Here's a letter I just picked off the Internet. It was published by New Jersey Senator Joseph Azzolina. HOW RIGHT HE IS!
AMERICA IS DROWNING IN GOVERNMENT DEBT The United States Congress has voted yet again to raise the federal debt ceiling, despite urgent warnings from U.S. Treasury Secretary John Snow that America would soon reach its debt limit.
This is the fourth such increase in just five years. The current increase of $781 billion raises the overall limit to $9 trillion. That amount is incomprehensible for most people not into the numbers-crunching game.
Five years ago, the national debt stood at $5.8 trillion.
Prior to World War II (1941), there was no official debt limit. Congress had to authorize each separate debt issue. The enormous borrowing needed to finance that war forced a change. Beginning with the Second Liberty Bond Act of 1917, Congress authorized the Treasury to set the terms of each bond issue.
Generally, congressional leaders of both parties try to attract as little attention as possible when increasing the debt limit. Why? The politicians don't want voters to think their elected public officials lack fiscal discipline.
Since 1941, when Congress first began setting a statutory limit on the total debt permitted, Congress has voted more than 80 times to increase the limit, extend the duration of temporary increases, or change the definition of “debt” subject to the limit. In the last 25 years, the limit was raised 28 times, according to The Washington Times, which has been monitoring the rising debt load in recent years.
Simply put, the dab ceiling has had little practical impact on fiscal policy.
Currently, the debt limit applies only to the gross federal debt, which includes debt held by the public, such as savings bonds and T-bills, and that held in various government accents, such as Social Security, Medicare, and airport and highway “trust funds.”
The debt limit does not apply to other government liabilities the government has assumed from the insurance and guarantees it provides to bank deposits, certain pension plans and the debts of government-sponsored enterprises such as Fannie Mae (mortgages).
From an economic perspective, what really matters is the amount of debt held by the public, rather than the gross debt.
Publicly held debt represents federal borrowing in the credit markets. Such borrowing competes with private borrowers for the savings of households and businesses and increases the taxes needed to pay interest on the federal debt.
Curiously, while the gross debt has been soaring, increasing from $712 billion in 1980 to more than $8 trillion today, the share of debt the public holds has been decreasing sharply, from 78 percent in 1980 to less than 68 percent - or $4.8 trillion - today.
As a percentage of gross domestic product (GDP), publicly held debt peaked at 109 percent of GDP in 1946, just after the end of World War II. By 1974, it equaled just 24 percent of the GDP. Then it started to fluctuate, rising to 49 percent in 1993, declining over the next seven years, and increasing again starting in 2001 (the year of the 9/11 terrorists attacks on America).
Most experts expect the publicly held debt to increase for at least several more years, perhaps to 40 percent of GDP by 2009.
This level of debt is neither extraordinary nor unmanageable, according to The Washington Times economic analysts. It was much higher as a percentage of DDP, for example, during the popular Reagan years when the nation's economy took off because of tax cuts.
What is troubling is the long-term outlook. In just two years, the first Baby Boomers (those born between 1946 and 1964) will turn 62 and become eligible for Social Security. Three years later, in 2001, they will be eligible for Medicare. All those government IOUs now in the Social Security and Medicare “trust funds,” which represent most of the $3.5 trillion in “intragovernmental” debt holdings (money the government theoretically owes itself), must be paid.
Social Security and Medicare already account for about a third of all federal obligations. As more Baby Boomers retire, the share will grow.
If ever there was a reason to get serious about Social Security and Medicare reform, this is it.
(If you have any ideas or issues you would like to bring to my attention, just call me at my Middletown Office: 732-671-1486. I am now serving the public as a volunteer “Citizen Activist” to protect New Jersey's taxpayers and voters from government excesses.) Senator Azzolinia, you are so right. This country, from the Federal government down through every state, county, parish, city and governmental district to the poorest credit card holder, has gone stark, bonkers, crazy with debt. And every day I get telephone calls from mortgage lenders and other money merchants trying to loan me money. What also disturbs me is the amount of governmental debt that is in tax free bonds, bonds that must be repaid by future generations of taxpayers. Look how The Terminator went crazy in California! He got elected to office on the pledge that he would solve California's financial problems which the Democrats had exacerbated by borrowing huge sums of money by issuing tax free bonds. Then, after going to a huge campaign fund-raising banquet hosted by Wall Street brokers and listening to billionaire Warren Buffett blowing smoke in his ear, Aaahnold, upon being elected went out and borrowed $16 billion on his own. And no sooner did the bill pass than all the big spenders, the school districts and cities and the other municipal taxing authorities who had been screaming so loud, just reinstated their big spending programs. Hey, Happy Days Are Here Again, So Sing a Song of Cheer Again . . . Wasn't that the Democrats theme song when they were the Big Spenders, playing the Tax and Tax, Spend and Spend, Elect and Elect political game. Like one bemused California Senator remarked, "You don't get yourself out of a hole by digging it deeper." But what the hell! Who cares? Borrowed money is easy spending money. That's what all the hucksters have been telling us all these years. Who can blame a simple minded iron pumper for believing it? This madness only encourages the rich, such as Senator Kerry's enormously wealthy wife, to buy government bonds instead of investing in employment-creating private enter-prise. And now, the Feds have turned to issuing I-bonds, which are insured against inflation, the traditional curb on excessive debt, and puts the nation forever in the thrall of the money lenders. Why invest your money in factories and other private enterprises in America when you can get a sure 5-6% tax free and guaranteed by our tax payers? The wealthy aren't stupid; that's why they're rich and the rest of us are poor. You know, Jesus was right when he drove the money lenders out of the Temple. Maybe it's high time we did the same.
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