Tuesday, April 21, 2009

The National Debt

This article is a tad America-Centric. I live there. It's my country, and I do love it. Non-American readers are encouraged to apply what they can of this to their own nation.

Like most nations, America is in fairly badly in debt. $7 trillion is owed to external sources, and another $4 trillion exists in inter-department loans. The debt continuously gets larger as interest continuously collects, and then on top people insist both on extensive spending programs and low taxes, not realizing that one or the other has to give. Possibly even both.

To remind you of how ludicrously large 7 trillion is, let me think up some things I could do with $7 trillion:
  • I could buy a car and a mansion for every person who ever lived.
  • I could fill all the planet's lakes with an expensive fluid, like Cristal
  • I could terraform Mars, Venus, Mercury, Io, Ganymede, and parts of the asteroid belt
  • I could buy everything on Earth. Everything physical that exists as of this writing.
  • I could feed a trillion people lunch at a mid-ranged American buffet
  • I could automate all labor on earth and mandate that every person go on vacation. For the rest of their lives.

This can't be good for our credit rating, collectively. So far, bonds have been traded, mostly to American citizens, but other nations are also heavily involved, mostly China and Japan. They're not interested in loaning us money just because, but expect to be paid back at some point. Also, it is unwise to abuse credit. Given a credit line of $10,000, it is better to use it to buy groceries and promptly pay it off as soon as possible than to buy a huge plasma screen television and all the video games you can carry.

We cannot just pay this off by printing more money. The Confederacy tried that, the Weinmar Republic tried that, and both immediately died of hyperinflation. That is to say, their currencies became worthless, even simple goods like bread cost wheelbarrows full of currency, and the stability of the government collapsed because trade was impossible. This is happening yet again in Zimbabwe, which failed to learn from history and is once again repeating it.

Some people specifically don't want to pay off the national debt. I must remind them that there is an interest cost to all this debt. Debt is never free. Taxes could be something along the lines of 6 - 20 % lower if the government didn't owe such absurd sums. Let me give reasons that I think should appeal to everybody:

  1. Borrowing money that you never intend to pay back is stealing.
  2. Living beyond your means is not only irresponsible, it is stupid
  3. Debt for no reason is unbiblical, "Neither a borrower nor lender be."
  4. It's literally costing you money as the interest charges pile up.
  5. Sooner or later, payment must happen. Not paying it is punishing your children. You love your children, right? If you don't have children, do you give a hoot about the future at all?
  6. A large debt is a shame upon the nation. Don't you care about your nation's prestige?
  7. In severe emergencies, like world wars, multistate natural disasters, and so on, the government must spend ridiculous sums of money. A bankrupt nation would have to turn over and die instead. Care to surrender to, oh, say, North Korea, or roll over and die just because a hurricane came by?
  8. If the government were a person, it would be a slacker with a minimum wage job and several maxed out credit cards. Would you lend that person money? I wouldn't.
  9. If the government did go bankrupt, it's not just the things that you hate that would go away. Republicans would lose the entire military, all five branches, corporate assistance, and farming subsidies. Democrats would lose the EPA, most of the country's educational system, the NEA, the NSF, and both sides would lose social order.
  10. "Loss of social order" means people shoot you for your stuff and the police are too bankrupt to give a wet slap. Hope you own a good machine gun, an infinite supply of bullets, and don't need to sleep at all!

To make matters crazier, Estonia, a country with a much lower GDP, has insisted that it will pay off its entire debt by 2010, next year. I find it embarrassing on a National level that they have that big a head start. I wager that if I held a pop-geography quiz, a quarter of the people would have no idea where Estonia even is. Sigh.

I can't count on the government to have the stones to follow my plan. Republicans may whine that it's the Democrats fault for spending money on things, and Democrats complain that the Republicans obsess endlessly on tax cuts, but when Alan Greenspan saw a plan to slash the debt due to budget surplus in 1992, no Congressperson would have anything to do with it. God forbid their favorite thing be skipped in favor of some abstract that their pea-brains couldn't seem to grasp. (As a liberal guy, I might personally blame the Republicans more, since they seem to entertain so many Norquistian fantasies about how taxes are some kind of bizarre crime against them that liberals thought up for no reason, and that if the government went bankrupt we'd all move on to some kind of gold-coin-using government-free utopia, but they'd call me a tax-and-spend nutjob. And I do admit that spending greatly when you're heavily in debt is a poor idea.)

I thought that I thought of this first, but apparently this obnoxious Republican beat me to it. If every one of us Americans paid $10 per year, it would take 23,000 years to pay off the debt. If we made it $10 per day, the debt would be paid in 63 years, and probably less from the ever-decreasing interest payments. I can't count on you to do this, so I will take the first move and make a small contribution. Of course, we will also have to show some political backbone and try to stop making the problem worse. No more tax cuts. No more wars unless someone literally puts troops on our turf. No more entitlement programs. We must elect government that assume that money is just not available. Furthermore, the government should not print money during this time, except as debt payment, and then only extremely minimally. Absolutely not more than $100,000 per year. Probably we should only use the mint to create collector's coins until the debt is paid.

If I were controlling the government personally, my first action would be to sell all the gold the government owns and pay this to the debt first. We can buy it back later when gold is more correctly priced, but there's no need for the government to own shinies, really. I'm letting the tax-cuts expire, and anyone who complains will be given a passport, a Bulgarian-to-English dictionary, and informed that they have much much lower taxes in Bulgaria. (Bulgarian taxes are 10%, and all of the former Iron-Curtain nations are below 20%.) I'm looking at you, Norquist.

Now, this plan is worthless without knowing how to do it, and you can't just hand over cash at the DMV. The government has strict instructions on what they may accept as a debt payment, just to make sure no one is confused about the matter. I quote the government directly:

How do you make a contribution to reduce the debt?

Make your check payable to the Bureau of the Public Debt, and in the memo section, notate that it is a Gift to reduce the Debt Held by the Public. Mail your check to:

Attn Dept G
Bureau of the Public Debt
P. O. Box 2188
Parkersburg, WV 26106-2188

On further tax policies, I'd like to see if Republican theories on tax have any merit at all by implementing both cap-and-trade and a number of sin taxes. Their theory is that taxing something reduces its presence in the market. Cap-and-trade is basically a pollution tax. If taxing something makes it too expensive to continue, we would see measurably cleaner air as a result. Sin taxes on behaviors that we find obnoxious, like drinking, smoking, car horns that blare music out of tune, should also measurably reduce their presence. I predict that people will grudgingly pay and continue these behaviors anyway, whining and bitching the whole way through. Any additional revenue produced by this would be cream-on-the-cake, frankly.

As a last note, this would have a net effect of a significant deflation. If this needs to be countered, printing money would counter that nicely. Especially if it made more debt payments.

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