1. ## The national debt?

Hello all,

I was just wandering if someone could explain a little about the national debt to me. I have heard the number is in the trillions now, but what I want to know is when the government is spending lets say 100 billion dollars on somthing that it does not have where are we getting this money from?
If its from some bank or another county do we make payments on this debt? Is there interest? If there is payments how much are the payments?

Here is a little nugget some of you may have heard but I thought I would throw it out there by my calculations (a very rough estimate)

If I told you I would meet you for lunch in 1 million seconds, you are going to get very hungry waiting on me because a million seconds is a about 11.57 days!
There are 86,400 seconds in one day.
Had I said 1 billion seconds, you would be waiting roughly 31 years 25 days and change.
And for a trillion if my math is correct 1000 billion is a trillion so there is very roughly 31,709 years 289 days 1 hour 44.68 seconds. If my math is terribly flawed I apologize in advance but you get the idea. Thats just for 1 trillion if I am not mistaken the last number I heard in regular to the ND was several trillion.

2. ## Re: The national debt?

There most definitely is interest on the debt. And with trillions of dollars of debt, you can probably imagine how much money that comes out to be. Just as there is a cost for an individual to be in debt, there is also a cost for a government to be in debt. Money isn't "free". If it were, it wouldn't be worth anything.

The debt is held all over. China and Japan both hold about 20% each of our debt. Individuals can hold some of the government's debt, through treasury bills. You give the government money for a while, and they pay you back in a specified amount of time (with interest of course).

I personally believe our national debt is the single, most overlooked and also most dangerous topic of modern US politics.

Just to put things in perspective (since our own operating budgets aren't on the order of trillions of dollars) the national debt for 2008 is estimated to be at 72.5% of GDP.

http://en.wikipedia.org/wiki/United_States_public_debt

3. ## Re: The national debt?

The irony is that coming off one of the longest periods of prosperity in memory neither governments nor most individuals had the foresight to save for the bad times. Rather, they spent every dime they made and borrowed on top of that. I know people with hundreds of thousands in credit card debt who were making good money well above their living expenses. They spent the money on mostly useless consumer crap. It's pretty much the same thing with government. We spent hardly anything on infrastructure or other essentials but tons on lawmaker's pet programs.

I personally believe our national debt is the single, most overlooked and also most dangerous topic of modern US politics.
Actually that's one of the big four problems which will bite us in the future. The other three are Medicare, Medicaid, and Social Security. Combined these three things and interest on the national debt will eventually approach the GNP.

4. ## Re: The national debt?

I think I am getting the idea. The debt is held by other countries, banks ,and individuals and the government is basicly living pay "check to paycheck" paying the next balance holder in line with taxes collected that month or year.

I am still a bit unclear on the GNP and GPD stuff, but that Wikipedia link seems to help a bit, and I am going to read through it a bit more later (after some sleep maybe).

5. ## Re: The national debt?

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Nah, the moderators probably wouldn't like it.

6. ## Re: The national debt?

Originally Posted by jtr1962
Combined these three things and interest on the national debt will eventually approach the GNP.
But gov't can increase GDP (large part of GNP) through spending.

What bothers me is that A) the Fed doesn't report M3 money supply anymore and B) I wonder how long gov't spending increases have disguised mediocre performance in the private sector as it relates to GDP rate of growth.

7. ## Re: The national debt?

Originally Posted by IlluminatingBikr
I personally believe our national debt is the single, most overlooked and also most dangerous topic of modern US politics.

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You are quite right here - with a near tie with the trade deficit. No matter how much tax payer money goes to bail out the banks, none of it will do anything without dealing with the trade deficit - across the board.

Options
- Convert from an income based tax system to (sales tax on goods) + (sales tax on financial transactions) based system.
- Subsidize North American production like everyone else does
- \$ 10,000 rebate on cars made in US (engine, trans, power train, battery, tires, hood, and assy)
- \$ 500 fee on every shipping container coming in
- Ban gov'ts at every level from purchasing imported goods except in certain rare case such as National Defence needs
- Stop funding other countries govts
- \$ 100 rebate on any electronic product where the microprocessor, memory, and circuit board are made in NA.

4 out of 5 of the financial problems would be gone in 2 - 3 years. The surging US economy would pull out the rest of the world with it.

Just MHO of course.

8. ## Re: The national debt?

Originally Posted by LukeA
But gov't can increase GDP (large part of GNP) through spending.
I agree although the way to do so is mainly through the infrastructure spending which has sorely been ignored. We definitely need a major public works program at this point. For starters let's build the one thing we'll need to be competitive with others-a national high-speed rail system. It could move passengers during the day and priority freight at night. After that a few dozen new nuclear power plants wouldn't hurt.

9. ## Re: The national debt?

Originally Posted by HarryN
You are quite right here - with a near tie with the trade deficit. No matter how much tax payer money goes to bail out the banks, none of it will do anything without dealing with the trade deficit - across the board.

Options
- Convert from an income based tax system to (sales tax on goods) + (sales tax on financial transactions) based system.
- Subsidize North American production like everyone else does
- \$ 10,000 rebate on cars made in US (engine, trans, power train, battery, tires, hood, and assy)
- \$ 500 fee on every shipping container coming in
- Ban gov'ts at every level from purchasing imported goods except in certain rare case such as National Defence needs
- Stop funding other countries govts
- \$ 100 rebate on any electronic product where the microprocessor, memory, and circuit board are made in NA.

4 out of 5 of the financial problems would be gone in 2 - 3 years. The surging US economy would pull out the rest of the world with it.

Just MHO of course.
Hello HarrN,

So if I understand this correctly what the way this all ties together ie the national debt and subsidizing is...

By increasing sales tax and decreasing income tax the government would get its money when a product is purchased weather its American or import. This money would then be recirculated into the American businesses via subsidizing which would reduce the cost of purchasing American products while still allowing the American worker to retain his 30\$ wages. This growth in the economy would reduce the need for "bailout" money there by reducing the national debt?

If I am understanding this correctly that seems reasonable. While it is clear how this could potentially help our own economy, I'm not sure I understand how this would "pull the rest of the world out with it"? If we are puchasing less from them wouldn't that slow there economy?

10. ## Re: The national debt?

Hi Ventureofblood - In general, I am pretty much against the entire concept of subsidizing businesses to run. That includes banks, telecoms, and the manufacturing industries. There is a need for short term and long term approach.

There is a reality that our companies are not competing with "companies", but really with other governments - China, Taiwan, Japan, and frankly much of Europe. Regardless of how we feel about this concept / variation of capitalism, it exists and is quite effective.

A look at Taiwan (as a simpler example than China) shows some interesting points :
- Wages there are certainly not lower than the US for high tech products
- Product quality in Taiwan vs US is / can be nominally similar, esp in high tech goods. This isn't always true, but close enough.
- Equipment wise, Taiwan semi companies use exactly the same supplies and equipment as everyone else

The principle difference (as explained to me by a Taiwan excutive) is that by making things in Taiwan
- The govt' provides free / low coast loans for "work in progress" -IF it will be exported
- The semi foundry industry was financed / venture capitalized by the Taiwan govt - similar to China - although China took it to a new level.
- There is no / little income tax on semi goods made in Taiwan - mostly focused on the workers.

The effect, is that the US carries the social burden cost of taking care of not only itself, but also other countries (like Taiwan) who are too small to defend themselves.

The GDP of the goods we import are more or less hollow - they only carry burden, but no profit to the govt or to other NA firms (except a small retail profit)

In effect, the current tax system effectively subsidizes imported goods - by only taxing our own internal production. This is true regardless of where we buy goods from.

I really don't buy the concept that "profits from wages" are fundamentally different than "profits from investment". Both are the results of thought, work, and paying attention. We want to encourage profit to be gained from both sectors, while encouraging reasonable risk management.

A fixed National Sales tax (say 10% on every thing) that replaced the income tax would tax everyone and everything fairly. Since the majority of our consumer goods are currently imported, they would finally be carrying their share of the social / govt burden. The reduction in income tax burden on US workers and US companies would free up investment capital encourage them to make money - classic job creation.

One of the challenges we face on the investment sector is that our system encourages "fast and furious" investment churn. Regardless of what the adv say about "long term investment", the pros are not doing that. A real pro has computer programs finding small financial advantages that are executed (buy and sell) with only seconds or minutes of hold time. This is exactly the behaviour we need to moderate.

By putting a sales tax on investment transactions (not depositing your paycheck, but on things like stock, bonds, etc), the whole operation becomes more like the retail transaction it really is. If you know that you are going to pay 5 - 10 % on the value of a stock, then you are likely to hold it longer - as short shifts in price are not enough to bother with.

Options - An option is -at its heart, just a payment plan on buying a stock - with an out. From a tax perspective, you would pay tax on the underlying stock, not on the option value.

There is a very big short term problem in many sectors, so short term, we are subsidizing banks to the wall. I am not convinced this will have any positive effect at all, but I have no voice in the matter.

If the US auto industry completely collapses (similar to what has happened in US Semi industry and textiles), an entire core will be gone - and no amount of subsidies will help anyone. Nothing will stop the collapse of every bank in the world. US imports will drop to nearly nothing as consumption drops to the very bare essentials.

It is useful to consider that the US really does not need to import much of anything. America buys goods from overseas for three reasons:
a) Peace - it is cheaper to buy goods from countries and make them stable then to have wars.
b) Profit - while it is possible for us to be entirely self sufficient, it is not necessarily ideal profit wise
c) Financial Institution pressure - Banks want to loan money to more people so they make more money. Once everyone in the US is carrying a loan, they cannot expand that much more.

At a fundamental level - a weak US economy will drop demand from everywhere.

So after way too much writing here - short term, we need to "over equalize" the trading system to get the US economy going again.

After 3 - 4 years, we can bring it back to "equalized", drop the subsidies, and this will bring trade into balance. US consumption for goods from both domestic and a broader array of foreign sources will be even stronger.

If the EU would do the same thing, this would be even better than if the US does it alone.

Every trading block must achieve a kind of balance. Right now, China thinks they have a problem if they grow less than 12 % per year. If the "real" US GDP - in constant dollars - had 0% growth, we would not be having this discussion. It is entirely possible that China might have less than its ideal GDP "growth rate" while things go back into balance.

11. ## Re: The national debt?

I am pretty much against..........
It's at this point that information regarding "what is the national debt" is lost to "I'm against" and "I'm for" political stands. It's not that there's anything wrong with politically controversial debate. It's a matter of the improper place for it. The Cafe is the wrong forum. Seeking and providing the requested information is fine. Expanding it into political debate isn't. The proper forum(s) of the Underground are the designated areas. Thread closed.

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