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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: kumar who wrote (214969)	1/26/2007 8:58:17 AM
From: jttmab	Respond to of 281500

its rather easy. look at it from a personal perspective - lets say I have a house on which I owe $100. I can pay it off, or wait for the house to appreciate, in which case some or all of the $100 is my equity, not owed to anybody. I'm not sure that adequately makes the comparison. For US debt to begin to compare to the house/mortgage metaphor. You would also point out that the debt isn't fixed at the nominal $100. The debt, your mortgage, is continually increasing in the amount you owe, e.g., today you owe $100, next year you owe $110. The debt increases because you are continually taking out additional equity lines of credit and you aren't paying the interest accrued on the debt you already owe. Additionally, you aren't operating with a fixed rate mortage [debt instrument], you're using an adjustable rate instrument . To complicate things a little bit further, a source of the money that you've borrowed to keep this little game going has informed you that they're not going to allow you to continue to borrow additional funds. They'll wean you off gradually, by allowing you to borrow less than you did before. In Government, we call this source, Social Security. Your source, SS, has also told you that not only will they not allow you to take additional loans, they will insist that you actually pay off the interest and principal that you've been ignoring since SS began. And don't think for a minute that you're going to not pay SS, that means you're defaulting on Treasuries and your other sources of debt will be very unhappy...think "kneecaps and ball peen hammer". Just as an aside. You know why SS is going to demand payment of principal and interest? That's because you're getting [demographically] old. If you think your medical care is high now [~15% of GDP] just wait until your [demographically] old and Medicare starts chomping at the bit for your disposable income. jttmab

To: kumar who wrote (214969)	1/26/2007 10:02:00 AM
From: jttmab	Respond to of 281500

Here's an interesting passage on interest on the debt that gives it some perspective. ...In Fiscal Year 2006, the U. S. Government spent $406 Billion of your money on interest payments* to the holders of the National Debt. Compare that to NASA at $15 Billion, Education at $61 Billion, and Department of Transportation at $56 Billion. So how do we fix this growing debt problem?... federalbudget.com "Spent" is a funny word and while it may appeal to common sense "spent", I'm not sure exactly what he means by spent. It would take some effort that I'm not willing to put in right now. Interest accrues on the debt. For those that actually own treasuries, we have to pay that interest otherwise it's a default. SS debt is something different. The debt that the government owes SS accrues interest, but the Federal Government doesn't pay it, it just increases the amount of debt owed to SS. In the above passage I'm not clear when he says "spent" whether he means only that interest paid to the holder of Treasuries or he is also including the interest accrued and added to the debt for intragovernmental debt. It would make a very significant difference, but I don't feel like figuring it out. I'll assume [or pretend] that it includes both. jttmab