Explaining the national debt

Dateline: Tue 09 Aug 2011

Six months or so ago, I watched a documentary, I.O.U.S.A., about our growing fiscal crisis. It was dispassionate, non-partisan and well received by critics. Just in case you're suspicious it's something boiled up by the Tea Party, it was created in 2008, aired on PBS and is a project of veteran Sundance fame director, Patrick Creadon.

Here's some more info, from the I.O.U.S.A. website:

"I.O.U.S.A. boldly examines the rapidly growing national debt and its consequences for the United States and its citizens. Burdened with an ever-expanding government and military, increased international competition, overextended entitlement programs, and debts to foreign countries that are becoming impossible to honor, America must mend its spendthrift ways or face an economic disaster of epic proportions.

"Throughout history, the American government has found it nearly impossible to spend only what has been raised through taxes. Wielding candid interviews with both average American taxpayers and government officials, Sundance veteran Patrick Creadon (Wordplay) helps demystify the nation's financial practices and policies. The film follows former U.S. Comptroller General David Walker as he crisscrosses the country explaining America's unsustainable fiscal policies to its citizens.

"With surgical precision, Creadon interweaves archival footage and economic data to paint a vivid and alarming profile of America's current economic situation. The ultimate power of I.O.U.S.A. is that the film moves beyond doomsday rhetoric to proffer potential financial scenarios and propose solutions about how we can recreate a fiscally sound nation for future generations."

You can watch an excerpt on YouTube, the 30-minute version. You should watch it. Really. Here's the link:

http://www.youtube.com/watch?v=O_TjBNjc9Bo

Anyone who minimizes the Standard and Poor downsizing of the U.S. rating is on the wrong track; this is one of many red flags that demands our attention. Unlike some of the more radical critics, I'm not saying we're going down with all hands on deck -- that's one reason this documentary is being recommended, because it provides some common sensical solutions to pulling out of our free-fall.

But we are in serious trouble. Don't lay it at Obama's feet; don't snark Bush. Both men had a hand in creating this mess, along with many many others. Washington rhetoric and vicious partisan back-biting only adds to our sense of impotence and frustration.

Take a deep breath, take a look and be a bit encouraged on a day when the markets will no doubt tumble again. Maybe, with a rolled-up sleeves mentality and resolve, we collectively can wallow out of the financiall crisis many helped create.

Comments

hendy [Member] said:

The biggest error that I see is that while spending is high, there's an artificial ceiling imposed on tax revenue. The four largest places that we let reasonable taxation get away are by 1) the Bush Tax Cuts 2) inequitable mortgage securities deductions 3) warehousing and sequestering international corporate profits offshore, and 4) the need for services taxing of non-profits. I'd love to see the oil companies taxed to their very core, but that would hide the problem of dependency on foreign oil. We also have a ceiling on Social Security contributions, and a culture of 1099 versus W2 so that corporations don't have to offer benefits-- the freelancer's conundrum. In the meantime, the anti-tax greed culture continues.

2011-08-09 08:37:25

Roberta X [unverified] said:

Hendy, old thing, what do you suppose you will be paying for gasoline and heating oil once "oil companies [are] taxed to their very core?" They don't magically generate money, you know, they get it from their customers.

S&P was pretty unambiguous in their evaluation that the Feds spend too much and take in too little, but that latter item is kinda worrying: the top 10% incomes are already paying 70% of the taxes and they have a lot more clout than you and me. Tax "the big corporations" and it just makes prices go up, prices paid by the rich, poor and middle class alike.

Ouch.

And Congress is thus far disinclined to actually spend less; they cut the rate of increase and called that a real cut. So what's that leave, down the road?

2011-08-09 11:00:15

hendy [Member] said:

Ms Roberta,

The price of a barrel of oil today was about $78. The price for oil when it was $78 per barrel was $2.19. Look at the price today. The tax rate did not change. Draw your own conclusions.

2011-08-09 16:36:00

Write Man [Member] said:

Sorry Ruth, but you're being too kind to obstructionist Republicans/Tea Party types.

"S&P says it also revised its rating because its projection "now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues …"

In other words, the GOP's hard line against taxes helped to trigger the downgrade. And for any Republican too obstinate to see this message, S&P issues a further warning: To avoid a second downgrade, we'd probably have to generate "$950 billion of new revenues" by letting "the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating." (From William Saletan/Slate, here: http://www.slate.com/id/2301119/).

Undeniably Obama has made some bad moves -- some of that comes from being hemmed in by the two wars, debt, failing economy and tax cuts left by his predecessor. Some of it comes from trying to compromise with a party that will not tolerate even the tiniest bit of success for Obama or the Democrats, even if that success actually benefits a vast majority of Americans, who, increasingly, are becoming have-nots in the face of the fiscal austerity mandated by wealthy whites. And some of it comes from Obama and the Dems squandering the super-majority out of the party's continuing inability to unify as leaders.

2011-08-11 05:12:52

Jason [unverified] said:

I will say this much: it has been awesome how eerily similar Obama has been to Bush. Bizarre foreign policy, questionable cabinet appointments, and constant attempts to borrow our way out of debt.

You can lay this egg at the feet of Republicans and Democrats alike Write Man, but calling Republicans and Tea Partiers obstructionist while completely ignoring the sins of the Democrats just doesn't add up. When Bush was in office he was routinely called a terrorist, a warmonger, a liar, and even a racist. He was mocked and derided in the basest of terms, and even had respected members of the mainstream media lying in an attempt to demonize him. Do you have Republicans doing it now? You sure do (with the exception of the media, who love Obama, which IMHO infuriates Republicans even more.) Let's give that hostility some context, though, and act like our country isn't 3 years old.

Citing a small portion of S&P's logic for the downgrade doesn't make a point about much of anything, lest we forget this is one of the same bond rating agencies that gave all that exotic mortgage crap a big fat 'AAA.' I can appreciate trying to turn their statement into political fodder, but it's not. S&P doesn't care about politics, all they care about is the country's ability to pay it's debts. If Obama didn't want to have a hand in this, he could have raised taxes when he walked into office with a solid Democratic majority everywhere he looked, he could have simply STOPPED this insane practice of spending half again more than what they're generating in revenue in a given year, etc. For Pete's sake they have failed to meet their OWN benchmarks half the time.

2011-08-13 03:46:22

Jason [unverified] said:

Not to give Republicans a pass because they're obviously complicit in this too, but acting like they just showed up and threw a temper tantrum for no reason whatsoever is foolhardy logic. I could switch Democrat and Republican in your post and 5 years ago your post would be correct. Nevertheless I believe accountability begins and ends on the first and last days, so this hot potato has landed in Obama's lap and it's his baby to deal with. Defending him by essentially saying he didn't know what he was getting into probably does more damage to a pro-Democrat argument than it helps it.

Anywho, I say let the Bush tax cuts expire, ALL of them, but only under the condition that they service the debt. Make the half of the country that isn't paying any income tax pay something so they can share the sacrifice, and those who are getting a welfare workaround by getting back more in a tax refund than they paid all year certainly need to pay, period.

Calling high-earners "rich" isn't really a fair argument since we seem to consider the "rich" those who already have a lot of money, not necessarily those who are in the process of making it. If we could find a way to tax wealth as opposed to income that would be nice, but I doubt you'll ever make that happen. Perhaps a quarter of a percent national sales tax? I liked Ralph Nader's idea of a very small derivatives tax on every transaction on Wall Street, but the experts say that would destroy our economy as we know it almost overnight so I'm still on the fence with that one.

2011-08-13 03:46:55

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