From: hallam@zeus02.desy.de (Phill Hallam-Baker)
Subject: Re: national debt? why?
Reply-To: Hallam@zeus02.desy.de
Organization: Deutsches Elektronen Synchrotron, Experiment ZEUS bei HERA
Distribution: talk
Date: Wed, 13 Jan 1993 00:38:27 GMT

In article <visser.726710302@convex.convex.com>, visser@convex.com (Lance
Visser) writes:

|>In <1993Jan10.1778.29517@channel1> "john lovett" <john.lovett@channel1.com>
|>writes:
|>
|>+>This suggestion may be a little simplistic, but perhaps someone could
|>+>flesh it out.
|>
|>+>We have a large national debt, but since we owe it to ourselves, why not
|>+>declare that we forgive ourselves the debt, and forget about it?
|>
|>	The biggest part of the debt that the govenment owes itself is
|>money borrowed from the social security fund.  Now if we made social 
|>security self-sustaining from its tax intake on a yearly basis, then
|>I suppose you could consider that money "forgiven".

Since most social security systems tend to work this way that is not a huge
problem. The real difficulty is not the debt but cash flow. What realy matters
is that the actual bank balance never drops below zero. Beyond that you can
recon the size of the debt in a wide variety of ways by considering various sums
of money "capital" or "reserves". This is one of the methods used to squeeze
through the balanced budget legislation.


|>	The biggest problem with "forgiving" debt is that a country that
|>does it is going to find it impossible to sell its securities in future
|>to the market.  It also has the potential to create economic choas in
|>that forgiveness removes lots of wealth from the economy or at the
|>very least redistributes it.

If the USA reneged on its debt there would be a recession so bad the thirties
would look like a boom.

|>	The way giant debts such as ours are typically forgiven is via 
|>inflation and/or devaluation of the currency.  This method is preferable
|>in that it works as an invisible side-effect, rather than an explicit 
|>action like forgiveness of the debt. 
|>
|>	I have a real bad feeling, based on the pronouncements of the
|>Clinton people that they  think we can inflate out of the debt.
|>Clinton weasled out of his pledge to cut the deficit in half this past
|>week.

Yep thats what I;ve been hearing from a number of sources. Its the only way out
so far as I can see.


|>	The only way to solve the deficit is to:
|>
|>	1. Make social security and medicare self-sufficient from the
|>	special taxes raised for the programs.  Quit stealing money
|>	from social security taxes to make the deficit look smaller.
|>
|>	2. Freeze federal spending in most programs, cut other programs
|>	by vast amounts.

Start by axing the futile military fun and games. 


|>	3. Raise the income tax in the lower brackets until the deficit
|>	is closed.

No, the people who benefited under Regan should be the ones who pay for the
party now. They need to wake up with a hangover so bad that they will never try
another Reganite mugging of America.

|>	4. Bring in independent people to evaluate and rework the entire
|>	system by which the government does budgets and calculate 
|>	deficits.

Forget the accounting get the new thinking on the methods by which taxes are
raised and methods of preventing the dodgers. Close the loopholes that Regan
deliberately left open when he cut taxes for the super rich.

|>	5. DO NOT set up a national health insurance program that we cannot
|>	possibly pay for under current circumstances.

The US cannot afford not to have a national health care scheme. The private
system has failed so expensively that is just not sustainable.

|>	Clinton and company talk about "growth" solving the deficit and how
|>	cutting "unemployment" is more important than cutting spending in 
|>	reducing the deficit.  I believe that means inflationary policies,
|>	more taxes, and huge amounts of new spending.  At best, it means
|>	probably doing nothing to cut spending.

Of course there will be inflation. Regan and Bush saw to that. Low inflation can
only be achieved by a successful ecconomy. Until you have that its going to keep
on going up. You can hold prices down in the short term if you deflate but that
fails in the long term because you have to continualy increase interest rates.
It also relies on the rest of the world not having the same idea at the same
time.

--

Phill Hallam-Baker
Xref: sparky talk.politics.misc:66826 misc.legal:22250