Response to Russel

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#1

Originally Posted By: csoutherland
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Russel,


As a point of information, the national debt is not money owed to other countries; it is money the government has to borrow from our own institutions and people.


Carl

#2

Originally Posted By: jmyers
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Carl,


Can you help me with this question? I am trying to understand more about the way our government works so here it goes. Is the national debt what the fed's borrowed minus what other countries owe us, or does it not take that into account?

Joe Myers

#3

Originally Posted By: Blaine Wiley
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Joe,


The National Debt is the total sum of the yearly national deficits in the government's budget each year. ie. 5 years of 1 million deficit = 5 million debt. The debt is money owed to worldwide banks including US banks. The money was borrowed to finance each yearly deficit. At several different points, loans have been consolidated and financed to longer or shorter term debt, depending on favorable interest rates. Check with Greenspan on that one.

This years budget is 2,200 billion dollars or thereabouts (trillion). The government will spend about 2,600 billion dollars leaving a deficit of 400 billion. That will be added to our "debt". Debt is expressed as a percentage of Gross Domestic Product or GDP. This year the estimates of the debt range from 25% to 35% of GDP.

#4

Originally Posted By: pdacey
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Now my hair hurts! (well, what’s left of it)

–
Slainte!


Patrick Dacey
swi@satx.rr.com
TREC # 6636
www.southwestinspections.com
#5

Originally Posted By: jmyers
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Blaine,


So you are basically saying that it is just an expression of debt, not an expression of debt over income! Am I understanding that correctly?

Joe Myers

#6

Originally Posted By: Blaine Wiley
This post was automatically imported from our archived forum.


Joe,


That is absolutely correct. The national debt is just that, debt. Owed to many banks. Many US banks thrive on the interest paid to them by the US government alone.

At 30% or so of the GDP, the debt is not actually that much of a problem. The problem we have is government spending, and of that, spending on "entitlements", which at present covers over 50% of the budget. Now with the new prescription drug coverage it will further erode the discretionary spending side of the budget, i.e. military, homeland security, transportation, etc. God help us all if we ever get national health care. We'll be looking at doubling the tax rate in short manner!

Back to the point of government spending. If we simply maintain a balanced budget in future years, the national debt would fall to 23 percent of gross domestic product (GDP) by 2011 and 18 percent by 2015. Such a minor debt is not an economic problem. The national debt was 60 percent of GDP in 1950 and just under 50 percent in 1960. Now by balanced, I mean truly balance, not just the paper surplus forecasts we had in the late 90's.