A few days ago, I reported that the deficit and debt had steadily declined during Obama’s tenure. A reader pointed out that although we have seen the deficit dramatically reduced, so long as there is any deficit at all, the debt continues to grow.
He was absolutely right, of course–my mind was evidently elsewhere when I wrote that particular sentence. (It is a bit worrisome that, as I grow older, my mind increasingly takes these small trips to…somewhere.) The question that naturally arises, then, is: as the Obama Administration increasingly tames the deficit, how worried should we be about the debt?
Paul Krugman has the answer to that question.
About those projections: The budget office predicts that this year’s federal deficit will be just 2.8 percent of G.D.P., down from 9.8 percent in 2009. It’s true that the fact that we’re still running a deficit means federal debt in dollar terms continues to grow — but the economy is growing too, so the budget office expects the crucial ratio of debt to G.D.P. to remain more or less flat for the next decade.
Things are expected to deteriorate after that, mainly because of the impact of an aging population on Medicare and Social Security. But there has been a dramatic slowdown in the growth of health care costs, which used to play a big role in frightening budget scenarios. As a result, despite aging, debt in 2039 — a quarter-century from now! — is projected to be no higher, as a percentage of G.D.P., than the debt America had at the end of World War II, or that Britain had for much of the 20th century.
So perhaps we need not freak out about the debt, but still, it would be nice to eliminate it entirely. (Had W. left Clinton’s tax rates in place and not taken us into a costly and unnecessary war of choice, the debt was on track to disappear…but that was then and this is now…). So how much pain would we need to endure now in order to at least stabilize the debt–to keep it at its current ratio to GDP? Krugman has that information also:
Still, rising debt isn’t good. So what would it take to avoid any rise in the debt ratio? Surprisingly little. The budget office estimates that stabilizing the ratio of debt to G.D.P. at its current level would require spending cuts and/or tax hikes of 1.2 percent of G.D.P. if we started now, or 1.5 percent of G.D.P. if we waited until 2020. Politically, that would be hard given total Republican opposition to anything a Democratic president might propose, but in economic terms it would be no big deal, and wouldn’t require any fundamental change in our major social programs.
These facts would be comforting–if the people screaming bloody murder over the terrible, horrible, menacing debt were genuinely concerned about fiscal policy–and not motivated by partisan rancor or personal gain.
I must return to what I believe is the worst mistake President Obama has made since his inauguration, NOT ending W’s tax break on the wealthy when it expired. While I believe he was attempting to prove to the GOP was that the Democratic party and his administration were willing to compromise to begin turning this economy and jobless rate around. That was and continues to be the wrong compromise to make to the quickly bought and paid for current GOP. Can’t – or won’t – unring that bell! Anyone who has read, “The Audacity of Hope” knows and understands that Barack Obama believed in his heart that the American government could – and would – return to both parties of the administration seeing the wisdom of sitting at the bargaining table and seeking compromise to work out national problems. Debt, like war, is the reality we live with and until compromise is sought and found, it will remain our reality. On the subject of war; the escalating situation in the middle east will never end until both sides STOP; there is no way either side will ever “get even” by continuing to kill – the result of current actions is simply more destruction and dead bodies. The same can be said by the current Congress; they will never “get even” with Americans for twice electing President Obama by halting resolution of problems and any forward movement destroying human and civil rights with their pseudo religious blathering and continuing to sell their souls to the Tea Party, Koch brothers, NRA, big business, etc. Unless and until those staunch Republican voters realize they are being sold out by the current GOP members seeking retribution for electing President Obama TWICE and use the power of their vote, our debt will continue to rise.
From an article I read from Moyers and Company web site – “America is broke,” declared House Speaker John Boehner a few years ago. But clearly the country is not broke; we are just being robbed, as many corporations create ways of avoiding, dodging, shirking and generally not paying their taxes. The share of federal revenue coming from corporate taxes has dropped from around 32 percent in 1952 to 8.9 percent now. As a share of gross domestic product, it has fallen from about 6 percent of GDP then to less than 2 percent now.
Senator Bernie Sanders from VT. – Corporate Treason Multinational corporations physically based in the United States are evading their fair share of taxes by switching their address for tax purposes to foreign countries. It is “treasonous,” Sen. Bernie Sanders said during an interview Monday with television talk show host Larry King. “These corporations could care less about America and they’re prepared to move abroad if they can make a few bucks,” Sanders said. Sanders said that he will file an amendment to a Department of Defense authorization bill to prohibit the U.S. government from awarding federal contracts to companies that reincorporate overseas to avoid paying U.S. income taxes.
Further from Sanders Web Site – Walgreen’s, the giant drugstore chain, recently announced that it is considering moving its corporate headquarters from the U.S. to Switzerland to avoid $4 billion in U.S. taxes over the next five years. According to a recent report from Americans for Tax Fairness, nearly a quarter of Walgreen’s $72 billion in sales last year came from Medicare and Medicaid.
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Whenever I read or hear about Social Security or Medicare causing a debt problem , I quickly go into a critical mass with Nuclear white hot fission anger. If there is a problem with Social Security or Medicare funding for us, it is not as if we Baby Boomers were all born old yesterday. Presidents and Congress have spent their time making certain Corporate Taxes are not collected by allowing one tax avoidance scheme after another.
There is an article in USA Today regarding two banks (Deutsche Bank and Barclays) that have assisted 13 hedge funds in tax avoidance from 1998 until 2013. The amount of money that came to the banks as a result of their abetting is in the hundreds of millions of dollars. The American taxpayers are paying a huge price for this kind of manipulation of the marketplace. Of course, the banks characterize their actions as entirely legal and in full compliance with the law. The rich just keep getting richer while the rest of us have to play by the rules that are clearly intended to benefit those who have the power and money. The kicker is that so many of the rest of us seem to think that this kind of business is great for the country’s economy and that there should be less regulation.
I have a few small CD’s; the interest rate on them is less than 1%, so is interest on my savings account. I have checked other banks on line and they are basically the same. These rates came into effect AFTER “W” gave the banks billions in 2008. Customer service reps ckeep trying to get me to “invest my money to earn more”; no mention of market drops and losing money so I stick to my snail-paced, shamefully low interest rates on CD’s. Talk about “The Audacity of Hope”!
E+C+M+A+R.
Energy costs which will continue to rise due to supply and demand reality for fossil fuels, and continue to fall for sustainable energy due to technology and fuel-less and waste-less energy. (Paid by consumers)
Conversion from fossil fuel energy to sustainable, including construction of an entirely new sustainable energy infrastructure, has to be largely done in the next 150 years or so under all circumstances. (Largely paid by, and benefiting, investors)
Mitigation is doing conversion earlier than necessary, and leaving the thus no longer needed fossil fuel in the ground in order to reduce climate change and the subsequent adaptation and recovery costs. (Timing, not cost issue)
Adaptation is the cost of relocating civilization from places rendered inhospitable to the current uses, to places that the new climate supports, or protecting existing civilization from changes like higher sea levels, extreme weather, relocated precipitation patterns, changes in the seafood industry from ocean acidification. (Paid by taxpayers)
Recovery is the cost of rebuilding civilization from extreme weather damages due to inadequate mitigation and/or adaptation. (Paid by taxpayers)
The sum total to be spent on these unavoidable and largely additional expense categories cannot be estimated until we can predict the timing and effectiveness of mitigation, but could exceed the current national debt. (Wouldn’t it be nice if we hadn’t already spent that money on tax cuts, holy wars, and recession loss of income and recovery.)
The only decision on the table today is the timing (sooner or later) of mitigation. The fossil fuel industry benefits from the latest migration strategy. Taxpayers benefit from the earliest.