2013 Symposium: We Are Currently $18 Trillion In Debt; What Should We Do?

Cartwright: We’ve discussed this extensively before. I believe we debated it at length at one of the champagne summits back in October. The Republicans had the Democrats and Mr. Obama over the barrel back in October with the government shutdown and they caved in. They got scared that the media was blaming them and that the public was turning against them, so they rolled over and gave in. They could have forced the Democrats and Obama to do whatever they wanted by just keeping the government shutdown. The voters would have forgotten about it all by the time the 2014 mid-term elections came up. But no, they gave in and got nothing for it. In fact, Mr. Obama and the Democrats came out smelling like a rose.

So, we’re not going to see another shutdown. The Republicans don’t have the guts for it. They’ve become a bunch of cowards. Let’s remember something, when the government shutdown occurred, the federal government furloughed over 800,000 workers that were deemed non-essential. If they were non-essential, why were they on the government payroll in the first place? By the very definition of non-essential, doesn’t that mean the government could function without them? And it seemed like the shutdown was a non-event for about 99.9% of the general population. The government could still be shutdown and no one would really know the difference, except the furloughed workers. After all this, the workers ended up getting paid anyway. That’s BS to me. So, how did the shutdown actually save any money? It didn’t. It was all just a sham that was part of Washington politics.

We’re not going to have another shutdown. But that doesn’t mean that the Congress should just acquiesce and raise the debt limit. We’re in over our heads as it is. The Congress needs to cut spending significantly. There’s about 800,000 workers that we know are pretty much expendable at the federal level. Maybe they should be in the unemployment line. That would save some money. As a matter of fact, I wrote an article with Thinking Outside the Boxe a while back that examines ways the federal government could save money almost immediately. Let’s dig out that list and follow it.

Let’s make each and every department go through their budget and cut expenses by 10% each year for the next three years. Would it be painful for each department? Yes. Could they find 10% in savings immediately? Yes. Would it be in the best interests of the nation? Yes. Would it be better than raising the debt limit? Yes. Are there other savings at the federal level from eliminating fraud, waste, duplicate programmes, etc.? Yes.

Let’s also keep in mind that another way to confront our fiscal problems in Washington is to grow our economy in concert with controls on spending. Tax cuts spur growth. Elimination of regulations and bureaucratic red tape for businesses spur growth. Another way to do this is total tax reform that makes business more competitive and puts more income in the hands of the taxpayers. As the economy grows and spending is contained, the deficit falls. As the deficit falls, the borrowing needs of the federal government fall. As the budget moves into surplus, the debt can be paid down.

All of this is well and good. Would it be in the best interests of the nation? Yes. Does anyone really think the politicians and bureaucrats in Washington can accomplish this? No, not realistically. Does Washington have a spending problem? Yes. Can Washington spend beyond its means indefinitely? No. Is the spending problem in Washington going to bankrupt America? Yes. Can the American people do anything about it? Yes. If they’re truly concerned, they need to make sure they elect good candidates who will work together for meaningful change and not keep sending career politicians and their cronies back to Washington.

North Carolina: With the debt ceiling debate approaching, the question is whether the government will indeed shut down again, as well as raise the debt ceiling or possibly reduce spending. The government will most probably not shut down for a number of reasons. To begin with, Republicans do not want residual political fallout on their side, as they took the brunt for the first shut down. Secondly, Congress will not want to risk access to credit markets, and thirdly the votes are simply not there. Democrats in the Senate hold the majority, and they will not budge on essential issues. Congress will most probably raise the debt ceiling because neither party wants to be responsible for a supposed default on payment, but according to Forbes contributor, Peter Ferrara, Congress appears to not realize that as outstanding debt becomes due, it can simply be paid by newly issued debt, without violating the debt limit, as the total outstanding debt would not change. Current federal tax revenues are more than enough to pay the current interest due on the national debt. So not increasing the national debt does not mean defaulting on the national debt. In order to restore fiscal responsibility and sanity in Washington, a number of initial steps and changes that should be taken to start and continue the process of fiscal accountability. Initial actions would include balancing the federal budget and maintaining its balance in a specified period, followed by reducing and lowering the debt to 30 percent of Gross Domestic Product. Other steps would include tort reform, capping discretionary spending increases, replacing the current and unfair tax code with a simpler single rate system, providing full funding of national defense in order to protect America and its interests, create a health care system that is affordable for the country as well as for individuals and families. Additionally, Social Security and Medicare must be redesigned to function as maintainable programs. At present, these programs will not be able to pay for future generations without incurring severe debt. As the Heritage Foundation suggests, “they must function as real insurance programs that focus on those who need them for retirement security.”

Strong fiscal responsibility in Washington can only be attained through reducing the size of government and stimulating American innovativeness, along with tax reform and the transformation of entitlement programs to provide real economic security. This can be accomplished through a committed Congress willing to do what is right for the America people and for future generations.

Orlando: The debt ceiling might be the least well-understood issue in American political discourse. In fairness, it’s incredibly complicated. As much as family financial metaphors are grossly inaccurate, perhaps this one might be illuminating. Imagine that your family has been paying all of its bills for the past several months with a credit card. You are shocked when you open the credit card bill and the balance is staggering. Now, you can either work to pay off that balance, or you can call your credit card company and tell them you refuse to pay. Not raising the debt ceiling is taking the second option. All raising the debt ceiling does is authorizes the treasury to pay the bills the Congress has already accrued. It does not, in and of itself, reflect new spending.

The national debt might be the second least well-understood issue in American political discourse. Of the approximately 18 trillion dollars of federal public debt, about 75% is held by Americans in the form of government bonds, treasury notes, and anticipated benefits. Technically, the social security payments for people not yet retired are part of that figure, as are publicly traded bonds, which are essentially indistinguishable from currency, save for their volatility in valuation. About 25% is held by foreign countries, of which Japan and China are the principle players, with about 1 trillion each.

To be blunt, America will never be Greece. Greece’s financial problems resulted from a lack of control over its own monetary policy. The government continued to act as though it could issue more money to cover its debts indefinitely, when, in fact, it no longer had that power. It owed considerably more to its citizens and to private lending institutions than it could pay, and so it defaulted on its debt. The only way that will happen in America is if Congress refuses to increase the debt limit.

That said, government spending in America is a little out of whack, and it is mostly a revenue problem for the two biggest sources of discretionary spending. Social Security taxes and Medicare taxes are only applicable to the first $117,000 of income. This means that if you make $1.2 million dollars, you pay the same amount in Social Security taxes as people who make $117,000. About 900 people hit that threshold on January 2nd, 2014. This makes the Social Security tax harshly regressive. Extending it even to a million dollars could fix a significant portion of that debt problem while sharing the burden of retirement security more evenly between rich and poor.

Washington, DC: It is a well-known fact that the USA is a country in debt. However, while many people assume that a country in debt is somewhat similar to a person in debt, the story is completely different from an economic point of view. All countries as economic entities operate with some level of debt; and the USA has had a national debt throughout its whole history. In fact, the USA’s present day debt is not that high compared to other periods in history such as after the Civil War and World War II. Moreover, those periods of high national debts were usually followed by periods of national economic growth and prosperity.

In February 2014, the debate regarding the national debt ceiling is coming up again, and the worst thing that can happen is a stalemate. While it will be politically and ideologically motivated, the potential consequences of a possible stalemate will undoubtedly be economic. After all, the world has confidence in the American dollar and the ability of the American government to repay its debt. As such, the government must avoid establishing any debt ceiling and work out a prudent spending plan. It is a classic Keynesian economic model-the higher the government spending, the better economic growth and development the country will see. It is a bit like riding a bicycle—one should not stop pedaling in order not to fall.

While it might seem counterintuitive to many people to borrow more money and spend more money while in debt, it is the rational solution. The other measures often proposed—such as printing more money which will inevitably lead to higher inflation, or higher taxes which will decrease consumer spending and negatively affect the economy—are going to be disastrous.

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