Yesterday the Standard and Poor’s Rating agency (S&P) warned again that the credit rating of the US could be downgraded unless we resolve the credit ceiling issue and start reducing the debt. I then heard the President hold a press conference and blame the other guys for not having a fair and balanced plan.
The reality of a downgrade of the US credit rating would probably not be good. While I’m not sure what may or may not happen, common sense says that one big impact would be that borrowing money would cost more. The lower your rating, the bigger the risk to the people loaning you money and the more interest they want to assume that risk. If the government pays more, so will we the people.
In 2010, net interest outlays totaled $197 billion due to lower interest rates. The scary thing is the Congressional Budget Office (CBO) projects (Dec, 2010) that, under current law, the combination of rising debt and rising interest rates will cause net interest payments to balloon to nearly $800 billion by 2020. If the current amount doesn’t worry you, nearing a trillion dollars in less than 10 years should. And when you consider that it seems the CBO always underestimates the cost of government over time, maybe we should be a little frightened?
Fair and balanced is a point of view. I remember a tax increase in the 1990’s where the President said we were only going to tax the rich. When my taxes went up that year, I realized that the President and I had a different view of what rich meant. While I thought I was rich in friends and family and yet had to struggle to pay my bills, the law increasing taxes on the rich caught me in the net as well.
I keep thinking that the current debt situation is because of the spending our government has been doing. All my life I’ve heard people point out stupid things that the government spends money on. When you think about the attitude of “if we don’t spend it, we won’t get it next year” it does make sense how it happens. However if we can’t find ways to cut the federal budget, oh yeah, that is another problem since Congress has not passed one in a while.
Political posturing is not the answer for the debt or economy. It only matters for elections and I'm not worried about elections next year when S&P ratings this year could harm our economy and future.
What I want is a growing economy so people can go back to work and pursue their version of the American dream. As I look around the world and back at history, I am having trouble finding a country, a company, or even a person who spent themselves into prosperity. The obvious first step to me is that our nation needs to reduce its debt. It seems only fair to me that we reduce spending first, and start now.
Showing posts with label Debt Ceiling. Show all posts
Showing posts with label Debt Ceiling. Show all posts
Saturday, July 23, 2011
Monday, July 11, 2011
Debt Ceiling and the Deficit
Listening to the news, it would seem that it is time for the President, our Senators, and our Representatives to actually find some solutions on the debt ceiling based on what we regular Americans already know.
First, we are spending far more than we take in. A trillion dollar deficit increases our national debt. Since 2008 we have added 4 trillion dollars to our national debt. The only way to stop growing the debt is to reduce the deficit spending to zero. It doesn’t seem that this concept is all that hard to figure out, at least for those of us who live out of the infamous beltway.
Will reducing the federal spending hurt? Of course it will. Some federal employees may lose their jobs, some people living off the flow of money from the federal government will lose their income, and some companies will need to find new clients. It will be similar to what many of us around the country have experienced over the past several years.
The upside is that without the federal government spending every available dollar, the economy may begin to grow which would provide new jobs and opportunity.
Second, the debt ceiling is about spending. Congress has demonstrated their ability, over the past decades, to spend whatever amount is collected in taxes and more. We must start the process to only spend what we collect in taxes and fees (revenue). To continue increasing the limit on the federal credit card without a plan to halt the growth of the debt is foolish at best. At worst, it is destructive to every American’s future.
In our lives, if we leave large debts, they are paid out of our estates when we die. That means our family has a smaller inheritance. For the federal government that means the following generations are left with more bills than opportunities.
Third, if we want to actually solve this problem, Congress needs to do their job and pass a balanced budget. Then we need to live within our means, just as families across our nation already do. Discussions on raising revenue (tax and fee increases) and eliminating tax credits should be a part of the budget discussion, not a negotiating tactic in dealing with the debt ceiling.
Americans know what happens when your personal or corporate debt grows too large, we go bankrupt. Watching Greece, Ireland and other countries that have failed to keep spending under control should serve as a warning to us. I’d suggest that the approach that regular Americans take toward debt be followed by our government.
First, we are spending far more than we take in. A trillion dollar deficit increases our national debt. Since 2008 we have added 4 trillion dollars to our national debt. The only way to stop growing the debt is to reduce the deficit spending to zero. It doesn’t seem that this concept is all that hard to figure out, at least for those of us who live out of the infamous beltway.
Will reducing the federal spending hurt? Of course it will. Some federal employees may lose their jobs, some people living off the flow of money from the federal government will lose their income, and some companies will need to find new clients. It will be similar to what many of us around the country have experienced over the past several years.
The upside is that without the federal government spending every available dollar, the economy may begin to grow which would provide new jobs and opportunity.
Second, the debt ceiling is about spending. Congress has demonstrated their ability, over the past decades, to spend whatever amount is collected in taxes and more. We must start the process to only spend what we collect in taxes and fees (revenue). To continue increasing the limit on the federal credit card without a plan to halt the growth of the debt is foolish at best. At worst, it is destructive to every American’s future.
In our lives, if we leave large debts, they are paid out of our estates when we die. That means our family has a smaller inheritance. For the federal government that means the following generations are left with more bills than opportunities.
Third, if we want to actually solve this problem, Congress needs to do their job and pass a balanced budget. Then we need to live within our means, just as families across our nation already do. Discussions on raising revenue (tax and fee increases) and eliminating tax credits should be a part of the budget discussion, not a negotiating tactic in dealing with the debt ceiling.
Americans know what happens when your personal or corporate debt grows too large, we go bankrupt. Watching Greece, Ireland and other countries that have failed to keep spending under control should serve as a warning to us. I’d suggest that the approach that regular Americans take toward debt be followed by our government.
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