Why the U.S. Can't Inflate Its Way Out of Debt

This country is in piles of debt. Projections for how much more we could load on in the coming decades are downright nightmarish. You think it's bad now? Just wait.

It's obvious that big changes are in store, but progress (or even the hope of it) is painfully absent. Eventually, Stein's law -- if something can't go on forever, it won't -- will prevail, and we'll be forced to fix the problem.

How we'll do so is the trillion-dollar question. There are only three ways to end runaway deficits: cut spending, raise taxes, or allow deliberate inflation.

The easy way out
The third option is often cited as the "tried and true" method, and not in a good way. Indebted countries habitually ask their reserve banks to run the printing presses at full bore. Governments can then pay their bills with the newly printed money, at the cost of inflation. This eliminates debt without forcing politicians to make unpopular decisions on spending and taxation, which is why it's so prevalent.

But the idea also has a growing chorus of nonpolitical supporters. As an MSN Money article published on Wednesday titled, "Why Inflation Would Be Good For Us," declares:

… a quick bout of higher-than-normal inflation would lower the nation's debt in real dollars, bailing the government out of the debt threat. That means we could avoid Draconian tax increases or big spending cuts, both of which would be politically unpopular and could scuttle the economic recovery.

Sounds neat! Too bad it's fantasy thinking.

The timing of this article was unfortunate. Just 18 hours after it was published, Fed chairman Ben Bernanke sat before the Joint Economic Committee, which asked him point blank about inflating away debt. His answer gets to the heart of the matter: "Given the structure of our debt, [inflation] wouldn't even help reduce the debt ... given that so many of our obligations are indexed."

Bingo. Inflating away debt only works when the obligations are in fixed dollar amounts, like a mortgage. But essentially, all of our long-term fiscal problems are entitlement commitments that grow (are "indexed") with inflation. When inflation rises, spending on Social Security and Medicare rise at the same rate. So the debt-inflation relationship is the opposite of the get-out-of-jail-free card some envision. Debt still goes up in real dollar terms, creating even more of a death spiral.

Problems that won't go away
And I really do mean that "essentially all" of our problems are entitlement commitments. This chart, from the Congressional Budget Office's (CBO) 2008 Budget and Economic Outlook, tells the story (the y-axis is spending as a percentage of GDP):


These projections are more than two years old, and they've undoubtedly grown uglier since. In a more recent report, the CBO notes, "Almost all of the projected growth in federal spending other than interest payments on the debt comes from growth in spending on the three largest entitlement programs -- Medicare, Medicaid, and Social Security."

And all three of these programs grow with (or cause) inflation. Inflation in medical costs, in fact, has historically been one of the big drivers of overall inflation. That largely explains Medicare's surging burden, not to mention why premiums at much-maligned megainsurers WellPoint (NYSE: WLP  ) and Cigna (NYSE: CI  ) have plowed skyward. For Social Security, inflation measured by the consumer price index (where medical costs are also a component) fuels so-called cost-of-living adjustments, which push entitled benefits higher. When Ida May Fuller received the first Social Security check in 1940, she got $22.54. Today, the average disbursement is $1,066.60. Ponder why this inflation has yet to solve our debt problems, and you'll see how faulty the inflate-ourselves-to-freedom argument is.

What now?
If inflation isn't the answer, then cutting spending and raising taxes are. But doing this scares the everliving mess out of politicians, because it rankles the people who vote for them. Even those who talk tough about spending cuts ultimately cave. A good example came in January, when President Obama proposed creating a deficit reduction committee. The Senate immediately voted 97-0 (a rare show of unanimity) that the commission would be banned from touching Social Security benefits. We've become a morbidly obese country on a mission to outlaw diet and exercise. Good luck with that.

Overhauling entitlement spending is the way out of our long-term debt mess. I just wonder how feasible that is, especially in a proactive way. For now, we'll just wait for Stein's law to kick in.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article.WellPoint is a Motley Fool Inside Value selection. The Fool has a disclosure policy.


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  • Report this Comment On April 16, 2010, at 12:41 PM, alasker wrote:

    How about not spending money we dont have? Pay for all of the constitutionally mandated things- and whatever is left over will get divided up. Basically not pay our treasury bills- tell the pension funds, overseas creditors, social security, banks to stuff it. There is not enough money on the whole planet to pay our entitlements- unreal numbers that cannot be mentally grasped. besides the ruling class, the human has survived without entitlements (someone else paying for you not to work) for much longer than entitlements have existed. Sort of like Adam Smith, if you dont work you dont eat.

  • Report this Comment On April 16, 2010, at 2:15 PM, qazey wrote:

    What we should due is take 10% of every dollar that is intended for our entitlement programs, and invest it directly into all of the chinese stock market. Thus in twenty years when all our debt is due to pay them off, we will have bought every equity they have. IF I am not mistaken equity's grow larger than treasuries over the long run.

    We use their massivley growing economy to pay off our debt, which in turn was lent from them.

  • Report this Comment On April 16, 2010, at 2:17 PM, TrojanFan wrote:

    There are also two other options (in addition to your three) that your article doesn't mention that have historically been utilized by other nations facing similar predicaments:

    1. Invade other nations and plunder (steal) their resources to make good on your deficits. The Nazis effectively did this in the 1930s and 40s. Their first stop in virtually every country they invaded was at the central bank to raid their gold reserves to back the currency they were frantically printing and laundering in world markets with the help of the Swiss bankers who facilitated their access to world markets by brokering trade on their behalf thanks to their perceived neutrality.

    Of course, gold is a quaint notion in modern times. Oil is the real functional commodity of the world today. Interestingly, when viewed in this context the US and UK led invasion and subsequent occupation of Iraq and ongoing, on again/off again attempts to justify an incursion into Iran under some false pretense or another bears an eerie resemblance to the Nazi campaign of plundering gold reserves across Europe. Most people don't think of these issues in this way, but maybe we need to start to. It's no coincidence that the US and UK both have probably among the worse deficit sand debt to GDP ratios in the world and they are largely the driving forces behind these military campaigns. They are probably also among the most petro dependent economies on Earth.

    So the playbook goes something like this: If you run out of your own oil, steal somebody else's. Next, create contrived shortages through market manipulation and then price gouge the rest of the world to swallow the oil you've stolen at grossly inflated prices and then use the loot you've plundered to appease your creditors and keep them at bay.

    2. The second alternative you failed to mention is default. Just because you've made a promise doesn't mean you need to keep it. Companies, and now increasingly consumers, default and reorganize their debt all the time. How do you know the government won't capitulate eventually and do the same? I'm not saying that's a year away or even two, but if you have even an inkling that such a thing might happen at any point in the next TEN YEARS I would argue that you need to be making adjustments in your portfolio TODAY that give recognition to this mounting reality.

    By the way, this doesn't need to be an overt default. Pushing out the finish line on social security and Medicare benefits, while not an overt termination of benefits, does constitute a breaking of a social contract and therefore is a default.

    Maybe Goldman Sachs should open up a derivatives market in entitlement insurance contracts. I'm sure they're would be a BIG market for Social Security and Medicare CDS. The premiums would be small on an individual buyer to buyer basis, but the aggregate size of the market (ie. the notional value of the obligations involved is huge). Maybe they could insidiously short that market too and help blow up the government and sabotage the country and make enormous shorting profits in the process.

    Wouldn't that be GREAT everybody? I can hear it now:

    "Step right up and place your bets, ladies and gentlemen. Will social security be there for you in retirement or not? With this little wager it won't matter. For a nominal fee you'll be covered either way. This is the best little piece of insurance you'll ever buy!"

    Maybe I should be on a Goldman sales desk...

    Anyway, my point is that we need to broaden our thinking about these issues. To think that the government can't and won't ever default on their promises is simply naive and we all need to start preparing for that reality because not only are they writing checks they can't cash all over the place, but they are even taking on the private sector's bad bets in unprecedented levels which are effectively checks the private sector couldn't cash so why should we believe that the public finances will be sufficient to foot those bills where the private sectors on solvency failed. These crumby assets will drive the government into eventual insolvency too the same way they drove the private sector to the brink of insolvency. They haven't dealt with anything. They've just kicked the can down the road.

    Let the market mechanism do what it is supposed to do and quit interferring with it. Just let the whole market crash, stop trying to save it and prop it up and let the chips fall where they may. It will be painful, but I thought that's what made America a great place. We used to have the grit and determination to take the tough road and tackle challenges head on. When did we all get so soft?

    Wake up people.

  • Report this Comment On April 16, 2010, at 2:19 PM, TrojanFan wrote:

    Why is the Fool sensoring my comments?

    Did I touch a nerve there?

  • Report this Comment On April 16, 2010, at 3:02 PM, DJDynamicNC wrote:

    @Alasker - you're misunderstanding what the author means by entitlements. He doesn't mean "paying somebody else not to work." That would be TANF, which is notoriously difficult to receive access to and which only lasts for 5 years of any given recipients life, at most. TANF also takes up barely a fraction of a percent of the budget (many states supplement it because it is so underfunded; it's a frequent target).

    Instead, we're talking about Medicare, Medicaid, and Social Security. These are are paid for largely through payroll taxes from people who are working, and then utilized by people who retire (grouping Medicare with Medicaid is a little deceptive - Medicare is purely federal, whereas Medicaid is largely managed by the states with federal input).

    So we are not paying people to not work, we are paying people who no longer work because they have paid their fair share.

    In order to make Social Security solvent, we'll need to take such dramatic steps as 1) slightly altering the retirement age and 2) modestly raising taxes. I realize the Republican party has decided that taxes are never acceptable (while noting that not a single Republican congressperson has ever declined his taxpayer-funded paycheck in a fit of principle), but fortunately the adults are back in charge, so I hope to see some of this enacted soon.

    It will be nice to have some ACTUAL fiscal responsibility, for a change, from the same place it always comes.

  • Report this Comment On April 16, 2010, at 4:35 PM, yttire wrote:

    I think this article is missing the point.

    The government does not need to inflate away all debt- just a portion of it to be in the clear. The politicians will undoubtably inflate away the debt owed to other countries and internally.

    However, first they will need to roll the debt into longer and longer maturities (offering higher and higher yields to attract the debt there).

    Then, they will start to inflate, and say "sucker" to everyone who bought the long term maturity debt.

    Meanwhile, they will push out social security ages and "gracefully default" to escape those problems.

  • Report this Comment On April 16, 2010, at 4:39 PM, monehmye wrote:

    When the auto companies were bleeding, they were forced by the U.S. government to dispose of troubled and non performing assets. In some instances, they had to enter into partnerships with foreign companies. Perhaps, this management style should also be followed with some states. California, for instance. Why not sell it or mortgage it to the Chinese government? Perhaps they could do a better job of making it more profitable than the present crop of politicians. With the money, the US can pay off all its obligations and start clean. Hopefully, when times are better, we can buy back California. Otherwise, we can count our blessings. We are finally rid of all those kooks.

  • Report this Comment On April 16, 2010, at 4:41 PM, monehmye wrote:

    On second thought, maybe we should include Washington DC. But perhaps, even if we fire sale it, nobody would be interested.

  • Report this Comment On April 16, 2010, at 4:53 PM, buckeye2007 wrote:

    The chart shows Social Security, Medicare and Medicaid are about 10% of GDP and around half of the total federal budget. When you create inflation by increasing the amount of money in the system (print money) you inflate all of the goods and services in the economy that are valued in US dollars. Obviously, the US dollar ($) has a supply and demand created in the world econony. I believe Ben Bernanke in incorrect in saying that inflation will not help our debt. In the end it is the only way out of our current problem and this is why.

    As stated above, the value of the dollar is determined in the world economy. "King dollar" has prevailed because it has been the best method for total returns on your money. You buy dollar denominated assets and the dollar retains its value because the rest of the world is increasing doing business using dollars. The demand for dollars continues to outpace the pressure our deficit puts on it wiht increased supply. This is why the US is in a unique position in the world. If the US and the US dollar denominbated assets continues to be the best place to put your capital the US dollar will continue to keep its value. We have a diverse strong democracy and the dollar is the safest place for your capital.

    By printing more money, the federal government increases inflationary pressures on the entire economy. Some of our debt is linked to inflation (SS, Medicare, TIPs etc) but this is a small percentage of the entire US economy and an even smaller percentage of the world economy that does business in US dollars. The government can easily monetize our debt and cause a relatively small increase in overall inflation across all dollar denominated assets. The money supply is also a function of the velocity of money and in a recessionary environment the velocity slows. In fact, I would argue that the velocity of money could have a much greater impact on inflaction than the monetization of our debt. If the velocity of money (difficult to control using monetary or fiscal policy) suddenly increases there will be inflation (to much money chasing to few goods and services).

    You have to ask yourself..."How is our current deficit financed?" Here is a link to an estimate of who holds our debt.

    http://en.wikipedia.org/wiki/File:Estimated_ownership_of_tre...

    doc here:

    http://fms.treas.gov/bulletin/b2009-1ofs.doc

    I think you will find that foreign ownership is actually more like 35%-38%. These are loans. The values exists in "the market" (AKA people's mind). The fed and our government is holding almost 50% of the debt. The fed is really our banking system that is regulated by the government. Well...if it was actually regulated you would not have seen the near collapse of the system but that was a risk the system took and unfortunately we had to prop the system up by buy back all of the bad credit default swaps. These were just worthless insurance agreements that were not backed by assets but allowed mortgages to be bundled and sold as if they were guaranteed and AAA rated. Sorry, I was rambling there even more. This means our banking system (the FED adding to its balancesheet) has been buying a large amount of the government debt because it was trying to keep rates down to "refuel" the morgage market. If the FED starts to sell these securities bond rates will rise. The game has changed and the FED will have to sell these slowly over the next few decades or a large increase in economic activity will help absorb these securities. Foreign countries like China purchase our securities because they have linked their economy to ours. In order to increase demand for the goods they make they have to have goods and services flow to the US. They do this by purchasing our debt and keeping our interest rates lower than the other wise would be. The Chinese need more Yuan to circulate in their country but since they have linked the currency to the dollar the exchange rate is almost fixed. Since a Yuan is equivalent to a dollar in many ways more dollars in the world economy means more Yuan equivalents. The US consumes the goods China makes. I know it is not logical but the Chinese need us to buy their products at least in the short term. What does this all mean? In the short run we can monetize the debt and get a benefit due to the ability of the world to absorb the increase in supply of US dollars because much of the rest of the world is expanding and demanding more US dollars in the system but in the long run we must transform the economy and allow currencies to float and have much lower account deficits with other nations.

    We will eventually have to build products here in the US again but not until the current system stops providing advantages for large deficits and an increased US dollar supply.

  • Report this Comment On April 16, 2010, at 5:00 PM, jstarwalker wrote:

    Shame on all those old and sick people ! To think they would work all their lives to build a better America for their kids, and now require medical attention ! Why, some are so old they have quit work! But yet they are getting Social Security payments. It's disgraceful how they are responsible for our country's inflation.

  • Report this Comment On April 16, 2010, at 5:39 PM, BigdaddyDennis wrote:

    If people believe that the Government can cut spending and raise taxes .. then they probably believer that Pigs have Wings....

    It’s impossible for our Government to cut spending. Raising taxes and they would be kicked out of office.

    Personally, I'm up to my eyeballs in debt and would love for inflations to get rid of it.

    Just can't wait. It's going to happen..bring it on baby......

  • Report this Comment On April 16, 2010, at 5:54 PM, XMFkmoney wrote:

    There is at least a fourth way which the article surprisingly leaves out given that it's on the Fool website. The US can grow its way out of debt the same way companies are expected to.

    Whether you agree with the policies or not, one aspect of government is to finance infrastructure which, because of collective action problems, won't be built by the market (because of free riders, for example) but is valuable to the market. There's obvious stuff like highways, rail, and port security. The are also social safety nets and national health insurance.

    Keeping old people from dying in the streets might not turn a direct profit. It does create a growth friendly environment, though.

  • Report this Comment On April 16, 2010, at 6:14 PM, ChrisBern wrote:

    Good article, with one major caveat--the referenced entitlements are indexed to CPI, not to what people experience as true inflation. CPI is a number that the gov't invents and changes from time to time, and therefore it can be (and has been in the past) subject to political whims.

    Don't believe me? Look at how CPI increased from 1997 to 2007--it increased about 2.5% per year, or 25% total over those 10 years. Now look at how housing prices changed in that same time period. Housing nearly DOUBLED in that same 10-year period. So BY FAR the biggest expense nearly doubles, and CPI increases by 25%? Doesn't add up.

    So, there's another very credible scenario, which is that the Fed DOES crank up the printing press, while keeping CPI statistics artificially low, thereby keeping entitlement spending relatively "in line".

  • Report this Comment On April 16, 2010, at 6:15 PM, ChrisBern wrote:

    Good article, with one major caveat--the referenced entitlements are indexed to CPI, not to what people experience as true inflation. CPI is a number that the gov't invents and changes from time to time, and therefore it can be (and has been in the past) subject to political whims.

    Don't believe me? Look at how CPI increased from 1997 to 2007--it increased about 2.5% per year, or 25% total over those 10 years. Now look at how housing prices changed in that same time period. Housing nearly DOUBLED in that same 10-year period. So BY FAR the biggest expense nearly doubles, and CPI increases by 25%? Doesn't add up.

    So, there's another very credible scenario, which is that the Fed DOES crank up the printing press, while keeping CPI statistics artificially low, thereby keeping entitlement spending relatively "in line".

  • Report this Comment On April 16, 2010, at 6:27 PM, kirkydu wrote:

    actually there is a forth way, stop importing energy. If we go to hybrid and electric cars, natural gas trucks, solar roofing and nuclear power, that will save hundreds of billions in import costs for energy and create millions of jobs. Someday we'll do it.

    The cut spending will only come, due to various ox being personal pets, from a not-as-much war dividend in a couple years (maybe, and don't call it peace). A freezed in domestic spending would be great, I hope we have the gumption to do it. Of course, part of that gumption would require long term unemployed and able bodied welfare to work and/or go to school/trade training. Why don't we require that by the way?

  • Report this Comment On April 16, 2010, at 6:29 PM, TMFHousel wrote:

    "There is at least a fourth way which the article surprisingly leaves out given that it's on the Fool website. The US can grow its way out of debt the same way companies are expected to."

    Good point, and that section was poorly worded on my part. But this only works if nominal GDP grows faster than spending/inflation. And if you look at the hockey-stick projection of medicare spending, that ain't gonna happen without benefit cuts.

  • Report this Comment On April 16, 2010, at 7:27 PM, zanytothemaxx wrote:

    Republicans say the national debt is a big problem. It is over $12.3 trillion.....but Republicans do not mention it was the Bushes and Reagan that are responsible for $9.3 trillion of this debt. Republicans claim they are the party of "fiscal responsibilty". Well like Sen Vitter and his prostitutes while claiming to represent family values....the Republicans like to spend.....and with G Bush....invade other countries.

  • Report this Comment On April 16, 2010, at 7:40 PM, MrPracticality wrote:

    Given that most of the American public, as evidenced by the other posts, would rather wine about the problem and blame Washington rather than proposing solutions and, as crazy as it sounds, making some type of personal sacrifice, it's no wonder that this problem can't get solved. Although the following suggestions won't solve the problem, they will help to alleviate some of it:

    - Starting in 2015 raise the age of entitlement by one year until individuals have to be age 70 to collect it. When Social Security was created decades ago, many people age 65 could not work because of their physical condition and because many of the jobs at that time required intensive manual labor. No longer is that the case. Most jobs now do not require intensive manual labor and 65 year olds now are much healthier. If 65 - 70 year olds are working their employer will pay for their healthcare and/or they will have a paycheck to cover it (or at least some of it).

    - Create a means test. When Social Security was enacted it was intended to help a segment of the population which had the highest percentage of poverty. Instead it has now become a retirement planning tool. That is, consumers are now routinely advised by financial advisors to adjust for Social Security payments and Medicare support in their retirement planning. Many people collect Social Security and benefit from Medicare that really don't need it. There should be an income ($70,000/yr?) when the benefits are not received. Perhaps if consumers knew that Social Security would only be available in limited circumstances, perhaps they would save more for retirement. By the way, the largest povery segment in the country is children, which is also the segment that retiring boomers are expecting to pay for their retirement entitlements.

    To anticipate a likely response to this suggestion, just because someone pays taxes into a system does not entitle them to collect from it. For example, my tax dollars are used to provide subsidies for sugar beet farmers who are also are protected by tariffs from foreign sugar imports so that I have to pay more at the supermarket for a product that I am subsidizing. There are other numerous examples where the public pays tax dollars to provide a benefit that is only realized by a very small segment of the public.

    - Stop payments for individuals on life support who have no hope of recovery. Our government wastes millions of dollars per year keeping patients on life support who are clinically dead. For those who feel this is a moral outrage: (i) the government's resources are finite so that somebody who could actually benefit from medical care is being deprived of it by keeping clinically dead patients on life support; and (ii) if you are so morally outraged put you money where your mouth is and pay for it instead of insisting that government do it as in the case of Terry Schiavo.

    Nobody has a monopoly on good ideas. Instead of wining and blaming Washington for a problem that is really created by the those who feel our taxes are too high but nonetheless want to collect their entitlements, why don't we see more suggestion for solving this problem.

  • Report this Comment On April 16, 2010, at 8:05 PM, tomjf wrote:

    It will end up with you dying with no money, so the have nots can die with no money, after you have supported them all of you working life. Too many people in the wagon, and not enough people pulling it. Plain and simple.

  • Report this Comment On April 16, 2010, at 8:06 PM, demarvin wrote:

    The only possible solution to this debt situation is for our elected leaders to do absolutley nothing! Allow the system to test the absolute debt level it can carry.At some point something will occur, deemed "a crisis" and at that point the "government" will have no problem taking over the entire economy of the country which is the long term plan. Now,wages,prices,interest rates rents,everything can be controlled from Washington. Now, the country has been levelled all income and savingings will be distributed and the "population" will be happy.If you can think of what is going on now and what has been proposed just connect the dots,see when they end.

  • Report this Comment On April 16, 2010, at 8:24 PM, GoldenMartini wrote:

    TrojanFan suggests that we invaded and occupied Iraq in order to steal their oil, the same way the Nazi's stole gold from the countries they conquered. This is completely untrue. We rebuilt and restarted their oil production facilities which were destroyed by the terrorists. Then we left the oil for Iraq. We buy the oil we get from Iraq on the open market, the same way other countries do. We did not steal or take one drop. When our troops need gasoline for their jeeps and tanks, they buy it at a higher price than the Iraqi people pay.

    For someone to make up stuff like this and compare us to the Nazi's is absurd. It constitutes a vicious attack on our country, or soldiers and our morals. If we were like the Nazis, he wouldn't be allowed to write that kind of garbage.

  • Report this Comment On April 16, 2010, at 8:39 PM, sailrmac wrote:

    My 2¢ is that a little bit of everything will happen.

    Taxes will go up -The Bush tax cuts will be allowed to expire. Taxes on the rich, lack of AMT adjustments, and other "stealth" taxes and fee's will be enacted whenever politically possible.

    Spending will decrease -Social Security, Medicare, etc. will be pushed out a few years and means tested. The inflation rate they are indexed to will be "adjusted" (as it has been numerous times already) to understate true inflation.

    Inflation will be allowed -the fed will not sell the treasury bills it bought. It will keep rates low encouraging velocity. The treasury will continue to monetize debt.

    We will continue to manage expectations in clever, politically expedient, ways and thus "grow" out of our problems.

    More important is what are you going to do? Are you maxing out your Roth IRA and have you rolled your IRA into a Roth IRA? Have you invested it in something likely to keep pace or hold value in dollar decline environment? Do you realize this is a good idea from all three angles (increasing taxes, increasing inflation and not being able to count on entitelments)? Complain all you want? What are you actively, constructively doing?

  • Report this Comment On April 16, 2010, at 8:45 PM, bassiman wrote:

    For ss, we should increase the age at which we can start collecting not by a few months but by several years. When ss started we would retire at 65 and live until 70-75. Now with reasonable eating habits and exercise we can easily live into our late 80s and 90s. It would be interesting to see the numbers if we start full ss payments are 70 instead of 65 not start reduced payments at 65 intead of 62.

  • Report this Comment On April 16, 2010, at 9:25 PM, amskirun1263 wrote:

    Let's see, we could all start off by living within our financial means, which is most important. Second, taking an concerted desire to participate in our political/voting/contacting your state's representative/congress person. Finally, give all one has to stop Socialism from over coming America. Our ancestory came here and fought for Democracy, we must continue this fight or suffer the consequences.

  • Report this Comment On April 16, 2010, at 9:47 PM, xetn wrote:

    The other way out is default on all debt. And that is not entirely out of the question. It will become impossible to service all the debt that is building up as rates rise and there is absolutely no way to grow out of it. Either greatly slash spending (this will not happen with the present administration) greatly increase taxes, (possible, but would send the country into a tail spin), a combination of both of the above.

    As we have seen with Greece's efforts to cut entitlements (riots) the same will happen here if there is any hint of such a proposal. It is very difficult to get any cuts when almost 50% of citizens receive some type of payment from Uncle Sam (unemployment, federal employees, SS recipients, etc.

  • Report this Comment On April 16, 2010, at 9:54 PM, AirForceFool wrote:

    GoldenMartini,

    Thanks for speaking my mind for me... the billions of dollars we have spent on Iraqi infrastructure in order to try to create a stable country so we can leave is a testament to America's greatness... sure we miscalculated their ability to self govern given their centuries old differences... but we did it with the best of intentions... we would love a stable middle east free from tyranny... it's just more difficult then most invision... heck before the Gulf War, we were paying a little over a buck for a gallon of gas... how cool would that be... sigh...

    God Bless all those that put themselves in harms way so that others may have a better life...

    Chris

  • Report this Comment On April 16, 2010, at 10:49 PM, akutach wrote:

    How about an opt-out for Social Security and Medicare?

    For Social Security, I'd be glad to pay half of what I'm paying now to Social Security with no future benefit if I could get the other half directly into my 401k. I'm planning retirement with effectively no Social Security so I just see it as money thrown away anyway.

    For Medicare, over time as the benefits recede due to budget necessity in light of growing elderly population and uncontrolled expenses, the value of Medicare will diminish so that people of moderate means and up might preemptively opt out seeking other tax based mechanisms (needed as an inducement) to save for future retirement health costs. Again this assumes that for some people what they have paid in already is worthless so recovering part of future payments is better than nothing. Also, this assumes the government is rock solid in preventing insurance agencies from shenanigans to kick out the elderly from their insurance program when they become more expensive to the insurer.

  • Report this Comment On April 16, 2010, at 10:51 PM, akutach wrote:

    How about an opt-out for Social Security and Medicare?

    For Social Security, I'd be glad to pay half of what I'm paying now to Social Security with no future benefit if I could get the other half directly into my 401k. I'm planning retirement with effectively no Social Security so I just see it as money thrown away anyway.

    For Medicare, over time as the benefits recede due to budget necessity in light of growing elderly population and uncontrolled expenses, the value of Medicare will diminish so that people of moderate means and up might preemptively opt out seeking other tax based mechanisms (needed as an inducement) to save for future retirement health costs. Again this assumes that for some people what they have paid in already is worthless so recovering part of future payments is better than nothing. Also, this assumes the government is rock solid in preventing insurance agencies from shenanigans to kick out the elderly from their insurance program when they become more expensive to the insurer.

  • Report this Comment On April 16, 2010, at 10:57 PM, thinkingdumbman wrote:

    Wow!! All these smart people on here but!! I was born in 1960 and can't collect full SSI until I turn 67. The law was changed a couple of decades ago. I've been telling people this for over 20 years and still smart people know nothing. Over 20 years ago the politicians of the day tried to fix the system and went half way on SSI by changing retirement ages for baby boomers. They tried to do the same with other future budget problems and had their cars beat upon by old ladies. (no joke it happened on national TV) Our elder Politicians told us what was coming decades ago and did try to help us out. DO YOU REALLY KNOW AT WHAT AGE YOU CAN COLLECT SSI?

  • Report this Comment On April 17, 2010, at 12:10 AM, WalterMiddy wrote:

    I think TrojanFan's second option is the most likely for the very simple reason that the legislators are probably pathologically incapable of doing what is necessary now. If you want desperately to get elected--and most of them do, for whatever reason--they simply cannot make us voters make the hard choices; cut spending or raise taxes. The are unable to say "we won't give you your entitlement payment." They will only be able to say "We can't," as in , "we simply have no money left."

    The scenario of the Fall of 2008 was "unforseeable" but it happened. I think the state and federal governments defaulting on their obligations (public employee pensions?) and benefits is also unforeseeable...but probably as inevitable as the banking failure now seems in retrospect.

  • Report this Comment On April 17, 2010, at 1:04 AM, lbrown8331 wrote:

    We have still not collected the "surplus' out of iraq that the Bush administration had promised would occur if we "assisted" this country in ridding it of its dictorial leader - Sadam. The blood and treasure that went to the country, that did not ask for our "help" is now sacrificing our own country and the blood of our young people and treasure in the country that Did attack this great nation - Afghanistan. We don't have enough folks there to protect the ones that are there...and no equipment, people or money left to do it right. Bush admin owes this country what they threw us into debt for. when does that happen?

  • Report this Comment On April 17, 2010, at 1:07 AM, taniadunga wrote:

    Excellent words, Chris!

  • Report this Comment On April 17, 2010, at 1:49 AM, Patriot10 wrote:

    Set up a new USA currency manufacturing owned by the USA. Filtering it in to the federal reserve note, and/or take over the federal reserve as a seazure and use their system. Call back all USA bonds written on federal lands and properties null & void until the federal reserve hands back the Trillions the charged for interest. Jail all officials that sold USA bond to foreign and private entities for treasion aginst the united states by trickery due to the private fed res refusing to use the interest collected to write off the deficite and pull the bonds back. Stop all shreadding of fed res dockuments for prosicution.

  • Report this Comment On April 17, 2010, at 2:20 AM, TheKoz72 wrote:

    It is important to remember that a collection of short term debts have the same effect as being indexed. As interest rates rise the 2 year, 5 year and 10 year treasuries roll over at the higher rates used to fight inflation. Add that to the effect of our massive amount of US short term paper held by foreign countries that requires cash flow out to pay and we are in a bigger mess than the Treasury and the Fed will admit. One solution would be to set up balanced cash flow trade rules. That is to honor our free trade obligations but to limit dollars of imports in one quarter to the number of dollars of export in the previous quarter with some limited priority rules. That at least would begin to get some handle on the growth in foreign holdings of short term paper. Which is the negative side of being the world's trade currency.

  • Report this Comment On April 17, 2010, at 3:33 AM, key21 wrote:

    Back in the mid 1990's when all our US manufacturing companies started leaving for cheap labor/no pollutiion control, NO one tried to stop them.

    It was all about BIG company greed and saving a dollar at Wal-Mart!

    Thanks to NAFTA!

    What the heck do people expect when our manufacturing industry is NO longer here and we stood by and let our companies leave to foreign nations?

    Everything I purchase is NO longer made in this country. It's all foreign junk!

    Small tiny sweat shops had to close in PA, there workers made minumum wage and still could not compete against China's lower manufacturing costs/slum labor.

    This is no surprise, millions are now out of work and cannot find a job, THANKS NAFTA!

    Now millions cannot afford to even shop at Wal-mart

    to purchase MORE foreign junk!

    We woke-up too late!

  • Report this Comment On April 17, 2010, at 4:46 AM, bypie6 wrote:

    The U.S. has been the world's largest debtor for years --- over 30 years or so, so all you rabble rousers, such as the current phoney "tea party" followers of the empty-head Sarah "liar, liar, panties on fire", "Hock-pokey, lipstick Mom","I can see Russia from my house", Palin and the rest of poor excuses for abusers, please roll over and do you knitting of hatreds in your bedrooms.

  • Report this Comment On April 17, 2010, at 8:02 AM, judah12 wrote:

    We cannot print money like there is no tomorrow. If the dollar will be like the German mark before WW2. It will be worthless and people will no longer accept it as payment for anything. As for growing our way out of debt first we have to turn on the engine and step on the gas. You don't do this by adding trillions to the debt or spending more than you take in. Also the current administration does not understand that people pay thier bills with the net not the gross. We need to cut spending across the board and eliminate rules and regulations that stifle investment and productivity. Also and this will be hard for Obama, Ried, and Pelosi Listen To The People You Work For Us. We don't work for you.

  • Report this Comment On April 17, 2010, at 8:25 AM, tbranch1 wrote:

    It is going to take a combination of savings and sacrifice to bring entitlements more into balance. We need, however, a combination of entitlement reforms that involve shared sacrifice which seems a dead concept in our me-first culture. Here are three keys that in combination could restore solvency.

    1. Gradually raising the age of full retirement is indeed one important method lowering outgo.

    2. At the same time eliminate the FICA payroll tax income limit. Right now the deductions stop when one reaches $106,800. That means that Wall Street CEO's may have FICA deducted only for their first paycheck! Also deduct social security taxes on dividends and interest...unearned income! The present payroll tax system is highly regressive.

    3.. Emphasize cost-cutting in health care and force it on the health insurance companies. Why do we as a society spend almost twice as much of US GDP on healthcare with poorer outcomes than most other advanced nations? Neither the Republicans who oppose any 'right" to healthcare or the Democratic 'compromise" bill that was passed address this basic issue of costs.

    4. Bloated government payrolls need to be cut back and held steady. Why are federal government workers--with their job security and relative lack of stress-- paid twice with better benefits as their counterparts in the productive private sector?

    Acting on the ideas above would be a huge step toward solvency. Unfortunately, it is probably impossible politically because they involve sacrifice on the part of both the wealthy and less affluent . Republicans would rail against #2 above as "more taxation" (yes but fairer taxation) and many Democrats have a problem with #1, and #4.

    On #3--cutting health care costs-- many Republicans would be fine except so many Republican politicians accept so much health insurance company contributions, they will never get tough

  • Report this Comment On April 17, 2010, at 8:31 AM, vonkrebs wrote:

    Inlation -out of debt?

    Entiltements are a big part of US debt, and inflation would not help because those debts are indexed. Well said. I do not see anywhere mentioned that even bigger indebtness is sitting in ALL world nations national banks in form of their foreign reserves for global trade. I think that that debt far exceeds the domestic debt, and inflating Dollar would upset a whole world economy. So it is catch 22. And only way out is bide time until world reserves are "flushed out" and converted into some new "reference value for goods and labor". Then US can turn inwards to solve own problem.

    Vonkrebs

  • Report this Comment On April 17, 2010, at 8:40 AM, whalewriter wrote:

    When did "benefits" become a non-word, replaced by "entitlements"?

    I served my country, now I have Veterans Benefits. I paid into social security, no I can claim Retirement Benefits. I belong to the working segment of society, and if I lose my job, I expect to receive Jobless Benefits. If I become disabled, I expect to receive Social Security Disability Benefits.

    "Entitlements"? I don't think so. That sounds like something negative, reserved for royalty (or people who have an inflated opinion of what they "deserve").

    Thank you for letting me speak my mind. I think of it as taking "social responsibility", equivalent to paying taxes (which I do) for all of my current and future benefits.

  • Report this Comment On April 17, 2010, at 9:16 AM, CottageArtist wrote:

    Consider the following payroll deductions. (The following amounts are paid by the productive people of the US society.)

    1. 1.45% of employee earnings are deducted for MEDICARE.

    2. 1.45% of employee earnings additionally are paid by the employer for MEDICARE.

    3. 6.2 % of employee earnings are deducted for SOCIAL SECURITY.

    4. 6.2% of employee earnings additionally are paid by the employer for SOCIAL SECURITY.

    5. 0% of employee earnings are deducted for MEDICAID.

    6. MEDICAID IS NOT AN ENTITLEMENT PROGRAM.

    Reportedly, 47% of the U.S. households pay no income taxes.

  • Report this Comment On April 17, 2010, at 9:59 AM, anuragupta wrote:

    Defense and homeland security spending has been accounting for nearly a $1Tr per year for years now. How about stopping invading other nations and meddling with the politics for superficial benefits? At least now the costs outweigh the benefits.

    single payer public option at the cost of much higher taxes would have gone a long way in reducing the spiralling healthcare expenses

    I support higher taxes, free education and healthcare and defense expenditure capped to 1% of the GDP. Opening up the borders to increased legal immigration would help tremendously in supporting the real estate and bringing a vast number of people under tax net.

  • Report this Comment On April 17, 2010, at 10:54 AM, richard729 wrote:

    Theoretically, Social Security cost of living increases could be denied indefinitely as long as inflation is zero. But wait! That already happened for millions of retired Americans for 2010 who, by the way, paid mightily during their working years to build up the Social Security trust fund. Now that the money has been pulled out of that fund to finance other government programs we now find that trust fund full of government IOUs. You know, those same government securities we are promising to pay China back for financing Bush's $2 trillion wars in Afghanistan and Iraq.

    To make matters worse, though we've been told inflation is zero, the greedheads in the corrupt corporate world of billion dollar bonuses for CEOs decided that they cannot give up their addiction to the free money they can borrow at a rate of nearly 0%, thanks to the Federal Reserve.

    So, now these greed-infested corporate scions get to borrow for free, then turn around and raise prices to keep the conveyor belt of free money pouring in. This year (with inflation zero) my health insurance premium went up 9%, my car insurance went up 6%, my home insurance premium went up 6%, the price of food has gone up anywhere between 10% to 20% on some products and the price gasoline has taken another jump in the last 3 months.

    So, now that I'm retired and told to "suck it up" because inflation is zero, therefore I get zero cost of living increase, the Fat Cats continue to jack up prices so that they can maintain their rich and famous lifestyles. But, once inflation officially hits the consumers maybe seniors will get a pittance COLA. But, what good is that if the Fat Cats see this as just another reason to double the price of the increase in their products?

    After all, we can't have the rich suffering the same pains as the chattering masses!!

  • Report this Comment On April 17, 2010, at 11:12 AM, WDFISHER57 wrote:

    While I have little to no sympathy for many of the folks that created the financial nightmare in the home loans industry that caused this current meltdown, neither do I have any sympathy for the do gooders and social organizers who promoted the fiscal nonesense that begat it all. Now, unfortunately, a whole lot of the increase in debt is coming from those newly laid off, because of the sub prime credit crunch that destroyed their jobs and led to the millions in layoffs. I say that any person who was current on his or her bills up until say late 2008, is not a deadbeat but instead and unwitting victim of the greed in Washington DC and on Wall Street in NYC. The spinners want to exclusively blame Republicans, but in truth, it was folks like newly indicted Goldman Sachs that had help from their various ex CEOs in the US Treasury Dept. to deflect the consequences of their failed manipulations and to spread the pain and costs onto the backs of the tax payers. Levin, Geitner, Sumners, Dodd, and Franks are all about as criminally complicit as its gets, yet all but Levin still sit in powerful government positions, while continuing to cover up and thus prop up the unstable house of cards that is our economy anymore. The divide and conquer US news mwedia is also complicit in my opinion as they seemingly have a stake in the party they prefer to have in government theses days. Its why any and everything related to public discontent and the tea party folks is constantly trashed without ever having any real discusion on the merits of their positions. Until integrit and honesty is once more enshrined in news coverage, we the people are being lied to and thus poorly served.

  • Report this Comment On April 17, 2010, at 11:23 AM, mtnbears wrote:

    hello people,i just need to vent , look i am not the smartest person around, but check it out,

    1 first of all you can print up make more money to fix

    things for the american people, its just a temp fix

    it going to make things worse for every one,

    2 excuse me 4 my comments just going off some of

    the comments being discussed social security

    now at the age of 67,was this something voted on

    by the american people, lol why because they

    hope we die before we reach that age, i am 49

    theres a lot of americans counting on receiveing

    this money,do you think we will get it, and yet we

    do nothing, lol

    i love this country,it can be fixed in time just fire

    all the people we trust in straight up as soon as

    the first lie comes out of there mouth, you lie to

    your boss you get fired, rt, well they work for us,

    there no better then us, with out us there nobody

    gotta run, thanks

  • Report this Comment On April 17, 2010, at 11:26 AM, mtnbears wrote:

    excuse me that was you cannot make money

  • Report this Comment On April 17, 2010, at 11:27 AM, mtnbears wrote:

    you cannot make money

  • Report this Comment On April 17, 2010, at 11:36 AM, WDFISHER57 wrote:

    On a second front, I am tired of the "Bushs War" commentary from those on the left who would gladly see the average American taxpayers taxes raised if it led to one more entitlement he was then due. We fight the wars around the globe to protect this country, while taking the fight tothe enemies lands. If not there, we would be likely doing so here. And as far as Illegal inmmigration goes, it is the real culprit and reason that the US economy has stagnated in wage rates for many decades now, while the importation of cheap (in all ways and means) produced foreign goods has exacerbated that trend. We have foolishly flooded our markets with this poor substitute crap and replaced superior American made ones, which is now another reason to send our jobs overseas and thus dismantle the once proud US manufacturing base. WalMart and others promoted this trend, and originally cleverly emphasized "made in America" to sell it to US consumers. That is no longer the case and now cheaply designed and copied $4 shirts made in Paraguay (pick your location) still cost consumers $15 even at WalMart. If its cheaper to buy from a foreign producer, why haven't the retail prices fallen to reflect this. Go to the big stores (Macy's, Kohls, Penny's, etc) and see the same exhorbitant prices (even on sale) that used to be seen when it was "expensive" American tailors and suppliers products being sold. There is no justification for this greed that we have all been assaulted by. And that we the taxpayers are now getting stuck with all these bills, job losses and negative consequences that these disasterous policies have engendered is yet another crime in my view. Its time we threw out the whole bunch up in Washington DC., trimmed the bloated beauracracy and started demanding some accountability from the big corporations who always seem to have a federal bailout waiting in the wings while the little guy suffers and goes bankrupt for thing she or she had nothing to do with.

  • Report this Comment On April 17, 2010, at 12:03 PM, NoMoeMoney wrote:

    Why don't we just have a huge WW3 (worked for WW2) you kill off a large portion of people and put the rest to work making guns...

  • Report this Comment On April 17, 2010, at 12:05 PM, NoMoeMoney wrote:

    Why don't we just have a huge WW3 (worked for WW2) you kill off a large portion of people and put the rest to work making guns...

  • Report this Comment On April 17, 2010, at 12:40 PM, jimppaulsen wrote:

    The charts clearly indicate a growing problem with medicare and medicaid, but do not reflect the effects of the recent health care legislation. There is an implication that the problem will be worse, but does that take into account the increase in the medicare tax. Also, its not clear that medicaid is primarily paid for with state moneys, not federal. We must stop spending more than we take in. For those who don't know, more than half of the entire federal expenditure is military.

  • Report this Comment On April 17, 2010, at 12:45 PM, jmcoughlin8 wrote:

    Here is a novel idea and approach to lowering the national debt: lets ask the people for a voluntary donation. Lets ask other nations who we've helped in the past with foreign aid to make voluntary donations towards our national debt. We've reached out with donations to so many organizations and foreign countries for so many years, why not try this approach with our national debt? It seems logical enough to me.

  • Report this Comment On April 17, 2010, at 12:45 PM, doowoplover wrote:

    Always going after the people who pay the freight, entitlement programs. Not the crooks at the banks or corporations. How about Exxon making 45 billion in profits and NOT paying a dime in income taxes? Not even a windfall profits tax. Let's STOP being intellectually dishonest.In other words ,stop the BS. 7 billion missing in Iraq under Bush and his fellow criminals ,not to mention the Halliburton,Blackwater ripoffs .How about the defense budget with the 600 toilet bowl seats that's STILL going on?The republicans ,after inheriting a few trilliondollar SURPLUS dfrom Clinton ran the national debt into the ground starting a war on lies for oil profitsnot caring at all for the country or it's peopl;e,agin ,who pay the frreight Plundering ,abusing our treasury with bridges to nowhere. NOW, left with all the damage done by a criminal administration, Pres. Obama is cleaning up the mess. Imagine if the republicans had their way with Social Security and privatized it ,giving our money to Wall St.? We would have been in a worse depression than republican Hoover left us.Gimme a break! Stop the republican corruption every time they get power and we would not have this discussion.

  • Report this Comment On April 17, 2010, at 2:27 PM, forgetit235 wrote:

    Its Bush's fault. U.S. drowning in debt you say? So what nation on Earth isn't, China? LOL! Eat cake and shut up.

  • Report this Comment On April 17, 2010, at 2:30 PM, forgetit235 wrote:

    On April 16, 2010, at 2:19 PM, TrojanFan wrote: Why is the Fool sensoring my comments?

    Did I touch a nerve there?

    "====That's a fool for ya.

  • Report this Comment On April 17, 2010, at 2:32 PM, lampman79 wrote:

    Speaking of entitlements, why are we paying people in the Congress and the House life time benefits after leaving office? And how can they be allowed to vote themselves pay raises? There is a lot of waist in our government along with the corruption that goes with it. There is no other place I know of that gives full lifetime compensation and benefits to their employee's. It would save us money if that would just stop!

  • Report this Comment On April 17, 2010, at 2:33 PM, forgetit235 wrote:

    Its Bush's fault. So the fool says that the U.S. is buried in debt? What nation on Earth is not buried in debt, China, Dubai, etc.? LOL. Debt makes the world go around.

  • Report this Comment On April 17, 2010, at 2:39 PM, rikstik71664 wrote:

    prediction from CBO ~> http://www.washingtonpost.com/wp-dyn/content/graphic/2009/03... <~ hussein obama has ALREADY spent more in 2009 than w.bush did from 2001-2008.

  • Report this Comment On April 17, 2010, at 2:52 PM, rikstik71664 wrote:

    Therefore, President Obama should not run for reelection. They have failed to stimulate the economy, they have only added to the debt, they have not provided jobs, they did not fix healthcare (only piled onto an existing financial time bomb of medicare), and all we have to show for President Obama being in office were some good speeches, and an excellent speech in Egypt staving off at least a little bit of anti-American sentiment in the Muslim world for a brief period. For which he was given the Nobel Peace Prize of all things.

    We could have hired him for that, after all, if he wasn't in politics he might be a motivational speaker, but he really has no leadership skills, no executive experience, and now with his poll numbers well under 50%, so he has no credibility either, and therefore, he is ineffectual, and no longer needed. He is starting to look like a one-term president, and he will most likely go down in history as less than adequate, and more like Jimmy Carter or Herbert Hoover.

  • Report this Comment On April 17, 2010, at 3:22 PM, bluebear12 wrote:

    When experts talk about the hard financial times to come more and more they are telling us that gold will be the only thing which will hold its value. More and more people are saying to buy it because the currency will lose its value. The Bible speaks about buying gold in the last days. Jesus says in Rev 3:18 'I counsel thee to buy of me gold tried in the fire, that thou mayest be rich'

    Don't put your trust in riches, instead trust in God. 'For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not persih, but have everlasting life'. John 3:16

  • Report this Comment On April 17, 2010, at 3:53 PM, forgetit235 wrote:

    On April 17, 2010, at 2:52 PM, rikstik71664 wrote: Therefore, President Obama should not run for reelection.

    "====In my opinion, rik, reflect this on your dumbpookie, If God's good grace kept Obama from becoming President of the USofA, especially after eight years of repuke rule did to it, the next step would indeed be the abyss, literally

  • Report this Comment On April 17, 2010, at 4:14 PM, TMFHousel wrote:

    rikstik71664,

    I don't like responding to fanatical posts, but I couldn't hold back on yours.

    You write, "hussein obama has ALREADY spent more in 2009 than w.bush did from 2001-2008."

    Well, no. You made that up. Total federal outlays under GW Bush were $20.9 trillion, compared with $3.5 trillion in 2009. So you're off by a factor of 6.

    Maybe you meant deficits? Still no cigar. Debt increased by $6.6 trillion under Bush, compared with $1.6 trillion in 2009.

    And how much of 2009's deficit was caused by decreases in tax revenue from the recession? I've done the math: it's roughly 63% http://www.fool.com/investing/general/2010/02/09/sick-of-the...

    And if you're convinced Obama is so terrible for this country, then why are you concerned that he'll run for reelection? (You write, "Therefore, President Obama should not run for reelection."). If the people hate him as much as you imply, you should encourage him to run so that your guy (whoever that is) will win. Right?

    Morgan

  • Report this Comment On April 17, 2010, at 4:18 PM, jackie5831 wrote:

    I think anyone one who would troubled by a 60 or 70

    year old taking social securty or medicade need,s

    to walk in that person,s shoe,s for a day, I,m 62

    have a very bad heart can not work and yes I,m am on medicaid, but I did work and now if the Gov. did not help me I would die,I have 7 stents in my heart

    maybe to some they should not have helped me

    but tell me this when you are my age and need the help, there are many old people now that has to

    buy med,s instead of food,and we did not get a cost of living last year,but congress did, God help us

  • Report this Comment On April 17, 2010, at 4:28 PM, TMFHousel wrote:

    There seem to be a lot here under the impression that I'm for leaving the sick and elderly on the street in the name of a stronger economy. This isn't quite true (and would backfire anyways.)

    I'm for a strong social safety net, but it needs to be implemented in a way that is fiscally sustainable. Right now, it's not. Big entitlement spending needs to be appropriately backed up by big taxes. Everyone wants the former, but no one wants the latter. That's the problem.

    Morgan

  • Report this Comment On April 17, 2010, at 4:49 PM, SUPERMANSTOCKS wrote:

    The way I see it is to cut spending by way of a smaller government and I woudl add a flat tax of 1% and or 1 penny on taxable items. Leaving the yearly tax rate alone. I would also repeal Obamacare! I would also take 25% of the 1 penny flat tax and apply it to medicare and or social security. Leaving the rest to pay down the debt. 3/4th of a cent over a year time would or should do the trick. I am not a fan of the Canadian system. But they have a GST and it sure helps the federal government overall. Alot of us have been saying for years (Politicians) that a flat tax is the way to go. Just think of how many pennies or cents would go immediatley to work repairing the budget. Also, how fast things would change for us here at home.

  • Report this Comment On April 17, 2010, at 4:50 PM, SUPERMANSTOCKS wrote:

    By the way I am not a Politician. I am avg Joe. The cop. So I might as well be a Politician

  • Report this Comment On April 17, 2010, at 5:05 PM, TMFHousel wrote:

    Supermanstocks,

    You write: "I would also take 25% of the 1 penny flat tax and apply it to medicare and or social security. Leaving the rest to pay down the debt. 3/4th of a cent over a year time would or should do the trick."

    Let's break this down. GDP is $14.5 trillion, 70% of which, or about $10 trillion, is consumption based.

    So a 1% flat tax would raise $100 billion a year. Under your proposal, $25 billion would go toward Medicare and Social Security, which currently have combined annual outlays of roughly $1.2 trillion. $25 billion, therefore, would increase the programs by just 2% annually, which is just a fraction of their current growth rate (you need the programs to grow by 8%-10% a year just to keep up with baby boomer enrollment.)

    The other $75 billion in your plan would go toward paying down debt, and "a year time would or should do the trick."

    But the current federal debt is $12.6 trillion. So allocating $75 billion a year would take 168 years to pay everything off. (Assuming no interest, of course ... that's a whole different story.)

  • Report this Comment On April 17, 2010, at 6:57 PM, mountain8 wrote:

    Dear jstarwalker (long post back),

    I'm old enough to remember when people depended on their families to take care of them in their old age. Now they depend on the Government. Primarily because there are no families anymore. Just people living together.

  • Report this Comment On April 17, 2010, at 6:58 PM, jamesjsilver2000 wrote:

    how about instead of these politicians making 400,000 a yr. Come down to our lvl at about a hundred thousand a yr and have to pay their medical insurance then things would change!!!!!!

  • Report this Comment On April 17, 2010, at 7:09 PM, sbake5 wrote:

    Does anyone ever think about how much money the U.S. spends on aliens that come to the U.S.? One group of people is given social security, food stamps, and healthcare free. They have never worked here and most do not speak English. They are also some of the rudest people I have ever encountered. I know first hand because I see it everyday. We are paying for their fruit, meat, milk,etc. To make it worse, a lot of junk food is thrown in. I work hard and I can't afford to eat like that. Something has to be done but no one wants to take on the task for the fear of being called a racist. It has absolutely nothing to do with racism. It has to do with preservation of the American people who do work hard all their lives and stand by and watch these people eat our food and receive our hard earned Social Security. Wake up people! Pay attention. Notice when you go to the grocery store how everything is being paid for. Watch them pull out their food card and then pull out a wad of cash so large that rubberbands are used to keep it together-to pay for the taxables, of course. When are the American people going to stand up and say "enough". Why is everyone so afraid of this issue? Please don't use the term 'Humanitarian'-no bleeding hearts are welcome. This is serious and we need to band together.

  • Report this Comment On April 17, 2010, at 8:20 PM, MAXIMUS6443 wrote:

    i have to say anyone who supports that non U.S. citizen obama is simply IGNORANT... OBAMAS PRAYER PSALMS 109 VERSE 8

  • Report this Comment On April 17, 2010, at 10:25 PM, RobertLeeIII wrote:

    I haven't seen any mention or reference to overpopulation as being a cause or at least somewhat related to current problems that we face as a nation. Am i in a minority of

    one on this ?

    To you that would like to see those "entitlements" taken away, reduced or made unobtainable by raising the age for eligibility i say this:

    I am a BabyBoomer. My Father was in the war and lived to be 67 years old. I am his only son. I have no children. Some of you that are descendants of these veterans can see your way to deny these "benefits" to your own kin. I cannot !!! And i am the last of my line.

    Maybe you wish that more had died or been maimed so fewer of us boomers had been born to possibly live long enough to retire and burden you.

    My Grandfather had a small farm and lost most of it in the depression. His other son died childless.

    How many of your grandparents had large families that grew up to also have large families including you.

    I'm sorry, i regress. Don't get me wrong, i love people and i love children, but there are limitations ie. people

    Mr. House,

    Back to the subject at hand. America needs money.

    People need jobs. 1) We need to REPEAL NAFTA

    2) Establish tariffs on u.s. based companies overseas

    3) Tax unearned income and increase tax on income above middle-class. And i mean less than $250,000

    4) Bring gov. jobs in-line with private sector jobs

    5) Invest in infrastructure ( more jobs)

    That's all i can think of at the moment, but there's one more thing we all need to think about, and that is

    We need to finish this thing with afganistan and bring our people home, but to what i'm afraid to think. I took an early-out from the Air Force, and i was stateside, when we were winding down at the end of the vietnam

    to become a civilian and it's never been easy since.

  • Report this Comment On April 17, 2010, at 10:57 PM, hegibson wrote:

    What if couples actually had more babies? The birth rate in western countries has been going down, not up. So the growth has come more from immigration rather than from generation. Supposedly there will be fewer 'workers' to support retirees, perhaps that is the consequence of those workers having fewer babies, smaller families. The retiring generation that made the decision to "downsize" should step up to the plate and bear the consequences, accept the fact that their parachute has holes in it now.

  • Report this Comment On April 18, 2010, at 1:52 AM, RobertLeeIII wrote:

    First) The birth rate in western countries has been going down, only means the rise in population has slowed down a wee bit, not stopped, leveled off or in decline.

    Second) by "there will be fewer 'workers' to support the retirees", lets that every working person had 6 children to ensure enough workers to support one. That would be 12

    per family. Then those 12 have 12 each (144) x12 (1728) x12 (20,736) etc,etc. Now multiply that x 50 million new workers entering the workforce starting this year. Let me see...( 1,033,800,000,000 ) 1 Trillion+/- in a hundred yrs.

    Well there would be plenty of workers left, even allowing for the ones that died of natural causes ie. old age or not ( starvation, pestilence, wars, etc. but would they have JOBS.

  • Report this Comment On April 18, 2010, at 5:54 AM, EssenceofChar wrote:

    Social Security is not an entitlement that is a free-bee. It is earned and paid into. It is deducted from my paycheck every payday for the last 40 years. Therefore, when I retire I am entitled to it because I have paid into it and earned the interest for it being used by my government for the last 40 and how ever many more years I work.

  • Report this Comment On April 18, 2010, at 7:41 AM, skypilot2005 wrote:

    Morgan,

    Great article. This quote from Bernanke is revealing: "Given the structure of our debt, [inflation] wouldn't even help reduce the debt ... given that so many of our obligations are indexed."

    This hadn’t occurred to me.

    I need to dust off my Economics texts from the 70s. Thanks, for sharing it with us.

    Regarding your post in reply to rikstik71664 “And if you're convinced Obama is so terrible for this country, then why are you concerned that he'll run for reelection? (You write, "Therefore, President Obama should not run for reelection."). If the people hate him as much as you imply, you should encourage him to run so that your guy (whoever that is) will win. Right?”

    I recommend you refrain from any type of political comment. It hurts your creditability

    as an “economic” commentator. My opinion.

  • Report this Comment On April 18, 2010, at 7:46 AM, RockFossil wrote:

    Vote Jeb Bush, 2012.....He'll fix everything!!

  • Report this Comment On April 18, 2010, at 7:48 AM, DarkPoolViper wrote:

    Dark Pool Vipers are the cause of the down fall. insider knowledge. Is this legal? no but if your high enough on the food chain of polotics its admissable. Should they all be in prison for this little know trading fact. You decide. Look up US Dark Pools. And see why and who are the sharks here. Vote in Nov. vote out the No Choice shove it down your face politicans that sold us out to Socaistist believes and standards. Increase the value of the Yuan. He should be impeached for this Communist idea and in 2012 her will loose his place. As spokesman for the few. and leader of none.

  • Report this Comment On April 18, 2010, at 9:45 AM, NoMoeMoney wrote:

    Ha! I say enjoy life while you can because a perfect storm is brewing and the Empire is about to fall. Think about all the great ideas that people on this forum have for fixing the problem, do you honestly believe they will happen? Do you believe an objective, collective, rational thinking is going to be implemented? No way!! We live in a corrupted society that looks out for the interests of the few as opposed to the many and a solution to the problem will screw up their plans. Think about this, what will happen if the market crashes like it did in 2008? Do you believe we will just keep plugging along like nothing happened? There will be chaos! People are still hurting from unemployment, housing market, credit debt, what will another crash bring? Like I said, enjoy life now,it might be your last chance...

  • Report this Comment On April 18, 2010, at 9:57 AM, dw1234 wrote:

    I read a alot of these types of articles, both sides dems and repubs seem to agre that "entitlements" IE social security, medicade and medicare are goint to be in trouble in the near future, mostly because of a change of population status, and that due to the baby boomers. I would just like to point out that while the influx of boomers will no doubt strain or break the system, it is in fact only going to be a temporary problem. Here is one undeniable fact. The boomers are going to die. No one seems to be doing any calculations, based on this. There will be a spike and then on the the other half, a growing surpluss of funds.

  • Report this Comment On April 18, 2010, at 10:56 AM, davsbell wrote:

    Get rid of the UNFEDERAL RESERVE,return the power to print our currency to the people where it is Constitutionally required to be,back our currency by silver or gold as is Constitutionally required by LAW,declare BANKRUPTCY AS A NATION-WE ARE BANKRUPT-and stop policing the world,bring our troops home from guarding the POPPY FIELDS in AFGHANISTAN FOR THE DOPE PUSHING QUEEN OF ENGLAND,AND FINALLY LET THESE BANKERS AND WALL STREET THIEVES FAIL-INFOWARS.COM LAROUCHEPAC.COM,WHATREALLYHAPPEND.COM,WORLDNETDAILEY.COM

  • Report this Comment On April 18, 2010, at 1:37 PM, Dusty754 wrote:

    Report this Comment On April 16, 2010, at 12:41 PM, alasker wrote: How about not spending money we dont have? Pay for all of the constitutionally mandated things- and whatever is left over will get divided up. Basically not pay our treasury bills- tell the pension funds, overseas creditors, social security, banks to stuff it. There is not enough money on the whole planet to pay our entitlements- unreal numbers that cannot be mentally grasped. besides the ruling class, the human has survived without entitlements (someone else paying for you not to work) for much longer than entitlements have existed. Sort of like Adam Smith, if you dont work you dont eat.

    So what about people that have retired? You have eliminated pensions and social security in your scenario. I guess when you get too old to be able to work then you should just drop dead? Or if you become too sick to work?

    You are an example of what a true human being should not be and you should be sterilized so you are not able to reproduce.

    Bet you even go to church every Sunday too.

  • Report this Comment On April 18, 2010, at 2:32 PM, TheBlackTulip wrote:

    The Dept we face is unavoidable because we are a debt based economy. We can have our 'Reserve', which is not OURS, print money and EVEN IF WE DON'T SPEND IT it cost us whatever the Fed Rate is for them to print the money. This is the danger of having a PRIVATELY HELD Central Bank. We have had four. The Bank of North America, The First Bank of the United States [created by Alexander Hamilton and killed by Jefferson/Madison], The 2nd Bank of the United States [killed by Andrew Jackson] and 73 years later, The Federal Reserve.

    We must print our own money. The Colonists did it until the Crown forbid it; this led to the Revolutionary war. Lincoln did it with his greenbacks until he was, some say, killed over it. Lincoln's greenbacks were both legal tender and at 0% interest. When OUR government prints its own money that is a power reserved to the people and it comes at no cost and we don't have to 'ask' our Federal Reserve [which is neither federal nor reserved] to "run the printing presses full bore'. If Our government did not shirk their responsibility by giving the FR a monopoly over OUR currency then printing OUR own money would come at 0% interest rate ALL THE TIME.

    Many American's think that China is our largest lender. Not true. Our largest lender is the Federal Reserve. They are a privately held company with a government granted monopoly on our currency. WE are not privy to their complete stockholders list which is suspected to be up to 2/3s foreign.

    With the Fed making money hand over fist on every dollar they print they are absorbing the OUR national wealth even if their presses are not open 'full bore'. Our money is siphoned abroad every time they print money.

    Look at the success of Lincoln's greenback. He was prepared to continue this monetary policy because he saw the purchasing power it gave our nation to solve its own problems.

    Mandatory spending is a problem, this is true, but as long as the United States of America has to beg the Federal Reserve to bail US out, WE ARE NOT FREE! And every time the Fed bails US out Our problem gets worse.

    The borrower is the servant to the lender. There are greater powers at work her than just shifting political winds:

    http://wp.me/sywxb-3791

  • Report this Comment On April 18, 2010, at 2:54 PM, ScoopJag wrote:

    Morgan,

    There is a forth way to reduce the debt...increase governent income from growth...doesn't mean you have to raise the tax rate! That is why government needs to rig incentives for investment into certain sectors that grow, and need a primer.

  • Report this Comment On April 18, 2010, at 2:54 PM, englishonly wrote:

    Social security is not an entitlement. The government took money from our paychecks all our working years - telling us they were going to put it in an account to draw interest - so when we retired, we could get it back. An entitlement is somethng you receive for which you've paid nothing or not been forced to participate. If we had known social security was going to be treated as a slush fund by congress - and end up with nothing but I.O.U.'s when we were supposed to start withdrawing payments..... Americans might not have been so complacent and willing to contribute to the fund for 40 to 50 years of their lives. Our attitude is..... We paid the money in. Now we want it back.

  • Report this Comment On April 18, 2010, at 3:07 PM, TMFHousel wrote:

    scoopjag,

    I admit the section you're referring to was poorly worded, but note that the three ways I mention are the only ways to reduce *deficits,* not current debt.

    Morgan

  • Report this Comment On April 18, 2010, at 3:53 PM, wallandpenn wrote:

    Excellent post. Bernanke's comments may have been ignored by most in the media, but this shows there are really only two options. Pay off our debt or default. Unfortunately, I don't think even we are capable of paying off this debt. Given how Congress spends, I don't even see this as a priority.

  • Report this Comment On April 18, 2010, at 5:35 PM, boogiealbert wrote:

    i just want one of those no limit credit cards obama has !!!!!!!!!!!! that i won't have to worry about interest or paing back the loan ( your grandkids will pay it for me).

  • Report this Comment On April 18, 2010, at 5:53 PM, TheBlackTulip wrote:

    englishonly -

    "Social security is not an entitlement. "

    _______________________________

    Now that there is no money, SS is an entitlement. Lets suppose you had invested all that money privately, instead of paying into SS and right before you retired you moved it all into say Enron. When Enron went belly up [like SS has], what would you get?

    The fact that you get SS now even though it is toast makes it an entitlement. The fact that you claim you are entitled to it makes it an entitlement. The fact that the money you get now comes from others makes it an entitlement. The fact that some people get way more than they ever paid in just because they won't stop breathing makes it an entitlement. And, finally, the fact that anyone who dies after their first check voids the rest of the 'wealth' they put in makes it an entitlement.

    It is an entitlement. What can anyone expect when retirement investment was moved from public to private entities. Anyone who actually thought that the government was going to hold money for you was misguided at best. The government has proven over and over again that holding money is not their specialty.

  • Report this Comment On April 18, 2010, at 6:15 PM, TheBlackTulip wrote:

    englishonly -

    "Social security is not an entitlement. "

    _______________________________

    Now that there is no money, SS is an entitlement. Lets suppose you had invested all that money privately, instead of paying into SS and right before you retired you moved it all into say Enron. When Enron went belly up [like SS has], what would you get?

    The fact that you get SS now even though it is toast makes it an entitlement. The fact that you claim you are entitled to it makes it an entitlement. The fact that the money you get now comes from others makes it an entitlement. The fact that some people get way more than they ever paid in just because they won't stop breathing makes it an entitlement. And, finally, the fact that anyone who dies after their first check voids the rest of the 'wealth' they put in makes it an entitlement.

    It is an entitlement. What can anyone expect when retirement investment was moved from public to private entities. Anyone who actually thought that the government was going to hold money for you was misguided at best. The government has proven over and over again that holding money is not their specialty.

  • Report this Comment On April 18, 2010, at 6:16 PM, hahaha333 wrote:

    POLL WATCH---In reference to Drake's anti Obama poll propaganda. I will put the truth here in that regard:

    More with these fishy Obama approval polls. I cannot see his approval rating plung from 51% so fast and so far after passage of healthcare, especially with the additional accomplishment of arms agreements with Russia in particular. These selective polling tactics do nothing but add to the reality of garbage in garbage out dichotomy.

    "PRINCETON, NJ -- President Barack Obama's job approval stands at 51% after the passage of landmark healthcare legislation. That is slightly better than, though not fundamentally changed from, his ratings for most of this month.

    Bottom Line

    The passage of healthcare reform in the House, a major victory for the Obama administration, has not yet had an overwhelmingly positive impact on Obama's approval rating. That may be in part because of the divisiveness over the healthcare reform legislation, which struggled to gain majority public support throughout the process. It appears, though, that the healthcare victory did provide enough momentum to put Obama back above the majority approval level for the time being."

    Source Gallup.

  • Report this Comment On April 18, 2010, at 6:20 PM, hahaha333 wrote:

    POLL WATCH--In reference to Bruce Drake's anti Obama poll propaganda. I will put the truth here:

    More with these fishy Obama approval polls. I cannot see his approval rating plung from 51% so fast and so far after passage of healthcare, especially with the additional accomplishment of arms agreements with Russia in particular. These selective polling tactics do nothing but add to the reality of garbage in garbage out dichotomy.

    "PRINCETON, NJ -- President Barack Obama's job approval stands at 51% after the passage of landmark healthcare legislation. That is slightly better than, though not fundamentally changed from, his ratings for most of this month.

    Bottom Line

    The passage of healthcare reform in the House, a major victory for the Obama administration, has not yet had an overwhelmingly positive impact on Obama's approval rating. That may be in part because of the divisiveness over the healthcare reform legislation, which struggled to gain majority public support throughout the process. It appears, though, that the healthcare victory did provide enough momentum to put Obama back above the majority approval level for the time being."

    Source Gallup.

  • Report this Comment On April 18, 2010, at 7:42 PM, enzonio2 wrote:

    the deficit of AMERICAN can not be fix until 20 year. the goverment has no proper income to pay the DEBT. bec. of what happen during the DEMOCRAT PRES. CLINTON 8YEARS IN TERMS. by signing the WTO and NAPTA during his terms. and give the JOB TO CHINA and ASK MONEY FOR his 2ND TERMS. and OBAMA ADMINISTRATION has no sign of bringing the JOB back HERE. (why are we afraid of war. IS CHINA TREATINING U.S.A. if we bring back the manufacturing JOB HERE NO MORE MADE IN CHINA LIKE BEFORE ALL MADE IN U.S.A.) humans life is a very precious GIFT OF GOD JESUS. AMERICA IS ONE OF THE CHOSEN LAND OF GOD. WHERE ALL THE PEOPLE OF DIFFERENT COUNTRY COME HERE AND REFORM THERE LIFE IN THIS LAND AMERICA. THINK PEOPLE YOU KNOW.....

  • Report this Comment On April 18, 2010, at 8:04 PM, byjack007 wrote:

    This 'FINANCIAL PETTY ACCOUNTANT' way of looking at Macro- Economics kills me....Nations are NOT businesses, or households..that have to 'balance their books', or 'turn a profit'! That's as is well known,.... Micro-Economics. Nations CREATE economies, FUND them, and CREATE money....which is really just paper...BACKED by a COUNTRY'S POWER.....As the US is still the top or near top power country, it doesn't even EVER have to pay back 'it's paper debts'. It can snap it's fingers and FORCE a monatary change in the whole world, unless other nations are stronger than it and force repayment for generations, which they AREN'T...and won't be for at least 40 years...SO FORGET IT.

    We'll need to SPEND, and BORROW, and NOT PAY BACK our way out of this depression and make sure the rest of the world eats the 'junk' sandwhich, and that's THE WAY IT HAS TO BE.

  • Report this Comment On April 18, 2010, at 8:19 PM, byjack007 wrote:

    I can only say again GOVERNMENTS and NATIONS don't EVER 'HAVE' TO pay 'debts' or 'balance books'. As they CREATE money, CREATE the business conditions, CREATE the world economy AS THEY SEE FIT. Whatever they SAY becomes the new economic reality.....AS LONG AS....they have the world POWER to back it up.....and the US HAS that!

    The US is not some bankrupt petty grocer, or housewife balancing a check book. The US 'IS' the SUPERPOWER of the earth, 'THE' or 'A' top economic power...and whatever it says WILL BE the reality for the rest of the planet...and...this is FACT...not..fiction.

    Those greedy slobs now clamoring for the repayment of 'debts' are the same that have been growing wrongly rich, sucking off the US power and economic miracle, for generations...and it's time the free feast ended.

  • Report this Comment On April 18, 2010, at 8:26 PM, TheBlackTulip wrote:

    byjack007 -

    If the US defaults one time you will see that you are wrong. The Fed will call their loans on the US before China does. Through the World Bank and the BIS the Fed is connected enough to survive. The US is not.

    The borrower is the servant to the lender. End the Fed and convert from Fed notes to a US notes like Kennedy tried to do. A US minted currency is printed by OUR own elected congress at 0% interest to OUR country. No interest saves US $450 billion/year. Do you think WE could pay off the debt with that?

    WE have a debt based economy. That is why WE can't get out of debt. You don't default. You convert. The Feds Charter is up for renewal soon and the populous is just angry enough to end that Charter. Oh, the bank will exert pressure by tightening money like it did in the 1830s when Andrew Jackson ended The 2nd Bank of the US, but then it will be over. The system which benefits the few at the expense of the many will be history.

    There are greater powers at work here:

    http://wp.me/sywxb-3791

  • Report this Comment On April 19, 2010, at 12:03 AM, akddddjfleoe wrote:

    Easy:

    Let every immigrant in the country especially those with no education or skills

    Keep all Killers and rapists in Prison for rest of their lives, pay for them until they die and let them vote

    Continue to grow the government and shrink the private sectors

    Raise taxes especially on small business and health care

    Clean up China’s air with a Cap and Tax bill

    Pass a VAT like in Europe so companies move away

    Send more American solders to foreign countries to die

    Ban any Federal budget

    and spnd spend spend

    and vote for OBAMA and Pelosi in three years because they are so smart arn't they?

    Yep! This will solve everything. We can all share our toilets too.

  • Report this Comment On April 19, 2010, at 4:29 AM, PuppLuppy wrote:

    There is a fifth way: Legalize marijuana. Make a legitimate industry out of our # 1 cash crop and tax it. Create a few million jobs and stop wasting money our law enforcement resources, courts, jails, etc.

  • Report this Comment On April 19, 2010, at 6:01 AM, saunafool wrote:

    Perhaps this is splitting hairs, but we can inflate away the existing debt--that is in the form of bonds sold to mostly foreign bondholders.

    What we cannot inflate away is the deficit, as the entitlements are indexed to inflation.

    Therefore, if you could create enough economic growth and spending reductions in order to balance the budget, you could in fact inflate away the debt. I won't be holding my breath waiting for either the growth or spending cuts, however.

  • Report this Comment On April 19, 2010, at 9:36 AM, scooppy69 wrote:
  • Report this Comment On April 19, 2010, at 12:31 PM, ChrisFs wrote:

    Instead of using the article as a spot to complain about govt in general and push one's political points,

    here are some possible ways to reduce the spending that don't cost as arm and a leg.

    Soc Security. Rather than restricting it to treasury funds only, allow a portion to be invested in the wider stock or bond market, like practically every other pension fund in the world. No one on fool.com would recommend putting money intended for retirement 40 years away to be 100% in Treasury bill, but that's what Soc Security does. If it's a balanced portfolio, it will get better returns, which extends it's life and requires less taxes.

    Medicare: The study used is two years old, so it could predict the health care reform law. There's a number of reasonable cuts to Medicare right there.

    Medicare advantage company participants were given a 14% bonus to attract companies and encourage marketing. They have plenty of participants, so that's no longer needed and has been cut. In 2012, there will be a shift in the way payments are made away from payments for services. to payments for results. So If you are admitted to the hospital, go home and have to come back, because they screwed up the first time, rather than that being two payments,, it will be counted as one trip and reimbursed accordingly. They will spur hospitals to make sure they do things right the first time, rather than just shuttle you in and out.

    There's a bunch more stuff as well.

    Of course, it's not as much fun as just saying "I hate the govt, it spends too much blah blah blah"

    but sometimes you actually have to get things done.

  • Report this Comment On April 19, 2010, at 12:32 PM, ChrisFs wrote:

    Instead of using the article as a spot to complain about govt in general and push one's political points,

    here are some possible ways to reduce the spending that don't cost as arm and a leg.

    Soc Security. Rather than restricting it to treasury funds only, allow a portion to be invested in the wider stock or bond market, like practically every other pension fund in the world. No one on fool.com would recommend putting money intended for retirement 40 years away to be 100% in Treasury bill, but that's what Soc Security does. If it's a balanced portfolio, it will get better returns, which extends it's life and requires less taxes.

    Medicare: The study used is two years old, so it could predict the health care reform law. There's a number of reasonable cuts to Medicare right there.

    Medicare advantage company participants were given a 14% bonus to attract companies and encourage marketing. They have plenty of participants, so that's no longer needed and has been cut. In 2012, there will be a shift in the way payments are made away from payments for services. to payments for results. So If you are admitted to the hospital, go home and have to come back, because they screwed up the first time, rather than that being two payments,, it will be counted as one trip and reimbursed accordingly. They will spur hospitals to make sure they do things right the first time, rather than just shuttle you in and out.

    There's a bunch more stuff as well.

    Of course, it's not as much fun as just saying "I hate the govt, it spends too much blah blah blah"

    but sometimes you actually have to get things done.

  • Report this Comment On April 19, 2010, at 9:16 PM, MrArbitrage wrote:

    Another option is coming. Social Security and Medicare have been the proverbial "3rd rail" for a long time but as the elderly of the WW II generation die off, they are being replaced by the hedonistic Baby Boom generation. This generation rejected the morality of their parents, decimated the family unit out of their own selfishness while they justified so-called "free love" thinking they got away with it.

    After all these years, their sins will catch up with them as those children they allowed the government to raise while they were out trying to "find themselves" and the women disdained motherhood for their careers - this generation will take the moral relativism and use it against their hedonist parents.

    They will not work all day long in order to give away 75% of their income to pay for this albatross. The generation of voters who gave us The False Prophet will euthanize half the nation's elderly with just as little compunction as their parents had when they taught them the rectitude of aborting innocent babies. http://www.TableOfWisdom.com

  • Report this Comment On April 20, 2010, at 5:26 AM, MarkDonner wrote:

    How about reducing the bloated military with their massive waste of money? The military is like a giant welfare case draining half a trillion dollars a year. The military can be reduced to a tenth its current size and do just fine. Get rid of the useless overseas bases, and pull out of Afghanistan and Iraq which are costing $1 billion a month. Also stop bailing out corrupt banks and their thieving managements. That should handle your crisis

  • Report this Comment On April 20, 2010, at 8:39 AM, pimsleur wrote:

    Right wingers often suggest that the problem is with government spending of programs that help the majority of people. They want a tax system that taxes primarily the masses (leaving the rich with correspondingly lower tax burdens) and spending only on those things that will benefit them (including going to war to conquer oil fields that they can exploit for their own profit). The answer is to create a democratic, egalitarian economic system in which we start asking the rich to pay their fair share of the tax burden. Someone making millions a year can even pay, say, 75% of their income in taxes much more easily (they would still have millions left) than the average joe and jane can afford to pay, say, 30 per cent of their income. Of course, right now, the blubber rich don't even pay 30 per cent while joe and jane often pay an even higher per cent. And, please, don't tell me this will reduce incentive. It won't and historically hasn't when its been tried elsewhere and briefly here. In fact, the economy grew much more rapidly back in the fifties and sixties than it has since then, and, guess what, the rich paid higher taxes in those days. Finally, as others have noted, we can stop our imperial ways of trying to maintain hegemony around the world. That policy of hegemony and the bloated military budget that comes from it doesn't make the average person safer. In fact, it just makes other people madder at the United States, causing them sometimes to resort to violent terror against the US, which makes the average person less safe. Our imperial agenda since WWII has simply enriched a few people at the expense of the rest of us. Sixty years ago, the rich declared class warfare on the rest of us and they have been sticking it to us ever since. Where is Huey P. Long and his "Soak the Rich" tax proposals when we need him most.

    Respectfully yours,

    Pim

  • Report this Comment On April 20, 2010, at 9:03 AM, pimsleur wrote:

    When I first read the headlines on this article, I thought it was going to discuss the real debt that is crushing most Americans: the consumer debt we owe on houses, cars, and everything else we try to buy. It is far too high and it lies at the heart of our current economic difficulty. Here's what we must understand: The primary weakness we face in the economy, the weakness that has caused the current depression and that will continue to play havoc with our economy is a mal-distribution of wealth, too much money available for the rich and too little available for the rest of us. That means that there will be plenty of money available for investment in growth of the means of production but not enough available to the masses to buy the products of that production. As a solution, we offered easy credit to the masses to allow them to buy more than their incomes would otherwise allow. But that meant that the masses became deeply in debt. That meant that they could not continue to borrow and buy at the same rate. It meant that many of them began to default on big loans (housing crisis), which jeopardized basic financial insitutions (read banks), which caused the whole house of cards to begin coming down. But it all began with a mal-distribution of wealth. But what caused the greater concentration of wealth: right wing policies (both Democrats and Republicans) that shifted more of the tax burden to the average Jane and Joe, that resulted in less strength for labor, that kept wages low. Such policies allowed a relatively small percentag of the population to grow quite rich in the last 25 years (drive around the North Dallas ara and you will see what I mean). Many of these people came from families that were not as well off materially as they were, so people thought things were getting better. In reality, these people were allowed to accumulate some wealth, but also growing debts while leaving the majority of people with far less wealth. Look at the statistics: The upper five percent have far more of the total wealth today than they did fifty years ago, and the bottom third have less total wealth, not just a smaller percentage of a bigger economic pie, but actually less total wealth as measured by constant dollars than did their parents. A few people began richer; more people became poorer. Inequality leads to economic collapse, ultimately, and lots of social problems even before the economy collapses. Recent studies of different countries finds that countries with greater inequality (like the US) have higher rates of nearly everything bad--from crime to health problems. Once upon a time, equality for all was a basic tenet of the American creed, and when what's his name wrote the original pledge of allegiance to the flag, he wrote, with "justice and equality" for all. No more. We must return to those notions of equality of opportunity to restore our society and save our economy.

    We must INCREASE our social security entitlement to the masses. Most industrialized countries in the world guarantee their citizens 60 to 70% of their working income during retirement. In this country, SS only provides about 16% or something like that. Let's raise it to at least 54%. In fact, let's bring back an old American slogan once used for an imperial war: 54.40 or fight.

    Respectfully yours,

    Pim

  • Report this Comment On April 20, 2010, at 9:08 AM, LibertyGirl2009 wrote:

    Lots of great ideas here, but really, the only way out of this mess:

    1. Like someone else had previously mentioned, live within your means. If you are one of those people who bought a house you can't afford, you deserve to lose it. Sorry to be so blunt, but not my problem.

    2. Our federal and state legislators are a huge part of the problem. Stop voting them back into office. Demand fiscal responsibility and continue to vote out incumbents until the career of politicial is gone! See www.1andDone.org for more details. There are many groups supporting this concept...you all need to do it too.

    When your president tells you that you all should be thanking the government rather than criticizing it (there is a recent speech on tax day where he does just this), then he is out of touch. Get rid of him too in 2012.

  • Report this Comment On April 20, 2010, at 2:46 PM, EdtheC wrote:

    Here are some things to think about:

    1. Stop the Unearned Income payouts.

    2. Require that people receiving unemployment benefits work on projects formulated by the Government, ala, the WPA.

    3. Stop contributing to the payouts States make to people who have child after child and are without jobs.

    4. Completely open up the Bakken Formation to oil recovery.

    5. Uncap older off-shore wells.

    I'm sick and tired of seeing people who have absolutely no earnings receive an Income Tax refund and people who receive a greater Income Tax refund than that which they paid over the year.

    And I'm also sick and tired of seeing women have children simply to increase the amount of government support payments they receive.

    Also, "Green Energy" sounds very nice when you have a healthy, growing economy but when the economy is in the pits, you have to do what is possible to help the recovery. Government funding of "Green" programs is not helping the national debt!

  • Report this Comment On April 20, 2010, at 3:23 PM, FuerteFunds wrote:

    Look at the tax rate for the top 400 richest Americans, recently a static percentage, just maybe they could afford more than 20%.

  • Report this Comment On April 20, 2010, at 7:35 PM, ken8888 wrote:

    It's silly to lump Social Security in with Medicare and Medicaid as entitlement problems. Just look at the graph! Expenditures related to Social Security stay relatively tame, while M&M's go nuts.

    More reform to bring "bend the curve" on medical spending is the most important thing to avert a debt crisis.

  • Report this Comment On April 20, 2010, at 8:04 PM, dogsnameischip wrote:

    The real reason the U.S. can't inflate its way out of debt is because our debt is the direct result of inflation.

  • Report this Comment On April 21, 2010, at 12:03 PM, TopAustrianFool wrote:

    So what is the big deal? Of course I am against this debt, since it is nothing but stealing from the public. The reason is, that by financing the deficit the govt is really taxing the public without telling them, since it causes inflation. Or better yet, the Fed. is causing inflation by helping the govt finance its deficit. Thereby creating a debt. This little game is also the main culprit behind the Boom and Bust Cycle. But lets take it easy on the "Doom and Gloom" of the debt. The debt is nothing but another symptom of the Fed. inflationary policy. The only real long-term danger that the debt posses is that someone else will become the lendee of choice of high liquidity countries like China. That's a long-way off...

    What you really need in order to avoid disruptions on real growth is reduce govt spending. They will not do that unless you strip the Fed. from its monopolly. I just think that the Doom and Gloom is not warranted.

  • Report this Comment On April 21, 2010, at 12:11 PM, TopAustrianFool wrote:

    "And if you're convinced Obama is so terrible for this country, then why are you concerned that he'll run for reelection?"

    Like the Bush administration was so much better. They are both spenders, wasters and neither have a clue beyond their own self-agrandizing fantasies.

  • Report this Comment On April 21, 2010, at 12:13 PM, TopAustrianFool wrote:

    I guess I should have written Borrower of choice, since lendee is probably not even a word...

  • Report this Comment On April 21, 2010, at 3:43 PM, johnnymiami wrote:

    Wash my mouth out with soap but...Where are the charts that depict how much in taxes the giant corporations and super rich have paid over the last 70 years. If they were paying at half the rate of the 1940s, how much would that amount to?

    Why are some people so fast at finding money to supply bombs and bullets but when the guys who saved our butts get old, we can't abide giving them a few bucks for food and medicine?

  • Report this Comment On April 21, 2010, at 4:02 PM, Liz71979 wrote:

    Why not start at the root of the problem? All politicians are motivated by is getting re-elected. Everything they do is driven by that. They can't cut spending (even those that recognize it's the only way out) because *GASP* they might lose voters!! Oh NO! Term limits for politicians is the answer. I don't think the founding fathers ever intended for there to be career politicians anyway. Problem of course is that the only way to create term limits for congress is for them to approve it - when's the last time you voted yourself out of such a cushy job?

  • Report this Comment On April 21, 2010, at 5:30 PM, deepestvalue wrote:

    The US Govt. spends a lot of money on reserch,the results of which are given away for free. The next time we invent something big like the INTERNET, Licence it and pick up 10-12 Trillion Dollars over 10-25 years. Enough to pay off debt and then some....

  • Report this Comment On April 22, 2010, at 4:39 AM, Plenum100 wrote:

    Reducing defense/military expenditures doesn't seem to merit attention on this board - except for two-three comments.

    The lack represents a poor sense of priorities among readers. Irresponsible. Sad.

  • Report this Comment On April 22, 2010, at 11:58 AM, niceguy2931 wrote:

    Come on people. Do you not realize we have been doing it all wrong for the last 40 years. Remember when the Swiss Fr was 4 per $USD. I do. Remember when we produced and ran our own economy and were not running this world ponzi scheme of you pay our bills we buy your product ?- so that our biggies can have all the leverage. I for one am tired of buying undies from Pakistan. Lets cut out the middleman. Cut the consumers role to 50% for now. Tax the Corporation, the Church and lower the military $100K bonuses. If you take care of this three headed dragon youll be OK even with the benefits. And PS get rid of Cato the Heritage Foundation and the US Chamber of Commerce. They work againt this country.

  • Report this Comment On April 23, 2010, at 9:06 AM, steltek wrote:

    @Pim,

    Disproportionate tax burdens are unethical. They only exist because in a democracy, where the majority rules, and when given the option to put the burden on someone else, people will do so. Fixing the unethical and disproportionate system of rewards in the marketplace by imposing a disproportionate and unethical system of taxation isn't a solution. I.e. two wrongs don't make a right. If the system of labor and pay were ethical to begin with, the average person could afford life's necessities (and luxuries) and would not need charity (public or otherwise) to make ends meet.

    Attempting to fix this problem via government charity is a huge burden on an economy. An economy is like a circulatory system. Money must keep changing hands for it to remain healthy. Money that goes to the government 1) sits idle far longer than in private circulation, 2) a significant portion of it gets used for politician junketing and other waste, and 3) causes the government to require more resources just to disburse this money, leading to delays and further waste of money. The private sector does not have these problems.

    Ethical wealth distribution will never happen through government. However, we still have the problem of unethical wealth distribution in the private sector. American quality of life is in decline because the demand for domestic labor is in decline. The only way we will see an improvement in wealth distribution in this country is through significant investment in new domestic business. Vote with your dollars. Buy goods from ethical businesses. Vote for politicians who understand protecting both American business and American laborers without flagrant protectionism. America needs to become globally competitive and it can't do that without 1) people buying domestic products and 2) investment in new businesses.

    Domestic VC has slowed to a crawl, yet it is flourishing elsewhere. That is the real indicator of the future. We have to push our politicians to invest in new domestic businesses. Many of them will fail. That is the way of the business world. But some of them won't, because they will find ways to be competitive. Our economic future depends on investing in enough businesses to have a significant number of them globally competitive in the near future. We must invest in this innovation or it will not happen.

    Pushing the government to hand out money will only put more of a tax burden on the remaining businesses we have. More tax burdens means more insolvency, which means lower tax base, which means less money with which to pay benefits. This means they have to raise taxes, putting even more out of business, lowering the tax base yet again, and having less money with which to pay benefits. We want to get out of that cycle, not deeper into it.

  • Report this Comment On April 23, 2010, at 10:07 AM, Keal7 wrote:

    Thanks for the above chart that I have had to try to describe so many times on blogs. There is no sudden astronomical spending increase in 2009 that is suddenly more than all Presidents combine that is a popular rhetoric on extreme right wing sites. There was of course the 500b 2008 bailouts (nearly half returned) and the 750b 2009 stimulus (nearly half spent) to short cut the recession or avoid a depression and the 2003-2011 $1trillion Iraq war whose original contexts all did not pan out but those combined show up as blips beside the real spending problems we have - entitlements and that is really Medicare and Medicaid. If anything, the spending that is non entitlement is actually dipping when indexed for inflation.

    We really should start focusing on THE PROBLEM - entitlements. That was we can at least hope to get solutions instead of playing political musical chairs that only encourage career enhancing or preserving moves by the policy makers (most of which means they either do nothing or impede each other).

  • Report this Comment On April 23, 2010, at 10:29 AM, kdeken wrote:

    Love the quote you have applied to our inability to deal with cuts in entitlement spending . . . "We've become a morbidly obese country on a mission to outlaw diet and exercise." Well said !

  • Report this Comment On April 23, 2010, at 10:49 AM, Keal7 wrote:

    Thanks for your comments:

    On April 17, 2010, at 4:14 PM, TMFHousel wrote:

    The somehow newly discovered, angry, extremist, one-sided essentially misinformed and irrational portion of our population losing their heads could at this point also negatively draw back from efforts to collectively dig out of the ditch we got in at the end of 2008 (as everyone can at least definitely agree was a ditch - a combined crash of nearly everything - financial, housing, employment, and energy, military super-extention all at the same time).

  • Report this Comment On April 23, 2010, at 11:54 AM, TMFHousel wrote:

    keal7,

    I did not write that. Please don't attribute quotes to me that were written by someone else.

  • Report this Comment On April 23, 2010, at 2:26 PM, STORMSTOCKER wrote:

    ENTITLEMENT 101: Ya can't pay out anything, if everythings gone.

    ENTITLEMENT 102: If you don't have it coming in, someone, or everyone, has to take a cut in benefits,entitlements,-to match it.

    ENTITILEMENT 103: If the goose that laid the golden egg (US Taxpayer) is dead, those golden entitlement eggs stop coming. You can't farm or harvest, what you never sowed. growed,or planted. You can't spend it, if you don't have it.

    ENTITLEMENT 100: (Our government,-people we dummys elected,- flunked all 3 classes)

  • Report this Comment On April 23, 2010, at 4:03 PM, bugsnw wrote:

    Don't pay it back.

    There, I just solved the debt problem.

    - Dennis Miller

  • Report this Comment On April 23, 2010, at 10:15 PM, FunHater wrote:

    If anyone is counting on living off social security, they are nuts! I'm 45 and assume that if I get a social security benefit, it won't be worth much. What I would like to see is some sort of privitisation of the system. Imagine if each person who paid into the system actually had the amount of money they paid plus the employer portion in an investment, anything - stocks, bonds, mutual funds, heck in a savings account - they would be much better off then anyone will be from SS. That's the main problem - the money is not there!

  • Report this Comment On April 23, 2010, at 10:39 PM, JohnLillison wrote:

    I read some of the comments on here and think to myself, Have these people ever read a book? Taken an econ class that wasn't taught by a socialist? That is the real problem in America, too many uneducated people. Start with something basic and entertaining and work to same deeper stuff. Look up Mises, Bohem-Bowerk, Hayek, Smith, Reisman and those inflenced by them. Read also the writtings of the Founders of America. Understand why America is where it is and where it came from. Then we all need to vote out the politicians who think the government is anything more than a necesary evil.

  • Report this Comment On June 30, 2010, at 5:21 PM, StateCollegeGuy wrote:

    It's absolutely amazing how liberal and socialist-minded most (if not all) Motley Fool writers are.

    Raising taxes will help reduce the national debt ?! Pathetic.

    That's one of the reasons why I subscribe to the newsletter (primarily because some, not all, have some really good picks) but to get some sane economic commentary I go to mises.org. ..... Where I don't have to read crap like in the current article about how inflation is inevitable.

  • Report this Comment On September 09, 2010, at 2:43 AM, Jehnavi wrote:

    So play book goes something like this: If you miss your oil, someone else to steal. Secondly, price gouging to the shortage of engineering through the manipulation and the rest of the world to swallow the oil as you flew at grossly inflated prices, and then use the booty you plundered to appease your creditors and maintain frustrated.

    http://www.tipsforinvesting.net/american-debt-as-an-investme...

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