The National Debt Unicorn
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The great national debt debate
I don’t have time to get embroiled in the national debt debate, so I should not speak at all. I am an innocent bystander. Conservatives refuse to stop provoking me!
Debt is only a crisis when it can destroy the economy in short term. Otherwise, it is a problem. No matter how emotionally you state that it is a crisis, it doesn’t make it so. If we balance the budget and start paying down the debt slowly, there is no crisis. A crisis would be defined as the inability to do that. The debt is always considered historically high and massive by every drama-queen that analyzes it, because it is usually higher than it used to be. Debt is worse when our ability to pay it is less than it used to be. A crisis would be an inability to pay the debt, like Greece had, for instance. If you emotionally declare every problem you don’t like to be a crisis, you are susceptible to irrational and emotional reactions. Don’t worry, I am not claiming the Tea Party reaction to be irrational and emotional. I think they are pulling conservative strings with the skill of an expert marionette puppeteer in a very calculated way in order to gain influence and credibility.
We have a deficit emergency. We are packaging this emergency in the same box as a fictitious debt crisis.
Paul Ryan’s budget gutted 80 years of “entitlement” programs, aka social programs, aka, programs that allow the less fortunate in America to survive, and it made slight cuts to “defense,” aka our war-making budget. The argument he makes is that painful cuts must happen everywhere if we are to solve the problem, and in good faith, he guts social programs the right have resented for nearly a century. A good first step in the republican plan would be to admit that they are labeling a problem as a crisis so they can attack an 80 year old elderly foe that has thus far defeated them at every turn.
The Myste budget involves generating more revenue. I know that is an horrific idea because some long ago discredited economists say if you generate more revenue, you have less revenue (see Laffer Curve), and through the use of carefully crafted post hoc fallacies, Ryan has “verified” that this true.
1. The Myste Plan involves closing loopholes, even if we have to summarily close them, meaning that we remove almost all tax incentives, then put the ones we want back in an organized way.
2. Close all corporate tax loopholes.
3. Implement a small tolerable increase in the top marginal tax rate. It is NEAR historical lows now. No increase at all below the top marginal rates.
4. Remove the concept of long term capital gains ceilings. They are 15%, which is equivalent to the top marginal rate we tax poor people. Long term capital gains should be treated as income, just as short term capital gains are.
5. Cut the defense budget substantially. It is primarily used to make war, which is a luxury we cannot afford.
6. Review our welfare system (I include disability here). Probably as much as half of it (around half a billion dollars) goes toward paying people who can make almost as much not working as they can make working, and so choose not to work. DO NOT cut our welfare budget, however, unless or until, we can show a surplus at some point. Welfare keeps children from living on the street and starving in the heat in the summer and in the cold in the winter. They are not guilty of the malingering of some parents, and just so you know, plenty of parents receiving welfare benefits are not guilty of this either, just as my VERY hard-working mother was not when she received benefits. No one wants an America that tolerates children living on the streets, just so we can make sure no one takes advantage of the system, right?
I cannot even try to tell you how much revenue this plan would generate. I will say that common sense tells us that it would exceed the savings Ryan’s assault on the poor, the elderly and the sickly would create.
In summary, the Myste plan recognizes that Budgets contain revenue and expenses, not just expenses, and that debts are less urgent problems than budget deficits, and that Paul Ryan is a jackass, and that America is about more than just maintaining the haves, letting the have not’s be damned, and making war.
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John, points 1 and 2 I absolutely agree with your perspective. Aspects of point 6 I also agree with your take.
As for the Laffer Curve, it is simple and common sense economics. Somewhere on the linear scale of taxation, the optimum amount of revenue will flow into the government. Tax a given wage earner at 0% and you will receive no revenue. Tax a given wage earner 95% and he will decide what the heck is the point of working if I only keep 5% of the fruits of my labor. Finding that balance of placing that marginal tax rate at just the right spot so that most people feel that their taxes are fair and warranted for the amount of money confiscated from them, while they still decide that working to provide that taxable income is in their best interest.
Working for the better part of half a year to pay my state, federal, property taxes etc. is almost to the point to where I want to also become a ward of the state and have them take care of me, instead of providing that taxable income for the general welfare of the population.
As for the deficit crisis, and it is a crisis, we have kicked the can down the road far too long. It has become an issue now because many of the same credit agencies that helped create this mess with the housing collapse are threatening to down grade America’s bond rating if we don’t get our financial house in order.
We have too much debt at $14.5 Trillion now, which $4 Trillion of spending has exacerbated over the last two years of the Obama administration. If continued unabated, our spending will equal that of our entire GDP within the decade. It is unsustainable.
If we don’t start reducing our DEBT now, we will be down-graded and the interest rates we pay on our debt will go up. Mortgages, education loans, car loans… everything will become far more expensive. It is akin to be maxed out on five credit cards so you are only able to make the minimum payment, yet you still need funds to buy groceries, so you get that six credit card with no way of making that sixth minimum payment to it. We are at that point now.
The Ryan plan, while flawed, is the ONLY one I have seen thus far that tackles the problem seriously. I personally think that an across the board 10% cut in funding for all government agencies should be the minimal starting point, excluding social security and medicare. You cut more from the agencies where you are able to do so. You eliminate totally those agencies that are redundant, ineffective, or unconstitutional. The Departments of Education, Energy, and Housing and Urban Development can all be cut and handled as necessary on the state level, for instance. THAT would go a long way towards solving our problems.
The left’s desire to simply find savings by slashing the Department of Defense is not the best idea. First, they are one of the few constitutionally mandated functions of the federal government. Sure we can cut waste and fraud there, but eliminating the deficit so as to pay down the debt will take a lot more than just taxing the rich and eliminating the D.O.D.
T. Paine,
Thanks for the Laffer Curve lesson. I am familiar with it. Most economists, even republicans, consider it discredited. I have links examining it in detail, but no time at the moment to find them for you. I will. Please wait.
You are not a ward of that state. They will never take care of you, so fear not.
As for the deficit crisis, and it is a crisis…
I will refute your argument that the “debt crisis” is a crisis as soon as you make one. I reject your faith-based declaration, Billy Graham.
We have too much debt at $14.5 Trillion now, which $4 Trillion of spending has exacerbated over the last two years of the Obama administration.
I agree that 12 years of republican direction should have been overturned in the first two years of the Obama administration. I am as angry at Obama over this as you are.
If we don’t start reducing our DEBT now, we will be down-graded and the interest rates we pay on our debt will go up.
I agree that we should start handling the debt, which is why I laid out a logical plan for doing it. However, I do not agree that putting the word “debt” in all caps improves your argument or makes the debt larger or more dire than it is as a lower case word.
The Ryan plan, while flawed, is the ONLY one I have seen thus far that tackles the problem seriously.
The Ryan plan did not attack the debt problem. It attacked the Social Programs problem. I am sorry you have not heard that democrats want to raise revenue to help solve the issue. I thought you would have heard that in FOX morning prayers.
The left’s desire to simply find savings by slashing the Department of Defense is not the best idea.
As I understand things, the left is offering no solutions, thus if they have this desire, you don’t know about it. Stop making things up.
The deficit issue as you see it is not even being seriously addressed by either party currently.
The House did a reasonable job with their passing of Cut, Cap, and Balance. They should have sent that to the Senate and say this is our plan and given them nothing more. The Senate could either have voted it up/down or come up with their own plan… or table it and do neither as Reid originally chose.
Now there are multiple GOP and a Reid plan, none of which are serious.
The current Boehner plan wants to cut spending towards the deficit of $1 Trillion over ten YEARS, while raising the spending level ceiling more than that, and the Democrats STILL won’t approve it. The fact that Boehner even submitted such a plan tells me that the Republicans are no longer serious about the issue. The fact that the Democrats are rejecting any plan suggests to me that they never were serious about ever reducing the deficit, let alone the debt.
Sounds to me like it would be a good idea to shed as much interest-attached personal debt, stock up on supplies, and pray for the best. God knows that our elected officials have once again abrogated any responsibility in seriously addressing this seemingly non-issue to the progressive mind set.
The fact that the Democrats are rejecting any plan suggests to me that they never were serious about ever reducing the deficit, let alone the debt.
Would that I had more time to address all of this. You sir, suffer the same illusion as your Tea Party masters. Cutting social programs is not equal to handling the budget deficit. As long as we present this fallacy of false dichotomy, we are not going to get anywhere. You are mistaken. The democrats have never pretended to be serious about gutting social programs. Only the Republican Party has demonstrated its sincerity here. The Republican Party rejects the idea of deficit reduction if revenue increases are a part of the plan. They feel that taxation is an extreme solution, when grandma still has not yet used up her heating and heart medicine.
This lack of honesty about what the Tea Party is even trying to do puts a cloud of deception over all negotiations.
Did you pen this amazing work of fiction from the back of a unicorn? Yes your separation of crisis and emergency is truely revolutionary (as far as propaganda goes). Let me review your plan … Step 1. Increase Taxes; Step 2. Increase Taxes; Step 3. Increase Taxes; Step 4. Increase Taxes; Step 5. Slash National Defence in a time of war; Step 6. Do Nothing … or as you so eloquently put it … “review”. Do the sheeple that read your stuff really buy into this?
Joey,
I can only hope the sheeples are listening. For the sake of clarity, let me summarize your summary: stop making wars in a time of war (the horror! However, it is a unique opportunity. You cannot stop making war in a time of peace. It just doesn’t work). Raise taxes (you know, like Reagan and Bush did to handle similar “crises”). You forgot, don’t gut social programs (you know, like we didn’t do for the entire last century as we survived). I know you missed this part because you read really fast and efficiently, so some words must be sacrificed.
While your rebuttal was compelling, I am not sure it was compelling enough. It was brilliant, for sure, but were your points really substantiated? After hearing your thoughts on the matter, I will reconsider my position, and perhaps print a retraction if one is merited.
Thanks for stopping by, sir.
Thanks for the speedy reply. Your sarcasm is noted and appreciated. (seriously I love a smart-ass) As long as you address the issue of course. You attempt, rather cleverly, to say you can’ stop waring when you’re not at war … to clarify – your point is that you can’t make peace in atime of peace? To your six point plan … step q. Which ones would you “put back in” and when would you put them back in? (could i get it in writing) Step 2. I agree Step 6. What would you do after “reviewing” the welfare system? Last question: At what percentage of GDP does the national debt become a crisis? and would you support a balanced budget ammendment?
Joey,
1. War, hmm. My point is that long wars were not in the budget and should not have been purchased to the extent they were, especially Iraq and Libya. Of course, I guess during the Bush administration they were not in the budget, until Obama inexcusably inflated our debt by including them.
2. You requested my next point in writing. Fortunately, all of my answers are in writing; once again, I am over-achieving. Obviously, if the printed out tax code is several feet high, no one knows what all is in it. Therefore, which loopholes would be removed or added back in would have to be researched by everyone involved before a determination is made. In the end, GE would pay taxes, though. I think we can all agree on that. Even conservatives I talk to agree. Even Bill O’Reilly agrees. As a very wise man once said: “Don’t try to trip me up, Sparky.”
3. What would I do after reviewing the welfare system? I am glad you ask. I haven’t a clue. The point of a review is to figure things out, not to announce your plan. I am sorry if “review” was a misleading term. I often get confused by words, as some of them are really big and I am a simple man. I know this: as a general principle, if you know the answer before the review, you may skip that pesky step altogether and jump straight to the conclusion. The reason I included welfare at all is that I have much anecdotal evidence that it is abused, and there is nothing more fulfilling than chasing fallacious thinking with some truth at its core.
4. Your “last question” was comical. Let me repeat is, so in case you forgot: at what percentage of GDP does the national debt become a crisis and would you support a balanced budget amendment? For convenience, I am going to treat your last question as two separate questions. Again, I am a simple man and it is just easier for me.
5. At what percentage of GDP does the national debt become a crisis? I reject the question on principle, and because it embarrasses me. I am in an accounting related field and I do not even know the accounting principle that states a correlation between debt, GDP, and crises. I thought the debt to GDP ratio gave us a theoretical measure and nothing more than a “feel” for the situation. I thought a debt crisis was measured from a debt to income ratio perspective. God, this is humiliating. My original assumption was that a debt crisis is defined by one’s inability to pay one’s debt. That is why I offered the Myste plan to balance the budget and start paying down the debt. No one wants a future crisis, right?
I think Tea Party voted unanimously to raise the debt ceiling when Bush asked them to, even though it was making new historical highs with no end to its climax in sight. In my ignorance, I thought crisis to them is defined as we can now go after “entitlements,” so let’s do it. The crisis to them is not a debt crisis. It is an SSA crisis, a welfare crisis, a Medicare crisis, etc., and their concern is not that these programs will become insolvent, but that they will not.
6. You asked if I support a balance budget amendment. Which one? I would have to see the provisions in the amendment that made sure we would not have a government shutdown if “which revenues should be raised and what spending should be cut” could not be agreed upon. I think part of the amendment should include provisions that prevent government shutdowns in case of disagreements. If this were created and if the wording was not such that social programs get gutted in the case of a stalemate, then I would support it. It would have to be specific, such as, if no budget can be decided upon, then the prior budget continues (or perhaps something else, who knows. Let’s review it). The blanket question, “would I support a balanced budget amendment,” is incomplete. Since there are some not fully designed forms of such an amendment that I would support, my answer is “yes, I would support a balanced budget amendment” and “I doubt I would support anyone’s current vision of a balanced budget amendment, as that would probably be insane and promote the kind of thing that is happening right now.” Again, don’t try to trip me up, Sparky.
As a brother in the world of pen and paper, or in our case bits and ether, I developed an early respect for you, having just read this piece as my first exposure to your work. Being however, an ardent fan of well written sarcasm and irony, my respect for you after having read this reply, has increased accordingly. Many happy keystrokes in your future, Sir.
Bitco, you are too gracious, I thank you. You certainly are not the first to develop an early respect for me. Savor it, as all those who know me will attest, it is a fleeting sensation.
Hey now I loved you first don’t forget that 😉 The rest of the peons can get to the back of the line, all except your girlfriend that is.
Oh an not to forget your excellent post here goes. Not only are they trying to gut the social programs, you like clean air..forget it same goes with clean water, safe food, safe drugs etc and so on ad nauseum. The teabangelical faction is all about gutting everything to close the government down so they can get that commielibislamofascisocialistkenyanmuslimkittyeater out of the whitehouse, no matter what the cost.
I have been totally out of touch with news for the last two weeks and now I have a headache getting back to the spinning the teabangelicals are doing to get it their way and no other way at the expense of 300 million + people. It’s disgusting.
Hahahahahahahahaha! “commielibislamofascisocialistkenyanmuslimkittyeater” consider this officially stolen.
Jess, I still cannot figure out why you don’t write articles! I will always put you before everyone else, though! (Removing ring from my finger now).
I believe your argument more than any other I have read. Your point of separating “emergency” and “crisis” startled me, a moment of clarity, I hope Obama reads MMA and especially this post.
A very cogent and thoughtful argument.