Is Our national Debt Immoral?

Odious debt

Maybe that will take the edge off.

Here’s an eye opener: http://www.usdebtclock.org/

There are those that say that holding back the means needed for recovery is like shutting off a fire hose during a fire, saying that we might have a water shortage next year. Would it not be immoral to let the house burn down and let our kids inherit a bunch of ashes?

It’s been tempting to become immoral out of sheer bitterness. I’ve had house I fell behind in payment on but have since made a payment each month, trying to catch up. I’ve a bank that had no interest in participating in the President’s noise about loan modifications nor bargaining down on late fees that were half my mortgage payment each month. I’ve now got a house going to auction that no one is paying anything at all for anymore because my bank has been so greedy. They’ll probably write it off as a loss when no one bids, evict my family and then other tax payers will foot thei bill when the bank asks the government for bailout again. I’m counselled to take advantage of this time to stash the money that would’ve been going to mortgage and save up or pay other bills down. It doesn’t make me feel consolled though, all I can think about is the loss of credit, stable roof overhead and future security.

@kevbo now, that’s an interesting concept!

Its a common misconception that the national debt is bad for our country. Governments are not like people, a debt is not necessarily a bad thing.

Talk to an economics professor or read online to learn more.

I’d like to address this issue from two angles. First, drop the word “us”. I was not involved in this. Most of us weren’t. Individuals in government did this, against my and others’ will. I never signed up for this situation in the first place, so drop the “us”.

Second, a possible rebuttal is that the future America will be much richer than the present America. Think of it as inter-temporal welfare.

Morality is not involved – it is simply a seemingly natural inability to plan ahead or, as one saying goes, people cannot see beyond their own nose.

The business cycle is natural and the economy always recovers over time. But rapidly growing national debt will not correct itself but grow to unmanageable size. The proper course for an addict in withdrawal is more time, not more drugs.

@jackm Debt is one thing. Debt higher than the GDP, which is where we are headed is another.

This dept issue can actually be turned around fairly easily. Believe it or not, there are already several impressive and effective plans of action mapped out to recover U.S. national economic structure, all it takes is for the president to O.K. one and the country is on it’s way to recovery.

Of course, the people of the country could also restore the economy themselves if they all decided to take more responsibility for what they are doing, which, regrettably, most of them are not.

The majority of Americans today are affected and blinded by a “fake humility” of sorts causing them to believe they are part of the solution instead when they are in fact part of the problem. They believe they are being smart economically and yet they go out and buy the new Apple product the same week it is released.

I know this latter from first hand experience from living in the country currently.

@ChaosCross You had me until the Apple product part. Some, not all, of those people can afford the products. Still, GA.

This economist’s blog entry may be of interest: Link.

National debt is an economic issue, and morality is far too fuzzy a lens with which to peer into the economy. Sometimes debt is ameliorative, sometimes it can pose certain dangers. It is always amoral.

(Does this question keep popping up every day in different forms like a Hydra or is it constantly being re-edited?)

I don’t relate it to personal responsibility and immorality like you pose in the question. This idea that we are leaving it for our children and grandchildren, if someone hates that idea, which I do, then we should pay for it and get out of debt. How can someone be for the war in Iraq and not for paying for it? That is the opposite of being fiscally conservative to me. When we decide to go to war, there should be a tax increase, or federal spending cut somewhere that is passed at the same time we decide to go to war. Some of the TARP is actually being repaid or going to be, actually I read that not near the amount of money that was approved was actually spent. If we don’t get all the money back then we need to find a way to balance the budget.

I want to say that I think people in government should spend the people’s money as they would their own, if it were coming from their own pocket; but, it seems all too many Americans suck when it comes to spending their own money also.

I live with no debt, and I would like my government to do the same, or only take on a reasonable amount of debt and preferbly only borrow from people we truly trust.

They should know better than to vote to bail out inefficient industries with tax money ( OUR money! ) as payback for union campaign financing, but that’s what they did. They should know better than to toss money around like confetti in a misguided attempt to create jobs ( it’s never worked before! ) , but that’s what they did. They should know better than to spend billions of dollars on expensive, new programs during a time of fiscal and monetary crisis ( only adding fuel to the fire ), but that’s what they did.

Our children and gradchildren will be facing an almost insurmountable crisis as they become citizens: a massive debt amounting to over 90% of the nation’s Gross Domestic Product ( GDP ). I, for one, do not want them coming back to me and asking, “Why did you do this to us?”

The only immoral part is that there is no real intention of repaying it, yet the state continues to pretend that it will pay. At some point the debt will have to be repudiated (probably selectively) or erased by hyperinflation (printing the money to pay off the debt). The debt, like the currency, is unsecured by anything other than “the full faith and credit” of the state. When a powerful state walks away from its debt, there is little that can be done about it.

I’m not going to pick a fight with any answer. I’m just going to say what I believe to be the truth.

Conservatives are supposed to be in favor of tried and true solutions. That, in fact, is the core of what the word, conservative, means. Sadly, the people of the right today are, for the most part, nowhere near that definition. They wanted an austerity program instituted in a downturn instead of the spending we are now engaged in. They still want that. What they really want is less taxes, and that isn’t likely to fix the deficit, since drastically slashing taxes for the wealthy in the Reagan Administration is what started the debt curve skyrocketing in the first place.

We have been there and done that in 1929. Hoover “fixed” the crash of 1929 with an austerity program. The results were that unemployment rose from 2.5% in early 1929 to nearly 25% 1933 and the end of Hoover’s presidency. The gross domestic product dropped a stunning 40%. Banks throughout the USA and around the world collapsed and locked their doors without being able to even pay depositors. There was no FDIC so people who had done everything right their entire lives lost their jobs and their entire savings overnight. Tent cities sprung up all around the USA. Soup kitchens ran out of food trying to feed the hungry.

FDR came into office into office and instituted an aggressive deficit spending program to get the economy restarted. It worked, and unemployment dropped below 15% but by the 1936 elections Republicans were protesting the spending and debt so loudly that FDR cut back on the New Deal, and we had the recession within the depression, where unemployment spiked back up to 18%. Seeing that, Roosevelt reinvigorated the WPA and had unemployment back in check and the Gross Domestic Product back where its growth curve should have been by 1941, before Pearl Harbor was attacked. See Wikipedia for the GDP and Unemployment charts.

You will hear today’s right claim that spending never helps the economy and that only WWII cured the depression. This is pure revisionist history, wishful thinking of those who, despite its repeated failures, want “don’t tax, just spend” to actually work this time. First, the economy had recovered before Pearl Harbor. Second, and far more salient, what was WWII but government spending on the most massive scale ever seen to that time? The argument is, on its surface, absurd.

On this point, Paul Krugmann and the Keynesians are right When consumers cannot spend, and businesses can’t spend, there is only one sector left that can prevent a long-term dwindling spiral, and that is government.

Now, economic wrecks are rather like auto wrecks. When you drive the car into the ditch at 90 miles an hour, it’s going to get banged up. You may have to borrow some money to tow it out of the ditch and fix it back up to be roadworthy. If you don’t, you are going to spend a long time without wheels, getting nowhere fast. But once it is fixed up, you have to drive it to work and start paying off the costs of towing and repairs that you borrowed.

We did that back in 1945. Today our national debt is less than the GDP, thank goodness. We’re closing in on the GDP, but not there. The cost of fighting WWII (which, by the way, was largely touched off by the pain and fear that the global depression generated) drove the debt to 120% of GDP back in 1945. We rolled up our sleeves then and set top tax rates as high as 94% on income over $200,000 and we paid the debt down.

Of course, $200,000 was a real fortune back in 1945, and the taxes on earnings up to that level were much lower, so even people earning a million dollars got to keep nearly a quarter of a million. Lots pf new millionaires came into being in the post-war boom and the middle class really was formed in the USA in those years. So those tax rates did not stifle growth as the right likes to claim. That’s just more something for nothing wishful thinking. More claiming to be conservative while rejecting tried and true solutions.

With today’s robust economy, we don’t need taxes anywhere near as high as they were in 1945. Rates like they were in the Clinton Administration would work, as they did then. But we need to increase taxes and particularly on the top income earners, who are currently able to slide through loopholes that actually put them at a lower rate than ordinary workers. Our billionaires are not an endangered species needing federal tax shelters for protection.

@ETpro Good analysis

@YARNLADY Thanks. Makes the sore hands from typing worth it. :-)

There are only three ways any government can get money: it can tax its citizens; it can print more money; or it can borrow the money from individuals or other countries. Citizens will sit still for just so much taxation before rebelling. Printing more money leads to runaway inflation. Borrowing money takes money out of the pool available for investement, and stiffles both investment and other forms of lending. ( Borrowing from other countries can lead to a type of economic blackmail. )

The only way out of the mess made by those three methods is to unleash the creative energy of the people by encouraging the creation of new business. Most new jobs are created by small business, so with adequate money available for investment in business, and by allowing an adequate return on the creation of such businesses, the number of available jobs will increase.

@ETpro Thank you for your answer, very informative, and I agree with your viewpoint overall. I had a question about this debt to GNP ratio. Since it is a percent, it would matter whether GNP is going up, down, or level over those years according to your link. Do you happen to know what the GNP was doing in the Reagan years?

@ETpro has it, mostly. Bravo.

This is not a partisan issue of “FDR saved the economy and Reagan destroyed it” or FDR destroyed the economy and Reagan saved it,” etc. Being in debt to the Mafia isn’t a good idea nor is being in debt to China and middle eastern countries a good idea.

Forget about party labels and look at what politicians actually do. The simple fact is that both Democrats and Republicans consistently spend too much money—they’re both guilty.

We’re currently spending over $600,000,000.00 each and every day in interest alone yet we are borrowing at a record and rapidly increasing pace. Our children and grandchildren will pay for our irresponsibility one way or another. It doesn’t matter whether we’re Democrat, Republican or something else. CaptainHarley (third answer above) says it like it is with no partisan ax to grind.

@ItsAHabit

Thank you. We are in the process of ( in effect ) devouring our own grandchildren, both from the massive debt load incurred by the federal government, and by allowing the destruction of our environment. I fear that future generations will revile us, if they’re not too busy trying to dig their way out.

@CaptainHarley Again I ask, why are you going to push that debt onto your kids and grandkids, why don’t we pay it now? It will be given to our children because we won’t pay or bills.

@JLeslie

When I die, I will leave no personal debt. When I vote, I always try to vote for candidates who are fiscally responsible. Other than that, there’s not much one person can do. I do belong to the Texas Libertarian Party, and to the TeaParty, so that my efforts can be added to the efforts of others with similar outlooks, but right now we seem to be swimming against the stream.

Stay tuned. Film at eleven! : D

@CaptainHarley Ah yes, I do remember now your comments previously regarding your political affiliations. But, it seems that people in the tea party emphasive lower or no taxes. So, my perception is they don’t want to pay for the debt. I think we have to deal with the situation we are in now, and then do the right thing going forward, both things. The people who are very loud in the media right now seem to not be willing to address fixing the debt in my opinion, they just use it as a political tool. I thought maybe you were going down the same path.

@JLeslie That is why the Tea Party movement is earning the name, the Something for Nothing party. Surveys show most want their Social Security and Medicare. They want the world’s strongest army. That’s where most of our money goes. You could shut down the entire US government outside of entitlement and defense spending, and we still aren’t raising enough tax revenue to pay for operations. Only 17% of all federal spending lies outside those two areas. The idea we can slash taxes yet again and somehow make it all fly by trimming just a bit of spending here and there in the discretionary area is sheer lunacy. It can only be entertained by unwillingness to face mathematical facts or willful ignorance.

Regarding your question about whether GDP trends influence the debt to GDP curve, they absolutely do. If GDP is growing and tax rates aren’t cut, then revenues rise and so long as spending isn’t raised equally, deficits fall so the debt/GDP curve falls rapidly. The economy did expand when Reagan slashed the top tax rate by more than 60%, but spending was not cut. It was actually increased. The result was that even though GDP was going up, deficits went up faster than it because the tax cut starved revenue.

@CaptainHarley is quite right about one thing. Small business is this nation’s engine for economic growth. A breakthrough in clean, renewable energy sources could drastically change the debt equation. Let’s all pray for that.

@ItsAHabit This is not a partisan issue of “FDR saved the economy and Reagan destroyed it” I believe the numbers in the chart I posted the link to speak for themselves. There is no point debating facts. They are either correct, in which case you draw conclusions from them, or they are incorrect but asserted as fact, in which case you refute them. Accepting only those facts that match your concept of what they should be is the partisan road to hell for either party.

The simple fact is that both Democrats and Republicans consistently spend too much money—they’re both guilty. I don’t dispute that there is guilt to go around. But Reagan did start the massive debt upswing by slashing taxes for the wealthy. Clinton did turn the debt to GDP curve back down by increasing the top tax rate, and Bush did slash taxes for the wealthy again sending the curve soaring once again and doubling the debt he and Clinton inherited from his dad and Reagan. Again, facts are facts. It is awfully hard to solve a problem if you refuse to acknowledge what’s causing it. And slashing either entitlement or defense spending in the current economic conditions in NOT the road to prosperity. It would torpedo a recovering economy and sink us into long-term recession.

@ETpro Thanks for your answer.

Also, I did not mean to imply that @CaptainHarley is extreme in his thoughts, I have seen him on other threads and although we do not always agree, he does not seem to be lined up with any specific party or or follow BS spin talk.

@CaptainHarley Has demonstrated his intelligence. He’s not easy to persuade that he’s wrong, but then what intelligent person is? :-)

That the debt is too large and growing too fast is NOT a partisan issue. Both parties are to blame. I tried to keep partisan politics out of the discussion. But if people insist on making it partisan, the fact is that the Democratic Party is correctly known as the “tax and spend” party.

Regan had to increase expenditures massively to rebuild the military after Jimmy Carter slashed the military budget. And it was Jimmy Carter who had inflation running as high as 21% on an annualized basis. Most people lost much ground economically under his inept administration. Reagan squeezed inflation out of the economy and returned us to prosperity.

But endlessly arguing about politics is like arguing about religion and gets us nowhere. I say vote out of office those of either party who are promoting bloated budgets. It’s NOT a partisan issue.

@ItsAHabit Tax and spend at least is fiscally sound, even if we disagree with the spending. Get money, spend money. No tax and spend, is a disaster. if people want not tax and not spend, that is ok too for a balanced budget, although I probably unrealistic to some extent we have to do some spending, which I have no doubt you would agree.

I feel like the Christian Right, so not all Republicans or Tea Party people or whatever parties are being thrown around, and not sayng all Christians either, seem to tie up religion and morality with politics. I find it frustrating. They do seem to use words like it is immoral to not take responsibility for oneself, or immoral to pass on the debt, and they seem to use the words Democracy, US, and Christianity as though it is all synonomous. f course morality does not have to be tied to religion but for the extreme right I am talking about my perceptions is that they believe it is. I appreciate that you do not feel it is partisan.

Sorry if I was one of the people who helped to take the thread off of your main question :).

J.Leslie. You’re right that we have to tax and we have to spend. But tax and spend isn’t fiscally sound if we consistently spend much more than we tax. And, of course, ever increasing taxes has the effect of dragging the economy down.
We’re in a bind. Politicians want to provide more (of our money, of course) to their constituents so they can be re-elected ad infinitum. We need to liberate ourselves by forgetting about party loyalty and voting for those candidates who are most fiscally prudent. Of course, we always have to avoid third parties because they only split our vote causing us to be politically impotent.

@ItsAHabit re: “You’re right that we have to tax and we have to spend. But tax and spend isn’t fiscally sound if we consistently spend much more than we tax.”

That’s why that maneuver is called “spend and don’t tax” – because the taxes don’t cover the spending.

Re: “And, of course, ever increasing taxes has the effect of dragging the economy down.”

On the other hand, some tax increases stimulate the economy. Such a thing happened on Clinton’s watch, not to draw partisanship into it.

@JLeslie I agree the National Debt should be paid off, the sooner the better – but most taxpayers want the benefits without the responsibility – and therefore the spending continues, by using debt to pass off the expenses to a new crop of taxpayers.

If every taxpayer would now agree to pay it off, they would have to send roughly $70,000 per each taxpayer to cover their share.

@YARNLADY The highest estimates I have seen is $40,000 per tax payer, and I would say to do it over 5 years and see where we are at. I read that the top 400 earners make over $200million and pay an average of 17% tax http://www.forbes.com/2009/01/29/irs-high-income-personal-finance-taxes_0129_wealthy_americans.html (youo can skip the ad) lets up them to 20% that so the 3 percent difference is 6million per person in that income bracket is 2.4 billion using my rough math. That is quite a bit of money and they are paying much less tax as a percent compared to many of us, and forget that we are not even talking aboue maybe just raising taxes on everyone over 1 million maybe? Forget about the $250K mark I don’t think anyone will go for that. It’s not really $40K or $70K each person, and hopefully if at the same time we are curbing spending, and improving our economy, maybe addressing some trade issues it will get back into balance. And taxing these people 3–5% more will not hurt small business that makes no sense. They are not living check to check.

@JLeslie I agree with more taxes, but the abuses with the money they already have just makes me sick. I recently read of a fiasco in the Department of Veterans Affairs – One person authorized rent for a large building in San Diego, and the DVA paid rent for three years before someone got around to asking why the building was sitting there empty. It turns out the person making the original request had retired, and no one followed up on it. They had already found other accommodations.

Multiply this over the many, many different departments in the government in every city in the United States and it is a huge problem. Here in Sacramento, one government department had to vacate a building because of mold and other serious health considerations, but supposedly their contract forces them to continue to pay for the entire length of the original lease. Who would sign a contract that doesn’t protect the tenant?

A school district was supposedly tricked by their counsel, in cahoots with the former owner, to buy a huge tract of land for a highly inflated price, and the land can’t be built on because of it’s proximity to the airport. That one is currently in the courts – at taxpayer expense, of course.

@YARNLADY I did not mean to come across harsh if I did :). Glad we agree. I actually think some politicians love the deficit, because then they have something to run on especially since people connect it up with unemployment and the economy. None of the politicians seemed to give a damn about the debt when everyone was worried about the war, 9/11, and Osama.

@JLeslie I didn’t take it as harsh My statistics were extrapolated from the wikipedia article that used 2008 amounts.

@ItsAHabit If you really want to settle the question of taxation, just actually cut entitlements and government spending enough to balance the budget with the current revenues and see how long the political party that caused that pain has to wait before they ever win another election.

The real culprit in the National Debt is not Republicans or Democrats. It’s all Santa’s fault. Republicans used to piss and moan that it was hard to run against Santa Claus back when Democrats “gave” the American people Social Security then Medicare and Medicaid. But they wised up. What does every American of voting age want for Christmas? Just give money. So they launched “Don’t tax, just spend.” We the People are the ones that actually provide the Christmas gifts, not Santa, and We the People are who keeps voting to either get more for the same or the same for less.

Both equations are equally imbalanced.

LORD POLONIUS:
Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

Actually, a lot of government borrowing is absolutely and undeniably essential. For example, since we can’t figure out why pigs stink, the government is spending $1,700,000.00 on a study to to find the answer to that question.

Further question. Were the American citizens of the mid-1800s immoral to pass the Civil War debt down to us? Technically, we’ve never paid off any of that debt either, we just keep rolling it over and over. Yet most of us would agree that the money was spent on a just cause, no?

@laureth The point is not whether or not we have debt or the fact that it is rolled over or where it came from. The point is that we now have, or soon will have debt higher than our GDP. Which can never be paid off. As others have stated, debt is a good thing in the case of the country. Even people need some debt, just not more than they can possibly ever make.

I think you pay it down, you don’t pay it off….

@missingbite – We managed to get debt above GDP during WWII and then pay it down with huge tax rates. Unless we want WWII era taxes again, we truly do have to cut spending. However, unless we cut one of three things (1. Military, 2. Social Security, 3. Medicare) or raise taxes, we’re talking peanuts that won’t make any difference. Even if you axe all the cow fart studies, telescopes, the space program, college scholarships, food stamps and everything, we’ll still be in the same boat we are now unless we cut those big three expenses.

So, the livid Right won’t pay any more taxes. They also want a strong military. Since most of them are older, they’re going to want their Social Security and Medicare. What’s left? Huffery puffery.

I think we moderate defense spending (defending us is the primary or basic fundamental purpose of government; if we’re not defended, nothing else matters) and reduce Medicare, Social Security, New Health Care, and other entitlements as well as the studies of why hogs stink.

This handy chart (link) shows where the money goes, and why cutting “pig stink” studies is like trying to dig change out of the couch to pay off your McMansion mortgage.

laureth – Right you are! Had no idea Health & Human Services takes such a huge chuck of the budget.

@ItsAHabit As popular as it may sound to those not currently benefiting from Social Security, Medicare or Medicaid to cut those areas of spending, it would produce enormous pain among perhaps 100,000,000 Americans, most who can vote. Even those that are too young to vote have moms and dads old enough. You “change the deal” for those as Lord Vader so eloquently put it and your political movement will be dead for the rest of time.

We are currently the lowest taxed industrialized nation on Earth. We have the least in social benefit programs of the developed world. The right needs to come to grips with the facts. Our current tax policy is set up to benefit billionaires. The bottom 60% of Americans make less today in inflation factored dollars than they did 30 years ago. the middle 30% make about the same. Only the top 10% have gained positin, and the top 1/10th of 1% have skyrocketed in wealth. If we stay on this course long enough, we will create a banana republic.

I suppose some on the right know this, but they are in the economic class that is benefiting. Most of the right are just being used, fired up with rhetoric to go pull the lever and vote against their own economic interests and common sense.

After what @ETpro wrote, it kind of sounds like if the right got exactly what they seem to be asking for, that would be immoral. But then, I don’t believe they really want it, not in Washington, it just sounds good and gets them elected. They probably count on the left to balance it out somewhat. Probably both sides do that.