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Why is it so important that we pay off the National Debt?

thebestMAX

Diamond Member
Sep 14, 2000
7,457
106
106
Besides being a campaign issue, I mean.

Ill bet over 99%+ of the people on this board have a debt of some kind.

Most people dont seem to realize that it takes money to run a business and what bigger business is there than running a country?

Im not pro/con here, just want comments.
 

4824guy

Diamond Member
Oct 9, 1999
3,102
0
0
The debt is like a loan that we are paying interest on. Once we pay off the interest and principle, we will be saving so much money on these payments that it isn't even funny. The money we are spending on interest is like wasted money in my way of thinking.
 

kranky

Elite Member
Oct 9, 1999
20,999
109
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Wish I had more time to elaborate on this (a pet subject of mine), but here's a short look: Half of the federal budget is entitlement programs (Social Security, Medicaid, etc.). Of the entire remaining federal budget, half is interest payments on the national debt. So when there is talk of spending cuts, and everyone knows they dare not cut entitlement programs, only 25% of the entire federal budget is up for grabs. That's not a lot to work with.

Imagine how much the interest payments will grow when interest rates go up (as they surely will someday) as compared to today's low rates.
Much of the debt is held by the Japanese (due to the massive trade imbalance). If the Japanese decide one day that they don't want to hold that debt, the depression will look like a day at Disneyland.

Paying down the debt would greatly reduce US dependence on foreign countries to finance our inability to live within our means.

If you can't pay the debt down during times of prosperity, you sure as hell won't be able to do it during a depression!
 

Wangel

Banned
Mar 30, 2000
1,491
0
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Why doesn't the government just print up 3 or 4 trillion dollars and just pay off the debt? May be even print a bit extra and take everyone out to lunch too! Viola - debt gone!
 

bigvince

Banned
Aug 25, 2000
1,201
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WANGLE

when you pay off goverments you can't just hand them a suitcase full of $1000 bills. the US currency is a "Good Faith" system of money, meaning that there isn't one dollar worth of gold for every dollar printed. goverments know this, and while im not sure, i don't think they would accept cash.
 

rahvin

Elite Member
Oct 10, 1999
8,475
1
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thebestmax,

Currently approximately 15% of the federal budget is allocated strictly to pay interest on the debt. Imagine the massive tax cut and/or increased federal spending that would be possible without that interest. To put in in perspective, I believe all our millitary spending is approximately 25ish%.
 

JellyBaby

Diamond Member
Apr 21, 2000
9,159
1
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In addition to what's already been said, forcing politicians to pay off our debt means they can't use that very same money to charge up more on the nation's credit card.
 

Czar

Lifer
Oct 9, 1999
28,510
0
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Because if a country brags about how good economy it has and then it owes alot of money then it just plainly looks EXTREMELY STUPID.
 

DaBoneHead

Senior member
Sep 1, 2000
489
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At the height of the cold war, defense spending by the Soviet Union was slightly over 50% of their total budget.

I don't think the US ever topped 15% at any time. I'd be curious to know what it is today, I am betting on 6-9%. Anyone know what it is, or where to find that info?

~regards.
 

DaBoneHead

Senior member
Sep 1, 2000
489
0
0
Whoops.

I was wrong. Current spending is about 15% of the total US budget. It hasn't been below 10% since the carter days.

Also, it appears (IMHO) that too much money is going to maintain and "modernize" our existing Nuclear Weapons. It seems a significant amount of the overall military budget is going to those "strategic" weapons.
 

prontospyder

Diamond Member
Oct 9, 1999
6,262
0
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The Interest Expense for Fiscal year 2000 is: $ 343,767,165,725.72 according to the US Treasury Site.

Imagine eliminating that plus cutting down on excessive gov't spending....that would make one big tax cut! :)
 

Pretender

Banned
Mar 14, 2000
7,192
0
0


<< << my dymondz pay that siat off >>


What did he say? Does anyone around here speak asswipe?
>>

I do....he said he has a large rock up his ass and it's making him say dumb things.
 

JellyBaby

Diamond Member
Apr 21, 2000
9,159
1
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<< I do....he said he has a large rock up his ass and it's making him say dumb things. >>

ROFL!
 

Crimson

Banned
Oct 11, 1999
3,809
0
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One thing people don't realize is debt can be GOOD for a company/country. Think of it this way, if someone is willing to loan you 1 million dollars, and charge you 5% interest on it.. and you take that money, invest it in a program which averages 10-12% return per year.. whats the harm in having debt? You are making 5-7% by being in debt. In that sense debt can be a very good thing. Our national debt is similar.. we have many countries, including ourselves (Most of our debt is held by Americans as far as I heard.. not by the Japanese.. but anyways).. if people are willing to loan the country money at a low interest rate, and we use it to grow the country higher than that interest rate, its a good thing to have debt. Debt is not as evil as people make it out to be..

Another example, if you have $30,000 in the bank, and you take out a loan to buy a new car, you would be STUPID not to take a $30,000 loan, and invest the $30,000 you have saved in an investment which would return more money than the interest you pay in the loan.. its pretty simple when you think about it.
 

Nitzylpick

Senior member
Aug 30, 2000
248
0
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Crimson,

That sounds nice on the surface but looking deeper you are way off. There is a big difference between a company and a country. A company may be looking to invest in R&amp;D or increased production. Fine. This stuff is expected to pay off in new or more products that will generate more money for the company and profits to offset this debt.

A country is not in the business to make money. It does not generate products that produce money or profits. The money spent goes towards programs to redistribute the wealth, for the infrastructure of the country (roads,bridges, sewage, etc.), and to pay the salaries of public workers.

Where is this mythical 5% intrest rate you speak of and where can I get a guaranteed 10-12% interest? The gov't is not about to start borrowing money to invest in the stock market which is the only place you can get an AVERAGE return of just over 11% in the long run. Look at the last year and you'll see we won't likely get close to that average.

Now that 30,000 loan for a car? Yes it makes sense if you don't have any CC type debt that charges 15-18% interest. Of course, you are taking on risk by investing that money you &quot;saved&quot;, there are no guarantees in the stock market which is the only place to get returns such as you are touting. I fail to see how this can be an example of how the gov't debt is good.
 

Crimson

Banned
Oct 11, 1999
3,809
0
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Well, lets put it this way, we have a massive debt and yet we have the best economy ever.. Gee.. Must be a real big problem... and don't give me this &quot;Well if we don't take care of it the country will go to hell&quot;.. thats what you people have been saying since 1980, its now 20 years later and we still have an awesome economy..
 

rahvin

Elite Member
Oct 10, 1999
8,475
1
0
Crimson,

Yes and we also spend 15% of our budget on interest. 15% that could be better spent giving us all a tax break. If the debt went away the bond market would be severly impacted and the money would be forced to move over to corporate spending. We have billions of dollars in this country tied up in bounds that could be spent creating jobs. There are many many reasons to get rid of the debt and the only one against is that we don't seem to be having problems now, so why pay it off. Well the rainy day could come and we might not be able to pay it off some day. China's economy will outpace our own by about 2020.
 

JellyBaby

Diamond Member
Apr 21, 2000
9,159
1
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<< its now 20 years later and we still have an awesome economy.. >>

...and the american tax burden is the highest it has ever been in history.
 

chess9

Elite member
Apr 15, 2000
7,748
0
0
Crimson:

Without mentioning numbers, it's good to be debt free. It's good for you, it's good for me, it's good for countries. I realize this is an old fashioned idea and I must have a butt full of yen to even suggest it. But trust me. Once you've had $80K on your credit card for a few weeks, and weren't entirely sure you'd pay it off at the end of the month, you'll see the light. I can't tell you how many of my friends have told me their college kid just racked up $5K on a credit card and they had to bail him out. (And boys are the worst.) Check out the large number of bankruptcies. In '99, didn't we have a record number of bankruptcies? (Or was that '98?) Failure to properly manage credit card debt is the number one reason for most of those bankruptcies. (Many are from medical bills, but that's another rant.)

I've heard these arguments about how &quot;good&quot; having debt is, and they make me cringe.

Maybe you're right, but I will stick with better safe than sorry.
 

Pretender

Banned
Mar 14, 2000
7,192
0
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Back in the old days (e.g. soon after the formation of the country) the purpose of national debt was good: citizens who bought bonds in order to help the country would essentially be investing in the country: if it went under, they lost their money, if it didn't, they get some profit. Obviously this was incentive to encourage rich investors to have something to gain by keeping the stability of the country ensured. Nowadays, this doesn't really apply, and IMHO the debt should be paid off.


If the facts are skewed, it's because I got a 65 in American History last year. I paid attention, just didn't do the homework because it was all BS. So sue me. :p
 

AngelOfDeath

Golden Member
Apr 25, 2000
1,203
0
0
Seems like you are all wrong. Debt isn't neccesarily bad. As long as the CA is zero or positive in the long run.

What you also haven't thought about is that you are actually in a boom. You real income is growing much faster pr. year pr. capita than in Europe. The reason why you have this great debt as is now has to do with the growth. Japanese is actually financing the US deficite by exporting so much goods to the US that the amount of US import exceeds Export thereby creating a deficite on the the CA.

Hmmm, this could be quite complicated and take a bounch of time to explain, but the essens is there.

AoD ;)

[EDIT]Another thing, as I said debt isn't bad at all, in fact a country and specially the US can run a deficit forever if it wanted to. The only reason politicians are screaming about lowering the debt is because it's something people can relate to. The normal citizen knows how it feels having a loan, and therefor a country in debt must be bad, which isn't the case when it's a country we are talking about.[/EDIT]
 

Ferocious

Diamond Member
Feb 16, 2000
4,584
1
71
Our national debt is not too big a deal as long as it remains attractive to the nations we owe it too. Meaning their economies are lagging ours.

But eventually Japan will pull out of their decade-long psuedo recession, and then all of a sudden the return they are getting with their loans wont look so good.

Nearly every major financial leader or analyst in the countrie says debt reduction should be a major priority.
 

Shazam

Golden Member
Dec 15, 1999
1,136
1
0
AoD: Yes, perfectly stated.

Wangel: Printing more money does not work. It would just devalue the amount that a dollar was &quot;worth&quot;, leading to inflation. Brazil tried this, the stupid economic policy makers over there thinking exactly what you proposed.

bigvince: Gold is not used to back up money anymore. This sytem has not been used since the early 20th century. All money printed (ALL OVER THE WORLD) is now the &quot;fiat&quot; type of money.

Anyhoo,

DOMESTIC Debt is not that bad. FOREIGN Debt could be bad.

You cannot compare a country to a person.

First lesson of government economics:

The government has ultimate coercive power.

Repeat after me:

The government has ultimate coercive power.

Let me say this again:

The government has ultimate coercive power.

In essence, a gov't can tax you to the hilt. There really isn't much you could do about it until election time, and even then if all parties agreed that high taxation is the way to go, you're still up $hit creek.

Also, consider what would happen if a gov't did default on it's DOMESTIC debt. What does this mean? Does it mean you'd pay yourself $10,000? Who is the money owed to? Foreign debt of course is a completely different matter and can be extremely dangerous.

Also, gov'ts will always have some debt. Short term debt (<1-2 years) is almost harmless and in many cases a good thing (e.g. the car loan thing. Sorry, but you're an IDIOT if you use that $30,000 in savings to get yourself a car. The better plan of attack is to get a $30,000 loan, and if things are SO BAD that you can't pay the loan, THEN use the $30,000 you have in savings. At least you'll get a bit of interest off your savings).

And how about things like Treasury Bonds? They count as debt!

I highly suggest that if any of you have any interest whatsoever in this, take an Economics of Government course at your university/college. You will learn a lot, including just WHY many countries have so much debt (read: Keynes). You will also be able to tell when politicians are yanking your chain around economic policy.

Actually, let me give an example of how high taxes COULD be good:

If a gov't has a policy whereby a person gets a tax deduction for a registered savings plan, then this would &quot;induce&quot; people to save more in order to save on taxes. The savings rate would go up, increasing the money supply. This would in turn lower the going interest rate for loans, stimulating the economy as more people borrow for capital expenditures.

Mind you, I don't agree with the above scenario, just pointing out how things are not always as cut and dried as people think.

 

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