US debt, defict

A letter from my sister

A few weeks have passed since the election, and what is happening is all pretty boring.  I am getting turned off from politics.  All that hype about Benghazi and now Egypt and Syria…it is so depressing, in particular with regards to America becoming involved.  America has its own problems.  America is deeply in debt.  Why the hell does America have to lend money or provide military support to other countries unless we are OK ourselves?  Gosh darn, we are not OK!  Our debt is humungous!  Now as you know I don’t know anything about economics, but I simply cannot understand why the US for example continues to lend enormous amounts of money to other countries when we are in debt ourselves. It is just so disgusting, I am about to crawl back into my shell.

 Dear Sister Chris,

Unplugging the news is not a bad idea, especially if you are getting riled up. I did that for several years and it was great. However, if you want to stay in touch there are better sources than FOX news. If you can get the News Hour on public television or news on public radio, you will get a much more balanced and intelligent report. If not on television, I'm sure you can get them on the internet.
 

The debt is a problem. When George W. sent taxpayers back their money because, he said, it was our money and we should get it back, he should have used it to pay down a chunk of debt because the debt was ours too. At the time I commented that he was planning to destroy the government by starving it. Then came the wars, one with some justification the other for no reason than to further bankrupt the country. Then came the recession.

There is an interesting thing about the federal government. It makes money when people make money since it taxes income. Thus when someone buys a dinner at our restaurant, we pay income tax on what is left over after expenses. The expenses include buying food and booze and paying employees. The employees pay taxes on the money we give them as do the purveyors on the money we pay them and they in turn pay money to the people who supply them and so on. This is why stimulus programs, though turning up on the expense side of the ledger, make sense on the income side.

     I have been an advocate for getting out of debt for many years. I would love to see a balanced budget amendment but, if put into place without a long range (not too long) plan to reduce the current debt load, it would probably put us into a depression. A part of that plan needs to be putting money in the hands of people who will spend it because the more money changes hands the more revenue the country gets. That is part of the President’s plan (stimulus spending) Cutting government programs that put government workers out of work is recessionary. That is also part of the Presidents plan and the Republican; it better be balanced with stimulus which the Republican plan is not. Giving money to people who will spend it will help growth.
 

Whenever someone talks about cutting foreign aid as part of deficit control they are either stupid or blowing smoke. Write them off. The money we give to foreign countries is minuscule, less than 1% of the federal budget. I won't go into reasons for it as you can Google US foreign aid as percent of budget to find answers.