Generations and Solutions
Paul Krugman and his minions aside, most of us know that the massive federal debt (currently $17.5 TRILLION) is nothing short of inter-generational theft.
So often we complain that our worthless lawmakers are "stealing from our grandchildren."
But is that really true?
Of course, no-one (N O - O N E, nobody AT ALL) is calling for a balanced budget but let's just pretend for a minute.
Let's pretend we could balance the budget tomorrow. Let us pretend we could actually have a budget surplus in this twisted day and age.
And if we're dreaming we might as well dream BIG - let's imagine we could recreate the largest US Federal Budget Surplus in HISTORY ($236 Billion in the year 2000.) and do it every year, year-in year-out, for as long as it takes to pay off that huge debt.
How long would it take Paul Krugman's progeny pay off his Ponzi scheme?
Well, PK is 61 years old. Leaving his real kids out of it, let's just assume his offspring follows the oft-stated average of 20 years per generation. (That's about how long it takes for one baby to grow up and have another.)
OK, Paul's child is 41 and already paying, so is his grandchild at 21. His great-grandchild is only one year old but she'll get her turn when she starts working 15 years later (I started at 16, so have/will many others. Maybe not HER, but....)
Twenty years later (35 years from now), Krugman's great-great-grandchild will pick up the burden - as will, twenty years after that, his great-great-great grandson. In fact, his great-great-great-great-grandchild will dodge the bullet by only a year or so.
But this is a dream world of impossible expectations. What if we made it just a little more realistic - just the tiniest bit.
Assume every other condition remains the same but we can only manage the SECOND highest budget surplus in history - $127.3 billion in 2001.
If we still balance the budget tomorrow and keep it that way - and we pay down over a hundred billion a year, it'll take only... 137 years!
Paul Krugman's great-great-great-great-great-great-great-grandchild will write the last check to pay off the legacy of the "worst" generation.
Ten generations (including ourselves) - six of which as yet unborn - to pay off our folly.
And of course this is still living in a fantasy.
The obvious fact is that PK and his ilk have no intention of ever paying off this debt.
And some day, when the financial chicanery falls through,
when the artificially deflated interest on our Treasuries begin to rise from the lowest rates in history,
when the interest payment on all that debt doubles, triples, quadruples...! - the sh!t WILL hit the fan.
And then the pundits will say the obvious solution is to "forgive" this "crippling" debt,
and on that day untold trillions of dollars of invested wealth will disappear.
And our nation will fail.
Make no mistake we are talking financial collapse. Not a recession, not a depression, but the complete collapse of untenable economic "system".
And REAL bad things ALWAYS arise from such times.
We'll still be here. We'll still be Americans. But our Constitution will be "proven" "unworkable" and abandoned. And a strong-man WILL take over - they always do when the world goes to hell.
However, unlike the suppositions I started with, there is no fantasy here. This WILL happen. And it won't take generations.
But, there is an answer. It's not the answer to every problem we face, but it will buy us the time to work on all the rest.
A BALANCED BUDGET AMMENDMENT.
Nothing more - nothing less.
It can be done. It's just a constitutional amendment. We do them all the time (well, figuratively speaking). We just have to change some minds. Well, pretty much everybody's mind really, but still.
What could be more important.
Really.
-----------------
"I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing." Thomas Jefferson
---- (SHOW YOUR WORK) ----
($17,514,000,000 / $236,000,000 per year = 74.2 years)
($17,514,000,000 / $127,300,000 per year = 137.58 years)
now he pays
now child pays,
now grandchild pays,
15 years later great-grandchild begins to pay,
35 years later great-great-grandchild
55 years later great-great-great-grandchild
75 years later great-great-great-great-grandchild
95 years later great-great-great-great-great-grandchild
115 years later great-great-great-great-great-great-grandchild
135 years later great-great-great-great-great-great-great-grandchild
----------------------------------------------
So often we complain that our worthless lawmakers are "stealing from our grandchildren."
But is that really true?
Of course, no-one (N O - O N E, nobody AT ALL) is calling for a balanced budget but let's just pretend for a minute.
Let's pretend we could balance the budget tomorrow. Let us pretend we could actually have a budget surplus in this twisted day and age.
And if we're dreaming we might as well dream BIG - let's imagine we could recreate the largest US Federal Budget Surplus in HISTORY ($236 Billion in the year 2000.) and do it every year, year-in year-out, for as long as it takes to pay off that huge debt.
How long would it take Paul Krugman's progeny pay off his Ponzi scheme?
Well, PK is 61 years old. Leaving his real kids out of it, let's just assume his offspring follows the oft-stated average of 20 years per generation. (That's about how long it takes for one baby to grow up and have another.)
OK, Paul's child is 41 and already paying, so is his grandchild at 21. His great-grandchild is only one year old but she'll get her turn when she starts working 15 years later (I started at 16, so have/will many others. Maybe not HER, but....)
Twenty years later (35 years from now), Krugman's great-great-grandchild will pick up the burden - as will, twenty years after that, his great-great-great grandson. In fact, his great-great-great-great-grandchild will dodge the bullet by only a year or so.
But this is a dream world of impossible expectations. What if we made it just a little more realistic - just the tiniest bit.
Assume every other condition remains the same but we can only manage the SECOND highest budget surplus in history - $127.3 billion in 2001.
If we still balance the budget tomorrow and keep it that way - and we pay down over a hundred billion a year, it'll take only... 137 years!
Paul Krugman's great-great-great-great-great-great-great-grandchild will write the last check to pay off the legacy of the "worst" generation.
Ten generations (including ourselves) - six of which as yet unborn - to pay off our folly.
And of course this is still living in a fantasy.
The obvious fact is that PK and his ilk have no intention of ever paying off this debt.
And some day, when the financial chicanery falls through,
when the artificially deflated interest on our Treasuries begin to rise from the lowest rates in history,
when the interest payment on all that debt doubles, triples, quadruples...! - the sh!t WILL hit the fan.
And then the pundits will say the obvious solution is to "forgive" this "crippling" debt,
and on that day untold trillions of dollars of invested wealth will disappear.
And our nation will fail.
Make no mistake we are talking financial collapse. Not a recession, not a depression, but the complete collapse of untenable economic "system".
And REAL bad things ALWAYS arise from such times.
We'll still be here. We'll still be Americans. But our Constitution will be "proven" "unworkable" and abandoned. And a strong-man WILL take over - they always do when the world goes to hell.
However, unlike the suppositions I started with, there is no fantasy here. This WILL happen. And it won't take generations.
But, there is an answer. It's not the answer to every problem we face, but it will buy us the time to work on all the rest.
A BALANCED BUDGET AMMENDMENT.
Nothing more - nothing less.
It can be done. It's just a constitutional amendment. We do them all the time (well, figuratively speaking). We just have to change some minds. Well, pretty much everybody's mind really, but still.
What could be more important.
Really.
-----------------
"I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing." Thomas Jefferson
---- (SHOW YOUR WORK) ----
($17,514,000,000 / $236,000,000 per year = 74.2 years)
($17,514,000,000 / $127,300,000 per year = 137.58 years)
now he pays
now child pays,
now grandchild pays,
15 years later great-grandchild begins to pay,
35 years later great-great-grandchild
55 years later great-great-great-grandchild
75 years later great-great-great-great-grandchild
95 years later great-great-great-great-great-grandchild
115 years later great-great-great-great-great-great-grandchild
135 years later great-great-great-great-great-great-great-grandchild
----------------------------------------------
Previous comments... You are currently on page 4.
I'd miss my country.
What a nightmare - to exchange Jefferson's vision of America for Obama's!
If we never stop borrowing more - every year - year-in year-out - we will never be safe from the weight of that ever increasing mountain of debt.
We must Balance the Budget.
And our opposition's pat reply?
That our children are getting the COUNTRY. That the deficit spending is necessary to keep the country intact to be able to hand over to them!
What nonsense! As if our nation would fail should we learn to live within our means.
The things grown people say.
And for that - only a Balanced Budget Amendment will do.
But we can't just lay it on the "progressives". Every politician plays that game. They just spend it on different stuff.
(Don't get me wrong - I still vote Republican, but what else can you do?!)
But that, in itself, doesn't solve the problem. We can't just "grow out of it" if we never balance the budget.
No matter how big the economy gets, if our gov't still spends more than it takes in then we're still hosed - forever adding to a mountain of IOU's.
Your right, of course that dollar valuation and inflation effect the calculations but not the scale - and thus the point.
Should there come a time that inflation renders $17 trillion ($20T by then? 30?) harmless, well... we'll pretty much be at the end anyway.
One more thing - that idea of avoiding our problem by "growing" instead of "paying off" surely must assume continuous growth, right? But uninterupted expansion seems a tall order. How many down-turned years can such a system survive with burden of debt even larger than todays. How many more booms and busts past that one.
But all other arguments are smoke and mirrors.
The bottom line is we spent the money on ourselves and we're passing the buck to someone else - and we expect them to do the same. What could possibly go wrong?!
We need to stop it.
We need a Balanced Budget Amendment.
I was trying to keep it simple but I should have at least made mention. Truth is though, all that other stuff only made the pay-off worse, not better, so I didn't feel dishonest when I chose to oversimplify.
But thanks for pointing those out - that needed to be said.
As for precedent, that's cool as heck - did not know that.
Truth is, I don't doubt for a second that we WILL survive if we can simply staunch the wound.
But until the budget is balanced - the REAL budget, sans accounting gimmicks (thnx DB) - we can't even begin to shrink the sheer mass of debt. Debt in such titanic numbers is intrinsically dangerous, disastrously sensitive to even the smallest up-tick in interest rates. (Think "balloon payments" every time your mortgage rate goes up.)
But we'll make it - IF we get that Balanced Budget Amendment.
1. We could turn around the deficit problem with sensible economic policies that encourage real economic growth and put an end to unending freeloading and handouts to the politically favored. This would have the effect of turning tax-eaters into tax-payers. (No, it's not politically possible, but I can dream...)
2. The assumption that the repayment of 236B remains the same. If it's increased by 3% per year, payoff is in a little over 40 years. 5% translates to a little over 30 years.
Another ridiculous idea: Assuming 6% GDP growth per year, dedicating 10% of GDP over the current GDP to debt repayment pays off the debt in 22 years. This does assume that government revenue and expenses remain constant (yeah, right).
Compounding can both produce and destroy very large sums of money, when allowed to continue for long periods of time.
If you ignore this I believe there is precedent for paying off this level of debt (Oh yeah, ignoring state and local debt) and that was Great Britain after the Napoleonic Wars.
Don't this calculations depend on the value of the dollar not changing? The situation gets worse if the dollar is devalued more, and better if the dollar value goes up, doesn't it?