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What if... the national debt (karma: 1)  en>fr fr>en
By Sumayah Comments: 6103, member since Wed Nov 12, 2008
On Tue Jan 17, 2012 06:50 PM
Edited by Sumayah (204191) on 2012-01-17 18:51:17 Debates? Politics? I wasn't sure where to put this so if you think it needs to be moved, mod it and we'll move it over.

Okay, here's the scenario: your country's national debt is wiped to zero, and for good measure let's say it gets to move home with its parents for a year - no expenditures, all the tax money would be saved in a huge bank account. After one year, your country has to go back being a country again and paying for stuff. Do you think that with a year of profit your country would be able to stay debt free by budgeting wisely - maybe even setting some small percent aside in a high interest savings account (in case of emergencies) - or would your country be back in debt after a year of being on its own again?

8 Replies to What if... the national debt

re: What if... the national debt (karma: 1)  en>fr fr>en
By Chaconnemember has saluted, click to view salute photosPremium member Comments: 6250, member since Thu Jul 12, 2007
On Wed Jan 18, 2012 10:56 AM
This actually did happen to the USA, in the 1880's, and editorial cartoonists (notably Thomas Nast...the fellow who demonized "Boss Tweed" in NYC) drew cartoons about the surplus stifling the country (by taking too much money out of circulation.) A series of natural disasters (the Blizzard of 88), the costs of national expansion (railroads and land grants for railroads) and various financial panics made this concern academic. The short answer is "stuff happens." While we didn't eliminate the debt, we actually had budget surpluses in the 1990's. It was advertised as the "Peace Dividend" for the breakup on the Soviet Empire (and the need for the Cold War. This impacted me in a way, because the programs I managed as a federal employee got cut. It was no fun being a budget officer and "bean counter" in a financial office with no money. As it happened, I was also eligible to retire then and did. Then 9-11 happened resulting in new priorities (our solution to those may be debated, but that is really another debate.) There were also some tax cuts which reduced governmental income and the wisdom of those have, of course been debated and still are being debated, particularly as they had the effect of increasing the national debt.

When there is money available because there would be no debt, we always see unmet needs which fuel new ideas on how to spend money. This is true on both national and personal levels. In a sense, the presence of a debt serves as a check against profligate spending.

How one feels about all this is largely dependent upon how one views Keynesian economics (or even going back to Adam Smith - "The Wealth of Nations.") The real answer, of course, is "It ain't gonna happen."

Jon
re: What if... the national debt (karma: 2)  en>fr fr>en
By Heartmember has saluted, click to view salute photosPremium member Comments: 14987, member since Thu Feb 14, 2002
On Wed Jan 18, 2012 06:37 PM
Edited by Heart (21721) on 2012-01-18 18:45:01
Edited by Heart (21721) on 2012-01-18 18:47:19 Added additional info on why the national debt didn't seem to have decreased. Then decided to take it out because it was overly complicated and not really related.
Image hotlink - 'http://www.amarillo.com/images/headlines/020398/gopLR.jpg'


Under President Clinton, the USA had a balanced budget. In fact, we had a budget surplus - the first one since 1969 - and we continued to have one for the fiscal years of 1998, 1999, 2000, and 2001.

Clinton's administration did pay down the national debt - $452 billion over four years, though whether or not the national debt actually decreased depends on how you calculate the national debt, as explained here.

So, in a word, yes. We've done it before and we can do it again.

Chaconne, how did you miss that one?! C'mon now!
re: What if... the national debt en>fr fr>en
By Kekoamember has saluted, click to view salute photos Comments: 8865, member since Sat Jul 19, 2003
On Wed Jan 18, 2012 07:03 PM
I definitely think it's possible. I also think it's possible to balance the budget without actually suffering or cutting aid programs. We've long since reached a point as a country where different programs (like various forms of welfare and education) need to be redesigned to provide the same services but in a more effective way. If our politicians could stop putting crap in bills that doesn't belong there and actually make sure that the money designated for X only pays for X, I think we'd all be amazed at how quickly our debt shrinks (and eventually, hopefully, disappears).
re: What if... the national debt en>fr fr>en
By Chaconnemember has saluted, click to view salute photosPremium member Comments: 6250, member since Thu Jul 12, 2007
On Wed Jan 18, 2012 10:16 PM
Hahaha Heart, I didn't miss it, but Wiki was down today so I had nothing to confirm that the debt was paid down in those years. I knew there were surpluses because I was dealing with federal budgets in those years, but I didn't know offhand the numbers or that the surplus was applied to the debt. You will note I said we didn't ELIMINATE the debt during those surplus years. (Clever bureaucrat...give yourself wiggle room.) I'm sure the numbers are available elsewhere but I had other things to do today when I wrote that. Had Wiki been available I probably could have been more precise about which late 19th century years we actually did have a surplus. But I'm willing to sacrifice a days worth of absolute accuracy if the message gets to congress that the two bill before the Congress are deeply flawed. I also didn't want this rather hypothetical but interesting query by Sumayah to turn into a Clinton vs. Bush debate. You could probably guess which side of the fence I would have been on.

Jon
re: What if... the national debt en>fr fr>en
By Gioiamember has saluted, click to view salute photosPremium member Comments: 3021, member since Sun Jun 20, 2004
On Thu Jan 19, 2012 03:11 PM
^ don't worry Jon I saw your reference to the surplus during the Clinton administration. Interestingly enough, the way you look at the deficit could differ if you get rid of the confusing government talk. There really never was a surplus and the national debt didn't ever reach $0. Google it, you will find all sorts of resources and tables with actual numbers. The national debt is made up of a few different parts, Clinton paid down the public debt by borrowing money in the form of intragovernmental holdings. The economy was doing well during this time and there were more Social Security contributions. When there are more contributions than what is being paid out, the government uses that money to buy government securities. We basically were borrowing from ourselves and therefore not incurring anymore public debt and making the deficit look smaller, but now we just owe money to ourselves. This all ties into the future problems that will come with Social Security as well. This is why I have a problem with answering Sumayah's question, sorry I am making it complicated. You can't just "write off" our intragovernmental debt and hope to keep it that way. We as citizens paid into Social Security, the government had too much, so they lent the excess to themselves. That means when it comes time to pay our generation's Social Security, there won't be any money because the government lent it to itself, never paid it off and made the debt disappear. I hope that makes sense. Basically we have already made a promise of future payouts, and that is not being factored in (and wasn't being factored in when it was announced that there was a surplus). There are other trust funds to consider and they were all being considered as a "surplus" as well! You can't borrow money and call it income. Budget surplus =/= actual surplus.

Short and sweet, in a completely hypothetical world, if we had a savings to be used to pay out future trust funds (such as Social Security), or replaced that money that we borrowed from ourselves, then maybe we could hold on to it for awhile. That is a pretty big "if" and I don't see how it could happen.
re: What if... the national debt en>fr fr>en
By Heartmember has saluted, click to view salute photosPremium member Comments: 14987, member since Thu Feb 14, 2002
On Fri Jan 20, 2012 03:16 PM
Psh, people need to read the FAQs on these things. The block on Wiki was easily circumvented by visiting their mobile site (m.wikipedia.org). :P

I love the fact that a modern president was actually able to balance the budget - which is why Clinton is one of my favorite presidents (you know I gotta go for the centrist). It IS possible if we make it a priority...

...and aren't busy fighting two wars at the same time. *facepalm*

I fully support a balanced budget amendment. People argue that it isn't feasible due to the way we handle our money right now.

Well, DUH. That would be the problem! The way the government handles its finances right now isn't okay and shouldn't be allowed to continue. It'll hurt, if it gives some bureaucrats a couple ulcers, makes 'em break a sweat, well, GOOD. Maybe we'll learn a lesson.
re: What if... the national debt en>fr fr>en
By Chaconnemember has saluted, click to view salute photosPremium member Comments: 6250, member since Thu Jul 12, 2007
On Fri Jan 20, 2012 04:27 PM
^ Nothing really new under the sun, Heart. I've been reading a book about the building of the Pentagon in 1941/42. They were doing "smoke and mirrors" back then too. (The author of the book has a daughter in the class my daughter teaches.) It is an interesting read...both for the amazing project management that built the place in a bit over a year AND for all the financial shenanigans that went on to get it built.

Having had played games with Congress to get projects I worked on funded, these stories hit close to home. My favorite...the Pentagon has five stories. They were authorized to build four stories, but the start of WW II two or three months after the start of the building made it imperative that the size of the place be increased. But Congress was adamant it remain a four story building. Sooooo they piled up dirt up on one side of the first floor and called it the basement. The real basement was called a sub-basement. When the building was completed and the external landscaping and parking lots were built they bulldozed the extra dirt away from the first floor (this was done only on the first side to be built...the Pentagon was built more or less one side at a time.) Voila! it was now the five story building the War Department (the present Department of Defense was created after WW II) really did need to conduct the war.

Hooray4jj correctly points out some of the legerdemain that goes on in the budgetary process. I know it goes on...I had done my share of it myself within my own small bureaucratic empire. I can't comment on any of the more recent stuff as I retired from government in 1999 near the end of the Clinton presidency. Some of the Clinton balancing, despite the accounting games that went on were pretty real. My own budgets...a tiny portion of the DoD budget...were severely curtailed in the 90's, even starting at the end of the George H.W. Bush presidency. The breakup of the Soviet Union seemed to reduce the need for huge budgets, but did not anticipate 9-11 (which happened after I left.) I also saw how Congressional rules forced us to spend far more money than we had to for missions. One of my projects required a satellite communications link between two military bases, both inside the USA. Using military equipment, I could have established and maintained that comms link for about $50K-$70K per year. That was how the military did it if one end was outside the USA. Congress ruled that we had to use commercial telephone for USA to USA communications which required a lease which cost us over $1 million dollars per year. Ironically anyone of us with a broadband internet connection has a bigger pipeline from our PCs than I could buy for a million dollar lease in the late 1980s/early 1990s.

We had another case where a member of the Senate Appropriations Committee forced my agency to use a surplus facility in his state, a facility totally inappropriate to our mission. My programs were minor compared to the pressures to build a certain warplane or to equip a warplane with an engine that the services had no need for, but had foisted upon them by congressmen promoting industry in their own districts.

Jon
re: What if... the national debt en>fr fr>en
By Gioiamember has saluted, click to view salute photosPremium member Comments: 3021, member since Sun Jun 20, 2004
On Fri Jan 20, 2012 05:35 PM
Heart wrote:

I love the fact that a modern president was actually able to balance the budget


The standard budgetary process in the US uses projected figures. A lot of what was credited to Clinton was put in place by Republicans before Clinton even entered office, Clinton signed off on it basically because he was forced to. Yes, forced. Congress sent him a balanced budget which he refused to sign until he ultimately had to. That is the difference between a budget and real life. I could write a budget stating that I am going to save $10,000 this year, that doesn't mean it is true and it will work. Even with a balanced budget amendment, the government could just inflate profits to make it look balanced. Not only that, it will most likely include exceptions for times of war, national emergency, or recession. Which we have been in for how long now? Jon mentioned Keynesian economics, which typically states that during a recession deficit spending has positive effects. It is interesting none the less en.wikipedia.org . . . especially when you think back to the Nixon administration.

You also mentioned fighting 2 wars...did you also know that in Clinton's budget he proposed that we increase defense spending for the next 10 years?

All of this being said, it still has NOTHING to do with debt. A balanced budget tries to do just that, "budget" to get us out of debt in the future! We were still in debt and have never been out of debt since Andrew Jackson. During the Clinton Administration, the PUBLIC debt was drastically lowered by TAKING MONEY from the Social Security fund. Public debt is the debt that is sold to the public in the form of treasury notes, bonds, etc... Clinton didn't even do that on purpose either, it is already policy that if there is extra in the Social Security fund that it is to be used to pay off Public Debt.

What Clinton did do is impose a tax hike to try to attack the deficit en.wikipedia.org . . . . I don't actually have a problem with Clinton, I only have a problem with the way the information was presented. The economy was good back then, it had nothing to do with Clinton because we were riding the dot-com bubble, which did not last. What Clinton did have a hand in was squandering the money that was coming in during the good years and leading us into a recession.

In case anyone cares more about the smoke and mirrors and how much money the US actually had during Clinton, take a look at this article www.usatoday.com . . . for a better explanation on accounting principles and types.

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