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Home > Blog > I.O.U.S.A.'s U.S. Television Debut & Panel Discussion on CNN this Weekend

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11 Comments

1. Federal Reserve Impact

   On January 08, 2009 1:37 PM, Dee said:

   Based upon the financial timeline, as shown in the documentary, although the US has been in debt in the past, it was always able to recover being the US government was the one printing the money and making changes to the budget as required.  As soon as the Federal Reserve was created and the government began borrowing from this private banking "group", with interest, we were now at the mercy of the powerful banking industry for paying our everyday bills, in addition to whatever else we may need.  Even if the US were able to pay back every foreign country holding our debt, we would still owe the Federal Reserve for all money borrowed, past, present and future.  With this system, we will never be out of debt.

   "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks...will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.  The issuing power should be taken from the banks and restored to the people, to whom it belongs."  Thomas Jefferson

2. The FairTax would do much to help solve the debt problem.

   On January 11, 2009 4:09 PM, Art Villa said:

   Injunction with many of the approaches that this foundation recommends, the FairTax could be a big part of the solution to get our nation's financial house in order.  The FairTax would:

   1. Invite investment back to our nation by eliminating capital gains tax.
   2. Invite our industrial/manufacturing base back by eliminating Corporate Tax and highly regressive Payroll Taxes.
   3. Streamline tax compliance by piggy-backing on the back of state sales tax systems that are currently in place in 45/50 states.
   4. Enable Americans to build wealth again. 
   5. Ensure that no legal family will pay Federal Sales Tax until after their family survival is achieved via the FairTax prebate provision
   6. Broaden our tax base to all who consume within our lands including tax evaders/avoiders as well as foreign business travelers and tourists.

   There are many more benefits to the FairTax.  Please visit www.fairtax.org and/or www.fairtaxnation.ning.com for more information and to get involved.

3. Treasury Borrowings

   On January 11, 2009 5:17 PM, Johngba said:

   We need to dramatically extend the average maturity of U S Treasuries. I believe one thing we should do is start issuing 30 year treasuries again. We need to find out how deep that market is. If we use some of the proceeds to start paying down our short term debt it will force short term lenders to find investments other than short term treasuries.

   johngba

4. I.O.U.S.A.

   On January 12, 2009 10:14 AM, dove2101 said:

   After viewing IOUSA on CNN, I believe it's time for all Americans to view it... it should be required given the mess we're all in.

5. Automatic Savings

   On January 12, 2009 12:28 PM, selrahc said:

   During the airing of I.O.U.S.A. on CNN the comment was made that the government should institute an "automatic savings plan".  Isn't that what Social Security was supposed to have been.  And now I'm to encourage the same group that stole my SS savings to start a new fund and take more of my money? No thanks.  I'll pass on that.

6. FairTax - High Octane Fuel that will allow our Economic Engine to Roar!

   On January 14, 2009 7:40 PM, Art Villa said:

    

   

   

    

7. Re: Automatic Savings

   On January 14, 2009 11:25 PM, imademedoit said:

   Yes, the payroll deductions for Social Security (and Medicare) are a form of forced savings.  Most, moreover, eventually will collect more from these programs than they contributed during their working years.  No one has taken away anyone's Social Security, nor are there plans to do so.  Without law change, the Social-Security Trust Fund will be insolvent (bankrupt) around 2041.  This means they will have redeemed all of the IOUs in this so-called (cashless) trust fund.  After this, they estimate that the payroll deductions from there will cover, if memory serves, around 70 percent of the outlays.  Some of us want reform for this years ago.  The longer we wait, the more are those who escape helping to close this 30-percent gap, and the more that will be needed from those finally burdened to close the gap. 

   I haven't seen I.O.U.S.A yet, but I am confident that the forced savings it promotes has nothing to do with putting these savings in any politician's paws.  These would be private accounts with restrictions on them.  For instance, you would not be allowed to invest your (albeit forced) savings in the stock market, and withdrawals before a certain age would not be allowed.  After all, for the vast majority of us, we shall need the money in retirement (or old age,) therefore, as the argument goes, why should we not force those who otherwise will not save to save? 

   Social Security and Medicare never were intended to be sole providers in retirement.  Yet, millions treat them as such duing their working years, finding one reason after another for being unable to save a dime beyond what the Feds deduct from their checks for SS and Medicare.  When retirement (or old age) comes and they are strapped for income, they come begging not only to government but to various other charities as well. 

   This all is a "sensitive" subject for many.  Some argue they cannot save because their children are so needy---even under normal circumstances.  Well, some couples limit the number of children they have with the express purpose to permit them to save given their incomes.  Other couples want 3, 4, 5, 6,... children, have them, and cannot save a dime.  Then they expect "me" to subsidize them, from conception, through retirement, and even to bury them. 

   I am 100 percent in favor of any public policy intended to wean millions from the public dole.  Too many in this Country rely too much on government(s).  They will learn before much longer a hard lesson the hard way.  Since they refuse to learn from history, the present once again will show them why an over reliance on government(s) is not in their interests.  Over the past seven decades we've recreated the beast and surprise, surprise, the beast is hungrier than ever and getting hungrier!  Some of us have seen this coming for decades.  But, since no one can prove the future, some refuse to listen.

   Personally, I think there is a balance to find between the Right & Left poles, and forcing private savings (to be consumed in old age) is collaborating material for those on the Right whose default is to limit the cash (and, hence, power) given to government(s). 

   The power of compounding is real.  At 3% compounding, saving just $10 per week over 50 years grows to $60,934.  That is, by saving $26,000 ($10 x 52 x 50,) one ends up with over twice that.

   Then, too, when some talk about forcing others to save for their own retirements (old age,) they only are talking about roughly 50 percent of the population, as the other roughly 50 percent already save by choice---even sacrifice---knowing that they will need the savings later in life. 

   There are ways to use government to provide without government being the direct provider.  But whatever the case, more people will be taking more responsibility for their own welfares---even if we must force them to take more responsibility.  "Change we can believe in" and "Yes, we can" just might manifest more than for what millions bargained, err, voted.

8. Re: Treasury Borrowings

   On January 14, 2009 11:27 PM, imademedoit said:

   They are looking to issue more 30-year bonds.  However, there are concerns.  First, such long-term yields generate little cash upfront for the debt created.  For example, a $1,000 face value bond earning 4% compounding over 30 years, renders today about $300.  Put another way, if the government needs 300 billion dollars today, it would have to issue 30-year yields worth 973 billion dollars.  Your children and grandchilren will lament over your plan to replace short-term debt with long-term debt.  Moreover, the annual interest burden would remain the same, since all you did is shift short-term debt over to long-term debt.  Another concern is that investors today are leery of 30-year bond investments.  Nobody knows whether or not we'll bring our financial house back to sound footings.  If they keep running our debt up and up to the point where investors start demanding higher returns, no one wants to be stuck holding 30-year bonds at 4%.   

   There are but two ways to improve soundly one's debt position:  1) increase one's income or 2) pay down one's debt.  The Federal government's position for decades has been to to take income increases beyond GDP growth and issue debt.  Since 1941 real GDP growth (GDP adjusted for inflation) has averaged at 3.47 percent per year.  Since 1975 Federal spending has grown on average 7.5 percent per year, or 4.03 percent beyond its income growth.  This translates into borrowing, on average, of 22.3 percent of every budget since 1975.  That, in other words, is a lot of spending without taxation or a free lunch if you will.  Many are soon to learn that there really is no free lunch---somebody always pay, sooner or later, and later cometh soon.

   At the end of FY2007, our public-debt-to-real-GDP ratio stood at 43%.  This is not much to worry about.  If we use gross (or what many are calling national) debt, this ratio jumps to 77%, which does raise an eyebrow.  The portion of national debt that is not public debt is debt the Federal government owes to itself (3.9 trillion dollars at the end of FY2007.)  Some of us fear they will "simply" transfer this debt they owe to themselves over to public debt as they reduce the trusts to insolvency.  If they do this without borrowing any more than that from the public, we will not be in bad fiscal shape come 2041---assuming we have decent GDP growth along the way.  But, therein is the rub: will they stop borrowing from the public except what is necessary to redeem the IOUs of their so-called trust funds?  Unlikely.  Their default always is to borrow to stimulate, which is one side of Keynesian economics.

   The other side of Keynesian economics is a government calling in debt when it wants to stimulate an economy---i.e., inject cash into the economy.  But, in typical humanness, we ignore a balance that would require us to reduce our debt.  How can a government pay back debt when its people are clamoring that it needs to spend more?  Gotta have more for health care.  Gotta have more for education.  Gotta have more infrastructure outlays.  Gotta have energy investments.  Gotta have....  Gotta have....  Gotta have....    The Wall-Street bankers could raise billions to cover their suffering cash-flow needs by liquidating "some" of their investments in our public debt.  Yet, to do this our government would have to reduce its public debt.  Can't have that when mainstreet is screaming for more from government!

   One way to create surpluses in a Federal budget is to reduce the Federal budget.  Voters, by and large, are not informed well.  From 1975, the average annual increase for the Federal budget is 7.5 percent.  During President Clinton's years, the average budget increase was only 3.2 percent.  Moreover, "budget surplus" is a misnomer in every year since 1969.  Gross debt has grown every year since then, even during the so-called "surplus years" during President Clinton's administration.

   We need to pay off debt, not shift it down the road in a running 30-year window.  There is no free lunch.  Problem is the people want it as much or more than politicians want it.  Truth is some do get a free lunch.  But, this only is because someone(s) else end up paying for the lunch.  So, was the lunch really free? 

   The only saving grace in all of this is that most "leaders" don't want future generations remembering them---in documented history---in unfavorable terms.  Nobody wants to pay on or off another's debt.  This all comes to a climax relative to baby boomers, since so much debt stands to accumulate not for cross-generational purposes but for baby-boomer specific purposes.  It will be turbulent, but I trust we will emerge stronger and wiser.

   30-year yields have their place in a debt spread.  If we build a bridge that people will use/enjoy for 40+ years, then 30-year yields make sense.  Short-term debt should be just that---short-term debt.  When we operate in this continual reissuing of short-term debt, well, we just make the short-term long-term. 

   I have no problem with and favor issuing 30-year yields for spending that benefits the next generation(s).  If they benefit from spending today, then they can help pay for it.  The problem is this forever issuing new debt (short or long-term) and never paying it back.  The last time our gross (national) debt decreased from one year to the next was from 1968 to 1969.  Even with all the hype about the surpluses under President Clinton, national debt still grew by 2 trillion dollars over his 8 years.  The problem, in other words, is we keep growing the national debt---never paying it down. 

   Issuing 30-year yields to pay off some short-term yields is little different than issuing another credit card to pay off another credit card's balance.  The credit-card companies control this by limiting our credit limits.  The Congress, however, sets it own credit limit (debt ceiling.)  Go figure it knows no limit to date.

   I suspect "the people" will understand the past seven decades one day.  They call our trust funds savings yet these so-called savings sum into the debt ceiling they have raised one or more times per year for decades.  In short, they spin the trusts as savings, but on the books that count (Treasury's) they carry them (and rightly) as debt.  Can debt be savings?  Even they (in Congress) know debt cannot be savings, and as the trust balances grew (grow) with IOUs, so did (does) the debt ceiling---dollar for dollar.  Government schemes, like business schemes,  rarely play out nice.  With luck or Providence's help, this one will play out while maintaining our tranquility. 

9. Treasury Borowing

   On January 17, 2009 10:10 PM, Johngba said:

   My main concern is the average maturity of US marketable interest-bearing public debt which is 4 years 1 month as of Sept 2008 according to the Office of Debt Management. With slightly more than 50% of our dedt held by overseas investors we find ourselves in a unattractive postion. We would have considerably more flexibility if we issued debt with longer maturities in order to lenthen the average life of our obligations. The use of funds is of a long term nature and should not be funded with shorter term borrowings particularly if the lenders are concentrated offshore.  

10. Re: Treasury Borowing

    On January 20, 2009 10:30 PM, imademedoit said:

    Kicking the can down the road might give "us" more flexibility, but what about "them" down the road?  I support issuing long-term debt for new spending that benefits future generations (infrastructure, e.g.,) but to use long-term proceeds just to pay down some short-term debt is extreme injustice on the next generations.

    Since 1975 our gross debt grew less than the net interest due on a year five times (1997-2001.)  In other words, we've been borrowing to pay this net interest due for decades, and now you wish to continue this practice, only with longer term issues?  This not only solves nothing but makes matters worse down the road.

    From 1975-2007 our public debt grew by 4.69 trillion dollars.  Over the same period, the net interest due on this public debt sums to 5.03 trillion dollars.  This means we can say we actually did pay a mere 340 billion dollars of the net interest due over these decades to a relative few investors.  However, what they've been borrowing from the trust funds far exceeds (by 3.25 trillion dollars) this "meager" 340 billion dollars. 

    The problem is we have been using debt to be overly flexible for decades running now.  So, how is it you wish to continue using debt in order that "We would have considerably more flexibility?"  Your argument reduces to: "Since we're in a really deep hole, let us just dig deeper." 

    Long-term debt is the vehicle by which we spread the costs over a generation or two of spending today that benefits us today and future generations---it should be used for no other purpose. 

    They will try to issue 30-year bonds for upcoming infrastructure spending, alternative-energy spending, classroom-upgrade spending, and the like.  However, they will not attempt to issue long-term debt to buy back short-term debt. 

    If we want more flexibility, then we need to get there like any household, viz., reduce our  debt or increase our income. 

    From 1997-2001 "some" investors brought their matured bonds to the window, received face value, and walked away with principal and interest.  Barring this brief interlude, ALL investors in our public debt (for decades running now) bring their matured bonds to the window, receive another bond of greater face value as interest paid and walk away, leaving the principal invested.  We will not use new long-terms issues to call in any of this shorter-term debt.  After all, investors are not interested in investing in what ultimately will be a worthless piece of paper.  As I said in my first response, the face value of a 30-year yield would have to be over 3x as large to entice an investor with short-term principal to move it to long term.  Down the road what will government do when these issues come due?  Start issuing 60-year yields?

    A large part of why over half of our public debt load is now held by foreign investors is because domestic investors tire of receiving yet another piece of paper as interest paid.  Sometimes they want back their principal (with interest.)  Yet, when public debt just goes up and up, the government is not in the business of returning principal with interest.  So, if the government can raise via selling bonds to foreign investors the cash necessary to cash out some domestic investors, well, investment by foreigners grows, as domestic interest in our growing debt diminishes. 

    Perhaps you should read the following:  http://www.treas.gov/press/releases/hp1324.htm

    In this release, you will find concerning 30-year issues, "While proposals such as the introduction of longer dated bonds have been raised, we need to be cognizant of the limited capacity to raise funds from such instruments and the ability of the market to effectively digest the risk inherent in the types of securities."

    Investors (at least the smart ones) have limited interest in giving any government more and more cash just so said government can keep paying its debt burden by issuing more debt.  We've enjoyed the "flexibility" of doing this for decades running now, and its catching up with us.  Now you want to extend further this flexibility?  For what?  To bury us long term?  This may not be your intention, but it certainly is your consequence.

    Beyond all of this, public debt as it exists today is near meaningless---even if it grows by 2-3 trillion dollars over the next few years.  The problem is paying the net interest on the public debt, paying the interest on the trust-fund debt, paying to redeem the trust principal, and paying to otherwise fund the unfunded promises forward---all without borrowing much more from the public to do so. 

    We have spent and promised ourselves into a fiscal straightjacket.  If you want to regain some flexibility, then fight to renege on the unfunded promises.  This alone with free up at least an arm and a half.

11. Treasury Borrowing

    On January 29, 2009 8:25 PM, Johngba said:

    Shortening the average maturity of our debt is not the answer. Period.

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