Generations and Solutions

Posted by Zero 9 years, 11 months ago to Politics
98 comments | Share | Best of... | Flag

Paul Krugman and his minions aside, most of us know that the massive federal debt (currently $17.5 TRILLION) is nothing short of inter-generational theft.
So often we complain that our worthless lawmakers are "stealing from our grandchildren."

But is that really true?

Of course, no-one (N O - O N E, nobody AT ALL) is calling for a balanced budget but let's just pretend for a minute.
Let's pretend we could balance the budget tomorrow. Let us pretend we could actually have a budget surplus in this twisted day and age.
And if we're dreaming we might as well dream BIG - let's imagine we could recreate the largest US Federal Budget Surplus in HISTORY ($236 Billion in the year 2000.) and do it every year, year-in year-out, for as long as it takes to pay off that huge debt.

How long would it take Paul Krugman's progeny pay off his Ponzi scheme?

Well, PK is 61 years old. Leaving his real kids out of it, let's just assume his offspring follows the oft-stated average of 20 years per generation. (That's about how long it takes for one baby to grow up and have another.)

OK, Paul's child is 41 and already paying, so is his grandchild at 21. His great-grandchild is only one year old but she'll get her turn when she starts working 15 years later (I started at 16, so have/will many others. Maybe not HER, but....)

Twenty years later (35 years from now), Krugman's great-great-grandchild will pick up the burden - as will, twenty years after that, his great-great-great grandson. In fact, his great-great-great-great-grandchild will dodge the bullet by only a year or so.


But this is a dream world of impossible expectations. What if we made it just a little more realistic - just the tiniest bit.
Assume every other condition remains the same but we can only manage the SECOND highest budget surplus in history - $127.3 billion in 2001.

If we still balance the budget tomorrow and keep it that way - and we pay down over a hundred billion a year, it'll take only... 137 years!

Paul Krugman's great-great-great-great-great-great-great-grandchild will write the last check to pay off the legacy of the "worst" generation.

Ten generations (including ourselves) - six of which as yet unborn - to pay off our folly.

And of course this is still living in a fantasy.


The obvious fact is that PK and his ilk have no intention of ever paying off this debt.

And some day, when the financial chicanery falls through,
when the artificially deflated interest on our Treasuries begin to rise from the lowest rates in history,
when the interest payment on all that debt doubles, triples, quadruples...! - the sh!t WILL hit the fan.

And then the pundits will say the obvious solution is to "forgive" this "crippling" debt,
and on that day untold trillions of dollars of invested wealth will disappear.

And our nation will fail.

Make no mistake we are talking financial collapse. Not a recession, not a depression, but the complete collapse of untenable economic "system".

And REAL bad things ALWAYS arise from such times.

We'll still be here. We'll still be Americans. But our Constitution will be "proven" "unworkable" and abandoned. And a strong-man WILL take over - they always do when the world goes to hell.


However, unlike the suppositions I started with, there is no fantasy here. This WILL happen. And it won't take generations.


But, there is an answer. It's not the answer to every problem we face, but it will buy us the time to work on all the rest.

A BALANCED BUDGET AMMENDMENT.

Nothing more - nothing less.

It can be done. It's just a constitutional amendment. We do them all the time (well, figuratively speaking). We just have to change some minds. Well, pretty much everybody's mind really, but still.

What could be more important.
Really.

-----------------
"I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing." Thomas Jefferson




---- (SHOW YOUR WORK) ----
($17,514,000,000 / $236,000,000 per year = 74.2 years)
($17,514,000,000 / $127,300,000 per year = 137.58 years)

now he pays
now child pays,
now grandchild pays,
15 years later great-grandchild begins to pay,
35 years later great-great-grandchild
55 years later great-great-great-grandchild
75 years later great-great-great-great-grandchild
95 years later great-great-great-great-great-grandchild
115 years later great-great-great-great-great-great-grandchild
135 years later great-great-great-great-great-great-great-grandchild
----------------------------------------------


All Comments

  • Posted by 9 years, 4 months ago in reply to this comment.
    No doubt, Plusaf.

    The only time eco/politico's think farther than the next election is when they're planning their own dynasties.

    You and I? We're fodder.
    Reply | Permalink  
  • Posted by plusaf 9 years, 4 months ago
    PK is not worried about his progeny or yours or paying off the National Debt or anything like that.

    He claims to be spouting Economic Philosophy, but in reality, he's interested in just One Thing...

    The same thing that all major party politicians are only interested in.... Control (and personal power.)

    You should not let yourselves be deceived by what comes out of their mouths.
    Reply | Permalink  
  • Posted by 9 years, 11 months ago in reply to this comment.
    I think they wear blinders and try real hard not to look into blind spots. They tell themselves anything so as to continue with what they've "always" done.

    I don't think PK and BO really believe this treatise. Though how they can deny it - I don't know.

    I would actually be very interested in seeing a counter from the opposition.

    But you're right NP, they don't give a damn about us at all.
    Reply | Permalink  
  • Comment hidden due to member score or comment score too low. View Comment
  • Posted by Robbie53024 9 years, 11 months ago in reply to this comment.
    Well, I don't know about put off, but it certainly needs attention before any prolonged space flights are conducted. Mars would be the furthest that would be possible until a solution is found.
    Reply | Permalink  
  • Posted by $ jbrenner 9 years, 11 months ago in reply to this comment.
    My first PhD student did some nice work on how to counteract the effects of microgravity on bone, but I can't say that she solved it. Manned space travel should be put off until the microgravity effect on bone problem is solved.
    Reply | Permalink  
  • Posted by $ blarman 9 years, 11 months ago in reply to this comment.
    Absolutely. I believe economists refer to it as the "third-party payer problem" - the concept that people distort the actual value of a transaction when they do not bear the full costs of the decision.
    Reply | Permalink  
  • Posted by $ blarman 9 years, 11 months ago in reply to this comment.
    Yes, Treasury bills are one of the least risky investment conveyances on the market because they are backed by "the full faith and credit of the US Government" and the Constitution mandates that debt service payments preclude everything else (assuming anyone pays attention to that pesky Constitution anymore). Current interest rates, however, make them worthless as an investment because their interest payments barely even match current inflation rates! It's better than hiding your money in a mattress, but only barely.

    All that changes, however, once interest rates go back up. That is why having the banks who run the Fed holding all that debt is such a big deal: they buy the debt now for basically the cost of money, then cash in big in the future! And inevitably, the rates WILL go up.

    Another one of the dangers of fiat currency: you can print and issue it and get it backed by an international cabal that only really is out to cash in on the inevitability of rising interest rates.
    Reply | Permalink  
  • Comment hidden due to member score or comment score too low. View Comment
  • Posted by Robbie53024 9 years, 11 months ago in reply to this comment.
    They should pay them by writing a check from their own account. When they have the money and then have to give it up, they will look at gov't differently.
    Reply | Permalink  
  • Posted by $ blarman 9 years, 11 months ago in reply to this comment.
    Well said. You want to know how to lower the tax burden? Make the citizens pay for them instead of their employers. You could get some serious push if people had to pay Social Security, Medicare, and FICA with their year-end taxes instead of forcing employers to do it. Same thing with payroll taxes.
    Reply | Permalink  
  • Posted by 9 years, 11 months ago in reply to this comment.
    The very wealthy IN THE BEGINNING. Who could afford a trip to America in 1600? By 1912 the Titanic was filled with 3rd class passengers.
    Reply | Permalink  
  • Posted by $ jbrenner 9 years, 11 months ago in reply to this comment.
    I'm already planning ahead for the offshore city. I could plan for the space hab. Since I teach both the rocket scientists and the biomedical engineers, I know the problems of space all too well; I haven't solved enough of them yet to be prepared for a space colony. Space colonization is probably a century off, and only for the REALLY wealthy.
    Reply | Permalink  
  • Posted by $ jbrenner 9 years, 11 months ago in reply to this comment.
    FDIC covers up to $250 K per bank. They raised it from $100 K a few years ago. I don't remember whether that was before or after TARP. The key part is the "per bank" part.

    They do buy T-bills for their "rock-solid safety", but with the way that the Fed is printing money, the value of those T-bills is decreasing far quicker than most people think.

    I used to own T-bills earning 8% per year. At that rate it made sense. At the rate they return now, it really isn't worth any more than a dollar itself, and you don't have any immediate liquidity.

    For preservation of capital, I got an annuity guaranteeing me 5% or more every year. It is not quite as "rock solid" as T-bills, but frankly I trust MetLife more than I do the government now.

    It is the foundation of the investment pyramid, and that is what is so ******* scary. The foundation is not rock solid anymore. Frankly it is ripe for a fall, and that is exactly what George Soros is trying to engineer.
    Reply | Permalink  
  • Posted by 9 years, 11 months ago in reply to this comment.
    Hmmm, getting older I find my facts have a half-life. Is my statement incorrect?

    I realize the interest rate is next to nothing, but don't nations, banks, institutions, funds and even very affluent private citizens buy T-bills for their rock-solid safety.

    Once you get above $100K (or so) the FDIC doesn't cover it. And once you get above a certain $Net Worth it becomes more about preservation of capital.
    Just the foundation of the investment pyramid, of course, not the whole thing.

    I don't know - just what I learned a zillion years ago.
    Reply | Permalink  
  • Posted by 9 years, 11 months ago in reply to this comment.
    As will happen! Maybe not for me but soon enough.,

    Off shore cities and space habs.

    It's inevitable. We want it too much.
    Reply | Permalink  
  • Posted by 9 years, 11 months ago in reply to this comment.
    Quite right, sir!

    SERVICING the debt is just another line item in the budget - an interest-only payment to "roll-it-over" every year.
    But even a moderate spike in interest rates could balloon that interest-only payment beyond the entire federal budget.
    Reply | Permalink  
  • Posted by $ jbrenner 9 years, 11 months ago in reply to this comment.
    CNBC had the nerve to describe Bernie Madoff's efforts as the scam of the century on TV this weekend. What the Fed has done, what Fannie Mae did, and what the Democrat Congress did (particularly with Social inSecurity) makes their Ponzi scheme looks like Romper Room.
    Reply | Permalink  
  • Posted by $ jbrenner 9 years, 11 months ago in reply to this comment.
    But T-bills are worth nothing. Isn't the interest rate zero - or close enough to zero? People have planned for retirement based on 4-6% ROI in perpetuity, and for the last 14 years, that's not what they are getting.
    Reply | Permalink  
  • Posted by $ jbrenner 9 years, 11 months ago in reply to this comment.
    That is their plan, whether we like it or not. It gives us a lot to look forward to, doesn't it? NOT!
    Reply | Permalink  
  • Posted by $ jbrenner 9 years, 11 months ago in reply to this comment.
    But most people pay nothing, this doesn't included the unfunded mandates (which bring the total to $100 trillion or so), and it assumes an unsustainable interest rate. As 1%er's, I have calculated our share was in the millions of dollars ($6 million if I remember the calculation from about three weeks ago in a different thread). I would gladly pay $50 K as an exit fee if I knew that I would not be harassed wherever I went.
    Reply | Permalink  
  • Posted by $ CBJ 9 years, 11 months ago
    Any attempt to "reform" a fiscal and monetary system based on an arbitrary, unbacked, government-imposed, politically manipulated unit of account (the dollar) has about the same chance of success as "reforming" the public school system.
    Reply | Permalink  

  • Comment hidden. Undo