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Debt

Debt Reduction Equals Debt Increase

The ultimate irony, I’m afraid, is that the “debt reduction” plan being put forth in Congress is actually a recipe for an even larger debt. Huh? No, it’s true, taking money out of the economy will lead to a spiral of less demand, higher unemployment, and a smaller economy for the U.S. government to draw tax revenue from.

From Ronald Reagan all the way to George W. Bush, Republican presidents have known that Federal deficit spending can actually grow the economy. Yes, they were all Keynesians by consequence, if not by design.

Today’s Republicans are causing Reagan to turn over in his grave. They either don’t care about the well-being of the economy, or they are too dumb to realize what they are about to do to it. The debt reduction plan simply takes money that would otherwise be a part of the U.S. economy during a vital recovery period, and burns it up into thin air. That money will go back to all the nations that were lending it to the United States, and come right out of the pockets of consumers and the businesses that would have benefited from the spending.

We can safely assume that the removal of such large quantities from the U.S. economy will result in a decline in demand, an increase in unemployment and thus a decrease in Federal tax revenues. Oh, let’s not forget, as a result we’ll have an even larger national debt. Brilliant!

Meanwhile, we are less safe (fewer funds for police and military), we are less educated (fewer funds for education) and we are struggling through unnecessary pain (reduced benefits to Social Security, Medicare, Medicaid, Pell Grants, unemployment, etc.).

What a grand plan! It should be made clear that President Obama has his hands tied behind his back. He had to come to the table with this new Tea Party brand of Republicanism who had the economy held hostage. If not, we could have been looking at default and other much more dire consequences.

Unfortunately, despite history giving us valuable lessons to learn from, Americans know less about economics than they have in almost 100 years.  The extreme right has done everything it can to push creationism and suppress economics and political/philosophical thought.  America declines.

The world is surely laughing it up good watching us destroy ourselves. Austerity? God bless America! The land of the free, and the home of the brains!?

About Justin McAffee:
Justin is the publisher The Nevada View, which has earned the recognition in the Washington Post’s “Best State-Based Political Blogs,” as well as being awarded the “Most Valuable Blogger Award” by the local CBS affiliate in 2011. Follow him on Twitter @McAffee

Discussion

6 Responses to “Debt Reduction Equals Debt Increase”

  1. None of those previous Presidents had a $14 trillion national debt to contend with.

    FDR did run up a huge national debt to fight World War II, but that was over when the war ended. Today’s debt is without end, since demographics are working against us. Fewer young people to pay taxes to pay for all those long-lived retirees’ benefits.

    There’s a limit to how much any individual–or government–can spend when they’re already in debt to the point of owing more than three years’ worth of their income.

    Posted by Steven L. | August 1, 2011, 2:46 pm
    • I do hate to be the one to break this to you, but not only have we not finished paying off World War II, we still owe $55,757 on a bond issue from the Revolutionary War. Our pre-1917 debt is now calculated as $1.3 million.

      During World War II some 85 million people purchased $185.7 billion worth of War Bonds, as of January 1946, and as of now there are also about $16 billion worth of unredeemed savings bonds (e series, popular about 50 yrs ago) out there which are no longer earning interest.

      Aside from the fact that the debt from World War II hasn’t magically disappeared, and we’re still paying for operations in Vietnam, as well as that $55,757 still owed from the Washington Administration… it should be recalled that one man’s debt is another man’s asset. And, 68% of the current national debt is domestic, i.e. it’s interest and principle which we owe to ourselves. China may be one of our principal creditors but its holdings only account for approximately 8% of our total indebtedness.

      Posted by Desert Beacon | August 1, 2011, 9:13 pm
  2. Vicious circle. We have played this game before during the Great Depression. The government employing people and putting them back to work – building roads, preserving parks, and working in the military is what pulled us out of the hole.

    I’m pretty sure laying off government employees and making the already poor give the last cent they have is not going to work.

    I would love to see something new. . . . how about the billionaires pay their fair share?

    Posted by Angie Sullivan | August 1, 2011, 2:23 pm
  3. Another consequence of high unemployment is a spike in crime. Some people will do whatever it takes to survive, and when they rob you, it will not be for a mere 35% of what you have, which matches the top tax rate. It will be 100%.

    Then even if these criminals are apprehended, there are incarceration costs which are prohibitively expensive. it has been said, “A year in Jail costs more than a year at Yale.”

    Speaking of police, look for a huge spike of them writing tickets as a means of revenue enhancement. Don’t believe me, take I-80 from Reno and once in CA there are numerous speed traps. (CA has a HUGE budget deficit.) I bet it is likewise on I-15 once someone enters CA. (Can anyone from Vegas attest to this?)

    The facts are massive budget cuts that are not done correctly to root out fat instead of muscle and bones causes external costs that we pay for in another form.

    If you do not want to pay taxes to the Federal Govt, then instead you can pay your local carjacker or the highway patrol. Its your call America.

    Posted by Rex Ricks | August 1, 2011, 2:08 am
    • Please! Traffic laws are enforced in California because of drivers who think the do not apply to them! By law California cannot have “speed traps” speed reduction areas are well signed. The Problem with Nevadans complaining about “speed traps” is that they do not feel they are bound by California laws for some reason; 15 over or hindering traffic flow by failing to move right when they are slower than the traffic behind them are to prime examples!
      Easiest way to avoid the so called revenue generation is to obey the speed limit!

      Posted by Ron | August 1, 2011, 7:22 am
    • My parents used to tell me that during the Great Depression, when unemployment was 20%, they could leave their windows open on hot summer nights without worrying about home invaders. And subways, of course, had no cops on board the trains in the 1930s, because none was needed.

      Conversely, during the prosperous 1960s, the U.S. experienced one of the worst crime waves in its history.

      Poverty doesn’t cause crime. Unemployment doesn’t cause crime. Some white-collar worker who just got a layoff notice doesn’t run outside and rob a bank, much less rape a woman.

      What causes crime is a criminal mentality, and that’s due to upbringing and frankly to low intelligence.

      Posted by Steven L. | August 1, 2011, 2:48 pm

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