You know I was whatching a show the other day on the History Channel about the first 50 or so years after the revelutionary war. (can’t remeber the name of the show)I think by the year 1810 we were already several million dollars in debt. How depressing is that? We were screwed from the get-go!
That would be by far the most elegant solution.
And the most satisfying as well.
Been there done that. 
This is in the wrong forum. I’m gonna move it to GD.
Lynn
For the Straight Dope
I’d like to second Finagle’s request that the OP clear up the math issue a bit. It would be nice to know that paying about 55c on the dollar would clear my debt, but i’m afraid it ain’t gonna happen.
When we need a complex issue reduced to simplistic two-party dogma, it’s good to know that you won’t let us down.
I wouldn’t jump the gun on correcting yourself. As our neocon friends continually remind us, it may take over a decade before Iraq becomes FreedomLand, in which case the hundreds of billiosn we’ve spent so far will be chump change.
Paying off the debt entirely is a very poor idea: our nation’s economic policy is conducted, in essence, by the selective purchasing of government bonds by the Federal Reserve. Remove this tool, neuter the Fed, and the debt markets will become much more volatile, dragging down the economy.
Does this mean no Constellation? No tenders? Crap. I had a new name and colors picked out and everything.
Party pooper.
I too wonder about the importance of eliminating the national debt. Debt for a ongoing governmental entity is a different issue than for a finite one like a human. A human uses debt to enjoy goods and services on a pay as you go basis. For example purchase of a home or a vehicle. and sometimes nice dinners and hang-over’s. Understanding the effects of governmental debt doesn’t seem to be very intuitive.
The function of the national debt is that of money supply and economic management. It is really a fallacy that we are spending our children’s future How can we be consuming goods and services that will be produced in the future? The real issue is deficit spending. When the government spends more than it taxes the government is still consuming production of the economy. Somebody is paying somehow. One of the ways we might pay is in the form of inflation. In my view the inflation caused by deficit spending is just another form of taxation. Indirectly, given enough inflation the national debt diminishes in respect to the size of the economy. So it appears that the cause of increase in the debt causes in effect the repayment of the debt.
So what if Greenspan is able to control inflation through increasing interest rates … or better said the reduction in the money supply. It would seem to me to this also mitigates the size of the debt as related to the economy. So it is my opining that the debt it self is not a problem. The problem is the deficit spending that is facilitated by the debt. Sometime deficit spending is an important part of managing the economy. However there is a down side to this economic medicine.
Contrary to what I said above, I do believe that we are in effect consuming our children’s future. Increase of the debt I believe has an adverse effect on investment in infrastructure. Deficit spending consumes financial and real resources (production of the economic) that would otherwise be better used to increase the ability of the economy to produce goods and services. In a few years when there are only two folks working for every one person in retirement, our kids are going to need all of the productive assets they can get their hands on to keep us all in the style we are use to.
Just my armchair economist opinion.
Everybody really missed my main point…that is, we HAVE sufficient wealth to retire all of this debt! The USA is like a poorlly-run corporation…it borrows because it consistently outspends its tax revenues. The solution is NOT (as we have been doing for 228 years) to borrow more and more…it is to shift to equity-based funding of the governemnt. For example, Yosemite National Park is carried on the government’s books at zero asset value…when we all know that it would be worth BILLIONS of dollars if it were privately owned. So what is wrong with selling it off in the form of a realestae investment fund shares? These shares could be sold or exchanged on an open market, and the liquidity of these shares would make them acceptable to IRA/401k-type investors.
Peoplereally don,t understand…just as a corporation’s share values increase with time, so would the value of government assets. Meanwhile, the cancer that is the national debt keeps eating away at us.
If we retired the debt, and sold off the governemnt assets, we would instantly:
-improve the credit rating of every state and city in this counrty
-reduce interest costs
-free up so much more capital for investement
Plus, it would set off an economic boom-foreighn investors would line up in droves to buy up the government asset-backed shares.
The peopl who would LOSE from this (the big bankers and private speculators…like George Soros…do NOT want this! They like the fact that the American people are bound in purpetual servitude to the holders of the debt. I say, screw em! 
You may be right, but you still haven’t explained how selling $5 trillion worth of assets will clear a $9 trillion debt. I’m certainly glad you’re not my accountant.
I notice that, in your massive sell-off, you don’t include military hardware as a government asset that can be purchased by private investors. Nor do you mention reduced military spending as another way of helping to reduce the gap between income and expenditure. Some of you fiscal conservatives would be taken much more seriously if you didn’t keep insisting that the government only reduce its spending and asset ownership for things like social security, health, national parks, and forests, while ignoring the massive budgetary strain imposed by bloated military contracts for stuff that is often superfluous to the needs of national security.
While i don’t necessarily agree with it, there is an intelligent argument to be made for privatizing ownership of governnment assets such as this. The only problem is that you’re not making it.
Any plan such as yours would have to take into account the non-economic value of assets such as Yellowstone, and the fact that such places have enduring value to the American people that transcends their mere real estate price. You need to make clear what system of management you would have in place for such assets, and whether there would be any restrictions on their post-sale use.
For example, would you put a cap on the number of shares that any one individual or coporation could own in Yellowstone? And if not, would you allow a situation whereby one person could buy up a majority of shares and push through a plan to strip-mine and clear-cut the park? Or would there be safeguards in place that ensured it would remain a public-access park?
Similar questions need to be asked for every asset you intend to sell. If i buy a share in the White House, does that mean i’m allowed to drop in and crash in the Lincoln Bedroom whenever i get drunk in Washington, D.C.? What, exactly, would be my rights as a shareholder? You’re not seriously suggesting, are you, that i would be allowed to vote on how the building is used?
Your whole argument tends to assume that the one and over-riding goal of an economic system is efficiency. This is a normative judgment, and one that some people might not necessarily agree with. Some people are willing to make sacrifices in efficiency in pursuit of other goals–whether they be nebulous ones like “happiness,” or more-easily-quantifiable ones like equitable income distribution.
What, exactly, is the aim of your economic system? Would you be happy to have a country with no debt, but also with no national parks for public use (after they’ve all be razed by developers, miners, and timber companies)? Or do you believe that there are certain things whose value to society transcends their mere real estate value? You need to make your goals clearer, and you need to outline more fully your system for realizing them. Simply reducing the national debt is a laudable goal, but you need to tell us exactly what you are–and are not–willing to give up in order to do it.
not according to your own freakin math.
Having a private entity own it would most likely reduce, not increase, the productivity of the land, in terms of imputed economic value. Or do you disagree with my previous post?
Sure they do, but just like a corporation, if you sell everything off in 4-5 years when your debt doesnt come due for 10-30 years, you need to do something with the money. And unlike the corporation it would not be economically feasible to invest it in the private market, so the only alternative would be to, like the corporation, buy back some of the loans at a premium. Premium = losing money.
ralph124, I think you need to be more clear on just what a Real Estate Investment Trust is. You’re talking to people who think that if someone buys a share of Coca-Cola stock, he can walk into Coke corporate headquarters and walk out with a case of soda and that he’ll never see any more benefit from that share he just bought.
I actually like the sound of your idea, but I’m not an expert on the subject of REITs, so I’ll pass the buck to you.
Makes sense to me!
Now now, that’s just 100s of billions, not even a trillion, you propagandist you!
You bring up some excellent points and ideas. (Although I can’t say I agree with your plan) I think your plan goes perhaps [just] one step farther then needed, and overlooks one basic rule if accounting that all businesses take for granted. If your accounting skills are advanced, please forgive me for being elementary.
If the private sector used the same accounting system that the federal government did, many businesses (publically held anyway) would instantly be under stunning levels of debt and the brink of insolvency. If IBM builds a new $100M factory this year, they do not show $100M in expenses on their profit and loss statement. It is a capital expense and the $100M libility is shown on the balance sheet. It is then depreciated over 20 years let’s say, and 1/240th of the $100M shows up each month as an expense. (over the next 20 years) However, at the same time that the $100M liability showed up on the balance sheet, a $100M asset was added. (The liability being the money borrowed to build the plant, the [fixed] asset being the brand spanking new factory the $100M got them) IBM is no poorer for having built a factory, and they have invested in their long term health. Operations expenses though, like salaries, utilities ,rent, etc etc do not build the long term health of the business.
But the federal government makes no distinction between an “operations” expense (like entitlement programs) and “capital” expenses (Like Yosemite). It’s true that Yosemite is carried at “zero asset value.” That’s only because we have no “National Balance Sheet.”
It is not necessary to sell Yosemite to show it’s true value, and reflect it as part of the ‘national wealth.’ We could (and should in my view) adopt an accounting system that makes a qualitative distintion between “operations” expenses, like welfare, medicare, medicaid, congress salaries, armed forces costs for guns, uniforms etc etc etc and “capital” expenses that build long term national wealth like interstate highways, national parks, NASA, billion dollar aircraft carriers etc etc etc.
Yosemite is not suddenly more valuable in private hands, and to the extent that it is less valuable in government hands, it’s just because our accounting system isn’t able to show the tremondous wealth being held by the federal government. A privaye business will do nothing that we (we being the FG) that we can’t do ourselves. This type of accounting system (in use already by every multinational corporation in the world, many of which have businesses larger than the GDP of many countries) is in widespread use and fully tested and understood.
Would the politicians monkey with it. Absolutely. (sad but true) But the failure of Enron and MCI, (to name a few) involved monkey business that had them transfering garden variety day to day expenses to the balance sheet as capital expenses. I’m sure the average 2 term congressman is at least as skilled.
But that type of system would accurately show how our money is being spent. You’d know how much was being spent for “operations” and how much for “capital expenses.” A sensible profit and loss statement, balance sheet, and statement of cash flow would give us a much better view as to our true national health and indebtedness, and just how well our money was being spent.
And Yosemite would still be in public hands.
One more thing…
The value of Yosemite is a function of a balance sheet; a document that lists a person or business’s assets and liabilities. A statement of cash flow is a document that is essentially your checkbook, in simple terms. A profit and loss statement shows the quality of your earnings and expenses.
All 3 of them are critical to any person or business (although the average person doesn’t think in thos specific terms) or country. They are intertwined, and inseparable, but need to be managed semi-independently.
Let’s say a consumer wishes to build long term wealth. He/she buys stocks, bonds, real estate and other sound investments. These might be thought of long term investments, or capital investments. Along the way, this consumer spends very little on credit cards, movies, entertainment, clothing, a flashly car etc. The focus is on long term wealth building. Assuming they were bought advantageously, this person would be a “net creditor” and could be said to have a strong balance sheet. (assets exceed liabilities)
If however this consumer didn’t take into consideration cash flow, they may be unable to service the debt associated witht he buildup of assets, *regarldless of the quality of the assets. *think of how banks view this when making a mortgage. They typically want your mortgage to be no more than 33% of your gross income. They also look at your other installment debt and wish that your overall debt payments be no more than 42% of your income. those are cash flow concerns. As to how this relates to the USA, the question is, “What is our level of debt in relation to GDP?”, which is the same as asking, “What is your debt level in relation to your monthly pay?”
If our consumer has to sell Yosemite because they took on too much debt, that sucks. But, if they continue to have expenses that are greater than their income, there comes a point when there are no more assets to sell. As as how this relates to the USA, the issue is that we have spent more than we’ve taken in almost every year since 1969 (That’s right 1969), with the exception of a couple years during Clinton’s terms. Now taking on more and more debt may not always be a bad thing. A 25 year old starting out will have a limited ability to service debt, a 55 year old in their prime earning years may be able to handle much more debt. The 55 year old may be in a much better position, even though they have 4 times the amount of debt. (because of asset accumulation and higher incomes) The US’s GDP is significantly higher now than 1969, and we could, and should have more debt than we did in 1969. (assuming that that debt was used to build our nations’s capacity to build even more wealth)
In the end, we can’t just clean up the national balance sheet by selling assets, if we don’t look at the national cash flow statement. If we don’t balance the federal budget, what happens in 30 more years when there is no Yosemite to sell?
IMO we need to:
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Go to FASB type accounting that recognizes tangible national wealth and puts things like Yosemite on the national balance sheet.
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Balance the national checkbook. I’m dubious that tax cuts help with that all. I think most Americans were ok witht he taxes the way they were, as long as we were paying down debt. (Like in the Clinton years)
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Analyze our expenses. (The profit and loss statement!) Monthly expenses for long term growth like your mortgage or mutual funds are good investments. (NASA, DARPA, Highways, Aircraft carriers) but expenses on your VISA are not. (Pork Barell spending!)
Eisenhower is correct, as far as he goes. But that ain’t far enough. “Every gun that is not made, every warship not launched, every rocket not fired, signifies in the final sense a theft from those who used to be employed, those who **used to be productive members of the economy and are no longer.”
What a great idea, though. Let’s just stop spending all that money, thereby putting an untold millions of people outta work and start giving away the treasury to a non-productive segment of the population. Shouldn’t be at all a problem removing the taxpayers from the equation. At least for a year, or so. Eisenhower, in this respect, was an idiot. Government spending for things like this keeps people employed and creates jobs. Stop spending that money and the unemployment rolls skyrocket, simply adding to the misery. And making a militarily weaker USA in the not-so-long term. Brilliant.
Sorry for the unclear math:
-NATIONAL DEBT= $9 trillion
-Value of IRAs/401K=$5 trillion
-Value of government assets = 5-6$trillion
Further to the plan: the government decides to sell of Yosemite Nationa Park; it sets up a corporation to run the park, issue concession license, rent land, etc. The corporation sells shares DIRECT to investors…no George Soros banker types, no underwriters. Let us say that 500 million shares are sold to the American people; the sale price is $20.00/share…that is $10 billion. These shares yield profits through park admissions, concessions, etc. What is so different? The American people (as investors) STILL OWN the park! Meanwhile, the operations of the park yield a profit to the investors. You can sell your shares on the NYSE, or put them in an IRA…now the government has accomplished two things:
-(1) it no longer has to pay the salaries of park rangers, building upkeep, etc.
(2) it gets a huge windfall of cash, which we use to retire the national debt.
The money is ther…we can be debt -free within a few years.
But as I say, the banking industry doesn’t want this…they prefer selling more and more debt intruments (bonds) to the public, and raking off their juicy commisiions along the way.
That might be true for domestic debt, but I think that in the case of foreign debts, you’re indeed spending your children’s future income, since you’re are consuming goods and services that would otherwise be consummed by citizens of other countries. And your children will actually have to reduce their consumption of goods and services produced in the future to reimburse the children of your lenders.