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Nation's Debt: It's Not Being Rescued, It's Being Moved Around

by: Diane Rogers October 09, 2008    

Diane Lim Rogers

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The image “http://static.seekingalpha.com/uploads/2008/10/9/saupload_debt_clock_ap.jpg” cannot be displayed, because it contains errors.

So, have you heard that the U.S., as a whole, is overextended?   Have you heard that the federal government is “rescuing” the bad debt in the private sector by taking it on as their own, really all our children’s own, hopefully not-quite-as-bad debt? 

We’re just moving the debt around in our economy, not getting rid of any of it.  For proof one need only look up at the National Debt Clock in NYC, which in the past week had to give up its dollar-sign digit for a “1″.  The owner of the sign is working on getting a couple more digits added to the clock.  Why do I worry that folks might interpret that as an increase in the debt/credit limit of the country?

(The debt clock shows gross debt, which as of yesterday was at $10.2 trillion, which includes the debt the federal government “owes” to itself through the Social Security trust fund.) 

The “debt held by the public,” what the government owes to others, both in this country and abroad, is just under $6 trillion, but it’s gone up just as fast as the gross debt in the past week, because all of this new debt we’re issuing to finance the rescue is real debt, really owed to others–not just to the trust fund.  Want to learn more about the different measures of debt?  See this page on Concord’s website.

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This article has 70 comments:

  •  
    Oct 09 02:44 PM
    That's the American mentality for you. Need a computer or appliance? Pay $5k in credit card payments to some rent to own place. Too much credit card debt? Extract the equity from your home, and then keep spending. When your net value dives below zero, and you're working all week just to pay interest on your debts, just elect politicians who will mail you a check from the treasury. Your kids will figure out how to pay it back. You have NEEDS, like an expensive car.

    People around the world are saying: "I thought Americans were the wealthiest, most money-smart people on earth. What happened?"
    Reply
  •  
    Oct 09 03:08 PM
    Hey you knucklehead,

    the problem is with loafers like yourself being given bad loans that you have no intention of paying off. Get off your ass and be productive instead of complaining about it to noone in particular.
    Reply
  •  
    Oct 09 03:11 PM
    Sorry to get political, but isn't it mind-bugling that a single president managed to increase national debt by the same amount as all other presidents before him combined? That is including the times when we had a perceived economic growth?
    Reply
  •  
    Oct 09 03:18 PM
    ^ exactly. People have no right to complain about the government in this crisis. It is the irresponsibility of consumers and companies that have brought us here. What the hell is wrong with people... the government's job is not to bail us out!! get a clue...

    The govt has done more than enough to try and help out... In the end this is just capitalism at its worst. Blame it on greed.
    Reply
  •  
    Oct 09 03:20 PM
    Look at it this way: we have enough money to rebuild Iraq and half the world with it...
    Reply
  •  
    Oct 09 03:24 PM
    Don't expect these robber barons to put their money on the line now that they have it all and the entire world operating on a credit basis. Stop giving the banks money. They are just hording it and refusing to give it out. They are intentionally worsening the problem like they did during the Great Depression.

    The reason that the founding fathers didn't allow for regulation at the federal level is that they knew, as we are seeing now, that this would lead to the government being run by business and that business would eventually strip the population of its wealth. In a free market, every single penny comes from the population. If the population has no money, the market fails.

    The government is now trying to replace the population as the source by giving money directly to business, but business will still have no one to sell their products to no matter how much you give them. The only fix for this is to put money in the hands of the population, but our government no longer thinks in terms of the Citizens.

    Now that Congress has spent, given away, and wasted $11 trillion of the population's money, we have a problem.

    If you want to stop this madness, go here.

    ewebsmith.com/self/Sta...
    Reply
  •  
    Oct 09 03:26 PM
    We elected a moron who bankrupted every business he was ever associated with other than the Texas Rangers, where he traded Sammy Sousa for a song, but made money because his interest was a "gift" from his father's friends and because -- this is a stitch -- got the benefit of a new tax passed by the people of Dallas to buy him a stadium. He likes new taxes that line his wallet. We got what we deserve but lets hope 8 years is enough.
    Reply
  •  
    Oct 09 03:28 PM
    Stop blaming individual presidents. All our politicians are self serving f#ck toys. It's time for the people to take back this country... That will be a long hard task and while we may never have as many material possesions as before, we will gain back our freedoms and re-learn what life is really about.
    Reply
  •  
    Oct 09 03:35 PM
    DUH!!! Of course it's being moved around. It has been years since the US had a positive balance. Thank you for stating the obvious. Next time add a little value to the article - like solutions.
    Reply
  •  
    Oct 09 03:44 PM
    Wow, 1modelcitizen, you sure added value to this discussion.
    Reply
  •  
    Oct 09 03:46 PM
    So with that said... what do we do? What are your suggestions? Our members of Myinvestorsplace.com been asking this question for quite some time... what do you suggest.. .we all know the facts... but what can the layman do???
    Reply
  •  
    Oct 09 03:50 PM
    the babyboomers created this problem. then pull their retirement because it is too risky to invest. then blame everyone else. how did the greatest generation birth the worst, self serving generation in the history of this nation? thanks for screwing my generation. it is all about confidence by the way. my parents are getting the worst nursing home i can find when it is time.
    Reply
  •  
    Oct 09 03:51 PM
    What to do?
    Buy some farmland in a temperate climate near freshwater, purchase lots of seeds and jars, pull the family back together, cook meals at home, learn to get by with less and save your money :)
    Reply
  •  
    Oct 09 03:55 PM
    The President cannot spend money he isn't appropriated by Congress. And a HUGE portion of this increase in debt has occurred over the last 2 years (strangely enough, once a certain group took control over both houses of Congress ... who were they again?). If you're going to put any blame on the President, you also have to put a lion's share of the blame on those that gave him the money to spend to begin with: Congress.

    This is not a problem with capitalism; this is a problem with corrupt politicians not doing their jobs, and us, as their bosses, not doing ours.
    Reply
  •  
    Oct 09 03:56 PM
    The US had been very proud of its "growth". Trouble is, the rate at which it has grown has required massive amounts of debt to sustain. Companies have "grown" at x% a year, and yet take out regular huge loans to make payroll.

    That's IRRESPONSIBLE growth, not SUSTAINABLE growth. So what we have now is the inevitable result.

    The stock market has taught us that slow growth is not enough. Now it'll have to adjust.
    Reply
  •  
    Oct 09 04:02 PM
    I HOPE THE GOVERMENT BAILS OUT MY 401K.
    Reply
  •  
    Oct 09 04:02 PM
    As my name says, I did not participate in this. Those who bought well over their means (i.e.: homes, cars, etc...) and signed loans w/ ARMS (aka: flex rates) and honestly thought they could afford it. One of two things happened; 1. They wore the rose colored glasses and did not read the fine print regarding how their payments would fluxuate. 2. Bought into knowing they would not be able to pay it back (MANY PEOPLE DID THIS!). Now there are people in homes that are being foreclosed on because companies like Fanny Mae & Freddie Mac put them there and sales people (only looking to line their pockets) sold them on it. Either way, it's not right. These CEO's that forged documents and reports... well there's a special place in hell for people just like that. So now... with this rescue "taking place"... those of us who did not buy into the ARMS scandal... what happens with us? We are stuck paying the bill for something we did not do. Nice...
    Reply
  •  
    Oct 09 04:09 PM
    This financial mess could have been averted if Congress would have acted 4 years ago to remove George Bush from his digs at 1600 Pennsylvania Avenue. Trust is what the public relies on and now we have lost all trust in our government because Bush has taught us how to lie.
    Reply
  •  
    Oct 09 04:09 PM
    You do all realize that, save for a few narrowly defined executive order powers, the President has no real say in our economic fortunes? Indeed, the President, except for the bully pulpit his office affords, has little control over our financial fortunes, unless he chooses to sign or veto a bill presented by Congress. Democrats have controlled Congress, ergo all of the financial services, banking, regulatory and oversight committee's for the last 2+ years. Democrats have been in charge since approximately the time our economic decline started, yet they, the only ones with the power to do anything, have done nothing! I take it back, Democrats were the power behind the revised bankruptcy legislation that now prevents those in bankruptcy from disposing of credit card debt. Everybody say thanks to Senator Joe Biden for working his magic on the bankruptcy legislation to allow his cronies in the banking industry to prove that you can in fact get blood out of a stone!
    Reply
  •  
    Oct 09 04:10 PM
    What's not mentioned are solutions: Get out of Iraq, NOW! Switche to a hyrdrogen economy now. Iceland is bankrupt, let's use their now cheap geothermal to make hydrogen and get out of this mess. Stop government bailout intervention, too late and a dime short. Impose new regulations, make ARM mortgages disappear. Bring back monetary discrimination, many white families are as poor as black families, neither should get home loans when they can't afford them.
    The S&%t has already hit the fan, government please don't toss more money in the toilet, instead let's set up some long-term solutions, BUT START TODAY !
    Reply
  •  
    Oct 09 04:11 PM
    The problem is the Federal Reserve has flooded the market with fiat paper over the course of King Dubya's reign. That flood led to corruption and banks sprouting like weeds. And of course "THEIR" solution is to add to that flood of worthless paper by $700,000,000.00, which devalues YOUR spending power. It is a way of stealing out of your back pocket through inflation without you knowing about it but... exchange your US dollars for that of a foreign country that cares for it's people and is raising their rates and you will outsmart the thieves in power.
    Reply
  •  
    Oct 09 04:12 PM
    Just like this has really been everyone's problem, it's got to be everyone's solution. Live on less. Pay off your debt. Exist within your means.

    Oh yeah, and also, maybe the government could stop chucking my f#cking money out the window.
    Reply
  •  
    Oct 09 04:12 PM
    Well said Hegemon....
    Reply
  •  
    Oct 09 04:14 PM
    There is a solution! Everyone relax. Stop blaming everyone else for our nations and the worlds economic down side. Read about the FairTax and make an unbiased choice for yourself. This plan wasn't created by Republicans or Democrats but by citizens that saw that there had to be a change. Fairtax.org
    Reply
  •  
    Oct 09 04:15 PM
    Re-write the tax law's to a simple 15 percent for every one. No more loopholes.
    Reply
  •  
    Oct 09 04:17 PM
    But people, don't expect anything to get fixed if you vote for the same people who created this situation, meaning BOTH the Republicans and Democrats (with a few exceptions on each side). You're going to ALL have to start thinking outside the box for a change.
    Reply
  •  
    Oct 09 04:17 PM
    This economic collapse has been in the making every since Ronald Reagan's borrow and spend policies were enacted. The National Debt has spiraled out of control. Any one that believes that by cutting taxes we will grow out from under the national debt is just fools and probility believe in the tooth fairy as well.

    Reaganomics are dead. We should name this economic failure after him.
    Reply
  •  
    Oct 09 04:17 PM
    What do we do? I bet our founding fathers said the exact same words when they stepped off the boat. Just like we are doing now. We are all standing on the shores of an undiscovered country, saying, ok - What do we do now? Just a couple of suggestions. Start being nicer to your neighbors. Don't know who your neighbors are? Now might be a good time to go over and introduce yourself and your family. The only credit that anyone is going to have when this thing finally eases to a stop is the credit built up between you and another person. An economic system, just like any other social system, is still a reflection of the people. After all this is about people. Not some arbitrary numbers on a screen or a piece of paper. Start putting people first. Remember the golden rule. Do unto others as you would have them do unto you. Start practicing it. Guys these next 4 years are going to make the Great Depression look like a bad day at the dog track. To see that all you have to do is look at the numbers of people now, versus the 2 billion that we had in 1927 and do the math. 1804 1 Billion, 1927 2 billion, 1960 3 billion, 1974 4 billion, 1987 5 billion, 1999 6 billion. That is a logarithimic progression and it is not a very pretty one. Want to know who is to blame. I am, we all are. We started believing the illusion. The American Dream, was never something tangible and quantifiable, it is by definition, a dream, albeit a common dream shared by many and yet it speaks to each of us differently.

    Don't take your eye off the ball. This economic meltdown we are experiencing is one, just ONE, of the things we are gonna get to have fun with thanks to peak oil.

    There have been many people over the years that told us that this was going to happen if we didn't change our ways.

    Probably the best thing that you can do for yourself and your family is SHUT THE TV OFF, and start doing your own critical thinking and the next time someone says something to you that you find disturbing and threatening. Find out for yourself if the disturbing things you hear are true, before saying. Oh, that's crazy talk, and I don't believe it. With some things, it really doesn't matter if you believe them or not, they are still true. The era of political correctness is done. Time to pull the head out of the sand, clean the bugs out of your ears, roll up the sleeves, you are gonna get dirty on this one.
    Reply
  •  
    Oct 09 04:19 PM
    It is mind numbing that otherwise smart people fail to understand that free markets, without referees, cease to be free as the game turns into a free for all. The right wing, with Clinton's help, believed that Hoover was right and Roosevelt was wrong. They took away, brick by brick, the carefully constructed levees built by the post Depression leaders, to avoid a collapse from ever happening again. Glass Steigel existed for a reason. the Securities and Exchange Acts of 33 and 34 existed for a reason. Without transparency and regulation, the Wall Street houses and hedge funds, opted for the lines of business that generated huge profits -- that should have been a give away -- with crazy derivatives and unregulated insurance contracts, all intertwined in much the same way that existed prior to the Great Depression. As the rich under Reagan, Bush, Clinton and Bush got richer and richer, their incomes went into leveraged investments in paper, without exanding the means of production. Toyota spent $5 billion on R and D. GM spent $5 billion on unfunded pension obligations. The middle class was presented with a path to greatness fed by staggering loads of debt. The rich wined and dined on risks they failed to understand and did not want to understand. Children ruled Wall Street and then moved to Treasury.

    How do we get out of it? In the short term, we should never bail out the losers who played this game. Instead, we should wage war on our crumbling infrastructure, spending hundreds of billions on projects that will create jobs and leave us with capital improvements instead of stupid, mindless, ego driven wars. Rather than "tighten our belts" as McCain idioticaly proclaims -- the intellectual equal to bleeding a sick patiet -- we should address the scariest part of today's news, the dramatic cut back in state and local infrastructure projects. We should reestablish all of the post Depression walls, reinstateme the prohibitions on banks owning insurance companies and investment houses, and other businesses and require anyone taking deposits and making loans to be a bank insured by the FDIC.

    The right wing hates Roosevelt which is ironic. Roosevelt saved capitalism by putting referees on the field of play. We need them back.
    Reply
  •  
    Oct 09 04:22 PM
    Fairtax.org
    Reply
  •  
    Oct 09 04:25 PM
    Its amazing that every problem or success this world has is attributable to any US President. By that admission everyone else in government is off the hook. One thing I am sure of is every success or failure going forward will be accountable to how we as a people rally to the needs of our country just like those that have come before us... elect and evaluate all those you have chosen to represent you and hold them all accountable not just the President...
    Reply
  •  
    Oct 09 04:28 PM
    Dilberth: Don't blame it all on Bush when honesty demands recognition of the role both parties had in this. You can't minimize Barney Frank's or Chris Dodd's indefensible contributions. In fairness we need to add in Bill Clinton's National Homeownership Strategy.

    If you give your favorite political party a get-out-of-jail-free card this November you essentially teach them that is OK to screw you over and that you really don't mind all that much.
    Reply
  •  
    Oct 09 04:40 PM
    HOWEVER THE PAIN IS PAINTED OR PRESENTED, TAXPAYERS FOOT THE BILL

    Billions were made through this bubble, there is plenty of blame to be spread around, however, where will the magic come from?

    pacificgatepost.blogsp...
    Reply
  •  
    Oct 09 04:44 PM
    Before President Clinton left office, US will have 10 trillion dollars in budget surplus which basically would have wipeout the $8 trillion of debt the US owes the world. President Bush with his infinite stupidity choose to not only wipeout President Clinton's budget surplus of $10 trillion but also increase the debt by 50%. Now China owns so much of US debt that China can effectively bring US economy to its knees if China start selling US's IOU.

    It is no coincident that under President Clinton saw the large job creation in US history where 25 jobs was created by under 8 years of President Bush only less than 2 million jobs created BUT trillions of dollars of debt as assumed by the people.

    This debt burden couple with social security & other obligation, US debt will only increase in the near future.

    Thank God the idoit will be out of the office before he could bankrupt the US.
    Reply
  •  
    Oct 09 05:05 PM
    I think Bush does have something to do with the housing/mortgage bubble. His tax cuts reduced long term capital gains and interest earnings taxes to 15%. In a time of record low interest rates, that totally changed the present value calculations of real estate and mortgage investments. People were flipping houses and only paying 15%. Banks were writing 5% loans to broke people because the low expected taxes made such loans appear profitable. Where do you think the housing bubble came from? Do you have another explanation for why it began exactly when these tax cuts went into effect?
    Reply
  •  
    Oct 09 05:37 PM
    Solutions:

    1) Reinstate Glass-Steigel. Wally, you and Roosevelt are/were absolutely right. I blame both Clinton and the Republican congress at the time.

    2) Break up Fannie, Freddie, and AIG and auction off the parts to private parties over the next few years. Use the DOJ to ensure that they never become monopolies again.

    3) Tax investments at the same level as actual work (at what level and flat vs. progressive are other topics). What we need is more production and less speculative frenzy (3 destructive bubbles in 1 decade!). Why does our tax code encourage the flipping of houses and investments and discourage wage earning?

    4) Reconsider the balanced budget amendment - you remember, that idea from the 90's that was our only chance of avoiding the crushing national debt we now face? Also, ban earmark expenses. Only structural change will end deficit spending. Public pressure has failed. The future will be bleak otherwise.

    5) Wrap it up in Iraq and Afghanistan and accept that these will be unstable countries for our lifetimes because the people there have crazy values and the military can't change that. Put the vets to work on #6.

    6) Make energy independence a priority. Build light rail in all cities. Tax gasoline to discourage overconsumption. Fix the crime and school problems in inner cities to halt the spread of exurbs. Make developing new sources of energy a top scientific and engineering priority. The alternative is economic failure and an even more expensive war at some point in the future when the oil is cut off.

    7) Quit accepting disadvantageous trade deals from communist and fascist countries such as China and Russia just for the sake of free trade. We're going broke thanks to China's currency manipulations. Russia is threatening worldwide democracy with our oil money. Saudi Arabia still pays for jihadist mosques with our oil money. So much for the theory of trade expanding freedom. Time to learn and move on.

    8) Start thinking and investing long term for the first time in decades. Invest in schools, infrastructures, and inner-cities. Fair or unfair, the next generation will have to shoulder the burdens that the baby-boomers took on. If we don't prepare them, we're preparing for a national decline and poverty.

    9) Ban monetary lobbying. It's bribery. Why do we accept this? Where do you think most of the corruption and budget looting comes from? This one reform would do more to attract the right kind of people to government than any other idea. As it is now, public service is a good place to get filthy rich, which attracts the greedy self-interested conmen we have now.
    Reply
  •  
    Oct 09 06:00 PM
    Reading the comments on this subject, I can't help but notice the increase in anger on SA. I used to be the only one screaming.

    Nice to have company in the "unpatriotic"... poor and middle class.
    Reply
  •  
    Oct 09 06:08 PM
    Fairtax.org
    Reply
  •  
    Oct 09 06:09 PM
    So you b@satards have finally eaten up all the prosperity in my country. Will you all please go back to Europe (if they'll still have you), or find somewhere else to conquer & live in filth. Useless, stupid, short-sighted, greedy, weak hypocrites: "I told you so." Hrumph.
    Reply
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