Daiwa

First, 40% goes out of the united states. Much of the interest held by Americans is paid to high income Americans and does not return to the demand side. Poor people and middle income Americans do not hold a lot of the debt. The interest on the debt comes off the top and will take the general fund money needed for Social Security, Medicare, education and defense. It is not a doomsday scenario it is not a sound fiscal policy. The Fed Chairman is continually warning of the debt as did former Sec O'Neil. No person, company or nation can continually go into debt. The interest is a nonproductive component of the budget and does does not pay for any needed services. It is in essence paying for years of spedingt more then we taxed. There is no sound reason, given the fact that we are in a recovery, to be experiencing annual deficits of almost a half trillion dollars. What we are doing is mortgaging the future to pay for the past simply because we do not have a fiscal discipline to pay for what we want. To put ourselves in a position where the interest each year is equal to or greater than the amount we spend on national defense or on all other non-defense non entitlement programs is totally irresponsible.

1 - Simply put, debt is the opposite of both freedom & wealth. Real conservatives know this. 2 - The miracle of compound interest --in reverse. 3 - Decline of market confidence due to unsustainability. As a taxpayer & an investor, I think adding $400 B a year to the national debt & paying around the $200B a year in interest stinks. Period.

You named 3 theories, not 3 real world effects. I don't like deficits in principle either. But I also don't like welfare programs such as social security where plenty of people are getting far more money than was ever put in by them (not to mention all the people who get it without having worked a day).

The graph I posted i think makes the case pretty succinctly. It's the redistribution of wealth programs that are gobbling up the budget. Not interest on the debt.

Draginol

If you are opposed to programs such as Social Security and consider them redistribution of wealth you hold a position that is out of the mainstream thinking. The disparity between the have's and the have nots is not a condition that makes us stronger. Wealth results from the average person working and spending their money so the companies controlled by the wealthy prosper.

Social Security and Medicare are the most popular programs if ever enacted by Congress. If you and other conservatives believe that we're going to balance the budget by reducing or eliminating elements such as these, you will find very stark reality of the American voter will not tolerate such action is by its elected officials. The fiscal crisis being created by continually spending more than we tax could result is very large tax increases on the wealthy when it becomes clear we have gone ntoo far into debt. We should act before that happens for the best interest on the country.

You named 3 theories, not 3 real world effects.

That's incorrect.

There's nothing theoretical about debt being the opposite of wealth. That's a fact. And if you've ever been in debt, you know how it dramatically it reduces your freedom. That is, unless you skip town and change your identity.

There's nothing theoretical about the miracle of compound interest. It's a fact that has been demonstrated over & over. I'm amazed you think it's theoretical.

As for the third item, here's a real-world news item -- today right now -- about declining market confidence (Link):

Dollar drops on reserves concerns BBC, 22 Feb 2005 The US dollar has dropped against major currencies on concerns that central banks may cut the amount of dollars they hold in their foreign reserves. Comments by South Korea's central bank at the end of last week have sparked the recent round of dollar declines. South Korea, which has about $200bn in foreign reserves, said it plans instead to boost holdings of currencies such as the Australian and Canadian dollar. Analysts reckon that other nations may follow suit and now ditch the dollar...The focus once again has been on the country's massive trade and budget deficits, with predictions of more dollar weakness to come. A report last month already showed that the dollar was losing its allure as a currency that offered rock-steady returns and stability. Compiled by Central Banking Publications and sponsored by the UK's Royal Bank of Scotland, the survey found 39 nations out of 65 questioned were increasing their euro holdings, with 29 cutting back on the US dollar.

Not very theoretical. Real world & factual.

The graph I posted i think makes the case pretty succinctly.

The graph you posted stops in 2001 with Clinton's record surpluses & does not reflect today.

Here's a better graph from the same source:

Gene -

I think you're missing Drag's point - you've put words in his mouth. All he's pointed out is "what" is really pushing up the deficit - good or bad is a different debate.

ProgressiveUSA -

70-year projections being what they are, total crapshoots, I'd suggest not investing too much in them. Take a look at the same projection graph from 1999.

Cheers,
Daiwa

Hi Daiwa --

This graph is from June 2002 -- and from the same source as Draginol's graph. I agree that generally projections are a crapshoot -- but due to policy & events, not strict mathematics. For example, note that my graph shows interest near zero for the next 30 years. Wrong!

This graph *does* show the miracle of compound interest factor nicely -- but about 25 years too late. Adding to the natl debt only steepens the compound interest curve -- and marks the real crisis in both govt spending & market confidence.

BTW, thanks for the friendly tone! A pleasure!

ProgressiveUSA -

Thanks to you, too. I probably don't need to say it explicitly, but my point was that virtually "no" such predictions have ever been correct, except by chance. If you look at such long-range projections from any administration at almost any time since WWII, it is quite evident. I'm not advocating not making projections or ignoring them, since they can be useful to an extent (mostly for hypothetical arguments in places like this ), but any projection past 3-5 years qualifies as a wild-ass guess in my book. Even the near-term projections being made in 1999 turned out to have been wildly wrong.

Cheers,
Daiwa

Can you name a single negative real world side effect of the deficit?

Yes. Tax payers spend 250 Billion dollars a year on interest. Interest that could have been spent on education, interest that could have been given back in tax breaks. Everybody knows that debt= bad. Even the dumbest school children know that having $1 is better than having $-1 and paying $.50 to the school bully each week.

Another real world negative effect? The value of the US dollar is brought down. While this is just the beginning of the problem, we will see in the future more negative effects of our debt. In essence, the average American has the burden of another 22,000 dollars in debt to deal with, including paying interest on. If this is not a negative effect, I don't know what is.

Even the near-term projections being made in 1999 turned out to have been wildly wrong.

Due to your beloved Bush.

I agree projections are not often correct. Bush projected a $5.7 Trillion surplus in 2001.

How do you deal with reality.

Debt 1980 $909 Billion
Debt today $7.6 Trillion

Interest paid by American taxpayers in 1980 $90 Billion
Interest paid by American taxpayers in 2004 $313 Billion

I will hammer back home the numbers because they bear repeating. When our federal government is spending $8500 a year per man woman and child in the US for the ANNUAL BUDGET, there's definitely too much pork! (Those numbers don't even TOUCH what state budgets account for)

The graph I posted i think makes the case pretty succinctly. The graph you posted stops in 2001 with Clinton's record surpluses & does not reflect today

Did you forget that Bush was in office in 2001 and NOT Clinton?

en the near-term projections being made in 1999 turned out to have been wildly wrong. Due to your beloved Bush.

This is BS!!! Bush didn't get into office till 2001.