g5000
Diamond Member
- Nov 26, 2011
- 126,052
- 69,798
- 2,605
Gimme, gimme, gimme, and make that guy over there pay for it. That's the modern American motto.
Bob the Builder earns $50,000 a year and has no kids, no wife, and he rents his house.
Bob's next door neighbor, Joe the Plumber, also earns $50,000 a year, has two kids, is married, and he has a mortgage.
Joe gets tax deductions for his kids and for buying a house. Because of this, Bob has to make up the difference, or else the government will have to borrow the difference. Either way, Joe's tax expenditures are being paid for with other people's money. Bob has a higher tax bill than Joe. Bob is given a tax penalty for not buying a house. Bob is paying for Joe's mortgage interest deduction. China is lending us money to pay for Joe's mortgage interest deduction.
Over a trillion dollars of other people's money is spent on tax expenditures like these each year.
We are running out of other people's money.
The government is providing a wide variety of services. Record spending on roads and bridges, record spending on foods stamps, record spending on tax expenditures, record spending on defense, farm subsidies, corporate subsidies, bailouts, food and drug inspectors, and so forth. Everyone has their sacred cow.
This is a bipartisan effort. All those tax expenditures weren't put in the tax code at an average rate of one per day for over a decade by just one party. All that spending was not appropriated by just one party.
So here we are. 16 trillion dollars in debt.
Let's not spiral downward into a blame game. There's enough blame to go around for everybody. Your Congressman, my Congressman, your Senator, my Senator, your President, my President. Your lobbyist, my lobbyist. Your special interest, my special interest.
And we all have our finger in the pie. Don't kid yourself. You take a mortgage interest deduction? You have your finger in the pie. I'm sure you find ways to rationalize it. You have a free cell phone? You have your finger in the pie. I'm sure you finds ways to rationalize it.
Blah, blah, blah.
That $16 trillion is not going to pay for itself. A balanced budget only means the debt won't get any bigger, but the debt will still be there.
How are we going to pay that down?
Did you know we have been here before? In fact, our debt to GDP ratio was higher in 1945 than it is today.
Ten years later, it was down to 50 percent of GDP. How did we do that?
Here are the ways to reduce your debt:
1) Renegotiate with creditors for a lower interest rate. Restructure. Greece is doing that, as are other countries. But since we are the world's reserve currency and set our own interest rates, this is not an option for us.
2) Higher taxation and wage suppression. This was one of the methods used after WWII.
3) External devaluation. Lower the value of your currency against other currencies. This makes it cheaper to pay your external creditors and makes your exports more competitive.
4) Inflation. This makes it easier to pay your internal creditors. This, too, was a method used after WWII. The US government had a big bond drive to get Americans to buy bonds during and after the war. Then the government inflated our money so inflation was higher than the interest on the bonds. Nice, eh?
5) Default. Pay creditors pennies on the dollar. Not an option if we want to remain the world's reserve currency.
6) Grow the economy. A bigger economy means higher tax receipts.
Our available options are 2, 3, 4, and 6. I believe the US government will take the path of least resistance. Since growing the economy is the hardest, the government will go with all three of the remaining options.
Bob the Builder earns $50,000 a year and has no kids, no wife, and he rents his house.
Bob's next door neighbor, Joe the Plumber, also earns $50,000 a year, has two kids, is married, and he has a mortgage.
Joe gets tax deductions for his kids and for buying a house. Because of this, Bob has to make up the difference, or else the government will have to borrow the difference. Either way, Joe's tax expenditures are being paid for with other people's money. Bob has a higher tax bill than Joe. Bob is given a tax penalty for not buying a house. Bob is paying for Joe's mortgage interest deduction. China is lending us money to pay for Joe's mortgage interest deduction.
Over a trillion dollars of other people's money is spent on tax expenditures like these each year.
We are running out of other people's money.
The government is providing a wide variety of services. Record spending on roads and bridges, record spending on foods stamps, record spending on tax expenditures, record spending on defense, farm subsidies, corporate subsidies, bailouts, food and drug inspectors, and so forth. Everyone has their sacred cow.
This is a bipartisan effort. All those tax expenditures weren't put in the tax code at an average rate of one per day for over a decade by just one party. All that spending was not appropriated by just one party.
So here we are. 16 trillion dollars in debt.
Let's not spiral downward into a blame game. There's enough blame to go around for everybody. Your Congressman, my Congressman, your Senator, my Senator, your President, my President. Your lobbyist, my lobbyist. Your special interest, my special interest.
And we all have our finger in the pie. Don't kid yourself. You take a mortgage interest deduction? You have your finger in the pie. I'm sure you find ways to rationalize it. You have a free cell phone? You have your finger in the pie. I'm sure you finds ways to rationalize it.
Blah, blah, blah.
That $16 trillion is not going to pay for itself. A balanced budget only means the debt won't get any bigger, but the debt will still be there.
How are we going to pay that down?
Did you know we have been here before? In fact, our debt to GDP ratio was higher in 1945 than it is today.
Ten years later, it was down to 50 percent of GDP. How did we do that?
Here are the ways to reduce your debt:
1) Renegotiate with creditors for a lower interest rate. Restructure. Greece is doing that, as are other countries. But since we are the world's reserve currency and set our own interest rates, this is not an option for us.
2) Higher taxation and wage suppression. This was one of the methods used after WWII.
3) External devaluation. Lower the value of your currency against other currencies. This makes it cheaper to pay your external creditors and makes your exports more competitive.
4) Inflation. This makes it easier to pay your internal creditors. This, too, was a method used after WWII. The US government had a big bond drive to get Americans to buy bonds during and after the war. Then the government inflated our money so inflation was higher than the interest on the bonds. Nice, eh?
5) Default. Pay creditors pennies on the dollar. Not an option if we want to remain the world's reserve currency.
6) Grow the economy. A bigger economy means higher tax receipts.
Our available options are 2, 3, 4, and 6. I believe the US government will take the path of least resistance. Since growing the economy is the hardest, the government will go with all three of the remaining options.
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