Saturday, March 05, 2011

[1613] DEBT/DEFICIT - Okay- another big news week. Let’s talk a little about the debt/deficit. First, these 2 things are not the same, though in the media they sometimes get confused. This week the ‘left wing’ media has decided to fight against the ‘right wing’ and they had a few talking heads saying ‘there is no debt problem in the country- or in Wisconsin’. And of course the right shot back ‘are you nuts!’ Right now our govt. budget is around 3.5 trillion dollars [what we will spend this year as a govt.- not G.D.P. which is a number we use when talking about the trade deficit- which also gets confused with the govt. deficit- they are also 2 different things] so, we plan on spending 3.5 trillion. We bring in [thru taxes] around 2.4 trillion a year. So we are over budgeted by 1.1 trillion- we will borrow the money to pay the bill. Our debt- the amount that gets put on the credit card- the principle that we borrow- is now 15 trillion dollars. No matter what anybody says- that’s way too much. Why? When Bush took office [G.W.] the debt was 5 trillion- in all the years of the existence of our country- it never went over that number- and it took many years to get there. In 8 years of Bush [and 2 wars] the number hit 10 trillion. It doubled in 8 years. At the time many economists saw a real problem- but being the economy was doing okay- we kinda thought we would pay off the debt [credit card balance] as time went by. Then we had some major financial problems- some thought the world economy was on the brink of disaster- another depression. So we did bailouts- stimulus- things that were debated but cost lots of money. So in 2 years- what has happened to our credit card balance? It went up to 15 trillion. So it took hundreds of years to get to 5 trillion- 8 years under Bush to add another 5 trillion to the card, and then in 2 years we went up another 5 trillion. Too much- too fast. So what about the argument being made by some progressive news folks? The argument makes some sense. For instance all debt is not bad- lets change the above numbers to dollars- if you were making 3,500 a month, and your credit card balance was 15 thousand, and your expenses were 2,400- then in that scenario the debt would be okay- and it would be silly to take all your income to pay off the card- no- you need to use some for the car payment, the house payment- etc. That’s the argument being made right now from the left- but when the income is 2,400- the expenses 3,500- and you’re adding 1,100 to the credit card [actually every year- but you get the picture] then the debt problem is severe. So the truth is we have a big problem- yes it would be foolish to try and use all the income to pay off the card- but it’s also silly to say there’s really no problem [like some are now saying- Paul krugman from the N.Y. times espouses this idea and MSNBC has chosen to run with it]. So that’s why the congress is haggling over these Continuing Resolutions- basically extended the budget by 2 weeks at a time- cutting around 4 billion dollars every 2 weeks. In the long run they want to cut this years spending by 60 billion- some say that’s too much for one chunk. It would be like cutting the 3,500 a month spending [in the above scenario] to 3,440- really not that much in the big picture- because that hardly brings the long term debt down. So in my mind this is a real problem- and we as a country have not dealt with it yet. So that’s the scoop- is all debt bad debt? No. Is our current situation bad? Yes. Once again, this is a story that both sides like to tell- but they usually make their argument sound the best- while making the other side look like liars.

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