The Massive Debt Bomb Threatening You And Me

[No DUplicitous DUpe]

The Massive Debt Bomb Threatening You And Me
posted with permission from http://sane-ramblings.blogspot.com/

You and I are under an enormous threat and practically nothing is said or done about it. The U.S. government runs annual deficits of $1.4 trillion as it hemorrhages red ink. It costs over $200 billion a year just to pay the interest charges on that skyrocketing debt and that's at interest rates near zero.

What happens when interest rates rise beyond the near nothing they are now. Could the annual interest on the debt jump quickly to a half trillion dollars? To a trillion? Of course, if investors get nervous and demand premium rates for their money.

As they watch the President and Congress actually CUT TAXES, not expenses, they are growing nervous. Meanwhile, they see the amount of the debt itself is soaring.

As interest costs skyrocket, where will the money come from to pay for Medicare? Medicaid? Social Security? Education? Military? These will all be slashed severely while taxes will be raised sharply.

As Americans we can sit back and do nothing about our government's gross financial irresponsibility and watch everything we've worked for be jeopardized for if this is allowed to continue our dollar will eventually collapse in spiralling inflation. That is what happens when nations print money to pay their bills.

Or we can raise our voices, confront our problems now and solve them. Politicians consider this approach to be political suicide because it will involve some sacrifice. But it will ensure our nation's financial future and provide a far better tomorrow for you and me and our families and for our brethren throughout the world.

[dixiegrrrrl]

1. The economy seems to be a mystery to so many people,

which is a shame, since it is the lifeblood to our way of life.

We are indeed facing an enormous problem, and the WH seems to be in more denial of the consequences than the voters.

[RKP5637]

3. IMO it's like taking out a mortgage beyond ones means and then sacrificing

eventually everything else in ones budget trying to pay it off and/or go bankrupt.

[dixiegrrrrl]

6. Well, more like sacrificing all of the neighbor's budget to pay it off.

It's OUR money they government chose to throw away on wars, other countries banks as well as the big ones here,
paying BP "incentives" to poison the Gulf of Mexico, etc.
Now they have spent all the money, blown the national credit, ruined the dollar,stole our jobs, and are STILL blaming
the taxpayer for the problem!!!

[RKP5637]

9. I'm wondering what the story will be two years from now. I guess

I don't get it, but I don't see where all of the demand is coming from and where all of the jobs are coming from. The cuts for ten years have not been magical and the effect of the stimulus package has worn out after two years. What then will we be doing two years from now.

This country tries to support all of the things you mentioned without adequate taxation. It gets ridiculous.

Here's what I think will happen. The business community is happy as is ... they have no incentive to hire more people, just take the tax benefit and stay business as usual. Others, take the benefit and invest it, why hire anyone. It's all a fable. Businesses have figured out how to do more with less, employees are a pain to have around. We're moving into a new model for the 21st century of employment creation, but means being used are traditional, now this because all stops have been pulled out with meager results. The old formulas aren't working. Demand is low.

[dixiegrrrrl]

12. Latest figures I read is that government is 43% of the budget now

on all levels.
Remember when they said that consumers were 70% of the economy?
Back when there were jobs?
So we seem, now, to be paying for waging war and making banks/insurance companies rich, plus keeping city,county, state and Federal government employees paid.
And Wal-Mart.

[RKP5637]

16. Yeah, absolutely true. The equation makes no sense to me either unless one is

on the receiving end of the hoards of money heaped on them, and that is far from the majority of us. And the banks are getting rid of employees. One of my friends got let go after 20 years. And the reason was shoddy, they suspected their age was why. Now they don;t know what to do. I think there are about 2,300 in the layoff,

[Buns_of_Fire]

24. No money = no demand; no demand = no jobs; no jobs = no money to create a demand.

And so it goes -- while the Worthless Class in Washington keeps trying to stuff the egg back into the chicken.

[originalpckelly]

2. In my opinion they swept the depression under the rug.

It's only a matter of time before someone stumbles over it.

[RKP5637]

4. Yep, another band-aid over a festering wound. And in two years it will

be the same story again IMO.

[texastoast]

5. What happened to the brilliant idea of Pay As You Go?

http://www.ontheissues.org/2004/John_Kerry_Budget_+_Economy.htm


"Pres. Bush is the only president in history to {rescind pay-as-you-go}. I'm going to reverse that. We're going to restore the fiscal discipline we had in the 1990s."

Oh, spooky. Too bad 'Merka "didn't vote him in." We might all not be in this handbasket. Of course, the rich are doing just fine.

[Igel]

10. Pelosi, back in 9/2010 or 10/2010,

said how proud she was that she had upheld pay-go.

Of course, the details are that pay-go doesn't apply to a lot of budget categories, nor to emergency spending. So, of course, the spending's rather high, but only where pay-go wouldn't affect it.

Therefore, pay-go is intact.

It's like a woman who defines "virginity" as having been vaginally inseminated, yet engages in copious quanties of oral, anal, and even "protected" vaginal sex.

If you control the definitions for the words you use and take no pains to get agreement on their definitions from the listener, words mean absolutely nothing even though the listeners don't realize it.

(I will now define "surplus" to mean "deficit," "peace" to mean "bombed into submission, with ongoing significant military activities," and "threat to world peace" to as "indigenous populations".) "Bush scored major surpluses, even while achieving peace through the eradication of threats to world peace." Now, if I post that without the preface (in parentheses) on free republic I'd be meet with a few jeers but many cheers--even as I insulted them.

Semantics. It's not a simple manipulation, it's what words mean.

[Warren Stupidity]

22. paygo was bullshitty

the military budget was never constrained by it, so all it was was yet another excuse to cut funding for social services and infrastructure.

[texastoast]

31. Well, that is wrong, isn't it?

And as long as our beltway inhabitants take care of their military industrial complex johns, it will continue to be wrong.

[Statistical]

7. Worrying about a debt in a recession is like worrying about price of water as your house burns. n/t

[Vinnie From Indy]

8. And voting for this tax bill is like throwing gasoline AND kerosene on your burning house

and then wondering why it suddenly got bigger and started fires up and down the street. I think it can be easily argued that every dollar showered on the wealthy with this tax deal is one less dollar that may help pull the country out of this horrible economic environment.

[MadHound]

20. Except for the fact that Moody's is considering dropping our credit rating,

Thus making it more expensive to borrow.

Oh, let's not forget that Russia and China have dropped the dollar as the reserve currency they used for bilateral trade agreements, due to the fact that it is getting weaker and weaker.

Much the reason that many oil exporting countries are turning away from the petro dollar as the choice currency for trade, and now going to a basketful of currencies.

Debt has consequences, recession or no. You can't continue to borrow and borrow and not expect to have some consequences. You can't carry the largest debt in the world and not expect negative consequences.

[Statistical]

25. US borrowing rates are at an all time low.

Nobody is claiming that debt has no consequence or that we should borrow and borrow forever. Both are strawmen.

However in a recession cutting a debt if the height of stupidity. No economist liberal or conservative would ever attach their name to such a stupid idea.

You can't boost aggregate demand without deficit spending it is impossible. If you don't boost aggregate demand then it will continue to have a negative cycle (lower demand leads to lowered employment/production etc which leads to lowered demand to lowered employment/production etc).

The only way to inject outside money into a economic system is by borrowing.

"Oh, let's not forget that Russia and China have dropped the dollar as the reserve currency they used for bilateral trade agreements, due to the fact that it is getting weaker and weaker. "
The have done nothing of the sort. There is talks and rants and raves but China continues to buy US debt. Demand for US treasuries by foreign entities is at an all time high right now (due to uncertainty in global market).

Debt has consequences but cutting debt when growth is anemic will plunge country into a depression which is far larger consequence.

[KansasVoter]

30. People always have a reason to ignore the debt. Has happened for 30 years.

[TexasObserver]

11. Disagree. Now is NOT the time to worry about the deficit.

This economy needs much more government spending, not less. Talk of deficit reduction right now is not sound.

[customerserviceguy]

13. When will it be sound?

When interest rates on Treasury securities are in double digits, or after that?

That's what we're headed for. We have enough debt right now, that even a tripling of the anemic interest rates on government securities (which would still keep them below 10%) would cripple our national economy beyond the wildest tax cut dreams of the most money-hungry Repuke.

[TexasObserver]

14. When employment is full enough that balancing a budget makes sense.

It is folly trying to balance the budget when 10% of the country is unemployed and at least that many are underemployed. Only 5% unemployment can produce the revenues necessary to approach balancing a budget.

[customerserviceguy]

18. If we ever get anywhere near full employment

You'll see inflation come roaring back ($6 a gallon for gasoline) and interest rates will rise right along with it. The interest portion of the Federal budget will make the military budget look like squat.

[TexasObserver]

19. No, the interest portion of the debt will NOT make the military budget look like squat.

You need to do the math. The two numbers aren't remotely similar.

Your worries about inflation are grossly premature. When the economy is troubled, when interest rates are low and demand for loans low, when unemployment is ten percent, we don't fret about the prospect of inflation somewhere down the road when things are demonstrably better.

[Statistical]

26. Thanks for injecting some facts into this doom & gloom party.

Anyone claiming or fearing we can have rampant inflation with so much slack in the economy (supply and potential supply far far far outstripping demand) telegraphs how uninformed they are.

Inflation is only a risk if/when the economy begins to grow at a sustained pace (3%+ GDP) and U-3 at least aproaches historical norms <7%.

[TexasObserver]

34. The less a person knows about economics, the more they repeat GOP memes.

All of these shrills "the deficit sky is falling" arguments are long established themes the GOP uses when it is NOT controlling the White House. They NEVER worry about the deficit when they're in charge of spending.

Anyone on our side who buys this deficit reduction talk right now is falling for yet another sucker punch.

It's a sucker punch that relies on the ignorance of those to whom it superficially appeals.

[Statistical]

28. Hardly. The fed can reverse the process it has been doing.

By jacking up interest rates, and selling treasuries (to pull cash out of the economy) they can put a handle on inflation.

The idea that we are utterly powerless is silly and naive.

[The2ndWheel]

21. If it's sound, nobody cares

When things are going good, nobody is going to say anything, for fear of slowing down or stopping the good times. When things inevitably go bad because nobody wants to regulate the good times, then we have to do anything we can to pump the economy back up to the good time level.

Now that the economy is totally within the realm of the human imagination(since we can just add zeroes on a screen when needed), then this is the cycle we're in. The funny thing is that all these numbers either mean something, or they don't. If they don't, then I have no idea why anyone wastes the time and energy tracking them. There's no reason to have a limit on anything. Just give everyone everything. If the numbers do mean something though, then it will eventually catch up to us, because we do still exist within physical reality.

[Statistical]

27. 10% treasuries..... ROFL..... I mean sorry I need to catch my breath.....

Really you are aware the troubled PIGS nations have sovereign debt <10% right?

There is 0% risk of inflation in the immediate future. There is far too much slack in the economy (idle production, unsold inventory, etc) to have significant inflation. Without higher inflation you won't see 30yr bond > 5%.

Of course rising rates has a limited effect on US EXISTING DEBT. It makes future borrowing more expensive. What do you think the Treasury has been doing durring this record low rate era? What would you do? If you were smart you would redeem short term bonds and issue longer term bonds. Thus locking in ultra low rates for longer periods of time. If you look at Treasuries issuance and redemption reports that is exactly what they are doing.

As result even if rates rise the vast majority of our national debt has a maturity 7+ years away. These aren't variable rate credit cards.

[No DUplicitous DUpe]

15. RE: "This economy needs much more government spending, not less."

Then the government needs more revenue, not less - tax cuts are counter-productive. And what about the military spending? How can you justify that. It is insane, and will bankrupt us all, including all of the social programs we care about. We can't print money to get out of this hole Bush put us in.

[TexasObserver]

32. Yes, it does, and anyone who understands economics knows it.

Deficit spending IS an acceptable practice to attack a bad economy. It's a time honored practice.

Take a good look at the history of deficit spending and you'll see it has been used many times the past 80 years. The national debt is composed primarily of debt racked up by Reagan, Bush I and Bush II. Not once in their 20 years running the country did they even come close to balancing a budget.

The "we must attack the deficit" meme is one only used for political talk. It means nothing except "we need to cut social spending because we're Republicans and that's what we favor."

[No DUplicitous DUpe]

35. The Author responds to your comment...

Severely slashing the budget doesn't mean the elderly on Social Security or those who need food stamps to eat are cut-off.

But the government brings in only 61 cents for each dollar it spends and its debts are skyrocketing, making bond buyers nervous. Like other nations deep in debt are doing, we must make sharp cuts. Where to start?

We have a huge amount of military cuts that can be made. Our nation should not be and can't afford to be fighting its senseless wars. Those could be ended immediately.

We cannot afford any more jet fighters like the F-22 at a staggering $143 billion apiece. We have about 185 of them, none of them ever used in combat. They borrow the money to build them and then park them.

We can't afford 1,000 military bases all over the world, several times the number of bases of all other nations combined, can't afford new aircraft carriers. nor any of the other endless no. of weapons systems being built.

Yet, our response is not slashing our overhead but more TAX CUTS and STIMULUS which escalate our debt time bomb. We are as the German Finance Minister recently said, "clueless."

[No DUplicitous DUpe]

29. The Author's reply, "...to message no. 11 "TexasObserver" and others who harbor these feelings..

He says, "You don't get out of a debt crisis by incurring vastly more debt."

"It has been tried throughout the ages with catastrophic results. To anyone who doubts this, please see "This Time is Different: Eight Centuries of Financial Folly" by Carmen M. Reinhart and Kenneth S. Rogoff."

[TexasObserver]

33. You need to find better sources.

See my previous post to you.

You're repeating time honored GOP memes that mean absolutely nothing.

All they do is whip out these tired old themes when Democrats are in the White House. When the GOP runs the show, they don't EVER balance the budget. You're repeating time worn and untrue GOP memes.

[Warren DeMontague]

17. Cut the military budget in half. Legalize and tax marijuana. Stop incarcerating a million nonviolent

drug offenders.

Then come back and see what the numbers look like.

[Warren Stupidity]

23. the 'debt bomb' is bullshitty

all the 'solutions' somehow involve screwing social security and medicare recipients, cutting social services and infrastructure funding, etc. while leaving our insane levels of military funding alone.

[No DUplicitous DUpe]

36. 55 million a day in interest is "bullshitty"...

Think of what each state could do with an extra million bucks a day.