Wishful Thinking 101: Can We Talk About the Deficit Now?

[Aenlic]

In the debt record, there was an oddity around 1835 when the debt dropped from over $4 million to just $33K. In 1837 it was $37K, then up to $336K in 1838 and then back up to $3 million by 1839. I couldn't find a reason for the huge decrease in debt from 1834 to 1835. Except for 1835-1837, every other year since 1791 the debt has been in the millions. The national debt has gone up every year since 1929.

http://www.publicdebt.treas.gov/opd/opdhisto1.htm

Ah, upon further digging it seems the U.S. Congress debated and finally passed a bill in 1834 to pay off the national debt. That is why it shrank. Of course, the next year it sprang right back up again.

I can't find anything suggesting that the government defaulted on the debt. Perhaps it's some kind of urban legend?

Edit: Redleg posted while I was in the midst of compiling all this and happily surfing the net into all sorts of odd corners (I got side-tracked by the whole issue of Andrew Jackson and the 2nd Bank, which was occuring at the same time as the debt payoff). I defer to Redleg's post. It does seem reasonable the the various state defaults of the 1840's was the genesis of the story. I wonder how much of that 1840's problem was the result of the U.S. Treasury surplus of the late 1830's having been re-distributed to the states, leading to massive speculation and economic turmoil.

[yesdachi]

What would be the repercussion if the US started really (like a 10-20 year plan to be debt free) paying off its debt? Would other countries that held our debt get rich as heck?

[Vladimir]

OK stop , time out. How did this thread devolve into a debate on education without even mentioning the difference between discretionary and mandatory spending?

But first...Lemur: Yes we can talk about it all you'd like but if you think we're going to do anything about it ad infinitum.

The point is that the only part of the budget that can directly be controlled each year is so small that no changes we can make to it will make much difference. I don't have the numbers but I believe that this type of spending, Discretionary spending as it's called, is less than half the budget. The largest part of this budget (I think...GAH! Where's Ross Peroit when I need him?, Strike, Tex...you guys know where he is?) is military spending which you're not going to be able to cut (again) for quite a while.

Mandatory spending: Social security, Medicare, Medicaid, interest on the national debt; cannot be changed (directly) in the budget which means that it’s Mandatory spending. The only thing you can do is adjust the type of bonds you use to finance the debt. Any other option involves cutting back benefits.

The problem with the deficit is







OLD PEOPLE!

Old people vote in droves, old people get money for getting old, old people (who aren’t really that old by the way, 67) consume (an increasingly) large part of the mandatory spending. You can’t change it because, yes, it’s undemocratic (meaning that it’s career suicide for politicians).

The only way out of the problem is to grow your way out of it, and that’s something that won’t happen with (modern) Democrats in power. Someone feel free to mention the “surplus” of the 90’s…a bubble economy coupled with a gutting of the military is not sound economic policy. Another trick used in the 90's was to adjust the type of bonds used to finance the debt (see above). This created a short term reduction but a long term increase in the debt/deficit.

[Seamus Fermanagh]

Mandatory in that it is political suicide to alter them in any significant fashion = yes -- I discussed that above.

The only real means of reducing the deficit is, therefore, to reduce the budget for the military.

To accomplish this, withdrawal from Iraq and turning over most of the responsibilities in Afghanistan to the UN will be necessary. Pressure is already being applied to effect the former and the denial of Bolton's confirmation will clear the way for a less "The UN is useless" ambassador to be emplaced. Fully shifting responsibilities in Afghanistan will have to wait for a new administration, probably, but with the logistics involved in a draw-down in Iraq, that's probably a wise course anyway.

This is, by the way, the will of the people of the USA -- at least those who got off their duffs and voted. Fighting them "over there" has been evaluated as too costly in lives and treasure without producing a quick enough/decisive enough measure of success.

[Vladimir]

Mandatory in that it is political suicide to alter them in any significant fashion = yes -- I discussed that above.

The only real means of reducing the deficit is, therefore, to reduce the budget for the military.

To accomplish this, withdrawal from Iraq and turning over most of the responsibilities in Afghanistan to the UN will be necessary. Pressure is already being applied to effect the former and the denial of Bolton's confirmation will clear the way for a less "The UN is useless" ambassador to be emplaced. Fully shifting responsibilities in Afghanistan will have to wait for a new administration, probably, but with the logistics involved in a draw-down in Iraq, that's probably a wise course anyway.

This is, by the way, the will of the people of the USA -- at least those who got off their duffs and voted. Fighting them "over there" has been evaluated as too costly in lives and treasure without producing a quick enough/decisive enough measure of success.

Ok, I just spent the last 5 minutes looking "above" and couldn't see your other post.

I disagree with your assessment about Bolton: He's much less "The UN is useless" and more "The UN needs reform" which is nigh impossible to argue against.

As far as a reduction in military spending being the only "real" solution? Politically feasible is a more correct term, but not very practical. What’s total military spending per annum? Half trillion? My God, what’s the national debt up to? Doesn’t payment on the interest alone cost about two thirds as much as the entire military?

[Seamus Fermanagh]

Sorry Vlad. The post must have been in another thread, or one of those I failed to hit submit on.

I agree with you about Bolton, but he's gonna go down. The exiting liberal Republican from Connecticut is going to vote with the Dems on this and he will be rejected -- for precisely the reason I listed (valid or not).

The Democrats, when it comes to spending reductions, very much have the Clinton model in mind. He did balance the budget, using a combination of small tax increases (mostly of the hidden kind), substantial military spending reductions, and a solid economy. This (if any) is the model for fiscal responsibility that we'll see coming out of Congress and the one with which Bush will have to contend.

I don't like it, and think it stupid, but that's the way I read the tea leaves.

[Lemur]

Best quote I've yet read on the subject:

Are ever-growing entitlement and military expenditures really consistent with a free country? Do these expenditures, and the resulting deficits, make us more free or less free? Should the government or the marketplace provide medical care? Should younger taxpayers be expected to provide retirement security and health care even for affluent retirees? Should the U.S. military be used to remake whole nations? Are the programs, agencies, and departments funded by Congress each year constitutional? Are they effective? Could they operate with a smaller budget? Would the public even notice if certain programs were eliminated altogether? These are the kinds of questions the American people must ask, even though Congress lacks the courage to do so.

Required reading: Our Nation's Fiscal Outlook: The Federal Government's Long-Term Budget Imbalance.