Debt trap

In case you missed it, Congress last night raised the federal debt limit by
$800 billion, to $8.18 trillion.

The Washington Post reports that the

 

Weren't we actually repaying debt a five or six years ago? I know we didn't repay much, but I thought the total went down instead of up for a brief time.

 

$800 billion to $8.18 trillion

 

Nothing to see here, everything is fine. We can just increase our credit limit when we run out of money. No need to curtail spending on that pesky little military action.

 

All the solutions to all the complicated problems come down to one question; can you pay for them? I, for one, thought that cutting taxes to stimulate the economy was wrong. I understand the theory behind tax cuts, but I believe that forcing the government to pay its way with the money it has is a great way to stay out of trouble.

 

At what point does the US file for bankruptcy protection and do a little reorganization?

 

As a matter of fact, the Budget Office has said that 60% of the deficit is due to the tax cuts. This is important, because the current administration has been blaming it, and the lackluster economy on the war in Iraq.

The theory behind all of this was that the tax cuts were supposed to stimulate the economy and therefore increase income. The increased income would result in greater total tax revenue (even at the same tax rates) and solve the problem of the record deficit. Unfortunately, the tax cuts didn't stimulate the economy, and now the debt has grown so rapidly that it is unlikely that even an economy growing at a reasonable rate could generate enough tax revenue to decrease the deficit substantially. At some point the debt begins to feed itself as a big portion of it becomes interest payments on the debt.

Many people, myself included, felt that the tax cuts were wrong and wouldn't lead to a growth economy. The results have proven this to be correct and that the tax cuts were wrong.

Now that we have this record deficit we are likely to experience rising interest rates and a slowing economy. In addition, because of the rapid increase in the cost of energy and specifically petroleum products, we are likely to experience inflation. It is possible that we may, within a short period of time, enter a period of stagflation. That is a period where the economy is not growing (it is stagnant) but there is inflation.

We have had four years of failed economic policy, it is about time to recognize that.

 

Still considering myself new to the whole grown-up adult responsibility thing, and this being the vintage forum, y'all have the (respected! ) expierience to answer this question better than the 20somethings and teens on the forum: How do you think it should be dealt with, both federally and closer to home? How do you think the economy could be fixed? Will you be doing anything different to protect yourself to prepare for/make it through a period of stagflation, or if you feel prepared already, what preparations?

 

Una

Good questions.

How do you protect yourself? I think right now you keep as much of your investments in cash and cash equivalents (money markets and short term bonds) in the anticipation of increased interest rates.

I think you streamline your spending as much as is possible in anticipation of an economic slowdowns.

I think you get rid of as much debt as you can, and certainly don't incur more. Certainly get rid of all of your credit card debt.

Obtain as much training and skills as is possible in your field so that you become/remain a valuable employee and become a more valuable. Make yourself into someone special.

Learn to save. Earn more, live on less.


How do you fix the economy? I think you start by removing some of the tax cuts that Bush put into place. I think you have to be very careful in doing this. I think you can only tax the upper income earners. If you tax the middle and lower you will have too great an effect on spending which will slow the economy and that is not the desired effect.

I think you roll back section 179 depreciation to $25,000 (or $30,000 if necessary).

I think you roll back the estate tax to pre Bush amounts.

I think you get out of Iraq.

I think you fund alternative energy research and give tax cut to stimulate the use of alternative energy vehicles.

Only some answers, but it's a start.

 

Anybody who questions the President is an unpatriotic terrorist trying to endanger our boys on Iraq.

I support the President and don't you forget it.

Spend as usual. Is scares the s... out of the terrorists.

Cut taxes for the rich. It makes the economy work better because all us middle class guys will work hard to be just that rich.

Over 80% of Americans start out working at McDonalds. Now it looks like over 80% will end up there too.

Spend on arms. Spend on missiles. Spend on pork. Spend on all sorts of stuff, but don't tax gasoline too much.

Support the health industry. Give the pharmaceutical companies lots of breaks. Those 46,000,000 Americans without health insurance are just too dumb to lose their jobs and go on welfare. What's wrong with them?

Don't worry about the budget deficit. Don't worry about the jobs loss. Don't worry about the terrorists. Don't worry about the War Against the Terrorists. Don't worry about North Korea. Don't worry about Iran!

Gosh, it's those gosh darn gays and lesbians threatening to overthrow marriage by by marrying. That is the real threat to this country. Hate the sin. Love the sinner.

I support the President.