Tuesday, November 19, 2013

Government Debt vs. Household Debt

According to USA Today, as of last year, the national debt was roughly equal to the value of all goods and services the U.S. economy produced in one year.

CBS recently reported that the federal debt (about $17 trillion) jumped $409 billion last month --- to $3,567 per household. (Whether that CBS report is true or not is besides the point...read on.)

It should be noted that "households" aren't equally responsible for government debt, as we all pay different tax rates on our different incomes. But to put it in this way, only makes for sensational headlines, as conservative groups like to do — as a way to scare people into reducing government spending and cutting taxes (on the rich, who pay most of the taxes).

But even if one preferred to use this skewed analogy of "household debt" or "household budgets", then let's rationally argue the case from their own perspective.

Say we have $17 trillion in debt, and we have a $17 trillion annual economy, we'll also have to include what we (the government) has in assets — which is about $200 trillion according to Cullen Roche, founder of Orcam Financial Group.

So if we just change "trillion" to "thousand" for a household budget:

Let's say you only earn $17,000 a year and you owe $17,000 to the bank (for a mortgage, car, or whatever). To some people, that might seem like a lot of money. But what if you also had $200,000 in assets (cash, land, fine art, etc.) Would $17,000 of debt really mean anything at all?

We've been hearing a lot about the debt and deficits — ever since the Democrats were in control of the government. But government spending is down and we have less federal workers than since 1966. And government spending is down faster than since WWII.

Government spending and "waste, fraud and abuse" hasn't been our biggest problem—we could actually use MORE government (excluding defense), paid for with a more fair tax code.

The U.S. population has grown by over 1/3 (100 million) since the 1970s — but not enough tax has been paid by the top income earners over the past 40 years — when their tax rates should be DOUBLE than what they are today.

And as Cullen Roche points out, none of this even touches on the operational realities behind the United States monetary system, and the fact that we’re not going bankrupt unless we choose to go bankrupt...and we’re not going to be unable to pay the bills (on debt denominated in a currency we can print) unless we choose not to pay those bills.

And if the Republicans would like to define "wasteful government spending", let them — but they won't, because to them, what they REALLY think is "wasteful" is Social Security and Medicare (and not tax loopholes). If they were honest, they would just come out and verbally say it — in plain English.

The reality is, we don't have a spending problem — we have a revenue problem. Instead of cutting programs that the poor and middle-class rely on (instead of cutting taxes for the rich), do this instead:

Raise the minimum wage (including, for tipped employees); reform the tax code and taxing capital gains as regular income; institute programs to put the long-term unemployed back to work; reduce or eliminate H-1B visas until skilled Americans are hired first (at the prevailing wage); renegotiate ALL our "free trade" agreements, force the repatriation of overseas corporate earnings and tax them at the "statutory rate" of 35% (not at a lower "effective rate", with applied loopholes); ban any further outsourcing of manufacturing, service, and tech jobs; raise (or eliminate) the "cap" on Social Security taxes (most working Americans pay this tax on 100% of their income up to $113,700 a year); Strengthen Social Security, don't cut it!

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