Question about the National Deficit

Roody · Post by **Roody** » Fri Oct 01, 2004 11:18 am

How would any of you argue if someone told you that the National deficit isnt a big deal that we can just print more money?

Not really looking for a wise crack as I am a legitimate rebuttal to that idea. Believe it or not I have gotten it a few times over the last couple of days and I am at a loss of words to respond.

downhill · Post by **downhill** » Fri Oct 01, 2004 11:24 am

Of course you can....Brazil does it all the time as well as a lot of countries.

The bad side of it? It drives up inflation and devalues the US currency on the world market. Printing more, only devalues the dollar.

Check out Brazil's inflation or Israel's.

I'm sure there's more cause and effect to add but that's off the top of my head.

I'm not an expert on this though. Mabye someone on the boards more involved in money can chime in...

Zilog B · Post by **Zilog B** » Fri Oct 01, 2004 11:25 am

LOL. If you "just print more money", then you deflate the value of the dollars already in circulation, making it worth less.

emilyb · Post by **emilyb** » Fri Oct 01, 2004 11:27 am

Well, here's my not-so-totally-understanding answer....

I know that we have to have enough gold in the federal reserves to back it up. Now why and who would ever know is not really computing to me, because who really thinks of that when we are passing out $5 bills? I have oftn wondered the same thing....not for the deficit, but for poverty stricken ppl in general.

Meggie · Post by **Meggie** » Fri Oct 01, 2004 11:27 am

when someone says that just back hand them

Roody · Post by **Roody** » Fri Oct 01, 2004 11:36 am

Anything specific about it John as in links that I should look at?

Roody · Post by **Roody** » Fri Oct 01, 2004 11:37 am

Meggie wrote:when someone says that just back hand them

Don't consider that much of an option.

YARDofSTUF · Post by **YARDofSTUF** » Fri Oct 01, 2004 11:38 am

thats like being broke and jobless and buying a house on credit, in other words, stupid.

Ghosthunter · Post by **Ghosthunter** » Fri Oct 01, 2004 11:40 am

easy enough to get rid of the national debt..just kill majority of social programs and serisouly look to see where all the money goes.

Ken · Post by **Ken** » Fri Oct 01, 2004 11:43 am

staceyb wrote:Well, here's my not-so-totally-understanding answer....

I know that we have to have enough gold in the federal reserves to back it up.

Stacey,
Sorry but this is totally incorrect. We were taken off of the gold standard way before you were even born...

We do have a reserve, however, it is not even close to the amount of money printed...

The above answers are correct, it will/does devalue the dollar...

koldchillah · Post by **koldchillah** » Fri Oct 01, 2004 11:50 am

straight from the source:

http://www.treas.gov/education/faq/mark ... bt.html#q7

emilyb · Post by **emilyb** » Fri Oct 01, 2004 11:50 am

[quote="Ken"]Stacey,
Sorry but this is totally incorrect. We were taken off of the gold standard way before you were even born... ]

Oh well, that explains it....before I was born...gives new meaning to being wise beyond my years

emilyb · Post by **emilyb** » Fri Oct 01, 2004 11:51 am

so my question would follow....who cares if it devalues the dollar if their is no standard of how many we can print? (or like roody asked...what is that standard if there is one?)

Roody · Post by **Roody** » Fri Oct 01, 2004 11:54 am

Thanks for the link Koldchillah. That was helpful.

ScottE · Post by **ScottE** » Fri Oct 01, 2004 12:01 pm

The US currency is backed by the US Government. That's it.

Printing more money. Yeah you can do that. But when it costs $1,000,000 for a Mc Donalds Cheeseburger...

As somebody mentioned it before. After WW1 the German Goverment after owing millions of dollars in repartitions to the French and English just printed more money. People would be rolling wheel barrows full of 1,000,000 Mark bills down the streets. And people would steal the wheel barrow because it was worth more than all the money in it.

Scum333 · Post by **Scum333** » Fri Oct 01, 2004 12:19 pm

keep in mind people that with your mind on your money and money on your mind.

The deficit in not really real. It is made up of a dollar figure so liberal and republicans can posture.

so please, don't believe the hype.

koldchillah · Post by **koldchillah** » Fri Oct 01, 2004 12:57 pm

Scum333 wrote:keep in mind people that with your mind on your money and money on your mind.

The deficit in not really real. It is made up of a dollar figure so liberal and republicans can posture.

so please, don't believe the hype.

It's actually tiberium!!!

thepieman · Post by **thepieman** » Fri Oct 01, 2004 1:02 pm

One of the reasons why Terrorists in the middle east counterfeit our money...it devalues the dollar. If we were to just print money it would bring down the value of our money.

Pie

Bouncer · Post by **Bouncer** » Fri Oct 01, 2004 1:57 pm

Ghosthunter wrote:easy enough to get rid of the national debt..just kill majority of social programs and serisouly look to see where all the money goes.

Really? How long do you think it would take 17 biillion dollars to pay down the $7,000,000,000,000 debt?

Here's some info for you, the INTEREST on the debt accrues at about 1.1b a day. So.. you'd be able to pay about 16 days of interest by canceling just about every social program except medicaid and medicare.

Then you're done. Now mind you, if you'd like to cancel those as well then you just chopped 472b from the budget. Which sounds cool, until you realize what it means. Lots of old people and cripples dying in the streets.

Medicaid is 182b
Medicare is 290b
Everything else is about 17b.

Mind you, these are last years figures (last available I could find). Still, the point is, if you cut every bit of that you would still only cut about 40-50b a year from the debt. At that rate it would take you, (assuming these cuts were permanent and all the money applied to the debt and no deficit budget was run)... 340 years to pay down the debt.

Yeah, great plan, lemme know how it works out for our great great great great grandkids. That's only 85 Presidential Administrations! Zoom pow!

You need to try again, and this time, be a bit more realistic.

Regards,
-Bouncer-

Ghosthunter · Post by **Ghosthunter** » Fri Oct 01, 2004 1:59 pm

Bouncer wrote:Really? How long do you think it would take 17 biillion dollars to pay down the $7,000,000,000,000 debt?

Here's some info for you, the INTEREST on the debt accrues at about 1.1b a day. So.. you'd be able to pay about 16 days of interest by canceling just about every social program except medicaid and medicare.

Then you're done. Now mind you, if you'd like to cancel those as well then you just chopped 472b from the budget. Which sounds cool, until you realize what it means. Lots of old people and cripples dying in the streets.

Medicaid is 182b
Medicare is 290b
Everything else is about 17b.

Mind you, these are last years figures (last available I could find). Still, the point is, if you cut every bit of that you would still only cut about 40-50b a year from the debt. At that rate it would take you, (assuming these cuts were permanent and all the money applied to the debt and no deficit budget was run)... 340 years to pay down the debt.

Yeah, great plan, lemme know how it works out for our great great great great grandkids. That's only 85 Presidential Administrations! Zoom pow!

You need to try again, and this time, be a bit more realistic.

Regards,
-Bouncer-

So what is your plan dont cut and tax people to death? Economy does not get helped by taxing people. Revunue helps economy, and only way to get more revunue is to have more investors willing to risk their money but wont if you keep taxing them,

emilyb · Post by **emilyb** » Fri Oct 01, 2004 2:07 pm

What actually is running up the national debt? Is it domestic programs as well as foreign? If it is, then the debt would be paid off twice as fast as you suggest, bouncer, because stopping the programs alone would reduce the growth . If you then pay the money back, it is like crediting it twice. it will not be growing at the predicted rate/interest if it is not still being used.

Roody · Post by **Roody** » Fri Oct 01, 2004 3:17 pm

staceyb wrote:What actually is running up the national debt? Is it domestic programs as well as foreign?

Irresponsible spending domestically along with the war on terror. Sure, the numbers are made worse through no fault of his own due to 9/11, but in the case of Iraq with no solid evidence if any at all of a link between Iraq and Afghanistan most people have troubles justifying the President's spending.

ScottE · Post by **ScottE** » Fri Oct 01, 2004 4:18 pm

Roody wrote:Irresponsible spending domestically along with the war on terror. Sure, the numbers are made worse through no fault of his own due to 9/11, but in the case of Iraq with no solid evidence if any at all of a link between Iraq and Afghanistan most people have troubles justifying the President's spending.

Most of it is money + interest on loans to other countries that aren't going to be paid back, but who's keeping track?

Bouncer · Post by **Bouncer** » Fri Oct 01, 2004 4:21 pm

staceyb wrote:What actually is running up the national debt? Is it domestic programs as well as foreign? If it is, then the debt would be paid off twice as fast as you suggest, bouncer, because stopping the programs alone would reduce the growth . If you then pay the money back, it is like crediting it twice. it will not be growing at the predicted rate/interest if it is not still being used.

You've a point Stacey. To be fair, if that were the case it'd still decades, at least, to pay down the debt, assuming that we collected 500b a year over expenditures and dedicated it all to debt reduction. Because we have to pay off the interest before the principle, and so we'd still spend 380b a year just for interest.

In fact, interest payments are the third largest part of our budget right now.

We need to do two things to reduce the debt.
One, we do need a balanced budget amendment to the Constitution.
Two, we need to dedicate any surplus to automatically paying down the debt by law.

It's about the only way to do it, cutting HHS to 0% isn't going to stop the problem. Forcing the government to not spend more than it takes in keeps the debt from growing any larger. Then the surpluses, which increase over time as the debt (and interest payments) drop, allows us to speed up the process of repayment.

At the end of the tunnel we emerge with a basically bulletproof economy and the ability to either reduce everyone's taxes by a whopping 16% or drop it by 8% and fund pretty much any dang thing we want. Like free college for everyone or free medical care across the board, maybe even both.

Putting it another way, the first 45 days of work you do next year will simply be to pay off the interest on the debt.

Regards,
-Bouncer-

ScottE · Post by **ScottE** » Fri Oct 01, 2004 4:23 pm

Bouncer wrote:

We need to do two things to reduce the debt.
One, we need to quit paying crack *****s to have more babies
Two, we need to quit spending money to feed starving Africans

I agree 100%!

Ken · Post by **Ken** » Fri Oct 01, 2004 4:24 pm

http://www.treas.gov/education/faq/markets/national-debt.html#q8

FAQs: Financial Markets

National Debt

What is the national debt?

What caused the debt that the United States now has?

What is the total amount of the national debt?

To whom do we owe the debt?

How does the Treasury Department finance the national debt?

Why don't we just print all of the money we need to pay off the debt or to pay for government services?

What can be done to reduce the national debt?

What is the Treasury Department's position on increasing the debt limit?

I would like to make a donation to help pay off the national debt. How do I do it?

What is the national debt?

The national debt or public debt is a direct liability of the United States Government. Payments of principal and interest on all public debt securities receive backing by the full faith and credit of the United States Government. By law, amounts for payment of interest on the public debt are available automatically without annual appropriation actions by the Congress. For these reasons, U.S. Government securities are considered the safest financial investment in the world.

^ TOP

What caused the debt that United States now has?

The total public debt is largely a legacy of war, economic recession, and inflation. It represents the accumulated deficits in the Government's budgets over the years. The United States first got into debt in 1790 when it assumed the Revolutionary war debts of the Continental Congress. At the end of 1790, the gross public debt was approximately $75 million. For a brief period in the mid-1830's the public debt was virtually zero. At the start of World War I in 1916, the public debt was $1 billion. It then rose to a peak of $26 billion in 1919 to finance the war. The debt declined for the next decade. During the Great Depression of the 1930's, however, the debt increased from $16 billion to $42 billion. During the Second World War the public debt rose sharply to a peak of $279 billion in 1946. From its postwar low in 1949, the outstanding public debt grew gradually for nearly the next two decades. Then, beginning at the time of the Vietnam War in the mid-1960's, the rate of the debt's increase accelerated sharply.

^ TOP

What is the total amount of the national debt?

We have a fact sheet available excerpted from the Budget of the United States Government that shows the gross national debt at the end of each Fiscal Year since 1977.

^ TOP

To whom do we owe the debt?

The Treasury Department borrows money through the sale of Treasury Bills, Notes, Bonds, and United States Savings Bonds to the public. We have copies available of Table OFS-1--Distribution of Federal Securities by Class of Investors and Type of Issues and Table OFS-2--Estimated Ownership of Public Debt Securities by Private Investors. These tables can be found in the TREASURY BULLETIN, which gets published monthly by our Financial Management Service. You will be interested to know that a yearly subscription to this document is available from the Superintendent of Documents. You may place your order by calling 202-512-1800 or by writing to the Government Printing Office, Post Office Box 371954, Pittsburgh, PA 15250-7954. This material may also be available in your local library or in a depository library.

^ TOP

How does the Treasury Department finance the national debt?

Under the authority of the Second Liberty Bond Act, as amended, the U.S. Government borrows money by issuing Treasury securities to finance expenditures that exceed its receipts. Government receipts are primarily from taxes paid to the U.S. Government. The Government incurs expenditures through the administration of government and its programs. Total U.S. Treasury borrowing makes up the outstanding public debt.

Portions of the public debt come due (mature) frequently. Treasury officials must decide whether to refund the debt by issuing new securities or to pay off the securities with its receipts. The full faith and credit of the U.S. Government backs all Treasury securities. Our government has never defaulted on the principal or declared an interest payment moratorium on any of its obligations. Consequently, U.S. Treasury securities are considered and will continue to be the safest financial investment in the world.

The Treasury's financing activities (borrowing) include regular offerings of short-term Treasury bills and quarterly offerings of Treasury notes and bonds. Besides its regular financing, the Treasury will occasionally offer additional securities, such as cash management bills.

^ TOP

Why don't we just print all of the money we need to pay off the debt or to pay for government services?

Many people do not realize that when the Federal Government runs a deficit, it does not create money for itself to make up the difference. The Government finances the budget debt by issuing and selling bonds to the public. In addition, the Treasury Department does not print money to cover budget deficits. You may be interested to know that the only types of money that the United States issues directly through the Treasury Department are United States notes and United States coinage. While the Treasury's Bureau of Engraving and Printing (BEP) produces Federal Reserve notes, the Board of Governors of the Federal Reserve System issues them into circulation. The vast majority of currency notes in circulation today are Federal Reserve notes. In short, the Federal Reserve Board has primary responsibility for the control of the Nation's money supply, whether there is a budget deficit or not.

It is important to keep in mind that neither money-financed nor bond-financed deficits are appropriate for dealing with the Federal budget deficit. The immediate effect of financing the deficit by printing new money may be to keep interest rates lower than they otherwise would be. As time progresses, however, the excess money introduced into the economy leads to higher inflation and invariably to higher interest rates. So simply put, printing money to finance the deficit may not cause the Federal debt and debt interest payments to grow. It does generate higher inflation and rising interest rates over time.

The preferred solution for dealing with Federal budget deficits when they occur is to maintain a balanced Federal budget as much as possible. This requires that all U.S. Government spending be matched dollar-for-dollar by tax revenues whenever possible. This approach to budget management would reflect fiscal responsibility, but also provide a straightforward and honest way of informing taxpayers of their current and future tax liabilities.

^ TOP

What can be done to reduce the national debt?

The Treasury Department is concerned about the need to reduce the Federal debt. The Treasury Department issues debt to the public to finance Federal deficits. Consequently, debt reduction can occur only when Federal outlays do not exceed Federal receipts. While the size of the public debt in nominal dollars is at an all-time high, it is not near historic highs in relation to our economy's size. The power to appropriate lies with the Legislative, not the Executive Branch of the Government. Our Bureau of the Public Debt is responsible for the operational aspects of financing the debt, and as such does not formulate budget policy. While the arithmetic of reducing the outstanding debt is simple, the policy choices to achieve a budget surplus are not.

koldchillah · Post by **koldchillah** » Fri Oct 01, 2004 4:26 pm

Doesn't consumer debt play into this as well somehow? Too many visa cards being handed out these days so people can buy foreign goods but pay for them later if at all. Somebody had to pay for those goods in the first place, right?

ScottE · Post by **ScottE** » Fri Oct 01, 2004 4:26 pm

koldchillah wrote:Doesn't consumer debt play into this as well somehow? Too many visa cards being handed out these days so people can buy foreign goods but pay for them later if at all. Somebody had to pay for those goods in the first place, right?

No

Bouncer · Post by **Bouncer** » Fri Oct 01, 2004 4:28 pm

Bit of a misquote there.

Look, I know talking about gov't financing is boring. You think I like it? I don't. It bores me to tears. But it is dragging us down. We've gotta do something about it before we head back into a 70's (or worse) recession. Think 18% unemployment. Think foreclosures by the millions. We are living on borrowed time, and we've got to use what time we have left to try and bail the ship out before it sinks completely.

The alternative is really really bad. Ignoring it isn't going to work much longer.

Regards,
-Bouncer-

Ken · Post by **Ken** » Fri Oct 01, 2004 4:28 pm

Consequently, debt reduction can occur only when Federal outlays do not exceed Federal receipts. While the size of the public debt in nominal dollars is at an all-time high, it is not near historic highs in relation to our economy's size.

You have got to read people....

Bouncer · Post by **Bouncer** » Fri Oct 01, 2004 4:42 pm

If you can, I'd suggest folks read this article. Warren Buffet makes some very very good points, and while I'm not sure how well his idea would work, it may have merit. Either way though,, he lays out the problem we are facing quite aptly.

http://www.pbs.org/wsw/news/fortunearti ... 26_03.html

Regards,
-Bouncer-

Bouncer · Post by **Bouncer** » Fri Oct 01, 2004 4:46 pm

Ken wrote:Consequently, debt reduction can occur only when Federal outlays do not exceed Federal receipts. While the size of the public debt in nominal dollars is at an all-time high, it is not near historic highs in relation to our economy's size.

You have got to read people....

Agreed, however.

Foreign investment in the US is likely to decrease sometime in the relatively near future. When that happens we will have less credit money to spend on our budget. Further, it will cause a devaluation of the bonds and the dollars behind those bonds. At that point, inflation starts moving up and there's not a damn thing we can do about it.

Regards,
-Bouncer-
ps: Read the Buffet article and gimme your thoughts on it. I'm not sure an IC credit scheme is workable.. otoh, if we could actually pull it off we'd move back to trade balance and that would be a good thing.

downhill · Post by **downhill** » Fri Oct 01, 2004 5:05 pm

Bouncer wrote:You've a point Stacey. To be fair, if that were the case it'd still decades, at least, to pay down the debt, assuming that we collected 500b a year over expenditures and dedicated it all to debt reduction. Because we have to pay off the interest before the principle, and so we'd still spend 380b a year just for interest.

In fact, interest payments are the third largest part of our budget right now.

Regards,
-Bouncer-

Just a thought...does anyone else think that maybe the real reason for supply side economics isn't to help the economy but to keep this debt huge? Welfare for the very rich? After all...somebody's getting that interest and I'd guess that right now, it's a pretty safe investment... Just a rhetorical question...

JC · Post by JC » Mon Oct 04, 2004 7:19 am

Bouncer wrote:Really? How long do you think it would take 17 biillion dollars to pay down the $7,000,000,000,000 debt?

Here's some info for you, the INTEREST on the debt accrues at about 1.1b a day. So.. you'd be able to pay about 16 days of interest by canceling just about every social program except medicaid and medicare.

Then you're done. Now mind you, if you'd like to cancel those as well then you just chopped 472b from the budget. Which sounds cool, until you realize what it means. Lots of old people and cripples dying in the streets.

Medicaid is 182b
Medicare is 290b
Everything else is about 17b.

Mind you, these are last years figures (last available I could find). Still, the point is, if you cut every bit of that you would still only cut about 40-50b a year from the debt. At that rate it would take you, (assuming these cuts were permanent and all the money applied to the debt and no deficit budget was run)... 340 years to pay down the debt.

Yeah, great plan, lemme know how it works out for our great great great great grandkids. That's only 85 Presidential Administrations! Zoom pow!

You need to try again, and this time, be a bit more realistic.

Regards,
-Bouncer-

Wow the #'s for medicare and medicaid are amazing! I just think that there is a point at which people need to take responsibility for themselves, and not look at the government and the good people of this country for all the help! I think that goes for all, Old Retired young etc....