Posted by: minnow | August 1, 2018

What’s the Big Deal?

Most people have debt. It might be a house mortgage, credit card debt, medical bills, a car loan, or school loans. And, most people manage. Before 45 took office, the GOP howled about the National Debt. Despite completely turning the economy around the GOP pelted President Obama for the size of the debt. And it was true. It did grow. Under President Obama the debt rose by 68% or $7.917 trillion dollars. Meanwhile, in the first six months after 45 took office the National debt fell by $102 billion dollars. But, let’s give credit where credit is due. The incoming president doesn’t actually impact the the budget or the debt until the new fiscal year which begins in September. So this relatively small decrease in the national debt was actually on President Obama’s watch signaling the completion of the recovery from the recession Obama inherited. Under our new President, the deficit has actually risen from the $19.9 trillion he started with to over $21 trillion as of March 15, 2018. During the time the debt fell we actually had a debt ceiling. The increased debt was made possible because the current administration raised the debt ceiling, and then suspended the debt ceiling altogether until 2019.

So, the United States is in debt–what’s the big deal?

With personal debt most people are able to meet or exceed their minimum payments and slowly pay down what they owe. The goal is to get out of debt completely, having benefited from the taking on of (temporary) debt with a good education, better health, or property which increases in value. Even in the case of credit card debt, if paid off monthly individuals can establish themselves as a good credit risk should they want to borrow money later for a bigger purchase. Being a good credit risk can mean the interest you are charged on money you borrow is kept lower, ultimately resulting in you paying less for what you borrow.

Still, what’s the problem with debt? Becoming a poor credit risk–not paying off your debt and causing lenders to think you might never be able to pay it off–causes lenders to be reluctant to give you a loan. When they do, the interest on the loan increases which in turn costs you more for the privilege of borrowing. The world bank believes a country is in trouble (a poor credit risk) if their debt to gross domestic production (GDP) goes above 77%.The US debt to GDP ratios for 2017 was 105.2%.  In other words, according to world bank standards the US is in trouble.

The news has been full lately of stories about how Social Security and medicare need to be reformed. The GOP would have us believe these programs contribute to the national debt and cost taxpayers money. UNTRUE. The fact is, these programs take in far more than they put out. And, while retiring baby boomers are slowing changing the workers to retirees ratio both programs still pay for themselves. The problem is Congress has borrowed heavily from Social Security and Medicare–to the tune of $3 trillion plus–and hasn’t figured out how to pay back what they owe. The need for reform is a false narrative designed to distract from GOP greed and mismanagement.

The GOP solution begun under Ronald Reagan–give more money to the people at the top–hasn’t worked and isn’t likely to start. Instead, we need to rebuild a strong middle class.  This will broaden the tax base but even more importantly, it will expand the consumer base. In order to accomplish this, the tax burden must shift toward those who can most afford it and away from the middle class which has been shouldering it since the famous Reagan tax cuts. Under President Reagan the national debt increased $186% and the middle class began to shrink. We must reverse both those trends if the US economy is ever going to thrive again.

Ultimately we, the taxpayers, are responsible for the national debt. We need to understand what causes it, what can decrease it, and what we need to do to guarantee it doesn’t harm us more than it already has. We need to get money out of politics. We need a Congress which is responsible to all the people not merely their donors. We need problem solvers, innovators, and fact based thinkers. But first, we need you to find these people, champion these people, and elect these people. Midterms are only three months away.

 

 

 

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Responses

  1. But how do we get the giants to share? Great post.


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