The National Debt

[Nate the Great]

So I was browsing Wikipedia trying to get a handle on an issue that continually irks me, the National Debt.

http://en.wikipedia.org/wiki/United_States_public_debt

It still doesn't answer the fundamental questions. Here's a plea to any economic majors out there.

1. So for years they've wanted us to buy bonds to "relieve the debt," with the promise that we'll get the money back with interest later. How does this help anyone? It sounds like the government is just slowing their descent down the spiralling vortex.
2. Why in blue blazes can the Mint just print money willy-nilly whenever they feel like it? What's wrong with all of the governments saying "okay, the total worth of everything in the world is now fixed at X billion dollars/Euros/yen/whatever."
3. Why awe we still spending billions of dollars on foreign aid? Actually, why did we start? Shouldn't aid be spent on people who will eventually be real taxpayers?

[Chancellor Valium]

Ehh. Over here, we're so deep the IMF has refused to lend any more money to our government. But then, this is an oeconomy run by a man who sells off gold reserves when gold is at an all-time low price...While the Euro-tunnel project is so far in debt that if the bank tried to collect it would end up being shut down (I don't understand how, but a friend who understands economics told me.)

[Nate the Great]

IMF? Euro-tunnel?

The joke I'd really like to use is "did I forget to feed my Babel Fish again?" but as Babel Fish feed off of the wearer's brain energy, that really doesn't work. Drat.

[Burt]

Originally Posted by Chancellor Valium

Ehh. Over here, we're so deep the IMF has refused to lend any more money to our government. But then, this is an oeconomy run by a man who sells off gold reserves when gold is at an all-time low price...While the Euro-tunnel project is so far in debt that if the bank tried to collect it would end up being shut down (I don't understand how, but a friend who understands economics told me.)

I keep hearing this too. How the hell can it be? It's a flipping tunnel under the sea for crying out loud! How exacty are they running this thing? It's always busy, must make money. Yet is in debt. Amazing.
Less concerned about the national debt though. I think it's more just 'something that's there but means nothing to us' type thing. Like Greenland. I did read an amusing bit about the USA's debt in a Bill Bryson book (I think it was Notes from a big country)
Seems you guys are screwed.

[Gatac]

It's generally accepted that a modern government will run up serious debts. I think the rule of thumb is that new debts shouldn't be much above 1% of the gross domestic product, but of course the US has managed to collect a sizeable amount of foreign debt. The real problem starts when your new debts are outpaced by the interest you have to pay on your old debts, which cuts into the "real" operating budget of your country. Unless you find new ways to make money (like, say, tax air usage) or reduce spending (like cutting foreign aid), it means that you're basically screwed and doomed to a slow death. A lot of countries (among them the US, Japan and Germany) already have to deal with this and think of ways to stop it.

As for your numbered questions:

1) Yep, bonds are a delaying action. It's basically you granting the state a loan. If it works out, you win money. If it doesn't...you'll be the proud owner of nice-looking certificates. Of course it's a loss for the state in the long run, but often, you need money now and are willing to make yourself believe that times will be better when the bond is due. Ideally, everyone who agreed to offer the bonds and spent the money is already out of office when the whole thing is due...

2) Because total worth is not fixed. For example, until the commercial exploitation of music, it was all about the performers being paid to play for a small audience. With mechanical music reproduction, they basically created a whole new market. Other economic factors are being destroyed as we speak. (Commercial fishing could die out in our lifetimes if we keep it up like now.)

Also, since debts are often valued in your own currency, it may make sense for the government to induce inflation, which lowers the real worth of all debts and capital in general by making the currency worth less. Of course, this often leads into a death spiral of hyperinflation, and so most countries try to steer far away from that.

3) Foreign aid is a tricky little bit. On the one hand, we are embarking on what can be called systematic exploitation of third-world countries. For example, the USA has tariffs on manufactured goods from third-world countries - this, in effect, pressures those nations to only export raw materials, which in turn prevents them from establishing a manufacturing base that would allow them to climb out of their current hole. So, foreign aid does have some justification, even if it's only a drop of water on a hot stone. On the other hand, foreign aid is usually swallowed by the governments, which leads to high corruption. The only sensible option seems to be to allow those countries to build their own economy. (Red Cross food shipments undercut local farmers! Disaster relief is not the same as feeding an entire country constantly...)

Despite all the negative things I've said here, foreign aid is important and has helped literally billions of people. The thing is, it also has important drawbacks that need to be understood.

---

I'm not an economist, and if you dig deeper into the whole topic, you'll find the whole situation is exceedingly complex. I'm just telling it how I see it. I encourage everyone who's interested to take their own look at the affair and come to their own conclusions.

Gatac

[Nate the Great]

Call me a cynic, but the fact that spending has to go down seems to be the crux of why this isn't that simple of a problem. How does the government cut spending? Eliminate entire programs that are staffed by people depending on the income.

Sometimes I wonder if the solution couldn't be as simple as having rich people pay a higher percentage of their income as taxes. Face facts, Bill Gates could live on ten percent of his income about a million times easier than we could live on ten percent of ours.

[Gatac]

People always advocate new taxes - for other people.

...

Sorry, it's just been my observation that it's often "Tax the rich!" when this comes up, and this leads me to ask how that can be justified. The rich are already in the highest tax bracket, and the tax percentage means that they in effect already subsidize people who earn less. After all, on the axiom that you don't want to spend much more money on exactly tracking who does what, it can be assumed that all people will use roughly the same amount of resources and services as provided by the state, so the "fair" solution would be to take the total costs of the government divided by total taxeable population and let everyone pay the same amount to cover it. Of course, then you get the problem that 5000 bucks (figure grabbed from thin air) is peanuts for some and unpayable for others. From that perspective, most modern tax systems aren't just unfair, but massively discriminate against rich people. Even if everyone was paying the same percentage, those with more income pay more money for the same services. Add the higher percentage of taxes for rich people and it just shifts the burden more.

Taxes aren't fair. The best you can do is try to spread the burden in a way that everyone can bear their part.

A radical solution would be to give everyone a certain lump sum of "allowed income" and keep everything above that as tax, but that is a) massively unfair b) against the spirit of capitalism and free commerce c) never going to be passed as law by any government, ever. (Well, I suppose you could pass it, but good luck keeping the big money inside your borders.)

---

Rather than looking for innovative ways to tax the rich, how about looking into ways to close the gap between poor and rich? That's the real problem, imho.

Gatac

[Nate the Great]

And how do you close the gap between rich and poor?

1. Make the poor have more money.
OR
2. Make the rich have less money.

I don't see how you can do these independantly. Just do 1. and the national debt increases even faster and there are millions more dollars in circulation. Just do 2. and you've got lawsuits, tax evasion, fat cats moving out of the country, etc. You've got to do both.

[Gatac]

Just for clarification, I haven't given up on this topic, I'm just looking for a good way to respond to Nate.

Gatac

[Nate the Great]

I'd like to say whatever the nonsarcastic version of "good luck" is. Bon chance, perhaps?

[NAHTMMM]

Originally Posted by Nate the Great

And how do you close the gap between rich and poor?

1. Make the poor have more money.
OR
2. Make the rich have less money.

I don't see how you can do these independantly. Just do 1. and the national debt increases even faster and there are millions more dollars in circulation. Just do 2. and you've got lawsuits, tax evasion, fat cats moving out of the country, etc. You've got to do both.

And then you will have both sets of consequences happening.

There's a simple answer to the quandary, but first one has to ask a simple question (or a more complicated version thereof): Do we, as a country, really care about the gap between poor and rich? Or, if you prefer, do we as a country (or world, or whatever) really want to help impoverished people escape their poverty?

If we do, then the problem should solve itself because the people with more money will help those with less. Not just through governmental forms of welfare and unemployment benefits--for a country the size of, say, the U.S. that's not likely to be very efficient for very long--or through large charitable organizations and the like, but through old-fashioned "lending a hand". Helping out friends in a tight spot. Giving a few loaves of bread to the local food pantry. That sort of thing.

If we don't, then maybe we should stop pretending we do care. It might even be a service to charities and the like because then they'd see more clearly what they're up against. *shrugs*

I could go on in any of several directions, but I'd risk turning this into a long-winded, way-too-serious essay.

[Nate the Great]

Well, I suppose one particularly nasty way to solve the problem is to reintroduce tariffs on foreign products and reduce the minimum wage. Thusly more people in the US would be employed in those menial jobs that we've been shipping overseas all these years. I'm not really in favor of this, but alternate solutions aren't presenting themselves. At least positive solutions; I sort of eliminate ideas like "execute all the poor and homeless" as bad PR.

[NAHTMMM]

My point is, we don't have to go through national-level bureaucracies to start to fix this problem. The U.S. government is "of the people, by the people, for the people" (and an awful lot of other countries are democracies or republics too, of course), so we have the ultimate power ourselves, on the individual level, right? Going through a humongous, diffuse bureaucracy to handle a problem that is MUCH better to deal with (IMHO) on the individual level seems to me like trying to eat peas with a crocheting needle. One of those big, blunt crocheting needles.

But that requires enough non-poor people in a wide-enough area of influence caring enough about the impoverished to help them enough that they are no longer impoverished (or if they are still impoverished, it's their own faults). And you can't legislate caring any more than you can legislate morality, so you never hear about this on Capitol Hill or talk shows.

[Nate the Great]

We don't have to? And why would corporations or individuals sign over double-digit percentages of their income to charity and social reform for any sort of voluntary reason? Riddle me that, Boy Wonder.

[NAHTMMM]

Because they want to.

That probably seems absurd, but the ethos ( at the puzzle book I was working on earlier ) of various human societies has changed radically in this direction and that over time. Besides which, a lot of corporations already have their own charities and foundations and donation schedules and such-not in place. Now, what percentage of their respective incomes is that? I don't know. Are they doing it out of the goodness of their hearts, or for the publicity, or for tax purposes? I don't know, and it seems likely that the cause varies from one case to the next, but the dollar bills don't care why they're being handed around.

The gas station nearest our home (and possibly others) has a plastic bottle for customers to drop change in, to help pay for the medical expenses of one child or another (it changes every so often). When I went to the car dealership a few days ago for quasi-routine maintenance, they had a box of several varieties of fund-raiser candy bars on the counter in the cashier's office. Maybe someone's child's Boy Scout troop was raising money, I don't know. But I'm sure that neither business had to do that, and I'm sure there are some people--the sort who genuinely believe Bill Gates loses out if he stops to pick up a $100 bill from the sidewalk--who would argue that they shouldn't reserve six or twelve square inches of valuable counter space for such inane things. But they did, and hopefully the customers can make a meaningful difference for the better in each case. Such activities probably don't even register on annual estimates of nationwide charitable giving and tax deductions and so on, but if the child's parents manage to keep their apartment while getting their girl the life-saving operation she needs, well then, I'm not going to complain about the results .

[Nate the Great]

Uh, yeah...

I hate to break it to you, but for every child who gets a small fraction of their hospital bills paid for by such an endeavor, there must be dozens, if not hundreds, that don't, and a lot of them die. Thems the breaks. We may want to switch to a lighter topic now.

Egads! Marshmallow Gerbils!

[Burt]

So the Bubonic Plague?! Thats gotta suck, eh?

[Nate the Great]

Har har.

As for a "lighter topic," anyone else a fan of Juggling for the Complete Klutz and all of the other fine books by Klutz Press?

[Nate the Great]

Sorry, but I have to pick at this scab some more.

1. Will the National Debt EVER get any smaller? All I'm seeing is the rate of increase being SLIGHTLY slowed down. And by "slightly," I mean down from "really insanely large percentages annually" to "moderately insanely large percentages annually."
2. How come people actual buy into bonds? Giving up perfectly good money NOW in exchange for slightly more (but less valuable via inflation) money LATER?
3. How in the world did they get away with spending Social Security money for something OTHER than Social Security purposes? Sort of defeats the purpose, doesn't it?

[PointyHairedJedi]

He flies a pretty wonky orbit, that George W. Bush. Certainly not the one that most of the rest of us are on, anyway.