstayscrunchy

on Sep 16, 2004

I don't think it would effect interest rates at all. It's just, if we didn't have to make interest payments on the debt, the country would have more revenue. It could mean more pork, certainly -- but it could also mean lower taxes across the board.

I think you and I should run for office on a "National Unity" Platform. I think we're both a little fed up with politics as usual.

CrispE

on Sep 16, 2004

drmiler:

The national debt is currently 7.2 trillion, not 5.9 (there is a national debt clock website).

The problem with the debt is that it SUCKS money out of the economy. It hurts business by causing higher interest rates, which leads to more business failures, especially among small businesses. It hurts the people because it keeps credit costs higher and makes it harder for people to get out of debt.

Some believe, btw, that lower interest rates are good because it means the lower debt means lower borrowing costs. But that is fantasyland. Small businesses pay no where's near the 4% prime. They are paying 8 to 10% depending on collateral. So, say a businessman borrows $100,000 to open a bicycle shop. His cost of money at 10% is $10,000 per year. So, the first 50 bicycles he sells turns on not one light, pays no employees, and keeps no doors to the store open.

Finally, lets talk about the dollar. When the U.S. runs debt like we are now, it makes the dollar less dependable. This means we see erosion in the value of the dollar. So, between 2000 and now we have seen over 30% loss in buying power overseas.

So, if you were making $50,000 in 2000 and you are making $60,000 now, you can buy less than in 2000.

But don't worry.....

The debt isn't that important, unless you drive a car, own a home or a business, or want to retire.

drmiler

on Sep 16, 2004

The current debt of $5.7 trillion is 60-plus percent of our
income. Is that a lot? By way of reference—though it is
probably irrelevant—Canada’s debt is 87 percent of its
income. Japan’s is 105 percent.
The annual interest on the publicly held portion ($3.7
trillion) of the national debt is $200 billion. That’s about 2
percent of our national income of $9.5 trillion. Does the
size of the debt make interest rates, now at about 6.5 percent,
unduly high? Probably not. After the U.S.’s experience
with inflation, the 6-percent range is not surprising.
And interest rates came crashing down under Reagan even
as the debt was skyrocketing. So it’s difficult to argue that
lower debt would, by itself, produce lower interest rates.
Is the current level of debt hurting us? Given the huge
success of the U.S. economy, now in its 18th year of expansion—
thank you, Mr. Reagan—that’s an impossible
case to make. Then why do the politicians so furiously
rage to pay off the debt?
The real reason is this: although the current debt is only
2 percent of our national income, it is about 11 percent of
total federal government spending, and a whopping 35
percent of the politicians’ discretionary spending.
Although interest payments are in the non-discretionary
portion of the budget, if that portion could be shrunk,
politicians would have an easier time expanding the discretionary
portion. That means more money for pork.
Some politicians have almost admitted as much when they
have said we should pay down the debt now so that the
government would have borrowing power in the future in
case of an economic downturn—or, of course, some other
need (education, children, the environment—and re-election?).
The politicians don’t care about the debt. They just
want that money for themselves.

MARCH 2000 VOLUME 1, NUMBER 6
PRI
WASHINGTON BULLETIN
Why Washington Wants Less Debt 1
The Tax Revolt Lives 2
Don’t Give Up on Taxes 4
A publication of Pacific Research Institute for Public Policy

So what your saying is that these guys don't know squat? Why, are you an economics major???

Reply #5 By: CrispE - 9/16/2004 5:42:30 PM
drmiler:

The national debt is currently 7.2 trillion, not 5.9 (there is a national debt clock website).

The problem with the debt is that it SUCKS money out of the economy. It hurts business by causing higher interest rates, which leads to more business failures, especially among small businesses. It hurts the people because it keeps credit costs higher and makes it harder for people to get out of debt.

Some believe, btw, that lower interest rates are good because it means the lower debt means lower borrowing costs. But that is fantasyland. Small businesses pay no where's near the 4% prime. They are paying 8 to 10% depending on collateral. So, say a businessman borrows $100,000 to open a bicycle shop. His cost of money at 10% is $10,000 per year. So, the first 50 bicycles he sells turns on not one light, pays no employees, and keeps no doors to the store open.

Finally, lets talk about the dollar. When the U.S. runs debt like we are now, it makes the dollar less dependable. This means we see erosion in the value of the dollar. So, between 2000 and now we have seen over 30% loss in buying power overseas.

So, if you were making $50,000 in 2000 and you are making $60,000 now, you can buy less than in 2000.

But don't worry.....

The debt isn't that important, unless you drive a car, own a home or a business, or want to retire

Don Bemont

on Sep 16, 2004

The annual interest on the publicly held portion ($3.7
trillion) of the national debt is $200 billion.

It seems to me that thisis the truly relevant part of your post.

Would you like to add $200 billion in new welfare costs to the next budget? Helath care costs? I didn't think so.

So why would you be so sanguine about this kind of money as debt service?

drmiler

on Sep 16, 2004

Reply #7 By: Don Bemont - 9/16/2004 6:10:23 PM
The annual interest on the publicly held portion ($3.7
trillion) of the national debt is $200 billion.
It seems to me that thisis the truly relevant part of your post.

Would you like to add $200 billion in new welfare costs to the next budget? Helath care costs? I didn't think so.

So why would you be so sanguine about this kind of money as debt service

And you think what? That Kerry won't add to it? Get REAL!!! Of course this is assuming that your talking about GW.

ShoZan

on Sep 16, 2004

And you think what? That Kerry won't add to it? Get REAL!!! Of course this is assuming that your talking about GW.

Badrnik might not add to it,

liveletlive

on Sep 16, 2004

The problems with the debt , and just a few are : It's like using your credit card to live on for years , all the while giving tax cuts when they aren't wise.

Second, somebody will have to pay for it. And , with more baby boomers retiring, there may not be any Social Security left for everyone.

We will have to pay for Bush's high end tax cuts. It just won't be right now.

liveletlive

on Sep 16, 2004

Clinton lowered it. Kerry will do his best to lower it. IT HAS TO BE DONE.

ShoZan

on Sep 16, 2004

ShoZan

on Sep 16, 2004

Clinton lowered it. Kerry will do his best to lower it. IT HAS TO BE DONE.

Internet Bubble Lowered it, because there was more cash flow, not Clinton. I hate how presidents get or take credit for the economy failing or not, when all the control they have over it is too slow acting that it does more often than not more damage than good to the economy. The economy should get the credit for the economy period, last thing we need is an executive waving a magic wand making the economy better or worse.

drmiler

on Sep 16, 2004

Reply #12 By: ShoZan - 9/16/2004 6:26:56 PM
Clinton lowered it. Kerry will do his best to lower it. IT HAS TO BE DONE.

Internet Bubble Lowered it, because there was more cash flow, not Clinton, I hate how presidents get or take credit for the economy failing or not, when all the control they have over it is too slow acting that it does more often than not more damage than good to the economy. The economy should get the credit for the economy period, last thing we need is an executive waving a magic wand making the economy better or worse.

Hear,Hear! well said!

Don Bemont

on Sep 16, 2004

And you think what? That Kerry won't add to it? Get REAL!!! Of course this is assuming that your talking about GW.

I wasn't referring to either candidate, only general governmental policy.

Honestly, I have no idea what it was in my answer that implied that either major candidate was to be trusted in this area, but for what it's worth, I don't believe that either will pay down the debt.

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