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Why do we have a national debt at all?


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2023 Mar 27, 9:37am   13,441 views  128 comments

by Patrick   ➕follow (60)   💰tip   ignore  

Seriously, what is the point?

I know that a lot of people say so that the Fed can collect interest from taxpayers, and that may be so, but why would the government even agree to that?

It seems that every country on earth has national debt, but how can this be? It always costs more to borrow and pay interest than to save and simply pay for something.

Is every country on earth stupid and/or irresponsible? Is it just that they have more demand for services than they can afford? If that's so, then it's still stupid because they have to pay it off eventually anyway. Or do they just keep rolling over the debt forever, growing ever larger? Eventually their debts will be infinite and the interest will be unpayable.


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1   AD   2023 Mar 27, 9:54am  

Debt load has to remain sustainable and one measure of that is debt to GDP ratio. I also track how much of debt service or payment is a percentage of total federal budget.

Fortunately debt to GDP ratio peaked around 135% in mid 2020. In late 2019 it was about 106%. It was between 97% and 103% during Obama's administration.

The debt to GDP ratio is currently around 120% according to the Federal Reserve Bank of St Louis.

Seems like the Fed is working to get that ratio down within the range of 105% to 110%.
2   zzyzzx   2023 Mar 27, 10:25am  

Why do we have a national debt at all?

Because Congress spends like drunken sailors.

They also do budgeting backwards. They spend first, then decide later how to come up with the money. A normal, fiscally responsible person looks at how much they make, then decides how to spend it.

Congress loves kicking the can down the proverbial road.

If we simply printed up the difference, inflation would be even worse.
3   Patrick   2023 Mar 27, 10:53am  

cisTits says

If the Chinese (and Europeans and Japanese/Koreans before them) couldn't 'sterilize' their trade surpluses with US treasuries, then they would have to buy real goids/assets from the US.


I don't understand this. OK, we buy a lot from China, and we send them dollars for the stuff they ship over here. What does that have to do with the national debt?
4   AD   2023 Mar 27, 11:18am  

zzyzzx says

Because Congress spends like drunken sailors.


yep, income from tax and fee (i.e., oil and gas leases, etc.) collections are less than expenditures

from what i've read about $7 trillion of the debt is held by the social security trust fund, $7.5 trillion is owned by foreigners, and the remainder $17 trillion is owned by the American public such as federal reserve system, pension funds and IRA and 401k account owners

so only $7.5 out of $31.5 trillion is foreign owned or 23.8%

entitlement reform is likely needed such as requiring increase in social security tax, etc.

i suspect they may raise taxes a little instead of enacting a means test
5   AmericanKulak   2023 Mar 27, 11:59am  

Patrick says

I don't understand this. OK, we buy a lot from China, and we send them dollars for the stuff they ship over here. What does that have to do with the national debt?


The Chinese don't want to buy finished goods (where the real value added is, a Caterpillar made in the USA is worth more than it's weight in metal scrap), so they are given the option of buying (previously) low interest US Treasury bonds, which also helps them keep their currency artificially cheap. In return, the government gets debt to spend on Pork, like 20-year military conflicts or Transgender Surgery Research or Bridges to Nowhere.
6   clambo   2023 Mar 27, 12:08pm  

The debt is the value of outstanding debt in the form of bonds=IOUs.

The problem is that a significant portion of the bonds are owned by foreigners.

So the interest they make is not recycled in the USA economy, it goes overseas.

The 43% of people who pay income taxes are working to pay interest to foreigners; this inevitably impoverishes the USA bit by bit.

If you made $100,000/year, how much debt could you afford?
7   GNL   2023 Mar 27, 12:15pm  

IMO, there is only 1 reason people and/or groups do anything....because it is profitable. Debt is profitable.
8   AD   2023 Mar 27, 1:27pm  

From US Treasury: "A budget deficit occurs when money going out (spending) exceeds money coming in (revenue) during a defined period. In FY 2022, the federal government spent $6.27 trillion and collected $4.90 trillion in revenue, resulting in a deficit. The amount by which spending exceeds revenue, $1.38 trillion in 2022, is referred to as deficit spending."

The government needed to cut spending by $1.38 trillion to has a zero-deficit budget for 2022. They likely could have done this with a slight tax increase.

Last time the federal government had a surplus was in 2000.

It will be interesting to see by spring 2024 if deficit will be between 3% and 1% of total GDP ; it certaintly is trending to more favorable levels just like the debt to GDP ratio has decreased from 135% to 120%.
.



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9   RayAmerica   2023 Mar 27, 2:01pm  

A little history of America and its first central bank, the 2nd. Bank of the United States, a precursor to our Federal Reserve system.

Andrew Jackson won the Presidency in 1829, vowing that he would not renew the 20 year charter for the central bank. His political opponents did not believe he had the courage to do such a thing and therefore pushed Congress to vote on the bank's charter renewal, which they did, passing the bill to renew. To their surprise, Jackson vetoed the bill, starting the war between the bankers and Andrew Jackson.

Jackson firmly believed that the 2nd. Bank of the United States had gained far too much centralized power over the economy of America, which served foreign and special interests. He also believed that it created an unconstitutional banking monopoly that was rigged in such a way as to help make the rich get richer. The shear financial power of the central bank also easily influenced federal politicians, and that the central bank was able to wield enourmous political power by favoring, at different times, regions of the country over others.

During his entire two terms in office, the newspapers, the bank, the rich, along with its bought off politicians, etc., waged endless war against Jackson, but he never relented. During Jackson's 2nd. term, the federal government, for its only time in history, became completely debt free. Soon after Jackson left office, the bank's charter was renewed and the debt has been piling on ever since.

One quick side bar; the Federal Reserve is different from the 2nd. Bank of the US in that, through Constitutional Amendment, the Fed not only controls the money supply, but it charges the Government fees and interest on the debt that the government creates. In order to finance the government's reckless spending, the Fed creates money out of thin air, whereby the Federal Government pays fees and interest to the Fed. The Federal Reserve is also completely autonomous from the Federal Government, which has no power over its monetary policies.

Federal politicians love the Fed because they can 'finance' their corrupt, kick back, reckless spending without taxation. What most people don't understand is that they ARE being taxed via the 'hidden tax' of inflation (too many created dollars chasing too few goods and services).

Had we remained true to the Constitution, government debt would have been left to the Congress to deal with, and made Congress directly answerable to the PEOPLE. Prior to the Federal Reserve Amendment, if, as in the case of war, Congress decided to create money, it could do so without having to pay exorbitant fees and interest to the private centralized bankers.
10   NuttBoxer   2023 Mar 27, 2:06pm  

Patrick says

Why do we have a national debt at all?


The same reason we have FDIC, illusion. In a system designed to be corrupt and dishonest, it's very important the pretense of responsibility is maintained to prevent the illusion from being found out, and confidence plummeting, which would destroy the system.
11   RayAmerica   2023 Mar 27, 2:22pm  

Patrick says


I don't understand this. OK, we buy a lot from China, and we send them dollars for the stuff they ship over here. What does that have to do with the national debt?

By creating enormous trade imbalances with China, wealth continues to leave the USA. Also, instead of manufacturing goods here, which in turn would create jobs, which in turn would pay taxes, theoretically, would contribute to lowering the debt. Instead of America reaping the benefits of manufacturing at home, China becomes the beneficiaries. In a very real sense, we are helping to advance the despotic Communist rule over the Chinese people.

One thing in all of this that few people seem to pay attention to is this; many American corporations are operating in China, using cheap/slave labor, while bypassing much in the way of taxation. (Trump attempted to put an end to this via tariffs, but was met with opposition form both sides of the aisle)

American Multi-National corporations have been benefitting from America's corporate friendly laws since the early 80's. These corporations are able to avoid much in taxation, have access to cheap/slave labor
& natural resources, are able to avoid the environmental regulations (along with OSHA), unions, etc. What's more, American banks have helped finance these ventures overseas ... all to the detriment of America and its workers.

Trade deficits = national poverty

Trade surpluses = national wealth
12   clambo   2023 Mar 27, 4:14pm  

Cistits
Part of the federal budget each year is interest on certain kinds of debt.
A portion of the interest is paid to the foreigners who own the IOUs.
You are sending some of your tax dollars overseas.
13   RayAmerica   2023 Mar 27, 4:23pm  

During recent Senate hearings involving Treasury Sec. Yellen, it was disclosed that the servicing of the current debt is a staggering $674 BILLION annually. Most of that debt is currently @ 3%, which means that the cost of servicing the debt will be increasing due to higher interest rates.
14   Patrick   2023 Mar 27, 4:30pm  

OK, I've read all those and I still don't see any benefit to the American people in having any national debt at all.

One might argue that we need the ability to temporarily spend beyond current tax revenue, but our debt is not at all temporary.

I don't see the relation to balance of trade either. When we buy things from China, we pay for those things now. What does that have to do with the national debt?

We would all be richer if we simply saved our tax revenue in advance, and then spent it without incurring any interest payments at all.
15   clambo   2023 Mar 27, 5:00pm  

Of course there is no benefit to having a national debt.
It all started after WWI and prohibition I think.

For over 100 years the Federal government got by with 1. Alcohol and tobacco taxes 2. Tariffs on foreign goods.
16   Patrick   2023 Mar 27, 5:07pm  

Is there even one country with zero national debt? I looked on a list and found only Macau with no debt, but that's hardly a country.
17   HeadSet   2023 Mar 27, 5:26pm  

Patrick says

We would all be richer if we simply saved our tax revenue in advance, and then spent it without incurring any interest payments at all.

True. Some cities in the US have that feature - they only spend this year what they collected in taxes last year.
18   Patrick   2023 Mar 27, 5:28pm  

Interesting!

Do you have any names of cities with no debt? A quick search did not turn up any.
19   HeadSet   2023 Mar 27, 5:52pm  

Patrick says


Interesting!

Do you have any names of cities with no debt? A quick search did not turn up any.

Hampton, VA, where I used to live. However, it looks like they did take on a capital improvement bond since I left. Other than that, no debts issued.


20   clambo   2023 Mar 27, 6:37pm  

Norway is rich, and owns a lot of bonds.
Kuwait and others are likely rich too.
21   Patrick   2023 Mar 27, 9:26pm  

But they both have national debt:


Norway's national debt has decreased significantly over the past 23 years, ranging from 31.0 billion to 108.1 billion USD from 1998 to 2021. In 2021, liabilities were only 76 billion USD, resulting in a debt of 14,046 USD per person based on the number of inhabitants.



Kuwait's national debt has been steadily increasing since 2010 when it was 5,359 million euros 7,110 million dollars. In 2020 it was 2,655 dollars per inhabitant


Why do they have any debt at all?
22   AD   2023 Mar 27, 9:46pm  

RayAmerica says


Trade deficits = national poverty


Right around 1997 is when the trade deficit started to take off, which coincides with NAFTA and free trade agreement with China.



.

From the BLS website: "At its peak in June 1979, manufacturing employment represented 22 percent of total nonfarm employment, but that share had fallen to 9 percent by June 2019. Manufacturing’s falling share of employment coincided with job growth in service-providing industries, including professional and business services, education and health services, and leisure and hospitality."

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23   AmericanKulak   2023 Mar 27, 9:50pm  

clambo says


For over 100 years the Federal government got by with 1. Alcohol and tobacco taxes 2. Tariffs on foreign goods.

There was a contribution required by the states to pay based on per capita, if I recall. The states simply had to come up with the money, they didn't have to actually tax residents per head. They could have excise or state property taxes and pass the share to the Fed Gov along.

Unfortunately, the 24th Amendment got rid of POLL TAXES, which are a great way to take back America by excluding drains on society form voting, as many dumb Wine Aunts and Ho Moms and crack/meth heads wouldn't have the money to vote on election day or would have forgotten to pay or decided boxed wine and cat litter or crack was more important. AND it would make states have to track WHO paid, which would help prevent voter fraud.

SCOTUS went so far as to ban the the need to file free "State Resident" paperwork in the 1960s in a case involving Virginia substituting a filing for residency vs. a poll tax.

Interestingly, Leftoid cities are levying head taxes for Employees on both employees or employers. Seattle did so but repealled when big business squealed : The point being to soak suburban commuters and drain them of cash for Baby Mamas.

https://en.wikipedia.org/wiki/Seattle_head_tax
25   clambo   2023 Mar 27, 11:35pm  

Why Norway sells bonds I don't know.
Kuwait either.
But Norway has a giant investment fund that contains real assets, including USA bonds.
Maybe they like having a little cash for projects so they sell bonds and don't touch their investments.
That's like me using a credit card and not touching my IRA.
26   Misc   2023 Mar 28, 3:20am  

Patrick says

Is there even one country with zero national debt? I looked on a list and found only Macau with no debt, but that's hardly a country.


North Korea would rather be poor than be in debt. I obviously prefer our system.
27   NuttBoxer   2023 Mar 28, 8:24am  

Patrick says

Why do they have any debt at all?


In a central banking system, insiders are incentivized to take on as much debt as they can while maintaining the illusion, because worst case, they are bailed out through more inflation. Just like FDIC does not insure deposits, it's insures bailouts.
28   Patrick   2023 Mar 28, 9:11am  

But insiders could still do that if we had no national debt, right?
29   RayAmerica   2023 Mar 28, 9:23am  

Misc says

North Korea would rather be poor than be in debt. I obviously prefer our system.

North Korea is poor due to their totalitarian, Communist dictatorship. That's the reason for their poor standard of living and not because their government is not heavily in debt.

By the way, real wealth is when you actually own what you have. Artificial wealth is when you possess what you have but are making payments to the real 'owner,' the lender that you borrowed your funds from.
30   RayAmerica   2023 Mar 28, 9:33am  

Patrick says

But insiders could still do that if we had no national debt, right?

Patrick,
In every crime, the first question is always asked ... cui bono, i.e., who benefits? In this case, the private bankers of the Federal Reserve are the direct beneficiaries, because they earn $billions every single year due to deficit spending. Indirectly, federal politicians also benefit by gaining political power (along with, often times, kick backs from corporations and even foreign nations ... think Ukraine). The people pay for all of this through the hidden tax of inflation, which the average person cannot understand. If you don't believe that, ask practically ANY person to explain what exactly inflation is and how it comes about. Most will just shrug their shoulders and respond with something like 'inflation is when prices go up,' but can't explain how and why.

If every spending program had a tax attached to it in order to fund it, how many do you think would pass?
31   Misc   2023 Mar 28, 9:34am  

RayAmerica says

Misc says


North Korea would rather be poor than be in debt. I obviously prefer our system.

North Korea is poor due to their totalitarian, Communist dictatorship. That's the reason for their poor standard of living and not because their government is not heavily in debt.

By the way, real wealth is when you actually own what you have. Artificial wealth is when you possess what you have but are making payments to the real 'owner,' the lender that you borrowed your funds from.


You may expand your definition if we have $6 trillion or so in defaults by iffy corporations.
32   Patrick   2023 Mar 28, 9:41am  

Misc says

North Korea would rather be poor than be in debt. I obviously prefer our system.


@Misc How does not having a national debt make North Korea poor? And how does having a national debt make us richer? I just don't see either one at all.
33   Patrick   2023 Mar 28, 9:44am  

RayAmerica says


The people pay for all of this through the hidden tax of inflation, which the average person cannot understand. If you don't believe that, ask practically ANY person to explain what exactly inflation is and how it comes about.


I do believe all of that. And none of it benefits US citizens or the country as a whole.

RayAmerica says


If every spending program had a tax attached to it in order to fund it, how many do you think would pass?


I don't think that it is necessary to create a new tax for each program though. I just want all government spending to be funded with savings collected in advance, rather than via debt which incurs the large extra expense of interest.

Heck, funding by saving in advance would actually earn interest, make that system cheaper than a national debt in yet another way.
34   RayAmerica   2023 Mar 28, 9:49am  

Patrick says


I just want all government spending to be funded with savings collected in advance, rather than via debt which incurs the large extra expense of interest.

This is exactly what Andrew Jackson was advocating way back in 1829, and the bankers and their newspapers attacked him for the entire 8 years of his Presidency. Again, when Jackson vetoed the central bank charter, for the only time in its entire history, the federal government was completely debt free. When Jackson left office, the charter was renewed and we've been in debt ever since.
35   GNL   2023 Mar 28, 10:27am  

Fiat is a massive crime wave...3 card monty.
36   Misc   2023 Mar 29, 9:32pm  

Patrick says


Misc says


North Korea would rather be poor than be in debt. I obviously prefer our system.


Misc How does not having a national debt make North Korea poor? And how does having a national debt make us richer? I just don't see either one at all.



@Patrick Once upon a time, the United States government was running tax surpluses instead of deficits, and it was banking this money with the treasury. All the other governments of the world were being prudent and running deficits.

The US citizen protests about this were legendary. The citizens were stating that we had the richest government in the world, but therefore, had the poorest people.
37   AmericanKulak   2023 Mar 29, 9:43pm  

RayAmerica says

This is exactly what Andrew Jackson was advocating way back in 1829, and the bankers and their newspapers attacked him for the entire 8 years of his Presidency. Again, when Jackson vetoed the central bank charter, for the only time in its entire history, the federal government was completely debt free. When Jackson left office, the charter was renewed and we've been in debt ever since.

They hated Jackson and the banks used a mentally ill guy as his assassin. After Jackson caned the man, he told Jackson people with money put him up to it.
38   ForcedTQ   2023 Mar 29, 11:43pm  

Patrick says

RayAmerica says



The people pay for all of this through the hidden tax of inflation, which the average person cannot understand. If you don't believe that, ask practically ANY person to explain what exactly inflation is and how it comes about.


I do believe all of that. And none of it benefits US citizens or the country as a whole.

RayAmerica says



If every spending program had a tax attached to it in order to fund it, how many do you think would pass?


I don't think that it is necessary to create a new tax for each program though. I just want all government spending to be funded with savings collected in advance, rather than via debt which incurs the large extra expense of interest.

Heck, funding by saving in advance would actually earn interest, make t...

So what we really need are state and federal sinking funds, not debt chains!
39   Misc   2023 Mar 30, 12:07am  

Do you think that the taxpayers would put up with seeing all their money being hoarded by the government?

Do you really want the government to become a money making enterprise?

Historically the people have decided 'no' to these questions.
40   WookieMan   2023 Mar 30, 7:08am  

Patrick says

Interesting!

Do you have any names of cities with no debt? A quick search did not turn up any.

I’m on a board as an elected official. You’d be shocked how dumb citizens are. We have money sitting in an account for construction and people bitch that we’re hoarding their tax money. Basically they WANT us to spend it.

What the federal government realized is spending more makes a larger fraction of the population happy even if it’s debt. Our debt doesn’t need to be paid. Who is gonna collect?

Our board has a balanced budget. No referendum’s. $300k in the bank and soon to be about $1.2M. We’ll spend it but idiots think we’re scamming the tax payers. So what happens is it gets spent and then they bitch it wasn't enough. So the pressure kicks in to borrow.

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