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Who Owns the US National Debt? Is China the real threat we are being told?

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posted on Apr, 8 2007 @ 06:46 PM
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Very good points again, but how do you explain that the debt is being paid at rates that are affordable and that the recipients are mainly Americans themselves.

I think we should pay it down for sure but not off entirely, but to what point I do not know as I am no economist, nor do I claim to be.

Thank you for your very good information as it does make sense.




posted on Apr, 8 2007 @ 07:14 PM
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posted by edsinger

Very good points again, but how do you explain that the debt is being paid at rates that are affordable and that the recipients are mainly Americans themselves. I think we should pay it down for sure but not off entirely, but to what point I do not know as I am no economist, nor do I claim to be. Thank you for your very good information as it does make sense.



Hey, I’m no economist, either. We’re exchanging POV and in that realm one is equal to the other.

1) Debt is affordable. Yes. It is, currently. It is a small fraction of our GDP but that does not mean we should incur more debt as some seem to be advocating. As in a poison pill to prevent a hostile takeover.

Because the lenders see the US as being able to repay its obligations on time and in the stated amounts, they are willing to loan us money. Can you imagine how much interest lenders would want from Chad, or Zimbabwe? I doubt they could get a long term loan.

We currently pay about $400 b. a year in interest. Out of a $3 t. budget that is not all that bad. OTOH, if we owed half that amount, we’d have an extra $200 b. to toss around. Health care, Walter Reed, re-equipping our National Guard, building some much needed expressways, and so on, could all benefit from an extra $200 b. But alas, we have borrowed it so now we must pay it back. Ooo, it was good while it lasted.

2) Well, we are not paying anything (we do add on interest) on the $3.008 t. The $786 b. owned by banks is required, but we do pay interest on that too. The $2.674 t. owed to US citizens is “rolled over” so that when one guy redeems his bond another bond is sold to someone to take its place.

We pay about 4.75% interest on our debt. Cheap in the bond market. Which is only right, because as long as there is a United State of America, those bonds will be paid.

Don’t worry about paying the Debt down to Zero. The public loves a free ride too much to ever let that happen. It’s like the VISA saying they have raised your limit. Hey, it’s time to go shopping!



posted on Apr, 8 2007 @ 07:49 PM
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Well I guess we agree on many aspects of this problem. I want discretionary spending lowered and for interest and principle to be paid on the debt.

That's the problem with these large numbers and the Fed, it is hard for me to see into the future.

Right now GDP is 13trillion, in 15 years it should be around 25 Trillion, and 1/4 of that is a ~6-7 trillion US Gov budget, that is a lot of money.

If we can control the rise in spending, then we have a shot..



posted on Apr, 8 2007 @ 08:15 PM
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My main point as a conservative is that we need to spend less and balance the budget ASAP. Taxes should be held or raised slightly. I am all for a VAT or simplified tax. Our spending may create interest payments that eliminate us affording a military!


You can create all the charts that you want, but the facts are we are facing a point of no return on debt, not only government but household!

The downfall of Rome, Spain, Britain and other empires was their debt.



posted on Apr, 8 2007 @ 09:34 PM
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posted by edsinger
We agree on many aspects of this problem. I want discretionary spending lowered and for interest and principle to be paid on the debt. That's the problem with these large numbers and the Fed, it is hard for me to see into the future. Right now GDP is 13trillion, in 15 years it should be around 25 Trillion, and 1/4 of that is a ~6-7 trillion US Gov budget, that is a lot of money. If we can control the rise in spending, then we have a shot..



Or we could return to the Clinton 1993 tax rates. That would make it all faster. And we know that worked OK, because those tax rates gave us a balanced budget and a projected surplus. In 7 years. And Congress had its own internal limit, “no new spending without funding.” It worked.

Pols Dem or GOP, will do what the majority want.



posted on Apr, 8 2007 @ 09:52 PM
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Under Clinton we had a conservative Congress and they also had a part in balancing the budget. The Clinton tax hike also caused the 2001 recession in my opinion and the economy is growing now without the tax burden.

again look the government revenues are growing FASTER than spending, that is how you balance the budget.

Plus 1993 had the benefit of the growth in the late 80's and early 90's until 92 after Bush Sr. raised taxes.



posted on Apr, 9 2007 @ 10:11 AM
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posted by edsinger

(1) The Clinton tax hike also caused the 2001 recession in my opinion
Plus 1993 had the benefit of the growth in the late 80's and early 90's until 92 after Bush Sr. raised taxes.

(2) The economy is growing now without the tax burden. The government revenues are growing FASTER than spending, that is how you balance the budget. [Edited by Don W]



First point. I do not subscribe to that theory for these reasons:
1) Time lag. Too much time between the causative event and the adverse event.
2) No corollary has been established.
3) Ignores many superintervening events.
4) No reputable economist like Alan Greenspan subscribes to this notion.

Second point. This is Jambalaya economics. Throw in a bit of this, a bit of that, and Viola! You have your desired outcome.

No one says paying taxes is fun. We pay taxes to accomplish a common purpose. We employ the agency of government to do for us that which we cannot do for ourselves. It’s a collective effort and it must be supported. Our choice is not taxes NO taxes but whether we adopt a national policy to pay as we go or to charge current outlays to pay later. Like a national VISA card. Which overuse brings with it equally bad consequences.

The bad connection between tax rates and economic growth is not all that clearly established. For example, the World War 2 max tax rate on personal income was 91%. Corporate max tax rate was 52%. additionally, there was an “excess profits” tax on corporations based on prior earnings records. New taxes like the telephone tax remained until just a few years ago. In fact you should have a $30 refund coming this year. I have already received mine.

The max rate was lowered to 70% in 1964. It was lowered to 50% under Jimmy Carter. If that theory about taxes and economic growth was true then how can anyone explain the country’s greatest economic growth ever, between 1945-1975? We are still “coasting” on that! Although between Reagan and the 2 Bushes, we’ve about used that all up.

Explain, I asked, not ignore.

Count me out of those voodoo or Jambalaya economic theories.

[edit on 4/9/2007 by donwhite]



posted on Apr, 9 2007 @ 10:54 AM
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posted by mel1962
(1) My main point as a conservative is that we need to spend less and balance the budget ASAP. (2) Taxes should be held or raised slightly. (3) I am all for a VAT or simplified tax. (4) Our spending may create interest payments that eliminate us affording a military! You can create all the charts that you want, but the facts are we are facing a point of no return on debt, not only government but household! (5) The downfall of Rome, Spain, Britain and other empires was their debt. [Edited by Don W]



1) We have entitlements. That is a national policy. For example, anyone who has an income less than a specified amount is eligible for food stamps - no longer use stamps but now use a credit card. When the law was passed, Congress did not know how many people would be eligible and how much it would cost. But, we did it, and it is called an entitlement. Medicaid, another entitlement. Again, based on income. Meant at first to serve AFDC children and new mostly single mothers. But, it is an entitlement because Congress pays for it as it goes along, n0t knowing from year to year how many people will be on Medicaid.

Social Security and Medicare are entitlements. The 2 largest.

About $1.7 t. of the proposed 2009 $2.9 t. is in entitlements. That is, the Congress really can’t do much about that. Neither can the president. That leaves about $1.2 t. to fund the discretionary programs. Nearly hall of that is set for the DoD, interest on the debt is next in size, leaving barely $ $200 b. to run all the other government programs and services. All the so-called “welfare” payments are less that $70 b. So where and how do you seriously cut government outlays?

Scratch “spending less” as an option.

2) Agreed, especially on “raised” but not slightly.

3) I’ve explained elsewhere that the former advocates of a flat tax have achieved a flat tax for the Rich and Famous - R&Fs - so they are no longer boosting that.

It is a rule of thumb that the retail price of goods is 10X the cost to make it. VAT - value added tax - as goods move through the process of mining ore, refining, processing, manufacturing, distributing and retailing, a tax is added at each step based on the “value” added at that stage of the process. Cost out compared to cost in. The VAT is not intended as a “simplified” tax, but is instead a method of evenly spreading the tax burden. A European concept not looked on kindly over here by the R&Fs. Scratch the VAT.

4) Yes. At some point in time, people who are currently loaning us money to pay for things we think we need or want but are not willing to pay for will either find a better place to invest their money or will want more interest than we can bear. Borrowers are always at the mercy - directly proportional to the amount of debt - of the lenders. Always.

Equally true that our long time government policy does not encourage savings or thrift, but instead encourages consumption. Over consumption. Looking back, it was strongly encouraged to save 10% all during War 2. Movies were usually double features, and at the break, the movies sold War Bonds and War Stamps in the lobby. Children bought 5 cent stamps and when a stamp book was filled, could turn it in for a $25 war bond which was sold for $18.75. Held 10 years to be worth face value. Workers were encouraged to sign up for payroll deductions. And etc. We know how, we lack the will to do it.

5) It would be nice if that was so. Like so many social phenomenon, there are usually 100s and even 1000s of reasons for success or failure. We have never lived in a world with the amount of debt we have today. This is brand new to everyone. I don’t think we are handling it very well. Some do, some say “borrow your way out of debt!” Stupid as that is, there are many people who think it is possible.

Frugality is still a by-word for a comfortable future.

[edit on 4/9/2007 by donwhite]



posted on Apr, 10 2007 @ 08:58 PM
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A great set of posts Ed and don.



[edit on 10-4-2007 by Nerdling]



posted on Apr, 19 2007 @ 07:11 PM
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In a word replying to the China question, NO!

Reading from the pie chart posted by Edsinger, China holds $354 b. which is 4% of our ND. National Debt. Japan, OTOH, holds $649 b. which is 7.4% of our ND. Our own FDIC banks hold $786 b. which forms part of the banks required reserves, 9% of the ND. But these are small potatoes compared to the two 800 pound gorillas in the room. The Social Security Trust Fund and the Medicare Trust Fund.

The largest and most worrisome part of our nation’s debt is held by - - - you and me. A total of $3,008 b. A whopping 34.5%.

This money was paid into a number of Trust Funds. Over the years, Congress has enacted certain taxes that it felt should be used for certain purposes. Highway Trust Fund. Airport Trust Fund. Wildlife Trust Fund. There may be other funds I am not familiar with but all of those mentioned are small potatoes in relative terms when compared to the two 800 pound gorillas in the room. The Social Security and Medicare Trust Funds.

12.4% of all wages up to $80,000 is collected for the SS Trust Fund to hold until the wage earner reaches 65 or 67 and retires. Then the retiree receives back a monthly payment for as long as he or she lives. Other payments made from the SS Trust Fund are to disabled wager earners and survivors of deceased wage earners. The exact amounts are based on the earnings history of each contributor. The SS Trust Fund is the largest and was started in 1935.

2.9% of all wages is collected for Medicare and placed in the Medicare Trust Fund until needed. When this Trust Fund was created in 1965, the US was spending less than 5% of its GDP on health care. Today’s expenditure on health is closer to 18% and is predicated to reach 20% by 2010. To remain solvent the Medicare tax would have to be raised to 5% or 6%. Or, alternatively, the issue of our constantly rising health care costs must be addressed in a serious way never before done in America.

Facts helpful but not essential to this discussion and which I do not know.
1) The current annual amounts collected and paid into the SS Trust Fund.
2) The current amounts paid out in SS benefits.
3) The size in dollars of the SS Trust Fund.

The same information relating to the Medicare Trust Fund would be helpful but is not essential in understanding why there is a legitimate concern over the short term future of both the SS and Medicate plans.

So you ask, where is all that $3 t. already deposited into the 2 Trust Funds? Would not that money carry us “across” the 20 years shortfall gap from 2010 to 2030? Is this not a lot like Joseph in Egypt dealing with the 7 years of plenty getting ready for the 7 lean years? So what happened?

Truth is, we spent it.

We have learned the Federal government cannot “save” money. Not like you or I save money. The Federal government is not like any other entity. The Federal government alone can make or print money. We cannot. Legally, anyway. The Federal government sets interest rates. The Federal government oversees the spending of about 1/4th of our national GDP. Wal-Mart, the largest private business, accounts for 2.1% of our GDP.

When Congress established Medicare in 1965, it also created the Consolidated Federal Budget. A single Federal budget replaced several budgets which accounted for revenue according to the intended usage. Economic theorists explained that keeping separate fiscal accounts was illusionary. Just as there is only one United States, so also all Federal revenues go to the one United States and all Federal payments come from one United States Treasury.

There are still valid uses for Trust Funds. But to use Trust Fund money responsibly requires strong fiscal discipline. Something all 535 Member of Congress admit is near to impossible to obtain. You know, earmarks and all that. Trust funds today merely point to who the US has given an IOU and for how much. The actual tax money was spent as soon as it came into the Treasury. Which is not evil or illegal. It is reality.

In the not too distant future we could face choice whether to continue to rely on the Government’s absolute promise to pay back with interest all the money collected from you. You can rely on that guarantee as your “foundation” from which you can plan other investments. But regardless how your other investments turn out, the Government’s guaranteed amount will be there.

And here is one more overriding reason for Social Security and Medicare. It has been deemed a proper exercise of governmental power to use all reasonable means to assure as many people as possible a minimum income and access to health care after they are too old to work. This is a social justification for the continuance of Social Security and Medicare.

We know today there will be a shortfall in Social Security revenue around 2025. Medicare, OTOH, will hit much sooner, perhaps as early as 2010. In each instance, we will have to do one of 2 things: 1) borrow money or 2) raise taxes.

[edit on 4/19/2007 by donwhite]



posted on Apr, 21 2007 @ 02:58 PM
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Great post! I guess we only have 2 choices.

(1) Decrease Spending
(2) Increase Revenue

how about a combination of both?





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