Now that the old year is finally a thing of the past we can look forward to new beginnings. I doubt that this year will be much better economically or politically, but we always survive and will do so again. Keep up the good fight and we will persevere.
I have been a bad girl and haven't been reading blogs recently. If you announced wonderful news about a new baby, wedding, job or other exciting events and I did not respond please forgive me. Worse, if you had bad news to relate and you did not see my name offering sympathy I do profoundly apologize.
My life has been hectic and that isn't going to stop for a few weeks. My daughter will be arriving Sunday for 9 days ( 2 days traveling) thus giving me a week of sheer joy. To have her all to myself is going to be the best gift I could ask for. I love my granddaughters, but when I visit they do require attention. My daughter is the typical soccer mom busy providing a taxi service for her kids. The house is usually full of teenager noise leaving little time to have long chats with Gail.
I plan on making the most of our time together and our one-on-one time will be uninterrupted. I will also put her to work doing those chores I can no longer tackle. She has been forewarned and is okay with it. Of course, after a working visit she may never want to come again, but it's a risk I'm willing to take.
Now on to serious matters.
One of my favorite quotes is this one from Henry Wheeler Shaw: "The trouble with most folks isn't so much their ignorance, as knowing so many things that 'ain't so'."
I thought I understood the National Debt, but I didn't have a clue. I suspect most people look at it the way I did. I equated it with a family's debt. You know, your income doesn't reach far enough to pay cash for all those goodies you just must have, so you borrow money from your trusty banker and buy that car you really can't afford. When you borrow more than you can repay it accumulates with interest.
I really thought that Uncle Sam owed China, Germany and other countries all that money and they were the equivalent of the bankers in my illustration. This is what the politicians would like to have you believe so you can envision a time when China calls in their markers and our country is owned by them. Instead of repossessing the car, China repossesses us. The message (sometimes subliminally) is that the biggest crisis facing our country is our debt. And to acquire more debt would spell disaster. Are you convinced yet? The Tea Baggers certainly hope so. They probably believe it or else why try to destroy our country with this nonsense?
A better illustration to the National Debt would be that, instead of borrowing all of the money from a bank, you borrowed from your savings plan.
Paul Krugman, bless him, set me straight and I hope to pass his message along. Here is the 'skinny'. (Is that slang word passe?)
Excerpts from his New York Times Op-ed piece on defecit reduction:
(I have taken the liberty of highlighting points I think are important.)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The economic “experts” on whom much of Congress
relies have been repeatedly, utterly wrong about the short-run effects
of budget deficits. People who get their economic analysis from the
likes of the Heritage Foundation have been waiting ever since President
Obama took office for budget deficits to send interest rates soaring.
Any day now!
And while they’ve been waiting, those rates have dropped to historical
lows.
Deficit-worriers portray a future in which we’re impoverished by the
need to pay back money we’ve been borrowing. They see America as being
like a family that took out too large a mortgage, and will have a hard
time making the monthly payments.
This is, however, a really bad analogy in at least two ways.
First, families have to pay back their debt. Governments don’t — all
they need to do is ensure that debt grows more slowly than their tax
base. The debt from World War II was never repaid; it just became
increasingly irrelevant as the U.S. economy grew, and with it the income
subject to taxation.
Second — and this is the point almost nobody seems to get — an
over-borrowed family owes money to someone else; U.S. debt is, to a
large extent, money we owe to ourselves.
This was clearly true of the debt incurred to win World War II.
Taxpayers were on the hook for a debt that was significantly bigger, as a
percentage of G.D.P., than debt today; but that debt was also owned by
taxpayers, such as all the people who bought savings bonds. So the debt
didn’t make postwar America poorer. In particular, the debt didn’t
prevent the postwar generation from experiencing the biggest rise in
incomes and living standards in our nation’s history.
It’s true that foreigners now hold large claims on the United States,
including a fair amount of government debt. But every dollar’s worth of
foreign claims on America is matched by 89 cents’ worth of U.S. claims
on foreigners. And because foreigners tend to put their U.S. investments
into safe, low-yield assets, America actually earns more
from its assets abroad than it pays to foreign investors. If your image
is of a nation that’s already deep in hock to the Chinese, you’ve been
misinformed. Nor are we heading rapidly in that direction.
Now, the fact that federal debt isn’t at all like a mortgage on
America’s future doesn’t mean that the debt is harmless. Taxes must be
levied to pay the interest, and you don’t have to be a right-wing
ideologue to concede that taxes impose some cost on the economy, if
nothing else by causing a diversion of resources away from productive
activities into tax avoidance and evasion. But these costs are a lot
less dramatic than the analogy with an overindebted family might
suggest.
And that’s why nations with stable, responsible governments — that is,
governments that are willing to impose modestly higher taxes when the
situation warrants it — have historically been able to live with much
higher levels of debt than today’s conventional wisdom would lead you to
believe.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
II hope you now have a better understanding of the National Debt. I do.
Coda:
Happy Birthday Gail
January 8, 2012 is the big day and it's also the day you arrive. We will celebrate this momentous and happy occasion in style.
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