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When Having the US Debt Paid Off Was a Problem

timothy posted more than 2 years ago | from the problem-I'd-take dept.

The Almighty Buck 633

Hugh Pickens writes "NPR reports that not so long ago, the prospect of a debt-free U.S. was seen as a real possibility with the potential to upset the global financial system. As recently as 2000, the U.S. was running a budget surplus, taking in more than it was spending every year — and economists were projecting that the entire national debt could be paid off by 2012. So the government commissioned a secret report outlining the possible harmful consequences of retiring the debt completely. For one thing, paying off the national debt would mean the end of Treasury bonds, a pillar of the global economy. Treasury securities are crucially important to the world financial system in a number of ways: banks buy them as low-risk assets, the Fed uses them for executing monetary policy, and mortgage interest rates vary based on Treasury rates. 'It was a huge issue ... for not just the U.S. economy, but the global economy,' says Diane Lim Rogers, an economist in the Clinton administration. In the end, Jason Seligman, the economist who wrote most of the report titled 'Life After Debt (PDF),' concluded it was a good idea to pay down the debt — but not to pay it off entirely. 'There's such a thing as too much debt,' says Seligman. 'But also such a thing, perhaps, as too little.'"

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1% (1, Insightful)

polar red (215081) | more than 2 years ago | (#37877774)

because debt is yet another way to subsidize big money?

Re:1% (5, Insightful)

betterunixthanunix (980855) | more than 2 years ago | (#37877804)

Public debt ensures that all tax paying citizens are on the hook. Even someone who is responsible and is able to manage their personal money suddenly become beholden to whoever holds the debt. What better way to hijack an entire country?

Re:1% (4, Interesting)

nickmh (2496180) | more than 2 years ago | (#37878058)

In the 1950's each $1 borrowed produced approx 95 cents of GDP. By 2008 that had dropped to 12 cents. At the moment it's -45 cents. For every $1 borrowed the USA errodes 45 cents of it's wealth. If USA fed spending continues at it's current pace? It will take 20% of the rest of the worlds GDP to fund that spending by 2020. Europe is toast. They're about to go to the Chinese for funding. That will come will strings I'm not sure the West is ready for. There will be no money left for the USA to use by 2020. The rest of the west will have used it. Meanwhile the USA's industrial productivity is dropping year by year. Those "organise anywhere" people are getting what they want. A dismantling of capitalism. I'm not sure they're gonna like like it. Industrial productivity is the only way out. But that's not going to happen while you have the Fed funding and subsidising projects that will lift energy and industrial input costs. HHHmmm, I wonder what sort of reaction an economic dictator will get when they tell the USA how to run their country in return for continued support? I, for one, am not looking forward to all this unravelling.

Re:1% (2, Insightful)

Anonymous Coward | more than 2 years ago | (#37878220)

Well, the problems we currently face are mostly caused by US policies of the last 10 years which are better described by "organize nothing, remove any regulations, cut taxes, finance wars we can not afford ourselves". So look who were the decision makers in the US during this times.

Re:1% (3, Interesting)

tompaulco (629533) | more than 2 years ago | (#37878226)

In the 1950's money was borrowed to fund research and development. This resulted in putting men on the moon and spurred the computer age and caused 20 years of growth. That is called an investment. Investment debt is a good thing. Consumer debt is a bad thing. Buying TVs on credit cards is a bad thing. That is the equivalent of what they politicians are doing with our money right now. They are wasting over $2 trillion dollars on the equivalent of paying people to stay home and watch TV and have kids that will grow up to stay home and watch TV and have kids. As much as people complain about the military budget it pales in comparison to the amount that is spent on social programs. What the politicians are doing now is the equivalent of borrowing money from one credit card to pay off another.

Re:1% (0)

Anonymous Coward | more than 2 years ago | (#37877854)

I'm the 1%. I didn't realize it until I saw the videos of people claiming to be the 99%!

Yes, because debt IS money (2, Interesting)

Colin Smith (2679) | more than 2 years ago | (#37877918)

Money is borrowed into existence. Paying off debt causes the destruction of money.

Right now there is about 9.5 trillion in money, 50 trillion in debt, of which 14 is public.

If the government pays off it's debt it would cause a massive depression because all the money would disappear.

This is why you have exponentially growing debt.
http://media.chrismartenson.com/images/credit-market-doublings.jpg [chrismartenson.com]

Basically the monetary system is totally messed up and has been since 1971. What's required is monetary reform.

Re:Yes, because debt IS money (1, Interesting)

jhoegl (638955) | more than 2 years ago | (#37878022)

That makes absolutely no sense. How can money disappear when it is valued at an arbitrary sum?

Just make up more shit about money and increase the value.

Re:Yes, because debt IS money (3, Informative)

Arlet (29997) | more than 2 years ago | (#37878056)

Fractional reserve banking brings additional money in circulation by borrowing. https://secure.wikimedia.org/wikipedia/en/wiki/Fractional_reserve_banking [wikimedia.org]

Paying off the debt takes that money out of circulation again. As a consequence the money that's left over will become more valuable, and prices will drop. This could result in a deflationary spiral according to many economists.

Re:Yes, because debt IS money (3, Interesting)

hedwards (940851) | more than 2 years ago | (#37878194)

Those economists are idiots. The only reason that's at all a risk is because the Federal Reserve has allowed the wealth to accumulate in the hands of a small group of people. Basically, robbing the poor to pay the rich by keeping treasury yields low. And they keep the yields low by issuing additional bonds.

The problem is that it has the effect of discouraging the poor from saving any money and gaining the advantage of savings while artificially increasing the numbers in the bank accounts of the rich.

So, in a sense it could cause a deflationary spiral, but only if there's criminal negligence on the part of the Fed as it would require a prolonged period of significant debt retirement rather than a smoother more predictable payment plan.

Re:Yes, because debt IS money (3, Informative)

chill (34294) | more than 2 years ago | (#37878216)

Fractional Reserve banking is a sword that cuts both ways.

Watch this movie [moneyasdebt.net] for a clear explanation.

Re:Yes, because debt IS money (0)

Anonymous Coward | more than 2 years ago | (#37878050)

No, if the government pays off it's debt it wouldn't necessarily cause a massive depression. (It can, but it is not a given.)
The disapperance of the fake money would however cause a massive deflation. This means that those who have money saved would become richer. See how the rich ones wins regardless of what happens?

Re:Yes, because debt IS money (1)

khallow (566160) | more than 2 years ago | (#37878130)

Right now there is about 9.5 trillion in money, 50 trillion in debt, of which 14 is public.

If the government pays off it's debt it would cause a massive depression because all the money would disappear.

First, US public debt is 10 trillion USD (the remaining 4 trillion is imaginary intergovernment holdings). So that should be 46 trillion (or so) debt of which 10 is public US debt. So even if the US pays off its debts completely there are still 36 trillion in debt out there.

Re:Yes, because debt IS money (4, Interesting)

erroneus (253617) | more than 2 years ago | (#37878174)

Yes, that is the Federal Reserve's notion of money and the one they prefer because they control that money. That's why keeping the US Dollar as the unit of international exchange is so important. Prior to this, the notion of wealth was collecting and maintaining what ultimately traces back to physical resources.

So now, "money" is generated by having someone "owe" you something. This is in a very literal sense a means by which the entire world is enslaved.... to the 0.0001%. I know it sounds all conspiracy theorist-like, but think on it.

The stuff you earn and save is actually a form of debt and its ultimate value is determined by the central party who owns the debt. If the Federal Reserve were to blink out of existence, ALL of my money becomes worthless and my savings becomes zero.

No, IT IS NOT MESED UP (1)

brunes69 (86786) | more than 2 years ago | (#37878178)

People who think the monetary system is "messed up" simply because debt creates inflation and "this is bad", simply do not understand economics.

Let me break it down simple. You work 9-5 lugging rock. At the end of the day, I should pay you for lugging that rock. Where does that money come from? Me. But where did I get it? Someone who paid me for my company's work today. etc etc. But, keep going, trace it back. At some point the money came from work done YESTERDAY. And the day before. Etc.

But here is the problem - THERE IS NOT AN INFINITE SUPPLY OF YESTERDAYS. It runs out.

At some point, somehow, there has to be a reconciliation whereby the work done by the global economy TODAY gets paid for my money that doesn't yet exist. This is why inflation happens.

In a nutshell - inflation has to happen because time == money, and the amount of time moves in one direction, therefore the money supply has to do the same thing.

a quick note from our sponsors: (4, Insightful)

justforgetme (1814588) | more than 2 years ago | (#37877776)

Dear /.

debt is a good thing, you can't have enough of it.

Yours sincerely
the IMF

Is that the same form letter they sent to Greece? (1)

Colin Smith (2679) | more than 2 years ago | (#37877926)

Ireland,
Italy,
Portugal,
Spain?

Re:Is that the same form letter they sent to Greec (4, Funny)

tnk1 (899206) | more than 2 years ago | (#37878062)

That's what happens when you hit Reply All.

Re:a quick note from our sponsors: (3, Insightful)

Chapter80 (926879) | more than 2 years ago | (#37878072)

Huge debt was not the problem.

If I run a company, and I perceive money to be cheap right now (i.e. low interest rates for me), the logical thing for me to do might be to borrow lots of money and invest it into projects that will have a long term payoff, and allow me to grow or solidify my company. Same thing for individuals: If you can get a cheap interest rate, borrow and invest in something (perhaps a cost-effective education) that will have a good payoff.

The factors that create "cheap money" are having a great credit rating and the market interest rates being low.

The US had a great credit rating during 2000-2010. And interest rates could be considered low. So a logical decision would be to borrow lots of money at cheap rates, and invest in projects with good payoffs. I don't believe that the historic debt was necessarily a bad decision.

The bad decision was to borrow a shitload of money and have a huge party of wasteful spending.

Re:a quick note from our sponsors: (5, Insightful)

Dragon Bait (997809) | more than 2 years ago | (#37878164)

... logical thing for me to do might be to borrow lots of money and invest it into projects ... The bad decision was to borrow a shitload of money and have a huge party of wasteful spending

Absolutely correct.

Businesses have the concept of capital expenditures (generally plant, property, and equipment) and operational expenditures (labor, utilities, rent). For a family, capital expenditures are buying a house; operational expenditures are going out to dinner. Borrowing for capital expenditures when interest rates are low is an intelligent maneuver. Borrowing to cover operational costs is unsustainable.

(Yes, I know, you can use your credit card to buy dinner [operational cost] and pay it off at the end of the month ... you're not incurring long term debt. However, using the credit card for dinning out all the time and then only paying the monthly minimum, you're heading for trouble.)

Re:a quick note from our sponsors: (3, Insightful)

erroneus (253617) | more than 2 years ago | (#37878204)

This is called "a bubble." It's a situation of unsustainable growth and prosperity. It's like buying lots of things on credit and thinking you're well off. In reality, someone will come along to collect and then you will realize you were never well off.

Well at least we didn't over-react much (0)

Anonymous Coward | more than 2 years ago | (#37877778)

Oh wait....

when frosty piss was a problem. (-1)

Anonymous Coward | more than 2 years ago | (#37877780)

It's not a problem if you enjoy chugging it!

Say what? (4, Insightful)

msobkow (48369) | more than 2 years ago | (#37877792)

If there is no US debt, implying no need for Treasury bonds, that means there's nothing for people to invest in?

Man, I've heard some absurd statements before, but this one takes the cake!

Re:Say what? (4, Insightful)

JoeMerchant (803320) | more than 2 years ago | (#37877840)

If there is no US debt, implying no need for Treasury bonds, that means there's nothing for people to invest in?

Man, I've heard some absurd statements before, but this one takes the cake!

Nothing as "safe" as securities backed by the U.S. government. There may come a day when the U.S. government cannot pay its debts, but likely long before that day comes, the dollars they would be paid off in would be worthless too...

Personally, I have more faith in the U.S. government than, say, Apple, or WalMart.

Re:Say what? (5, Insightful)

SuricouRaven (1897204) | more than 2 years ago | (#37877894)

There can never come a day when the US government cannot pay it's debts, because no matter how bad things get they always have the Option of Last Resort: Print as much money as they need. The resulting inflation would be so severe it'd erode trust in the currency and initiate the hyperinflation death spiral and lead to the most serious global economic crisis of all time... which is why it hasn't even been considered as a serious option. But it's there. Should the situation ever become so desperate that economic suicide is the only way out.

Re:Say what? (2)

Morth (322218) | more than 2 years ago | (#37877954)

Well, it might work, if they're fast. But you're assuming the debt is in US dollars, which it probably isn't (at least not all of it).

Re:Say what? (1)

JoeMerchant (803320) | more than 2 years ago | (#37878006)

T-Bills are payable in dollars... the day that the U.S. government can't borrow in and pay off in dollars, we (most of the Western world) all need to seriously consider starting our own local subsistence farms.

Re:Say what? (2)

khallow (566160) | more than 2 years ago | (#37878170)

That's called default through hyperinflation. The end result would be that the US still defaulted on its debt (and will be treated as such!), plus it just destroyed any dollar-based asset out there including hundreds of millions of peoples' dollar-based debts and savings. You really should think about the consequences of hitting the hyperinflation "reset button" before you post such things. As I see it, there is no "last resort" in that strategy. It's just self-destructive wriggling on the hook.

Re:Say what? (0)

Anonymous Coward | more than 2 years ago | (#37877938)

If the "hyperinflation death spiral" happens, we'll have starving billionaires [itpepper.com] .

Re:Say what? (0)

Anonymous Coward | more than 2 years ago | (#37878016)

But it is far easier for me to avoid Apple or WalMart than it is the U.S. government.

Re:Say what? (5, Insightful)

rtfa-troll (1340807) | more than 2 years ago | (#37877874)

If there is no US debt, implying no need for Treasury bonds, that means there's nothing as clearly stable as Treasury bonds for people to invest in?

There FTFY. Suddenly if you actually read it the article doesn't seem as stupid as if you completely misrepresent it.

We are clearly going to get a big bunch of amateur economists commenting on this one. Lots of people who understand nothing of economics (and thus would be perfectly qualified to teach economics in most universities, it often seems). Given that this is a tech site and not an economics maybe let's at least try to read the article and then the Wikipedia article about whatever we are posting about and at least attempt to flame those that don't. Nobody up for that?

If we look at this a bit further, the obvious alternative to US treasuries would have been AAA rated securities, such as the collateralized debt obligations [wikipedia.org] which more or less caused the current economic crisis. That makes this paper pretty foresighted.

Re:Say what? (0)

Anonymous Coward | more than 2 years ago | (#37877942)

You can let your cash sit at the bank or under your mattress. You get 0% interest rate, but it's clearly stable. After the debt is paid the government still has one knob (burn tax money or print some) that they can adjust until inflation is 0%, and then It's not all that bad to have 0% interest rate.

Re:Say what? (3, Informative)

TheRaven64 (641858) | more than 2 years ago | (#37878122)

It is if you want any kind of economic growth. If you have no inflation and no interest then keeping your money under a mattress becomes as good as putting it in a bank - in both cases, it will be worth the same amount next year. With a small amount of inflation and a similar interest rate, you want to put the money in the bank so that it will remain worth the same amount in a year, rather than being worth less if you put it under your mattress. The bank will then loan it to businesses wishing to start or expand, enabling them to grow.

Re:Say what? (1)

Arlet (29997) | more than 2 years ago | (#37877962)

If the US didn't borrow so much, there would also be less dollars in circulation, and less need to invest them back into Treasury bonds.

Re:Say what? (0)

Anonymous Coward | more than 2 years ago | (#37878090)

Could you elaborate why we need rock stable bonds to at all? Just so that very rich people can multiply their wealth?

Re:Say what? (1)

rtfa-troll (1340807) | more than 2 years ago | (#37878250)

Could you elaborate why we need rock stable bonds to at all? Just so that very rich people can multiply their wealth?

Well, that's probably one of the main uses.

However, a key use was to allow little people like us to keep wealth from when they are working (and typically have more than they need) until when they retire (and typically have less). Basically, if you invest in stocks, the big people will rip you off since they all have insider information and so you need to be pretty knowlegdable to get a better return than a bond.

Re:Say what? (1)

khallow (566160) | more than 2 years ago | (#37878112)

If we look at this a bit further, the obvious alternative to US treasuries would have been AAA rated securities, such as the collateralized debt obligations which more or less caused the current economic crisis. That makes this paper pretty foresighted.

It's worth noting that US treasuries and such were also AAA rated securities. And that society does not have an obligation nor the power to deliver risk free investment.

Can an exponential really be described as stable? (1)

Colin Smith (2679) | more than 2 years ago | (#37878158)

I don't think it can.
In fact it could probably be described as maximum acceleration.

Re:Say what? (0)

Anonymous Coward | more than 2 years ago | (#37877880)

I agree. Why can't the government still write bonds even if it has no debt? Wouldn't you rather borrow money from someone who has no debt!

Re:Say what? (0)

Anonymous Coward | more than 2 years ago | (#37878074)

This has to be the most confused post today.

Re:Say what? (1)

camperdave (969942) | more than 2 years ago | (#37878110)

A bond *is* a debt. If I buy a thousand dollar US bond, then the US owes me one thousand dollars plus interest. I think you may be confusing debt with having a negative net worth (owing more than you can pay out).

I've got a better one (1)

Colin Smith (2679) | more than 2 years ago | (#37877982)

"The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending." - Larry Summers

Riiight. Lets not .... change anything then... Just more, more, more debt.

Re:I've got a better one (1)

tukang (1209392) | more than 2 years ago | (#37878100)

His point is that the financial crisis destroyed confidence and froze spending. Markets tend to overreact on both the up and down sides and too little confidence can be just as harmful as too much.

Re:I've got a better one (1)

Colin Smith (2679) | more than 2 years ago | (#37878132)

My point is that to much debt, too much confidence caused the financial crisis. More will not solve the problem it just makes it bigger.

Re:I've got a better one (1)

khallow (566160) | more than 2 years ago | (#37878202)

So the solution is to slam the economy hard back into overconfidence mode? Economic policy that attempts to stay on one side of this delusion is going to continue to fail badly just as it did after the attempt to recover from the dotcom bubble by creating a real estate bubble.

Re:Say what? (1)

gzipped_tar (1151931) | more than 2 years ago | (#37878088)

No matter what the idiotic buffoons like Krugman say, this is one of the the most outrageous crap of the so-called post-Bretton Woods world, I believe.

Basically USA chose to hem itself in a position of so tremendous responsibility that no single nation in the world can bear. I'm not advocating immediate return to gold standard but if this is not a lesson for those who trust the government to act rationally and responsibly, I don't know what else would be one.

Short sighted (2)

Pharmboy (216950) | more than 2 years ago | (#37877794)

This makes a lot of assumptions. First, if we really had paid off all the debt and had a surplus, Congress would have found plenty of ways to spend the excess cash, in particular, infrastructure. Or they could have rebated back the difference to tax payers. More importantly, once the debt level got low, Congress has shown repeatedly that they are willing to increase spending on everything under the sun, good and stupid alike, so the actual chance of paying off the debt completely and running into problems with no treasury bonds being issued, is highly unlikely.

The govt. can still issue bonds even if they have no debt, to assist the global market, the question being what they do with the cash that is raised.

Re:Short sighted (2)

JoeMerchant (803320) | more than 2 years ago | (#37877862)

During the boom time for real-estate values in Florida, the local counties were awash in money... they had plenty of things to spend it on. There are no more county maintained unpaved roads in most central Florida counties now, lots of new administration buildings, and now that the tax money is on the decline, they're all crying about programs they are having to cut.

I thought the promise of Republican politics was smaller government and less taxes, but when they got handed the Presidency and later control of Congress with the debt on the run, I didn't notice any decline in taxes. I think the reduction of taxes is a good way to keep the debt at a "healthy" level, I'm just not sure who I can vote for who will actually deliver on the rhetoric.

Re:Short sighted (0)

Anonymous Coward | more than 2 years ago | (#37877948)

I didn't notice any decline in taxes

That's because Bush's tax cuts weren't promised to you.

Re:Short sighted (1)

chill (34294) | more than 2 years ago | (#37878152)

Yes they were. Among other things, they lowered federal income taxes across the board.

However, because of the nature of percentages, they had a disproportionate positive affect on higher income earners. Still, lower income earners did see a decrease in their federal income tax.

Re:Short sighted (1)

Dragon Bait (997809) | more than 2 years ago | (#37878232)

I didn't notice any decline in taxes

That's because Bush's tax cuts weren't promised to you.

If you're paying 0 in taxes, a 100% tax cut still leaves you paying 0 -- so any tax cut isn't going to directly benefit you (and why should it?)

For amusement, calculate what you'd have to pay today if the tax code of 2000 was still in effect. Then calculate it based on Bush's tax cuts. Assuming you would pay anything in 2000, you'll probably be paying less now.

Re:Short sighted (0)

Anonymous Coward | more than 2 years ago | (#37878028)

My home province of Alberta in Canada was debt-free for a short period after running on a long-term platform to clear all of the province's debt. Actually, it was a very short period, as the governing Progressive Conservatives (Canada's Republicans) couldn't figure out what to do with all of the loads of money they suddenly had available now that they weren't paying off any debts.

So they went on a spending spree (including a plan to pay for some infrastructure programs that were worth 5 times as much as the debt repayments but would have generated EVEN MORE extra cash eventually) that's continued on through the global recession, which put us back into debt. Now they're expecting to be back out of debt once again by 2013, but they still don't seem to have a plan. It's just gone back to being an amorphous blob of debtlessness out on the horizon, still far enough away that they aren't worried about having too much money to spend, but close enough that we know it will become a reality once again.

So, if the US ever gets its debt back under control and on the road to full repayment, I wouldn't be worried about the global economy. I'm sure your leaders, no matter who's in charge at the time, will find plenty of ways to get onto the rollercoaster of debt-repayment/indebtedness.

Re:Short sighted (1)

TheRaven64 (641858) | more than 2 years ago | (#37878138)

I thought the promise of Republican politics was smaller government and less taxes, but when they got handed the Presidency and later control of Congress with the debt on the run, I didn't notice any decline in taxes

That's because you weren't part of the Republican base [derkeiler.com] , to whom those promises were made.

Re:Short sighted (2)

Black Parrot (19622) | more than 2 years ago | (#37878182)

I thought the promise of Republican politics was smaller government and less taxes

You need to learn to distinguish between politicians' advertisements and what they're actually selling.

Re:Short sighted (1)

Dragon Bait (997809) | more than 2 years ago | (#37877882)

The govt. can still issue bonds even if they have no debt, to assist the global market, the question being what they do with the cash that is raised.

Well, obviously the answer is to invest in U.S. Treasury Bonds ... oh, wait.

Re:Short sighted (2)

chill (34294) | more than 2 years ago | (#37878116)

Bonds are debt. They are where you loan the government your money and they promise to pay you back at a later date, plus interest. Debt.

Saying you can pay off all the debt and still issue bonds indicates a fundamental misunderstanding of finance.

You don't think all those millionaires and billionaires pay cash for everything, do you?

They, too, have debt. However, their debt-to-income ratio [wikipedia.org] is much smaller. That is, they take in more than they loan out. The U.S. government doesn't. They take in roughly $2T and spend roughly $3T per year.

The U.S. doesn't need to pay off all debt. The article is correct. We do, however, need to get our debt-to-income ratio in significantly better shape.

The Myth of the Clinton Surplus (0)

slick50 (136573) | more than 2 years ago | (#37877796)

The claims that we had erased the federal debt and had gone on to a surplus were based on long-range projections that were totally inaccurate, and had never been realized.

Re:The Myth of the Clinton Surplus (0)

Anonymous Coward | more than 2 years ago | (#37877810)

I think the claim isnt that he erased the debt, but that he erased the deficit, big difference.

Re:The Myth of the Clinton Surplus (1)

Anonymous Coward | more than 2 years ago | (#37877830)

Look, I never liked Clinton, but it's surely not his fault when the "fiscally conservative" Republicans who came after him act "fiscally conservative" and balloon both the debt and deficit with their warmaking. Of course the potential long-term result of the Clinton administration's policies wouldn't actually come to fruition after the Republicans got involved and screw everything up. It's not Clinton's fault that the Republicans did this.

Re:The Myth of the Clinton Surplus (5, Insightful)

amiga3D (567632) | more than 2 years ago | (#37877878)

I never liked Clinton either but I'm starting to revise my opinion based on the last two clowns that replaced him. He looks better everyday.

Re:The Myth of the Clinton Surplus (2)

Dragon Bait (997809) | more than 2 years ago | (#37877908)

Look, I never liked Clinton, but it's surely not his fault when the "fiscally conservative" Republicans who came after him act "fiscally conservative" and balloon both the debt and deficit with their warmaking. Of course the potential long-term result of the Clinton administration's policies wouldn't actually come to fruition after the Republicans got involved and screw everything up. It's not Clinton's fault that the Republicans did this.

Bush was a fiscal conservative?!? Since when? Even outside the wars the stupid b*st*rd kept spending. Remember the trillion dollar pill bill?

And frankly, let's not forget that it isn't just the president who decides the budget. Clinton delivered a budget that was $210B in the red. It was Newt and congress that balanced it (and generated the surplus).

Re:The Myth of the Clinton Surplus (2)

amiga3D (567632) | more than 2 years ago | (#37877986)

Well actually Clinton did sign that budget eventually. And the next year it went much smoother. The one thing about Slick was that he was a smart politician. Once he saw the advantages to balancing the budget he quickly moved so that it became "His idea." Just like when he tried Health Care Reform. Unlike President Obama, once Clinton saw what a crazy powder keg that was going to be and how no one would be happy when it was over he quickly dropped that like a hot potato.

Re:The Myth of the Clinton Surplus (1)

Anonymous Coward | more than 2 years ago | (#37877996)

Look, I never liked Clinton, but it's surely not his fault when the "fiscally conservative" Republicans who came after him act "fiscally conservative" and balloon both the debt and deficit with their warmaking. Of course the potential long-term result of the Clinton administration's policies wouldn't actually come to fruition after the Republicans got involved and screw everything up. It's not Clinton's fault that the Republicans did this.

Bush was a fiscal conservative?!? Since when? Even outside the wars the stupid b*st*rd kept spending. Remember the trillion dollar pill bill?

And frankly, let's not forget that it isn't just the president who decides the budget. Clinton delivered a budget that was $210B in the red. It was Newt and congress that balanced it (and generated the surplus).

Nope nada, incorrect.
It was the Omnibus Budget Reconciliation Act of 1993 Clinton and the Democratic congress passed before the Republicans took over the house. You know the tax policy that not a single Republican voted for.

There's no significant difference between parties (1)

Colin Smith (2679) | more than 2 years ago | (#37878014)

The debt has grown at an exponential rate of around 9% per year for the last 4 decades. Republicans or democrats.
 

Re:The Myth of the Clinton Surplus (1)

sycodon (149926) | more than 2 years ago | (#37877968)

*Sigh*
Repeat after me, "Congress has the power of the Purse.

Clinton was dragged kicking and screaming into fiscal sanity by the Republican Congress.

Bush is at fault for not vetoing Nancey's crazy spending after 2006, and then there is the fiscal unholy alliance between Obama and the Democrat controlled Congress that showed us all what it means to spend like a drunken sailor.

Re:The Myth of the Clinton Surplus (1)

SuricouRaven (1897204) | more than 2 years ago | (#37878010)

War is very expensive.

Re:The Myth of the Clinton Surplus (0)

Anonymous Coward | more than 2 years ago | (#37877844)

No one has ever claimed that we had erased the federal debt. We eliminated the deficit and had a surplus for a year or two, but that is not the same thing as the federal debt.

Re:The Myth of the Clinton Surplus (4, Interesting)

trevelyon (892253) | more than 2 years ago | (#37877936)

It also did not include actualizing the social security debt or some of the other debts / trickery that was used to create the supposed surplus. It's explained here:

http://www.craigsteiner.us/articles/16 [craigsteiner.us]

You can verify it here (U.S. Treasury site):
http://www.treasurydirect.gov/NP/NPGateway [treasurydirect.gov]

Enter 09/30/1997 through 10/01/2001 for range and look at 9/30 for each year.

Deficit. Not debt. (0)

Anonymous Coward | more than 2 years ago | (#37877956)

The terms are not interchangeable. The deficit became a surplus with projections on eventually paying off the debt more than a decade after Clinton would leave office. No one claims Clinton paid off the debt during his term.

Re:The Myth of the Clinton Surplus (1)

Attila Dimedici (1036002) | more than 2 years ago | (#37878054)

Lots of people are replying to this saying that no one said that we had erased the federal debt, and that is correct. However, there are lots of people who believe that we were running a surplus at some point under Clinton, and that is not true either. Clinton never had a surplus. The size of the federal debt has increased every year I have been alive, including every year that Clinton was President. If there had been a surplus under Clinton, the size of federal debt would have decreased. It did not happen.

US debt saves the world... (1)

Anonymous Coward | more than 2 years ago | (#37877806)

If the world moves oil deals into another currency and the US no longer sold treasury bonds there would be no hope for the dollar to remain a reserve currency. In that case I don't think that the global economy would blink, but how about the US economy.

Re:US debt saves the world... (1)

berashith (222128) | more than 2 years ago | (#37877824)

this becomes not an issue of the US economy, but of the ability to extend into others business. The economy would be fine, as there would be no need to raise money through bonds. The money would just be there. However, if we lost the reserve currency status, then the state department would be neutered.

Good thing we solved that pesky problem.

Re:US debt saves the world... (1)

JoeMerchant (803320) | more than 2 years ago | (#37877900)

The quality of life in Japan, Europe, Australia, New Zealand, and many other places that don't use the U.S. dollar as their currency seems to be just fine to me... If the Arab states want to price oil in yuan, rubles, won, or pesos, it's a symbolic move at best - it would indicate a loss of respect, but I don't think the U.S. would suffer as a result, more likely the U.S. would already be suffering due to whatever caused the Arabs to select a new currency in the first place.

Re:US debt saves the world... (0)

Anonymous Coward | more than 2 years ago | (#37877940)

It's not quite that simple. Oil is traded in US dollars. That means that for countries to buy oil, they have to buy US dollars. The United States doesn't: if they're out of money, they can just invent more US dollars[1].

This little rouse doesn't work if oil was traded in say, Euros: in order to buy the oil the United States would have to buy Euros. Sure they could invent more US dollars to buy the Euros, but that would just drive up the price of the Euro.

[1]: Yes, I know it's not that simple, but this isn't an Econ class.

Re:US debt saves the world... (0)

Anonymous Coward | more than 2 years ago | (#37878230)

Trading in yuan would have no effect at all, as it's tied to the US dollar.

Re:US debt saves the world... (1)

Dragon Bait (997809) | more than 2 years ago | (#37877934)

If the world moves oil deals into another currency and the US no longer sold treasury bonds there would be no hope for the dollar to remain a reserve currency. In that case I don't think that the global economy would blink, but how about the US economy.

If the US had balanced the budget -- stabilizing the currency -- there would be no talk of moving oil off the dollar. It is the massive deficits combined with "quantitative easing" that are causing the erosion of faith in the dollar.

So, your scenarios of if A and B wouldn't happen.

Since when (0)

Anonymous Coward | more than 2 years ago | (#37877846)

Is it the job of the government to enter into deals that nets him a loss of money ?

This makes no sense to me (1)

NotSoHeavyD3 (1400425) | more than 2 years ago | (#37877850)

I mean even if you don't currently don't have any debt you may want to have some for a couple of years because you want to make a big purchase like a house or a car. Actually on top of that even if you're in the black temporary credit is still useful and even I have that right now, it's called a credit card.(IE even if your finances are in the black loads of people still use credit cards since it helps with transactions.)

Re:This makes no sense to me (1)

sgt scrub (869860) | more than 2 years ago | (#37878066)

Sounds like the "Slavers will like you better if you prove yourself to be a good indentured servant in the form of paying them 30% on top of every purchase you make." pill. Everybody accepts debit cards. Spending less than you make over the years will give you more buying power than using credit cards. Save until you have $20k in a bank account. Your mail box will magically get filled with offers to give you credit. Save until you have $50k in the bank, buy a POS house on a $20k lot with cash. Save that $500-$1000/mo you would have been paying for rent. In 5 years you'll be able to build a nice house on the lot.

Re:This makes no sense to me (0)

Anonymous Coward | more than 2 years ago | (#37878166)

I live in Europe, here even POS houses cost 300k euros.

Bullshit (1)

Hentes (2461350) | more than 2 years ago | (#37877858)

You can just take the money and buy bonds of another country for it, thus having a surplus and still using bonds.

They don't know (2)

prefec2 (875483) | more than 2 years ago | (#37877886)

They made a study. And they looked at their glass sphere and the remains in their coffee mug and came up that maybe, no debt is a problem. The result is _perhaps_ there is something like too little debt. But they do not need to worry. The surplus during the early 2000 was due to the New Economy bubble. Every one made some extra money by lending and borrowing until the whole mess blow up, the fed reduced the interest rates and the financial companies worked on the housing crisis, which triggered financial crisis of today, which triggered the state finance crisis. And all debt of all countries increased from the last dip after New Economy and the present crisis. And the same applies to crises from the past.

The Jews had a ruling once (if I remember correctly) after 49 years they divided all livestock among all families equally. As that was the representation of wealth, they collected all the money of the world and divided it equally among the people. Maybe we should do that. Or at least take all state debt of all countries and declare it gone. Ok the banks would most likely end to exist. But hey we could build new ones.

Money as Debt (3)

markdavis (642305) | more than 2 years ago | (#37877892)

Unfortunately, debt *is* money. If you have never seen the video, do yourself a favor and watch it:. Trust me, it is worth your time:

http://www.moneyasdebt.net/ [moneyasdebt.net]

It is fascinating and scary.... and real. Our whole economy is now built on debt, and it really is not a good thing.

Re:Money as Debt (4, Interesting)

markdavis (642305) | more than 2 years ago | (#37878180)

Sorry, here is where you can watch it online, now, free:
http://www.youtube.com/watch?v=Dc3sKwwAaCU [youtube.com]
or
http://video.google.com/videoplay?docid=-2550156453790090544 [google.com]

He also released a followup video a few years later:
http://www.youtube.com/watch?v=rCu3fpg83TY [youtube.com]

Re:Money as Debt (1)

chill (34294) | more than 2 years ago | (#37878190)

Seconded. This is a great video with wonderful educational value. As far as I can tell, it is fairly non-partisan and sticks mainly to the facts of finance and money.

Videos like The Money Masters 1 & 2 and Inside Job are also excellent, and have a great deal of good information. However, they approach the issues with a bit more of an agenda. Still, they are very worthwhile.

the "surplus" argument is dishonest at best... (0)

Anonymous Coward | more than 2 years ago | (#37877904)

http://www.craigsteiner.us/articles/16

Rentiers (4, Insightful)

Baldrson (78598) | more than 2 years ago | (#37877930)

This kind of "economics" is the sort of epic stupidity that is bringing down the US economy.

Using the US government as your debt-collection agency so you can park your capital somewhere while you golf with Obama or whatever it is you do, is EXACTLY the kind of thing that results in the deindustrialization of the economy.

When TFA says: "banks buy them as low-risk assets" it is betraying the truth of the "economics" profession reflected in Modern Portfolio Theory [wikipedia.org] 's so-called "risk free asset [wikipedia.org] ". The reality is that this "risk free asset" is the foundation of the centralization of wealth via what classical economists referred to as "economic rent": The portion of return on the economy which is, for all practical purposes, simply the result of there being an economy.

A rational political economy would distribute all economic rent evenly in a citizen's dividend thereby replacing all government transfer programs (with their attendant public sector rent seeking [wikipedia.org] ) with market demand for what the people (as opposed to the wealthy or the politically influential with their lobbyists) need..

Since it is clear that the US Federal government is now captured by the rentiers (rent seekers) of both the private and public sectors, it cannot admit rational political economic thought. So the responsibility devolves to the States. There is a proposal for State legislation to remediate some of the pathology created by a positive feedback loop of centralized power [dailypaul.com] , but realistically, even the State governments are so depleted of resources by this vicious cycle that there is little hope for them to salvage the Republic.

Absurd (1)

sgt scrub (869860) | more than 2 years ago | (#37877970)

It sounds like he fell for lies by the same people that say deflation would destroy the world. Deflation works exactly opposite from inflation. If someone has their money invested instead of in their pocket, inflation causes investments to be more valuable. If someone has their money in their pocket and none invested in the market, deflation causes the money in their pocket to be more valuable. Deflation and debt consolidation in the U.S. would negatively effect less than 20% of the U.S. population and less than 2% of the world population.

Re:Absurd (1)

Arlet (29997) | more than 2 years ago | (#37878036)

How did you get those numbers ?

Re:Absurd (1)

stinerman (812158) | more than 2 years ago | (#37878134)

He pulled them out of his rear.

Deflation is bad because it makes cash an investment unto itself rather than a medium of exchange. Pulling your money out of a bank and keeping it under your mattress becomes a sound investment strategy.

If cash becomes more valuable, people hold onto it because it's appreciating. They don't spend it, meaning less people buy things, meaning prices go down, meaning your cash becomes more valuable, etc., etc. Meanwhile debts are still valued in dollars, so when your wages get cut (because of the deflation, you're making more in real dollars), it becomes harder to pay off those debts.

Re:Absurd (0)

Anonymous Coward | more than 2 years ago | (#37878184)

As you say: deflation causes investments to lose value. So why on Earth would any sane person with capital invest in anything other than cushy, hundred dollar bill packed mattresses? One of the key drivers of the current recession is lack of capital/human investments by businesses. They're sitting on huge piles of cash and not building factories, hiring workers, and otherwise making the economy hum along. Consumer spending is down, so they're "waiting it out." Meanwhile the unemployed *still* can't afford to buy anything... they're unemployed. The "spender of last resort" is hobbled by the current crop of tea-infused Republicans. Debt is necessary to "prime the pump" or "grease the wheels" or whatever other analogy you prefer. Deflation would be an absolute disaster.

Pension funds (0)

Anonymous Coward | more than 2 years ago | (#37877980)

One man's debt, is another man's pension fund.

So yes, sovereign debt is a necessity in the capitalist system, but too much of it is a problem.

Projected, not actual, surplus (1)

kenh (9056) | more than 2 years ago | (#37878042)

President Clinton & Republican-controlled Congress ran PROJECTED surplus, not actual. Every year of the Clinton Presidency saw national debt rise, it never retreated during his presidency.

Every year when a new budget is proposed it includes a ten year projection that is non-binding and almost certainly pure fantasy - for the projections to be true spending policies proposed ten years in advance need to be adhered to and the economy needs to react EXACTLY as predicted up to ten years earlier.

Clinton's supporters still believe those projections...

Re:Projected, not actual, surplus (0)

Anonymous Coward | more than 2 years ago | (#37878108)

Clinton's supporters still believe those projections...

On the other hand, thanks to Lower Taxes Everyday and Rollback on goddam gummit regulations, even the projections have been dismal for most of the last decade.

I, for one was a heck of a lot more prosperous back when my taxes were higher. Even after paying those "crushing" taxes.

Of course a sample of 1 is meaningless. However there seem to be a so-called "99%" who are expressing much the same opinion.

Monetary Reform needed. Bankers = Fraudsters (3)

rcb1974 (654474) | more than 2 years ago | (#37878092)

If I were to print money in my basement, I would go to jail. Why then are banks allowed to do it? Banks get to create money out of thin air every time they get people to sign a loan. This is because they are allowed to loan out 9x more money than they take in from people making deposits. That is why banks LOVE it when you deposit money in your savings account because it gives them permission to loan out 9x more money. Not only can they collect interest on that money that they create out of thin air, but if you can't pay them back, they get to seize your assets!

The hand that giveth is above the hand that receiveth. Private banks are above the governments who borrow money from them. Bankers are the masters of deception and fraud. The only things they create are debt and inflation through fractional reserve lending (fraud). Both of those are bad. They create all kinds of problems (such as the "business cycle"), and force people to participate in speculative investing or else watch their savings get inflated away.

Fractional reserve lending was pioneered by Nathan Rothschild and stemmed from greed -- he wanted to lend out more gold than he actually had! Anytime a bank expands the money supply by loaning out more money than they actually have, they are stealing from you who have saved. I understand the need to expand the money supply in order to prevent deflation. However, the government, not a private central bank, should be the one to do that. If the government created money, then they could spend that money rather than having to tax it away from the citizens.

It is no coincidence that the IRS was created shortly after the Federal Reserve Bank was created. How else would the government get money to pay interest on the money it borrowed? If you are in debt, you are a slave to your creditors. In 1913, "our" government allowed itself to become enslaved by the private Fed. The power to issue currency should reside with a government who is accountable to the public. The government exists to serve We The People. We The People should never allow ourselves to becomes slaves to our government (via entitlements, welfare, government healthcare, etc) who is a slave to the central bankers. Woodrow Wilson, and the few members of Congress who were actually present in the capital building 2 days before Christmas in 1913, made the terrible decision to give the power to issue currency to a privately held central bank (that doesn't even need to pay taxes!). The Fed is not really accountable to the public. Yes, the Fed board members are appointed by the President, but that very important decision should not be left up to a single man who may be too easily corrupted.

Governments do not need to borrow money from a bank. They can create money debt free! They are supposed to be doing that according to the US constitution:

"Congress shall have the power to coin money and regulate the value thereof." Since the value of money is determined by the quantity, Congress should be controlling the quantity of money, not banks!

Read up on Bill Still's ideas for monetary reform in his book "No More National Debt". If you don't want to read, then watch these films:
The American Dream
Money as Debt
The Money Masters
The Secret of Oz
Inside Job

Re:Monetary Reform needed. Bankers = Fraudsters (0)

Arlet (29997) | more than 2 years ago | (#37878106)

This is because they are allowed to loan out 9x more money than they take in from people making deposits.

You completely misunderstand the fractional reserve banking system. Go read it again: https://secure.wikimedia.org/wikipedia/en/wiki/Fractional_reserve_banking [wikimedia.org]

You'll read that banks can only loan out 90% of the money they take in. However, that 90% will at some point in the future be deposited, so the banks can loan 90% of that money out again. In the end, this results in a 9x money multiplier, but every dollar that the bank loaned out is covered by a deposit.

There's no such thing as too little government (1)

Anonymous Coward | more than 2 years ago | (#37878102)

'There's such a thing as too much debt,' says Seligman. 'But also such a thing, perhaps, as too little.'"

Too little debt! What a bunch of knuckle-heads. Its this kind of thinking in government that leads to all of their stupid policies such as, "there is such a thing as too little war, so let's start one." "There's such a thing as too few prisoners in jail, so lets start a little drug war."

These people are warped and are scared that the people will one day realize that their is no such thing as too little government.

Thank god... (1)

tverbeek (457094) | more than 2 years ago | (#37878188)

Thank god we had George W. Bush to save us from that fate!

Republicans always lie about Clinton. (4, Interesting)

Required Snark (1702878) | more than 2 years ago | (#37878218)

Here are the quick and dirty numbers

http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms [wikipedia.org]

Let's look at one figure, the percentage change in the national debt. Take the two terms (Regan, Bush) before Clinton, and the two terms after him (Bush). Negative numbers are decreases, positive increases.

  • Regan +9.3%
  • George H. W. Bush +13.0%
  • Clinton -0.07%
  • Clinton -9.0%
  • George H. Bush +7.1%
  • George H. Bush +20.7%

The last time a Republican president decreased the National debt was Richard Nixon in his first term in 1973, +3.0%. This was over 9 presidential terms ago, over 36 years.

So when Republicans try and trash Clinton's economic record, they always quote misleading figures. Also known as lying.

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