Should The GOP Be Talking About A Surplus Budget To Retire The Debt?

[anaconda]

Shouldn't the talk be about a planned surplus until the debt is retired? Not just a "balanced" budget?

[sevin]

You mean actually lower the national debt? That's crazy talk.

[anaconda]

You mean actually lower the national debt? That's crazy talk.

Could work as a way to spin this to the American people. Fill them with a sense of obligation to not pass on the debt to "the children." A great way to attack tax and spend politicians.

[Zippyjuan]

They had a chance to do that when Bush took office but said no- instead it got doubled. They would have to try to balance the budget before they can even think about paying down anything on the debt and I don't see them even doing that. "Spend without paying for it" or "spend and cut taxes" is not much better than "tax and spend". The former adds more to the debt than the latter but both grow government.

[cswake]

Ideally, yes. Realistically, if we wanted to pay it off, we'd have to generate $500 billion surpluses every year for the next 30 years to do it. That amounts to an immediate budget cut of $2 TRILLION.... plus entitlement cuts down the road so that costs don't go up.

This is why Paul says the debt will never be paid back, neither the politicians nor the public would go for it.

[Jordan]

Balance it, reduce regulations/tax code and we'll easily grow our way into a surplus.

[anaconda]

Balance it, reduce regulations/tax code and we'll easily grow our way into a surplus.

Good point. I forgot about expanding growth making the debt a potentially smaller percentage of GDP.

[heavenlyboy34]

Shouldn't the talk be about a planned surplus until the debt is retired? Not just a "balanced" budget?

A "surplus" means the government has more money than it needs and should give it back. ;)

[Zippyjuan]

A "surplus" means the government has more money than it needs and should give it back. ;)

Exactly what George W. Bush said when asked if money should be used to pay down bills the US had already run up in the past and has to borrow to pay interest on. Then he went on to add even more to the pile of bills (debit). By the time he left office, the debt had doubled. If that money had instead gone to reducing the debt it would have meant a much smaller one today and less of a threat to the economy.

[ILUVRP]

I heard a while back,about a 1 mil tax on stock buying , only on buying , that would be $1 per $1000 worth of stock. It would pay off the national debt pertty fast.

[erowe1]

I don't think so. I think they should be talking about declaring the federal government bankrupt without any pretense of anyone ever paying down the debt.

[anaconda]

A "surplus" means the government has more money than it needs and should give it back. ;)


Shouldn't they retire Treasury Bonds as the method of "giving it back?"

[Jace]

..

[jclay2]

Balance it, reduce regulations/tax code and we'll easily grow our way into a surplus.

Its going to be hard to keep the budget balanced when we have accrual liabilities to the tune of 50-100 trillion plus coming due don't you think? I agree with you , it just needs to be structural and to the bone. We got into this mess by borrowing on our futures and now is the time to pay for it. To bad the elites and the economic morons in academia will push for inflation to pay for these programs and government in general. The end game is currency collapse, pure and simple.

[jclay2]

It wasn't too long ago that the Fed feared that budget surpluses were going to retire the debt and severely reduce the Fed's power.

(I posted this a while back. It's all from former Fed Chairman Alan Greenspan's book, "The Age of Turbulence.")

Greenspan wrote that in early 2001, the Federal Reserve Board was disoriented and feared it was about to lose its grip on the economy. He discussed in detail a serious predicament for the Fed -- budget surpluses.

In January 2001 in the weeks before George W. Bush’s inauguration, the dotcom bubble had already burst and the economy was in recession. The Federal Open Market Committee was discussing lowering interest rates. On January 3, the FOMC cut the Fed’s fund rate by half a percent to 6 percent. Greenspan said at the time he thought it would be the first of many rapid cuts as the economic picture looked to be deteriorating. (They cut it by another half a percentage point before January was over, and the same again in March, April, May and June, bringing it down to 3.75 percent. These cuts led to the housing bubble -- but Greenspan didn't take credit for that.)

However, at the same time, the Congressional Budget Office was predicting huge budget surpluses and the Fed was worried about this prospect. The issue looming large for the FOMC was the disappearance of the national debt. The CBO was predicting surpluses as far as the eye could see. Even allowing for the recession that was setting in, the CBO was getting ready to raise its projection of the surplus to a stunning $5.6 trillion over 10 years.

The consensus of economists and statisticians at the time was that the surpluses would continue to build because of a surge in productivity growth caused by technology.

The federal debt in January 2001 stood at $3.4 trillion. More than $2.5 trillion was considered reducible, or readily paid off. Irreducible debt is considered savings bonds and other securities that investors would decline to sell.

The projected surpluses were so large that debt repayment was expected to be completed within a few years, with the surpluses continuing on after that. The CBO statisticians envisioned the surpluses at $281 billion in 2001, $313 billion in 2002, $359 billion in 2003, and so on. The CBO expected the reducible debt to be fully paid off by 2006. Any surpluses thereafter would have to be held in some form of non-federal assets. In 2006, the surplus would break $500 billion. Thereafter, a surplus of more than a half trillion dollars would flow into Uncle Sam’s coffers each year.

The money would be piling up year after year. Greenspan asked what would the treasury do with that much money? Where would it invest? Our government would become the world’s biggest investor, putting it into the stock market, real estate, corporate bonds, etc., which he found "truly scary."

"As the evidence for this ongoing surplus mounted, I felt an odd sense of loss," he said in the book. Greenspan explained that he had a theory that human nature, being what it is, would always lead governments into budget deficits. "Had human nature changed?" he asked.


Greenspan said he came to the conclusion that chronic surpluses were almost as destabilizing as chronic deficits. He came up with a plan to phase out the surpluses through tax cuts and by funding Social Security to "work down the surpluses before they became dangerous," with triggers to stop the tax cuts if deficits returned.

Greenspan came out in support of Bush's tax cuts, to the dismay of the Democrats. On June 7, 2001, Bush signed a $1.35 trillion tax cut without the triggers Greenspan wanted. The surpluses were still going strong at that time.

But within weeks, it became apparent that the CBO forecasts were wrong. Suddenly, federal revenues plunged. The flow of personal income tax payments to the treasury were coming up short billons of dollars. The surplus was effectively wiped out overnight, and starting that July red ink was back to stay.

Revenue shortfall was a reflection of the stock market's broad decline, Greenspan wrote. Taxes on capital gains and the exercise of stock options had plunged. It was the tech boom that had generated the surpluses, not productivity, and the bear market had taken them away.

In January 2001, the CBO had estimated total receipts at $2.236 trillion for 2002. By August of 2002, the figure had shrunk to $1.86 trillion, a $376 billion downward revision in 18 months. Greenspan says $75 billion of the shortfall was attributable to the Bush tax cut, with $125 billion from weakening economic activity, while $176 billion was unexplained.

Of course, only a few months after the tax cuts were signed, came 9/11, followed by two expensive wars and massive budget deficits as far as the eye could see. The chronic surpluses faded into memory and so too the Fed's fears of managing a complex portfolio and having a reduced influence over our lives. Now we have Obama and debt is exploding even faster than under Bush. The Obama administration has granted broad new powers to the Fed that make it more powerful than ever.

The Fed feared that retiring the debt would severely weaken its power, but Clinton's budget surpluses were all a brief mirage created by the tech bubble. And the prospect of the Fed ever having to face chronic surpluses again seems less and less likely, nearly impossible.

AWESOME POST! Of course these nwo minions would be running with their heads cut off, pondering the horrible position of government surpluses.

[Jordan]

Its going to be hard to keep the budget balanced when we have accrual liabilities to the tune of 50-100 trillion plus coming due don't you think? I agree with you , it just needs to be structural and to the bone. We got into this mess by borrowing on our futures and now is the time to pay for it. To bad the elites and the economic morons in academia will push for inflation to pay for these programs and government in general. The end game is currency collapse, pure and simple.

Meh, from a here and now perspective, QE helped out a lot.

The banking system is far more liquid, and should the dollars ever escape bank reserves we'll see the money supply to debt ratio rise, which is good.

But yes, we need some massive structural changes. I fully believe that with a simple flat tax on corporations and people, we'd get the growth we needed to provide a surplus. Reduction in regulations would be great too. I did some digging last night and found it took a $10,000 bond just to put a business sign up in my city. :eek: Who knows how many business ideas die right there.

Supply-side fo life. :cool: