PUBLIC DEBT, DEFICITS.
POLITICIANS HAVE DISCOVERED HOW THEY CAN WIN ELECTION BY INCREASED GOVERNMENT SPENDING (HENCE INCREASE FISCAL STIMULATION) AND LOWER TAXES.
WHAT IS WRONG WITH THIS APPROACH.
1. DEFICIT SPENDING CREATES INFLATION.
2. HEAVY FEDERAL BORROWING CROWDS OUT PRIVATE INVESTMENT.
3. PASSES THE BURDEN ON TO FUTURE GENERATIONS.
4. MORE AND MORE FUNDS ARE PAID OUT TO FOREIGN INVESTORS WHO DRAIN ECONOMY OF WEALTH.
5. REDISTRIBUTION OF INCOME TO BOND HOLDERS FROM TAXPAYERS.
6. USE OF FEDERAL BORROWING FOR SPENDING CONTRADICTS POLICY OF INVESTING. (SIMILAR TO PAYING FOR VACATION ON HOME EQUITY LOAN.)
7. FEDERAL BORROWING DURING "GOOD" TIMES EXHAUSTS FINANCIAL RESOURCES THAT MIGHT BE NEEDED DURING A DEPRESSION OR WAR OR OTHER EMERGENCY.
8. FEDERAL OBLIGATIONS FAR OUTSTRIP ABILITY TO PAY - FHA INSURANCE, VA MORTGAGE GUARANTEES, CROP SUPPORTS, MEDICARE COSTS AND GUARANTEES, BANK INSURANCE ON DEPOSITORS, SEC INSURANCE, LONG TERM CONTRACTS FOR WEAPON SYSTEMS ETC, FINANCIAL AID OVERSEAS, ETC.
CURRENT NATIONAL DEBT STANDS AT $5 BILLION DOLLARS
IF THE DEBT HAD TO BE PAID OFF TODAY EACH PERSON IN THIS ROOM WOULD HAVE TO COME UP WITH $19,000.
THE AMOUNT OF DEBT THAT YOU OWE IS INCREASE BY $900 TO $1,000 PER YEAR.
A 1% RISE IN INTEREST RATES INCREASES THE NATIONAL DEBT BY $50 BILLION DOLLARS
CURRENT DEBT $5,000,000,000,000
CURRENT ANNUAL ADDITIONAL DEBT $250,000,000,000
IN FIVE YEARS 7.8 TRILLION $24,800 EACH
IN EIGHT YEARS 9.89 TRILLION $29,000 EACH
IN TEN YEARS 11.4 TRILLION $31,400 EACH
IN FIFTEEN YEARS 16 TRILLION $37,200 EACH
(ASSUMING A 3% POPULATION GROWTH, 5% ANNUAL INTEREST RATE AND $250 BILLION WORTH OF ADDITIONAL DEBT PER YEAR.
SOLUTIONS
A. STOP BORROWING - PROBLEM PULLING THE PLUG ON FEDERAL SPENDING WOULD BE EXTREMELY PAINFUL TO THE ECONOMY. 25% OF U.S. ECONOMY NOW GENERATED BY GOVERNMENT SPENDING.
B. RAISE TAXES - POLITICIANS HATE RAISING TAXES. OPPONENTS WOULD USE IT TO REMOVE INCUMBENT FROM OFFICE.
C. DEFAULT ON DEBT. - DISASTER - A LOT OF THE FEDERAL DEBT IS OWED TO OURSELVES - BANKS, INSURANCE COMPANIES, INDIVIDUALS, COLLEGES, COMPANIES.
WE WOULD NEVER BE TRUSTED AGAIN TO LEND TO AGAIN. NOT IN 100 YEARS.
D. DEVALUE THE CURRENCY. - MOST LIKELY CHOICE. WOULD MAKE FOREIGN GOODS MUCH MORE EXPENSIVE - WOULD INTRODUCE HIGH INFLATION OR EVEN HYPER INFLATION INTO ECONOMY. WOULD DESTROY SAVERS, LENDERS AND ELDERLY.