U.S. National Debt Hits $17 Trillion: How Did We Get Here?

Discussion in 'Business & Economics' started by cosmictraveler, Aug 29, 2016.

  1. iceaura Valued Senior Member

    I provided the link. It tells you exactly how much - in the hundreds of billions - remains outstanding from the TARP loans.

    For many years, extra money from the paychecks of the working poor has been collected by the Social Security program and accumulated in a special fund. This fund has stashed that surplus in US Government bonds of a kind - bonded USA government debt - against the time when the Baby Boomers retired and these bonds could be cashed in and used to cover the extra demands they would make. That time is now. The bonds are paid out of general revenues - income taxes and the like. If they are not paid, they are defaulted upon - that's the US government defaulting on bonded debt.

    All that money the working poor suckers paid in extra, for all those years, turns out to have been in effect a retroactive income tax hike of substantial size.

    To repeat:
    In this case, the US government would refuse to allocate money from its general tax revenues to repay the money it borrowed from (sold bonds to) the Social Security trust fund, money which had been supplied in the first place by a different tax stream dedicated to that program (the "payroll" deduction).

    The Social Security administration would then be forced to reduce or suspend its benefit payouts, or make other adjustments, because the US government had defaulted on those bonds now held by the Social Security administration.

    It's the Government - general revenue, income tax and all that - in bonded debt to the Social Security Trust Fund - special purpose payroll deduction, not funded out of general revenue.
    I never said the US government and country hadn't benefited - in some comparatively small ways, of course, considering the alternative uses of those hundreds of billions of dollars and the downside of consolidating the banking industry still further - from TARP. The question was whether the bailout monies had been fully repaid, and the answer is no - there are hundreds of billions still out on ostensible loan.
    I agree that US tax rates on rich people are very low. But I lack your confidence in the ability of the US to increase them substantially - enough to pay for the current debt of 17 trillion. That is not an abstract economic questions - of course it would be economically possible without great harm, and probably it would be of serious and significant benefit. But that doesn't mean we can actually do it.

    And if we can't, that debt pile is a serious problem.

    One thing it can crash is Social Security, for example. We have to raise taxes on rich people's incomes to cover the bonded debt to the Social Security Trust, money already paid into that Trust by wage-earners to cover the Baby Boom retirement crunch and loaned to the US Government general revenue funds at interest and for a limited time. Bonded debt.
    Last edited: Oct 26, 2016
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  3. joepistole Deacon Blues Valued Senior Member

    Yeah, you provided a link. But as has been previously and repeatedly pointed out to you, your reference doesn't support your assertion. You need to be honest Iceaura. I know it's difficult for you.

    As has been repeatedly pointed out to you that money was tax money; it wasn't a savings account; and it wasn't just from the poor. It was from the paychecks of American wage earners, and it wasn't accumulated in a special fund as you well know. The money was immediately transferred from one government fund to another and used to subsidize tax cuts for America's richest residents. When the government transfers money from one account to another it issues a "bond" to itself to note the internal transfer of funds.

    As has been repeatedly pointed out to you, debt has a very specific meaning, and you cannot be indebted to yourself. The government isn't indebted to itself and it cannot default on itself. Unfortunately for you words have meanings.

    They paid payroll taxes in excess of what was needed to support Social Security programs. That's not extra money. Yeah, it was an "income tax" hike, a huge one. But it wasn't retroactive. It was a large hike on the income of working wage earners that was used to subsidize tax cuts for America's wealthiest residents. There maybe hope for you.

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    To Repeat:

    The Social Security Program is a creation of Congress. It does whatever Congress instructs it to do. The benefits it provides Americans is solely determined by Congress. If Congress so wished the entire program could be dismantled at anytime and for any reason. Program benefits are whatever Congress says they are. The Social Security program isn't a forced savings account. It's a pay as you go social program.

    You just get hung up on the word government uses to transfer money from one account to another account.

    Good. but that was never the issue, and you implied otherwise. The issue is contrary to your assertion the government has taken in more than it invested.

    Contrary to your previous assertions, the US government clearly has the ability to increase taxes and increase them substantially. Whether it has the political ability to do so remains to be seen. It depends on who controls Congress. If Republicans control Congress they may not have the political ability to raise taxes. If Democrats control Congress they will. And as previously pointed out to you by any measure the US debt isn't anywhere close to 17 trillion dollars. When you eliminate the debt the US owes to itself, i.e. internal transfers), the real US debt is about 11 trillion dollars.

    And as for the rest, of your post it doesn't make sense. You can raise taxes without causing economic harm. As has been previously pointed out to you taxes have been much higher in the past without adversely affecting the economy. The fastest periods of American economic growth occurred when American tax rates were at an apex.

    Why? The "debt pile" is perfectly manageable. If we become fiscally incompetent as Republicans have been, then it becomes a fiscal crisis. But that will always be the case regardless of the debt or the time. Whenever you are fiscally incompetent there will be adverse consequences.

    You are back to your inability to understand the issues. It doesn't matter what the federal government calls it internal cash transfers. It could call them moonshine. It doesn't matter what the US government calls its internal cash transfers. Those transfers are not debt. That's why those transfers are reported separately by the US Treasury. That's why the Congressional Budget Office doesn't recognize those internal transfers as debt. That's why investors don't recognize those internal transfers as debt. That's why no private enterprise recognizes internal transfers as debt.
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  5. iceaura Valued Senior Member

    I asserted that the TARP monies had yet to be fully repaid. My link handed you exactly how many hundreds of billions remained outstanding. It's right there, an ordinary decimal number easily read by you.
    The extra money, the surplus that accrued due to the extra percentage of payroll deducted to cover the Baby Boom retirement, was in fact accumulated in a special fund - two of them, technically: https://www.ssa.gov/news/press/factsheets/WhatAreTheTrust.htm
    That was Reagan's doing - to levy higher payroll tax rates, and stash the surplus in US Treasury bonds so it could be redeemed when the Baby Boomers who were paying retired. That time fast approaches. The problem is, of course, that Treasury bonds are redeemed from general tax revenues - income taxes and so forth. So these have to be raised, or the Treasury bonds that cannot be redeemed will be defaulted upon. And if they are raised on the class that already paid in the money - the working poor, the middle class - rather than the wealthy who profited from the bonds and the tax cuts they financed, that would be manifestly unjust as well as destructive.
    Exactly. As I pointed out, if the US government cannot in fact raise taxes on rich people, this debt pile can become a serious problem in a very short time - whenever the Chinese want it to be, essentially. It can crash Social Security, for example, as we see.
    Being unable to raise the tax rates on rich people after cutting them is fiscal incapability - a form of incompetence, if you will. If we are incapable in that way, the debt will be very difficult to "manage".
    We're not talking about an internal cash transfer. We're talking about bonds, that pay interest, are redeemable, all that stuff. Debt.

    Treasury bonds are debt. By definition. They are redeemed via general tax revenues, not Social Security payroll taxes. The bonds currently held by Social Security are a large obligation on the general tax revenues, which will require tax rate hikes to meet. If unmet, the bonds will be in default.
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  7. joepistole Deacon Blues Valued Senior Member

    You are not being honest again. So you don't remember writing: "Most of the borrowing the US has done has been to pay for wars, Wall Street bailouts, and the 50% extra the US pays for medical care." http://www.sciforums.com/threads/u-...ow-did-we-get-here.157729/page-3#post-3410961

    Per the US Treasury:

    "Treasury established several programs under TARP to help stabilize the U.S. financial system, restart economic growth, and prevent avoidable foreclosures.

    Although Congress initially authorized $700 billion for TARP in October 2008, that authority was reduced to $475 billion by the Dodd-Frank Wall Street Reform and Consumer
    Protection Act (Dodd-Frank Act).Of that, the following amounts were committed through TARP's five program areas:
    • Approximately $250 billion was committed in programs to stabilize banking institutions ($5 billion of which was ultimately cancelled).
    • Approximately $27 billion was committed through programs to restart credit markets.
    • Approximately $82 billion was committed to stabilize the U.S. auto industry ($2 billion of which was ultimately cancelled).
    • Approximately $70 billion was committed to stabilize American International Group (AIG) ($2 billion of which was ultimately cancelled).
    • Approximately $46 billion was committed for programs to help struggling families avoid foreclosure, with these expenditures being made over time.
    The authority to make new financial commitments under TARP ended on
    October 3, 2010. As of December 31, 2015, cumulative collections under TARP, together with Treasury's additional proceeds from the sale of non-TARP shares of AIG, exceed total disbursements by more than $12 billion. Treasury is now winding down its remaining TARP investments and is also continuing to implement TARP initiatives to help struggling homeowners avoid foreclosure." https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/Pages/default.aspx#

    Regardless of what happens, the fact is Wall Street Bailout has not contributed to the debt as you have stated.

    Isn't that what I have repeatedly told you over the years? But the money wasn't accrued, it was spent. It was used to fund tax cuts for America's wealthiest residents.

    Well, yes sort of, as you have been repeatedly told the surplus wasn't stashed in US Treasury Bonds. It was transferred to the general fund and used to fund tax cuts for America's wealthiest. An internal transfer isn't debt, it's just an internal transfer. And that transfer was recorded with a "general account series security". It didn't create a Treasury and sell it at auction as is the custom with Treauries.

    It was a fraud perpetrated on the wage earner that began with the Reagan presidency. And it would be manifestly unjust and destructive to raise the taxes on wage earners to pay for expected program costs with one exception. They could remove the wage cap and tax all wage income. For the past 30 plus years only lower income wage earners paid payroll taxes on all their earned income.

    Not exactly as you pointed out, the government will have to either raise taxes or cut benefits. That's a discussion currently underway. Republicans want to cut benefits and Democrats want to raise taxes. It will probably be some combination of both. But the fact is, it's not a doomsday event. The debt isn't unmanageable. There is never a good reason for fiscal recklessness.

    And the Chineses have nothing to do with this....nothing. The only way the Social Security program crashes is if Congress causes it to crash.

    Well, you are assuming facts not in evidence. Obama has already raised taxes on rich people. During the Obama administration Obama with a Republican congress was able to raise taxes on America's richest. He has increased both the payroll tax burden and the income tax burden on some of America's richest residents. So clearly we are capable of raising taxes. We do have the political will and ability.

    Ok, you are back to being unable to wrap your head around intragovernmental transfers. Internal government transfers are not debts and are not treated as debt by professionals like the Congressional Budget Office, the Office of Management and Budget, economists and other professionals whether you can recognize it or not. That's why the US Treasury reports intragovernmental "debt" separately.

    Yes, Treasury Bonds are debt obligations of the US government. But that's not what we are talking about here. We are talking about a special type of security which is only issued to note the intragovernment transfer of money. We aren't talking about US Treasuries that are created and sold to the public as auction. There is a huge difference whether you can recognized it or not.
  8. iceaura Valued Senior Member

    I already regretted including the comparatively smaller contribution of the bailout with the much larger ones in my list. That was in fact slippery, and apt to mislead, and in particular to confuse the Joes of this world.

    Notice, for example, that your numbers included the 46 billion for helping families avoid foreclosure as if it had been disbursed properly, and helped avoid foreclosures, and so forth. The net effects of that in increasing the debt would be far too complicated to get through in a discussion with somebody who doesn't think the T-bonds currently held by the Social Security Trust are bona fide debt.
    The taxes on the rich need to be raised to approximately the level at which they were expected to be when the Social Security surplus levy was imposed, in the 1980s. Anything else incurs further damage.

    I doubt any possibility of that. But maybe you are correct, and the US government can raise taxes as much as it needs to, as quickly as it needs to, on the rich and non-wage earning population, in its current political constitution. In that case the Treasury bonds held by Social Security can be redeemed on schedule.
    An "intragovernmental transfer" does not create a new debt obligation that must now be met from general tax revenue. The sale of Treasury bonds to the Social Security administration does.

    You can "transfer" 'til the cows come home without creating a new demand on the general revenue stream.
    They are Treasury bonds. They are called "Treasury bonds" by all those links you have been provided, including official government sources. They pay interest . They can be redeemed, retired,

    ->and defaulted <-.

    Bonds were sold to the the Social Security administration, instead of simple intra-agency cash transfers, because Social Security is not funded from general tax revenues.
    Yes. In theory, they could do that. I have posted that among several other suggestions, elsewhere, demonstrating that Social Security is perfectly sustainable without harm to the US economy.

    That would be a good idea going forward, despite its locking in the fraud without other initiatives (- the cost or investment of the earnings on capital made possible by the Reagan two-step would then have been transferred to wage income, something the very wealthy who profited by the whole deal can manipulate and avoid, and the "retroactive income tax" made official and irrevocable)

    The point is that the US government apparently cannot actually do even that, given the nature of the incoming administration and sitting Congress, in the foreseeable future.

    So - - - - -
    Last edited: Oct 28, 2016
  9. joepistole Deacon Blues Valued Senior Member

    LOL….do you now, do you regret being wrong? Then why are you obfuscating? This really isn’t that difficult. The facts aren’t slippery here. You are, as is your custom.

    The unpleasant fact for you is contrary to your assertion the Wall Street Bailout didn’t contribute even a single penny to the national debt. The government has been paid back more than it gave out. It really is that simple. This isn’t at all difficult.

    As is the norm with you, your reference doesn’t say what you say it says. It directly contradicts you. That’s probably why you have stopped referencing it.

    The unfortunate fact for you is the government has been paid back much more than it invested. That’s called a profit. The fact that more money will eventually be paid to the government doesn’t change the fact the government has received more than it gave out, i.e. invested. It doesn’t change the fact the Wall Street Bailout hasn’t contributed even a single penny to the national debt.

    Well, not surprisingly you are mixing two different things. First, for the purpose of this discussion, it doesn’t matter what the money was used for. What matters is how much the government gave out and how much it received back in return. And the government has clearly been paid back more than it paid out. It really isn’t that complicated.

    And, even though you have difficulty understand this, you cannot be indebted to yourself. Just as you cannot be indebted to yourself, the government cannot be indebted to itself. Debt requires two separate entities. Using excess taxes from one government program to fund another government program isn’t debt. It’s just transferring fund. Words matter. Their definitions matter.

    I’ve already instructed you on the scam perpetrated on lower income wage earners for the last 30 years. But again, that’s not relevant here. Your assertion that the Wall Street Bailout is a good portion of the US national debt is the issue. And if you were honest, you would admit your error instead of obfuscating.

    You can doubt what you will, but the fact is Obama in conjunction with a Republican Congress has raised taxes on America’s wealthiest residents. Effective capital gains tax for the uber wealthy has gone from 15% to 23.5% and the top income tax rate has gone from 35% to 39.6%. It can be done whether you doubt or not. I has been done and done rather recently.

    Contradict yourself much….? Yeah, you do. As has been endlessly explained to you, the “bonds” government uses to denote intragovernmental transfers are special issue securities. They are not Treasuries.

    For your edification below is a link explaining all the securities issued by the US Treasury. You will notice there is no mention of Treasuries issued to the Social Security Trust Funds, because they don’t exist. You keep conflating two very different things.


    No they aren’t. That’s why you won’t find them in any listing of debt issued by the US Treasury. In the link I just gave you, you will see how the US Treasury defines bonds and it isn’t what you say it is. There is no mention of Social Security – none.

    No they weren’t sold. In order to sell something you need a buyer and a seller and you don’t have one. When money is taken from the Social Security Trust Fund, the US Treasury issues a special security to note the transfer. In essence the government writes an IOU to itself, noting it has taken money from one fund to another.

    I don’t know what you are trying to say. But the Social Security programs are very manageable. Taxes on the uber wealth will need to rise. But that’s not a bad thing. It’s a good thing for a host of reasons. It keeps the economy healthy and competitive.
  10. iceaura Valued Senior Member

    I did - twice now. I should not have included mere hundreds of billions in outstanding bailout loans (and the bailout configuration in its many ramifications itself) as a major contributor to the US debt, and I regret doing so.
    You instructed me on a matter I have been posting here for several years - including in posts addressed to you, years ago? And that's the thanks I get - -
    If they had mentioned Social Security, they would have talked about the US government bonds held by the SS Trust Funds. In my links, they (the US Federal government official sites) do - explicitly. That's why I posted them. Here's yet another link, not official government but reasonably reliable:
    Last edited: Oct 29, 2016

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