How to Frame the National Debt for Public Deliberation

Some alarming facts: As of 5/12/10, the national debt held by the public is $8.4 trillion; intragovermental debt is $4.5 trillion, making the total outstanding national debt $12.9 trillion. Public debt is now 53% of GDP. By 2020, even though the GDP will have nearly doubled, the public debt will be 90% of GDP. If nothing is done, by 2040 nearly every tax dollar that is collected will go toward Social Security, Medicare, and interest on the national debt (compared to 41% now).

The Debt Issue

For the past several months I have been working on a project to frame the national debt (hereafter, the Debt) for public deliberation. “Framing” an issue for public deliberation means laying out, in public (not policy or expert) terms at least three possible approaches to a problem and the trade-offs inherent in each course of action. Each approach should tap something people hold valuable (e.g. health, respect, fairness, equity, freedom) and pursuing it will likely entail giving up a little of something else people hold valuable (e.g. more freedom for all on some matter might mean less security for some). Some ideologies pump up some values to divine heights (as Republicans tend to do about freedom) but most people, regardless of ideology, value it, too.  Same goes with social justice, fairness, health.

At the beginning of trying to frame the debt issue the best course seemed to be to have people deliberate on raising taxes, cutting expenditures, or “growing” out of the problem. This framing has been tried many times.  It seems obviously right, but it fails to get underneath ideological bickering. I was persuaded that this policy approach was the wrong way to go, so I switched to thinking of the Debt as a problem of concerns about greed, irresponsibility, and loss of dominance in the world economy.  But this approach didn’t seem to get off the ground, either. Over a working lunch with a colleague last week, I moved to seeing the Debt differently – as a fundamental SIGN of a national inability to connect political deliberation on what we want as a country (what we think are our collective obligations to each other) and what we are willing to give up in order to meet these politically generated obligations.

The national debt is the imbalance between (1) our obligations to each other now and in the future and (2) our willingness to meet those obligations. These obligations emerge through a political process of deciding together the import and necessity of public services such as common defense, education, infrastructure, health care, pensions, and other collective goods. This political process is incomplete if the will to pay for these obligations is not developed at the same time.  The debt is a measure of our collective failure to fully deliberate, to work through the consequences and come to terms with the costs of meeting our politically generated obligations.

Finding a balance will mean, at every step, connecting our deliberations about what we want with deliberations about what we are willing to give up to get what we want.  The only way to stem the Debt is to insist on such a connection. This means that understanding the Debt as a political problem means understanding the need for deliberation on all aspects of the national budget.

A Problem of Political Will

Deciding on (1) our obligations to each other and (2) how much we are willing to pay for our collective obligations are both political tasks but they are not ideological ones. The debt is a problem beyond ideology.  Liberals may want to increase both sides of the equation; conservatives may want to lower both. But the debt is a sign of a disconnection and acquiescence, giving liberals more services and at the same time giving conservatives fewer taxes.

As Joel Achenbach wrote in the April 25, 2010, Washington Post,

In addition to running a budget deficit, Washington for years has had a massive deficit of political will…. In the fiscal debate, the default position, as it were, is to do nothing. Debt is the grease of Washington legislation; for short-sighted leaders, it is less a political problem than a political solution. As long as the government can continue borrowing at reasonable rates, citizens can have their tax cuts and government services, and eventually the growing debt becomes someone else’s problem.”

Someone else – as in our children. Achenbach quotes Brookings Institute economist William Gale: “This is all an exercise in current generations shifting burdens on future generations. Future generations don’t vote, of course.” As for the current generation of voters, we tend to punish politicians and parties that dare to raise taxes or cut favored programs.

The deficit of political will is not just in Washington, it is throughout the public. David Leonhardt’s analysis in the May 12, 2010, New York Times is spot on. Under the headline, “Greece, Debt and A Lesson: A Red Ink Question: is U.S. So Different?”, after likening the U.S. debt situation to the Greek one, he writes:

The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same. Both countries have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem.”

We, the people are.”

We have not figured out the kind of government we want. We’re in favor of Medicare, Social Security, good schools, wide highways, a strong military — and low taxes. Dealing with this disconnect will be the central economic issue of the next decade, in Europe, Japan, and this country.”

Leonhardt cites experts who point out that (a) this isn’t a problem of waste, fraud, and abuse,[1] and (b) it’s not even a problem of needing to cut spending. To get on the right track, we need “to find spending cuts and tax increases equal to 7 to 10 percent of G.D.P.” per year, the sooner, the better. That is now about $1 trillion, more than twice the amount of Medicare’s entire budget. Also, “the combined budgets of the Education, Energy, Homeland Security, Justice labor, State, Transportation and Veterans Affairs Departments are less than $600 billion.”

For these reasons, Leonhardt observes, the Republican call to cut spending cannot fix the Debt. Nor can the Democrats’ plan to raise taxes on the rich and reform health care. What would work, he writes, is a plan “that included a little bit of everything and then some: say raising the retirement age; reducing the huge deductions for mortgage interests and health insurance; closing corporate tax loopholes; cutting pensions of some public workers, as Republican governors favor; scrapping wasteful military and space projects; doing more to hold down Medicare spending growth.” These may be unpleasant, he writes, but they are manageable.  The question is whether we are ready to make the hard choices. As Treasury’s chief economist told Leonhardt: “It’s not a matter of whether we have the resources to solve our problems. It’s a matter of political will.”

Framing the Debt for Deliberation

At this point I think we can say that the issue for public deliberation is not the Debt, per se, but the problem of developing the political will to bring down the Debt.

Should a framing of the Debt take up the level of policy detail found in Leonhardt’s plan? It could, but I don’t think this is the best way forward at this point. I think what needs deliberation is the political problem that we let debt happen, that we avoid hard choices, that we are shifting an impossible burden to our children, that we elect people who promise to give us what we want in a way that is unsustainable. The political issue of the National Debt is not a matter of taxes and entitlements but, at bottom, a matter of a broken political process.

My challenge now is how to turn this insight into a framework for public deliberation.

The introduction to the framing should lay out all the strategic facts about the Debt that show (1) the magnitude of the problem, (2) how there are no easy solutions, and (3) what kind of choices need to be made. Then it should discuss the broken political process that allows the Debt to continue to escalate. The options or choices that follow should offer three ways forward.

What would be the three or more approaches to the issue?  How about these?

Approach 1: Based on widespread concerns about loss of national sovereignty (that much public debt is owned by foreign countries) and international vulnerability, focus on how to get out of foreign debt and strengthen the U.S. economy. This will involve deliberation about levels of entitlements and taxes, but primarily it will focus on investing in growth.

Approach 2: Based on worries that the political system is unaccountable, that officials are more focused on getting re-elected than on being fiscally responsible, reform the legislative process so that officials are can no longer run up deficits. Examples: Sunset requirement for all appropriations; restore the pay-as-you-go law that led to budget surpluses in the Clinton era.

Approach 3: Based on deep concern that we are saddling future generations with the debt we are running up now, start making hard choices about what our collective obligations are to each other, how we will meet these obligations, and what are fair ways for the current generation to share this burden.

I welcome thoughts on how well this framework could serve as a starting point for public deliberation on the Debt.  The big question is whether this meets the need to create more public will to tackle this huge problem.


[1] Leonhardt quotes budget expert, Robert Greenstein: “Most of the public thinks, ‘If only the darn politicians could get their act together to cut waste, fraud and abuse, and to make tax avoidance go away and so on.’ But the bottom line is, there really is no avoiding the hard choices.”

24 thoughts on “How to Frame the National Debt for Public Deliberation

  1. Leonhardt says “We have not figured out the kind of government we want.” I disagree. I think the public knows (and so far has gotten) exactly what they want: “Medicare, Social Security, good schools, wide highways, a strong military — and low taxes.”
    The debt is beginning to illustrate that this is unsustainable, but the public doesn’t think so and remains unconvinced that THEY have to do something or sacrifice something.
    What will it take to convince the public that something has to give? I have no idea. But I think a crucial element to buidling political will is found in your footnote: the public has to be convinced that the hard choices are unavoidable and doing nothing is not an option.

  2. Awesome post and a fantastic idea. I do not know that I have the cerebral facilities for something so deep, but I can ask questions.
    You said
    “I think what needs deliberation is the political problem that we let debt happen, …”

    Honestly, how do I let debt happen or how can I do anything to stop it.

    This is an honest question.

    Tony

  3. Beth and Tony, Thanks for your comments! Beth, in a deeply democratic sense, a public must come to terms with thing itself, not be the object of convincing. Hence the need for public deliberation and a framework that will help people think through these things and begin to make some real choices. A real choice means not only do I want X but I am ready and willing to pay for it.

    Tony, i think we “let debt happen” when we don’t come together as a people and decide what needs to be done. Most of us, myself included, fail to act, so debt “happens.” We elect people who make bad promises. Or we have a system that is dysfunctional. Individuals can make a difference by helping to convene a public or joining some kind of civic organization in their community that is taking up these issues.

  4. There is a fundamental lack of knowledge concerning economics, accounting, and finance in this small piece authorship. It’s amazing that this debate happens so often in an artificial vacuum of evidence and observation. Economics, accounting and finance are as non obvious and counterintuitive as evolution and gravity. People that disagree with those theories are rightly counted as fools. At the limits of a science there is a great deal of room for debate and opinion. Such is the case with economics, physics, and evolution. However, to say that any of these is the playground of opinion is obscene.

    A debate about what and why we spend collective resources on is important. Just as important is how we afford such spending. I applaud you on being brave enough to engage in this endeavor.

    However, to engage in this debate without a basic education in it is reckless at the least especially when you claim to wish to frame the debate.

    The fundamentals of economics will not change. The fundamentals of accounting will not change. The fundamentals of finance will not change. How can this be? The answer is simple. At their most fundamental, all of these subjects of inquiry are based on mathematical associations.

    Frankly, if you want an area of inquiry that has some meat on it, I suggest financial reporting. We have great reporting tools for companies? Why doesn’t the government employ such skills to its benefit? That is a better path to accountability than debate alone.

  5. Tony Costano, we have never met. If there is something in particular you would like to correct, please do share that rather than just send out a flame. I’m not sure what good you are trying to do here.

  6. I think your idea about the problem of political will is right on track. I’m actually working on a video game to engage young people on this challenge as well.

    The game is called U.O.Me. and it challenges players to payoff their share of the national debt by making policy and personal decisions. Players will also be able to share their results with friends on Facebook to spark conversation–thus building political will–to find out if others agree with their choices.

    It’s in development, but watch the trailer here: http://bit.ly/bmpnX4

  7. Dear .O. Me. Game: Interesting idea, but could you tell me where you get the figure that the US has $62 trillion of debt? And why exactly are you raising money? Please let me know on both counts or I will have to delete your comment.

  8. Sorry, not trying to flame. I’m just really forward and lack social grace. I’m aware of it, but that doesn’t necessarily make it go away. It just inflames my old catholic guilt. =\ I do try to keep things on an intellectual, not personal level. However, I am an aggressive communicator. I apologize for that.

    There seems to be a bias to the authorship. The message I read is that debt is bad and making people pay for it who had little choice in the matter is worse.

    I would argue that debt is not bad. I would say that saddling a group that has no say in the matter is terrible on the surface.

    I would say that a proper framing involves the following:
    1) Understanding of economic theory in a scientific sense; includes accounting and finance

    1.5) We are producing a population without financial literacy just as we are producing a a population without mathematical literacy.

    2) Observation of economic data

    3) An agreement that government is persistent and in the best interest of humanity.

    4) An agreement that a group cannot identify itself as a group without ushering and expending resources towards a communal goal. Otherwise there is little qualitative difference between a simple categorization of like minded individuals and an “group.”

    5) An understanding that Liberal Conservative debate is an axis between public and private

    6) An understanding that there is a logical relationship that connects personal freedom a.k.a. privacy and a claim against public resources and that this is an inverse relationship.

    6.5) This should eliminate the position of socially liberal economically conservative because it’s just not logical

    6.75) Religious conviction, ethnicity and sexual preference don’t seem to impact on social and economic success as far as I can tell and are not appropriate topics for a debate framed on an axis of public and private although many would disagree with me. Call me crazy.

    7) The extent of public contribution is a matter of personal opinion should be debated and elected by the group

    8) The specifics of public goals are matter of personal opinion and should be debated and elected by the group

    An explanation of debt in companies:
    1) An asset has a long run unleveled rate of return on the asset. All else being equal…

    2) Management can be better or worse at achieving that long run rate of return

    3) So long as the return on asset is greater than the interest rate, then debt is secure in its belief that a fixed claim will be met.

    4) Economic cycles can sometimes create a short run phenomena that creates a situation where the current rate of return on the asset is below the interest rate.

    5) The company should have reserves for this occasion. The debt holders can reorganize debt or the company in order to attempt to assure the long run rate of return is achieved. This is the basis of reorganization bankruptcies.

    6) A long run downturn phenomena specific to the company or to the economy will mean that liquidation bankruptcies occur.

    Questions that we should all be asking of our government and ourselves.

    1) What level of debt should the country have in the long run; long run sustainability?

    2) What level of debt is possible in a short run without impairing our ability to move forward; short run sustainability?

    3) What kind of return are we achieving on our expenditures?

    4) Is that level of return greater than our debt?

    5) Now that we understand what level of expenditures and debt is sustainable, what mix of products and services for the public good should we engage in.

    6) Is that mix of products and services consistent with the freedoms or regulations we impose on society and the economy. If not, we can expect trouble?

    7) Are our efforts achieving the rate of return, or desired effects we set out as the rationale for implementing the expenditure?

    Now, applying the methods of financial measurement used for companies to not for profit organization, mission driven organization, or governments is controversial. Arguments against this position usually stay within the realm of, but it just doesn’t work that way. However, it can usually be shown that in fact it does. Starting point is that everyone, regardless of mission, is competing for the same limited capital pool. That’s the heart of what economics is.

    Interesting aside: economics is the study of the allocation of scare resources to human endeavors, yes no. Is evolution not the study of the allocation of scare resources to genetic characteristics? If so, what is sociology or political science. Scarcity is one of the most fundamental of human constraints. It seems odd that humans tacitly recognize this in ordinary course, but don’t seem to fully understand its implications.

    Psychologically, there is a simple human cognitive bias for this. As a species, we overestimate the value of short term rewards and underestimate the value of long term rewards. Compounding the problem, we underestimate short term risk, and overestimate long term risk. This may be of some concern when addressing political will and the people…

    This cognitive bias cannot be combated through debate over priorities. It can only be overcome through education and a strict adherence to observable phenomena.

    A couple of last points and then I’ll go.

    Economics, accounting and finance are as non obvious as gravity and evolution to the uninitiated. Just because there is room for debate at the leading edge of the science does not mean that any of the them are the playground of opinion.

    Economics, accounting and finance are sciences in and of the fact that at their most basic, they are comprised of mathematical relationships. In so much as they are, they cannot be be denied without denying math itself.

    Why doesn’t the federal government utilize the tools of financial reporting they impose on companies???

    @ Zero Sum Game or “It’s You or Me”: I imagine that the 62 trillion in debt includes some estimate of unfunded government obligations including social security. The government doesn’t write those into the accounting. Ostensibly, they are avoidable expenditures. Oddly enough GAAP requires the funded status of these types of obligations to be reported on the balance sheet. Of course we fudged a little, because that would have shown large swaths of the economy with such obligations to have obligations that produced fixed claims in excess of the the companies’ ability to produce gains.

    1. Okay, I did not put in that emoticon with sunglasses in there. That’s so not me…

      1. Thanks for these thoughts. I think one of the most imporant questions you ask is this one: “2) What level of debt is possible in a short run without impairing our ability to move forward; short run sustainability?”

  9. Noel, this is a very interesting topic and I appreciate the way you have analyzed the problem. Some points I would make…..

    1) I think there is a basic truth about taxation that most people do not understand. This is the economic truth that we cannot tax our way out of this. In taxation, like everything else, there is a point at which the taxes themselves begin to kill the goose that lays the golden eggs. So if you apply a higher tax rate to the economy, you reduce output and thus see no increased revenue. I believe that we have reached that point with the economy today and we are getting ready to see a real life experiment in the tax laboratory. The Bush tax cuts are going to expire at the end of this year and we will see a substantial hike in tax rates, but I do not believe we will see an increase in revenue. I for one, a small business owner, will see my total marginal tax rate (fed, state, and local (california)) go to over 50% on the last dollar earned. I will not accept this. I will either shelter those earnings in my profit sharing or 401K or, I will simply cut back on my work. Why bust my butt and give half of it to the government. In the end, there will be no additional revenue taken out of my pocket next year, and this will be the net effect across the economy, there is a point in taxation where you actually start to get less revenue, the higher the tax rates go.

    In addition to this, we have the bottom 50% of income earners paying about 5% of the taxes and the upper crust paying the other 95%. The only way to raise any money out of this situation is to raise taxes on the poor (this is essentially what a VAT would do). Is there any politician who would honestly do this?

    So I believe that the current tax take of about 20% of GDP is as good as it gets. Try as you will, I dont think there is any more money to get through taxation without a police state.

    So that brings me to the question of framing the debate……A) I agree that the current level of public debt is immoral. Our generation will go down in history as the greatest cheats and crooks; having saddled our children with the largest debt ever seen. Our country has no shame when it comes to debt. Across the nation familys are getting bailouts and walking away from their obligations with the enablement and encouragement of our government. I believe that most Americans think, regarding the nat. debt, that the government is going to take care of it. We are in denial. Our nation needs an intervention about debt. The 1st thing that has to be done in framing the debate, is we have to make people understand how evil and bad it is to run these horrible deficits. Until our nation understands this, there will be no progress. We have to break through the denial. During my lifetime, whichever party was in power, always downplayed the deficit spending. This has to change.

    2) The root of this problem is socialism. Over the last 100 years we have slowly accepted the notion that it is OK to take money from one person and give it to another who needs it more and use the government to do it. This seemed right enough when it started, after all we were taking from the rich and giving to the poor, what could be more noble. But this has all gotten well out of hand. We are now taking out loans in the name of our children to sustain benefits to all sorts of corporate and social beneficiaries. What are we doing? We are a nation of bailouts and there is a large part of the population who thinks that the nation is going to get bailed out of this mess, or the rich will be made to pay. The government that we have is unsusainable. But who, outside the tea-party understands this? Our nation is headed the way of Greece and we have to get people to understand what this means for our children and grandchildren.

    So I think there are two basic truths that must go into this framing….. We can’t tax our way out of this, the problem is the spending and 2) socialism as we practice it today, is immoral. We are robbing our grandchildren.

    More later, my laptop is dying…..DW

    1. Derrill, Thanks for your comments. You raise an important perspective that I will be sure to include in the framing. The idea is to get all reasonable points of view in the mix in a way that will help people work through the trade-offs. You point out a central dilemma — the downsides of trying to “tax ourselves out of this” versus the immorality of passing this debt onto our children.

      The stuff about socialism and bailouts I think is a red herring. Do you think all manner of redistribution is socialism? That’s pretty extreme. Why shouldn’t those who have benefited help out those who have had the deck stacked against them. Or to put it less provocatively, wouldn’t we all agree to a system that provides some kind of safety net? Or resources to help people now so they can contribute more in the future? That’s a basic premise of public schools. Under your definition of socialism, all schools should be privatized. But I don’t think you would honestly believe that.

      None of this is meant to condone any irresponsibility. There is clearly some waste, fraud, and abuse that contributes to the debt, but that contribution is miniscule next to our huge commitments to social security, medicare, and defense.

      Anyways, thanks!

  10. @DW

    Deficits in and of themselves are not evil or immoral. They are part of a well run and self regulating economy, just as surpluses are.

    Please provide a criteria for evil debt. I would argue that a level of debt that incurs interest rates greater than the ability to produce an equivalent return as unsustainable. I’m not sure about evil, but I’m sure there is some saddling of the children that is inappropriate. Of course the children can default on the debt. That is also an option.

    Is socialism simply a system of transfer payments??? Last I heard there was something a little more to it.

    For your final two points:

    1) can you please show the calculations that went into your assertion that we cannot tax our way out of this. Certainly you have done these calculations, right. You’ve set up an amortization table, and calculated GDP at the very least, right??? I mean that’s the smallest amount of effort that could have been put into it, right??? I mean it would be irresponsible to have not done that tiny amount of work before exclaiming the evil of debt, right, much less the time frame of that evil. I mean an amortization table isn’t that hard. You can even download them online if you’re lazy.

    2) Is socialism equivalent to robbing our children? Perhaps you mean that shifting a debilitating tax burden / debt load to people that have no say in the matter is wrong irrespective of the decision to have a command economy or not.

  11. Okay Noelle,

    You appear to be a serious philosopher. I’m a new comer you essays. I did not know anything about you.

    1) What claims do you feel can or cannot be made about debt and why?

    2) What information do you believe is required to support your answer to question 1?

    3) There are three usages of the phrase “framing the question” at play right now. One is to define the boundaries of legitimate discussion. Another is to provide rhetorical context, through the omission or inclusion of information which sways the audience. And to conclude, to put forth the question of debate.

    Do you believe you’ve used one or many of these usages. Can you clearly delineate the usages in different portions of the essay. Do you believe your readership can? Do you feel that conflating these usages may lead to a confusion in responses to what you have written. Could this lead to confusion about your own position?

    Have you considered that what you care about is not so much debt as it is bankruptcy, or a debt level that incurs an inability to meet current and future obligations.

    How do you define a political group. Would you include individuals who spend their funds individually, but in similar patterns for similar reasons, or would you say that a defining element is a pooling of resources and the hard decisions as to the best use of those funds for communal priorities. Does the group cease to exist if the individual and pull their contribution at any time if the group differs form the individual? Does it not become some loose demographic categorization at that moment? Does that group depend on voluntary contribution of resources to count as being part of a governed body.

    Lots of question, I know. Sorry. And again, no wish to flame. I’m just crazy and lack social skills. As a professional philosopher I’m sure you’ve never run across someone like that, but I would request patience. Oh and I can’t spell to save my life.

  12. Tony Regarding my assertion that we cant’ tax our way out of this. Please read the article at:

    http://online.wsj.com/article/SB10001424052748704608104575217870728420184.html

    The fact is that throughout the history of the US, no matter how high the tax rates have been, the tax take has never been higher then 19% of GDP.

    Question: How much tax money can the government raise with a 0% tax rate. Answer: $0

    Question: How much tax money can the government raise with a 100% tax rate. Answer: $0 Nobody will work if their earnings are highly taxed.

    Somewhere between 0% and 100% income tax rate is a sweet spot where the citizens will work hard and tolerate the government taking some of it. But there is a point of diminishing returns.

    Read the article and you will get the drift of what I am talking about. We cannot tax our way out of this mess.

    More later DW

  13. @ DW

    Okay look, as much as I used to love the WSJ, it has changed. I’m close to giving up my subscription and it will hurt me to do so.

    You can’t take journalism at face value.

    Worse, you do realize that the article is not an article, it is an editorial. It has no obligation to be balanced, well researched, or even true. Worse, it’s bent is obvious, inflammatory, and self congratulatory.

    In case you didn’t understand, the article is not a source of facts. It’s opinion. The WSJ doesn’t even call it an editorial. They call it Opinion, under the Opinion section. Come on. This just makes my hair hurt.

    A statement that things have never been does not mean that they cannot be. The economic law claimed is not an economic law. There is a position called tax neutrality and ostensibly congress practices this. The graph in the article shows more proof of that than anything else.

    In order to maintain tax neutrality, one group is taxed differently than another. “Supply side” economics would argue that keeping the rewards highest for the wealthiest will spur greater GDP growth for the country. That may be the case, but wealth distribution starts to look frightening.

    I think you’ll find that if you put wealth distribution against GDP you’ll see a positive logarithmic relationship between the two. As wealth is more distributed more GDP and this relationship is compounding.

    Bush 2 broke tax neutrality, but only by a small amount. He also depleted the surplus by giving it back to the people. The people bought TVs and Cars, and speculative investments in real estate. Oddly enough, Greenspan, in his earlier career, was called upon to solve the baby boomer SS problem. He created the surplus. It was supposed to save us for 10 to 15 years. That’s of the 20 or so years that we would have the shortfall. Now we don’t have those 10 to 15 years because we rebated the surplus. That was just great economic thinking. It was backed by strong accounting, financial and economic theory. No, it was politics.

    Leave politics out of it. Be more data driven. Being data driven means taking an objective look at the data based on sound theory. You can’t do it without the education. I’m sorry.

    The notion that somewhere between 0 and 100% is the sweet spot makes me cry. Come on. Be brave. Tell me that the tax rate should be 19% of GDP and then tell me exactly why. Otherwise, run the debt in an amortization table, calculate GDP, and tell me what level of debt we should be comfortable. You’ll be way off, but it’ll be a start.

    Oh yeah, I think 6 years ago Greenspan started hinting that the boomers would have to work longer than thought.

    And again, it’s not the current shortfall. It’s the unfunded obligation that makes this terrible. Now here’s the kicker… do you think a first term administration is going to have the courage to tell the boomers that they need to work until 70 and 72 for SS benefits.

    By the way, I don’t identify with liberal or conservative, democrat or republican. Generally one side thinks I’m I’m a left wing nut and the other thinks I’m a draconian fascist right winger. The fact of the matter is that I’m neither. I’m just annoyingly stuck on education and unbiased data.

  14. Okay, I just thought of something.

    Divide by the long run required rate of return minus the long run growth rate.

    Take the debt including an estimated present value of unfunded obligations. Now divide that by the number above.

    In the past, what was the ratio of equity to appraised value required for a house purchase. Now how does that compare with the ratio above. Do you think a house in the US is riskier than the entirety of the US nation. Yeah… I thought so.

    So, the debt may cause a short run liquidity problem. the question is what is the most appropriate way to handle it:
    Default: certainly not if it’s not a long term solvency issue and we have some evidence above that it’s not.
    Inflation: that may hurt as imports, particularly from China, are going to be more expensive. Yeah, no more $0.50 pairs of underwear.
    Higher taxes: This will mean fewer TVs and cars maybe even less foreign direct investment in our country. Then again it may be a buying opportunity and having a Chinese boss may not be so bad. I’ve known a few and they’re good friends.
    Increase the SS age for benefits.
    Bah… Hey I’m just a crackpot with a calculator… an MS in accounting, and MS in finance, and working on two professional certifications in accounting and finance.

    1. arg, typos…

      take the current GDP and divide by the the long run rate of return minus the long run growth rate.

      GDP / (rrr – g)

  15. Tony I like you. I just dont think we can tax our way out of this. Now, back to framing the debate…..

    I mentioned that the debt was a moral problem and I would like to follow up on this.

    We once had a Federal Government with limitations, but now they are few and minor. The federal courts have managed to mangle the constitution to the point where the feneral government is the most powerful in the world. I don’t think this is what we had in mind when this all started over 200 years ago. As an example, the federal government now has the power to tax the income of a person in California, and give the money to a corn farmer in Iowa so that ethanol prices can be kept high. If I tried to do this; walk up to a person in California and say “Give me your money, there is a corn farmer in Iowa who needs it” I would be thrown in jail for assualt. But the voters have learned that they can do through the government, that which is immoral if done by an individual.

    So what has evolved in Washington over past 60 years is a rich and powerful central government, and a voter base that knows they have to send someone to Washington who will plunder the treasury and bring home the pork, or else some they will see their taxes taken away and spent in a more powerful part of the country. There is a very powerful incentive to tax others and spend the proceeds on your local needs. I believe that it is immoral to take from others, even if it is done by the government. Now, I am not saying that we should not pay taxes for the common good, but what we have today is a system of political spoils. Our tax system is immoral, our stewardship of the public treasury is immoral and nothing will change until the electorate makes good government a high priority in the people they send to Washington.

    DW

    Washington is the center of power and this also makes it the center of corruption. In order to tackle the debt problem we have to get rid of the rigged system where the politically weak are taxed to the benefit of the politically connected.

  16. I’m not suggesting that we tax our way out. I’m just suggesting no one here has done the math and that it’s not that hard to do some quick estimates. If you’d done my analysis then you’d probably figured out that the back of the envelope calculations are not pleasant. It’s bad, it’s really bad.

    A quick aside. Most tea partiers think that Obama raised taxes on them. If you tell them that taxes were lower on 95% of Americans, they won’t believe you. If you ask them if they took their taxes paid and divided by their income reported off of their tax forms they’d cross their eyes like you were speaking gibberish. This is an example of a cognitive bias whereby we accept a lower standard of evidence for what supports our positions and a higher standard of evidence for what contradicts it.

    Is that bias at play here and how are we to overcome it?!? I propose that the best means of overcoming cognitive bias is to adhere as best as possible to observable and verifiable events to which we will apply an agreed upon body of knowledge. Call me crazy, but it seems to work in a lot of human endeavors.

    That said, we do not have the most powerful federal government in the world. China easily has more expansive social and economic command. And it’s working. It’s working really well. Their balance between command and free economy is kicking butt and taking names right now.

    Transfer payments to stabilize different areas of the country are part of what makes a federal government possible and what makes it work without bankrupting the whole country. The inability to make transfer payments, and the unpreparedness to do so is what cripple Europe recently in so much as they desire to have an economic system that decreases transaction costs amongst member countries in order to compete against other economic associations with better economies of scale, a.k.a. the USA and China.

    Look, you simply haven’t framed anything. No one here has. You’ve simply said that you have a problem with a strong central government. So should there be a federal government, or not. What does that look like?

    Also, how big is too big. Should the government be allowed to make you do anything you don’t want. Or should you be allowed to contribute only what you want and see fit?

    Center of power is the center of corruption is a glittering generality, a cute sound bite with no meaning.

    Now I’ve read what you have to say. My position is that you haven’t framed anything, but that you have asserted a position and you’ve failed to back it up with evidence.

    My standard of evidence is observable and verifiable, or tautology. Frankly, I’d take a logically sound argument where the assumptions are in question as a starting point for this debate.

    Now I’ve read what the Noelle has had to say and I posed some challenges that undermine her position as to the framing of the debate.

    I’ve posed relationships for what a group or community is. I’ve posed a relationship between liberal and conservative that is logically consistent. I’ve posed boundaries of sustainability. I posed a body of knowledge needed to support positions held. I’ve posed conditions in which both conservatives and liberals seem to want the best of all possible outcomes without recognizing the negative or inconsistent effects of their positions. I’ve excluded certain claims as not part of the debate. I’ve proposed a space whereby different positions are reasonably held and can be debated.

    Okay, so no one wants to frame the question, or describe the boundaries around which claims about debt can be made. I understand that. We want to get to the sex before we know what we’re dealing with. Okay, but it only ends in tears and hard feelings.

    The claims we seem to be debating: debt is bad/good, government is good/bad.

    My claims: government is persistent, government is best when decreasing the transaction costs between individuals, decreasing those costs are consistent with both liberal and conservative claims, liberal and conservative are an axis between public and private, as in public or private effort and outcomes, good and bad cannot be claimed about debt, solvency is good and bankruptcy is bad in that solvency has lower transaction costs than bankruptcy and that solvency is consistent with achieving communal and private goals and that bankruptcy is not. And ultimately I claim that there must be a strong basis of economic, accounting and financial expertise in order to evaluate solvency.

    Analogously, I claim that race, religion and sexual preference are not liberal or conservative claims. If government is to be involved in these claims, then what are the boundaries. If a religious claims are to be the basis of government regulation of social behavior, then how to we maximize government on a basis of religion? What are the logical outcomes of this maximization and are there any inconsistencies in the application of these claims.

    If government is to make and regulate social freedoms outside of religious basis, then what will the basis be. Is there a scientific means of determining this basis? I personally believe there is more scientific basis that is defensible than there is religious basis for social claims that are defensible.

    Just a thought… call me crazy???

  17. Update: A more useful figure may be to the Moon and back (once) in $100 bills, with change.

    Mercy.

    1. I certainly got that wrong. However, it should be from D.C. to Kabul in $100 bills.

      6 used US bills per 1/16 inch.
      96 bills to the inch, let’s call it 100/ inch.
      That’s $10,000 per inch.
      $120,000 per foot.
      $633,600,000 per mile.
      D.C. to Kabul is listed as 6,940 miles. Roundtrip 13,288 miles.
      At $633,600,000 per mile times 13,288 miles it adds up to:
      $8,419,276,800,000
      Kabul and back in C notes.

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