Government inefficiency and lack of accountability is the core problem, and both parties are guilty. Blanket protection will endure the continuance of the deficit/debt problem, zero based budgeting would be the best approach but unworkable among 535 self serving individuals.
zero-based budgeting is unworkable because it's inflexible, as is any system that forces a balanced budget in a certain time frame.
Smart household finances do not scale up to the federal level.
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We work together every damn day. --Jon Stewart
Warren Buffett, in a recent cable TV interview, offered one of the best quotes I've heard in all this drama about the debt ceiling:
"I could end the deficit in 5 minutes," he said. "You just pass a law that says anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election."
Smart household finances do not scale up to the federal level.
My apologies, I totally missed your point. While smart household finances may not scale up to the federal level stupid ones do in spades. Being debt free I forget that we are few indeed. Too many Americans are dumb enough to rush to a bargain purchase then tack that 18% or more credit card interest onto the purchase. The following gives an indication of that stupidity which scales up, indeed:
Quote:
The Motley Fool's Credit Center features several more mind-blowing statistics:
Total consumer credit: $1.7 trillion.
Credit card debt carried by the average American: $8,562.
Total finance charges Americans paid in 2001: $50 billion.
Percent of U.S. households deemed credit worthy by the lending industry: 78%.
Number of credit card holders who declared bankruptcy last year: 1.3 million.
What the stats don't tell you is the amount of people having emergencies such as medical expenses, or car repairs with no saftey net, I'm talking about the poor now.... People don't realize that while some well off folks live debt free, others who live from hand to mouth, suppliment their incomes with credit cards, by an industry that blaitently promotes borrowing with pre approved checks and on the spot credit to people who probably shouldn't be granted it so there certainly is a bit of irrisponsibility on the the part of borrowers as well as the lending industry. But the fact remains that some people on low incomes do use credit to fulfil absolute needs like medical or car repairs, a reality that the well off cannot evebn relate to. In terms of our country and the federal government, things like wars go on the credit card. Think about the millions and millions of dollars the country accrued in debt in the creation of the atomic bomb, and the billions if not trillions that the wars of today have cost us as well as the irresponsibility of wallstreet that we safety netted with the bailouts (I had mentioned creditors being irrisponsible earlier) so these things don't just come out of a vacuum.
When we went to buy a refrigerator a couple years ago, we went out, priced them, and figured we'd need to save up for two months to afford what we wanted. 3 weeks later, we found a great deal on the exact model we wanted. We borrowed money from family to make it happen, but we could have purchased it on credit. Even paying interest on it, we would have paid less than we had planned.
During a recession, construction crews are begging for work, tax revenues are down, but maintenance demands on roads, bridges, tunnels and other government-owned infrastructure, don't let up. The government taking advantage of the lower cost during these times may very well make fiscal sense.
In general, I like the warren buffet idea - balance the budget or lose your eligibility for re-election. I think it would primarily be used to play political games, though.
Being debt free is not necessarily the smart position. If you can get a greater return on your money by investing in your business than the cost of borrowing money, it makes good sense to take on the debt. When you can reliably earn 9% on your money and borrowing costs you only 5%, the smart position is to take on the debt. You'll earn a net 4% on every dollar you borrow. (The key issues, though, are the reliability of the 9% earnings and 5% costs. Back in 2005, I witnessed a loan officer teaching a class of real estate agents about the benefits of taking on ARM and interest-only loans and investing the proceeds. He even mentioned an "innovative" product he was offering, a negative-amortization loan where the borrower paid less than the accrued interest so the principal continuously increased.)
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We work together every damn day. --Jon Stewart
Yeah, I had a boss that had his son get a student loan and he bought a CD with the money. That's what I mean about the government having little or no accountability. The bigger the government grows the wider the loopholes and there are people poised to take advantage of them as with the stimulus.
There are instances where debt is justified but not credit card debt or a nation with a debt that will be $20 trillion or so by 2020. So far only spending cuts have been suggested with no debt reduction so grow it will. What will those who follow us do with a debt that we couldn't resolve, what a legacy?
Yeah, I had a boss that had his son get a student loan and he bought a CD with the money. That's what I mean about the government having little or no accountability. The bigger the government grows the wider the loopholes and there are people poised to take advantage of them as with the stimulus.
There are instances where debt is justified but not credit card debt or a nation with a debt that will be $20 trillion or so by 2020. So far only spending cuts have been suggested with no debt reduction so grow it will. What will those who follow us do with a debt that we couldn't resolve, what a legacy?
there isn't enough fat left to cut without getting into the meat, a government costs money to run especially with a military our size, so unless everything is on the table it won't happen there as social security and medicare are financially beneficial programs for a country as whole
we have to raise taxes to actually reduce our debt, we as a nation have run up the credit cards and just charging less to them isn't sufficient, we have to spend some to live so we must pay more in.
we have to raise taxes to actually reduce our debt, we as a nation have run up the credit cards and just charging less to them isn't sufficient, we have to spend some to live so we must pay more in.
The same applies to the credit cards, just raise the incomes of those who are in over the heads.
The same applies to the credit cards, just raise the incomes of those who are in over the heads.
The comparison between household finances and federal budgets simply can't be made accurately. Individuals can't print money; the federal government can. Individuals can't set interest rates; the federal government can. Individuals can't devalue their currency, reducing the real value of their debt; the federal government can.
Hauser's law says that whatever the federal income tax rate, the federal government will collect approximately 19.5% of GDP in tax revenue. The only way to reliably increase revenue is to grow the GDP. Whatever tax rate you set will have no long-term effect on revenue. The primary consideration MUST be what effect that tax rate will have on the economy.
The average American seems to think that reducing taxes will always benefit the economy. They forget that a tax on profits serves as an incentive for a person to reinvest in their business rather than pull their money out of that business as a profit. Multiply this incentive times every person doing business in the US, and the GDP is forced to grow. No, this doesn't hold true for all income tax increases. There is a point where the effect peaks and further increases become counterproductive to GDP growth. All evidence suggests that we are well under that peak rate
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We work together every damn day. --Jon Stewart
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