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Added by rcomeau
November 24, 2013

We received a Comment Form today from Doctor D, and I had the pleasure of meeting Doctor D today also. We look forward to your participation! Here's the question, and I think it is in response to Plank 1 on the Budget:

"For fiscal stability in your rational approach to government, how do you best propose to deal with the current $250 billion interest payment and projected payment of $500 to $750 billion yearly interest payment under more typical interest rates and for that mater of fact the $1 trillion + annual interest payment under stressed conditions?
You do have a good site and would like to participate more with you. BTW: I think that this is the most important issue in a fiscally survivable rational government."

This is an excellent question!!! I have thought about the same question for a few years, ever since the govt. began piling up huge debt in 2001.

We're not sure EXACTLY how this will turn out, but here is one scenario in which it MAY not work out so bad. Clearly if interest rates returned to anything resembling normal, the component called "Interest on the Debt" would double or triple over the foreseeable future (like the next 5-10 years). That would be hard to deal with and probably lead to devaluation of the dollar and reduced purchasing power for all Americans. However, something really unusual has been going on the last 4 years, and that is this FED Quantitative Easing (QE), where the FED buy's bonds, particularly long duration bonds (20-30 year bonds) is an effort to keep rates low across the entire yield curve. They typically only control the short end of the yield curve with the FED Funds Rate and Discount Rate, while the market sets the rate on the long end (10 year and longer bonds). When the FED knows rates will rise and holders of long duration bonds will get killed, they will stop issuing 20-30 year bonds. Now, they are buying huge quantities of long duration bonds. When interest rates rise, the value of the bonds on the FEDs balance sheet will decline. But, will the FED be hurt? They just printed the money to buy those bonds with, so if they go down in value, the FED will not be hurt like we individuals who have to work for our savings would be hurt. Suppose the FED holds all this long term debt for 30 years? It's financed at 1.5% - 3.5% interest. If it is held for 30 years, the component of the budget called "Interest on the Debt" would not go up that much, because so much of the debt is now financed at the lowest interest rates in a century, for a very long time. It's a little muddier than that, as not all of the debt is long term, but as rates rise to normal, given the FED's purchases of longer term bonds, the interest on the debt won't rise very rapidly. We can either refinance the debt in 30 years with inflated dollars, or try to pay some of it down over 30 years (a desirable but unlikely scenario). Any other ideas? (you can just add a comment on this thread, you don't have to use the contact form to send in a comment)
Added by DOCTOR D
November 26, 2013

For FYE 2013 interest payment was $415,688,781,248.40. That is with the FED still buying $85 billion in bonds each mo. I thank you for your hypothetical and I decline to predict the future, but we did not get to this point by magic nor accident.
What would be your fiscally stable rational approach to getting and maintaining a fiscally stable and rational government?
Added by rcomeau
November 26, 2013

Hi Dr. D, thanks for staying engaged with us!

Let’s just hit the high points. There are 5 components of the federal budget that count, Defense, Medicare, Medicaid, Social Security and Interest on the Debt.

The annual deficit last fiscal year was $671 billion.

Defense spending rose from 350 billion to 700 billion between 2001 and 2013 primarily due to the wars in Iraq and Afghanistan. We should be able to get back to inflation adjusted spending level at roughly 500 billion per year, which would save 200 billion per year. We should do a strategic analysis of the threats ACTUALLY facing America and deploy to address that. With our reliance on technology to run our daily business in this country, a cyber attack would be a cheap way to do considerable damage to US interests. How prepared are we? Are we preparing for the types of attacks that we are likely to experience?

In Medicare there are many measures we could take that would yield big savings. Medicare fraud is estimated to consume 10-20% and if we cut that we’d save 50 billion per year. We probably spend too much on care in the last year of life and could probably save another 50 billion a year with something like the IPAB review panel to specify what Medicare will pay for in the last year or the last six months of life.

Medicaid needs to specify what services will be provided and which ones will not be provided, based on standards set by a review panel, and within the amount budgeted.

Social security will end up being means tested and the wealthier citizens will receive less in the future. However, there is also fraud involved in people getting on to the social security disability roles. There is a cottage industry among lawyers who advertise on TV “have you ever been turned down for social security disability, then call us”. I am not sure of the level of fraud in that system, but any disputed case should be reviewed by doctors working on behalf of the government.

Regarding revenue, the Bush tax cuts in 2001 and 2003 reduced tax revenue by 170 billion per year. The fiscal cliff deal last Dec. made those cuts permanent except for the top 1% of taxpayers where the top marginal bracket rose from 36% to 39.5%. This was only projected to raise about 30 billion per year in revenue.

As far as interest on the debt, once you have incurred the debt, you have to pay the interest on it. Until the budget is balanced, we will incur more debt. In an ideal world we would balance the budget AND allocate 50 billion per year to pay down the debt to get it back to a more manageable level. First we would have to balance the budget, so until we do that, paying down the debt is not an option.

So, let’s see where we are relative to closing the 670 billion deficit:
• Cut defense spending to 2001 level, inflation adjusted 200
• Eliminate the remaining Bush tax cuts, increase revenue 150
• Medicare negotiate for drug discounts: 50
• Cut Medicare fraud 50
• Limit Medicare spending in the final six months 50
• Medicaid savings by setting standards for covered services ?
• Halt extended unemployment benefits (over 104 weeks out of work)?
• Cutback on amount of foodstamps per household ?
• Means test Social Security (to get through the baby boom bubble) ?
• Require hospitals to post prices online – one price per service only ?

The cuts with dollar figures get to 500 billion of deficit reduction, then there are the unquantified reductions. That would get us in the ballpark of 670 billion of deficit reduction.

You could not do all this overnight as it would be a major disruption to the economy. We didn't get here overnight, and we won't get out of it overnight.

Let us know if you like to write an article about one of these cost savings or one of your favorites and we'll post it.
Added by DOCTOR D
December 4, 2013

The question is what is in the best interest of the middle class. That being the 80% of America in the middle. So lets try to stick to facts. The best answer is Democracy where there is a fair, balanced and realistically functioning, fiscally sound government of, by and for the people.
We are obviously not there.
I said that the most important aspect is the debt.
Now a functioning Democracy needs a functioning government to provide necessary functions of government that facilitates the continuation of the power of,. by and for the people. There will always be the 10% outliers and that is a fact. Try as you might and you will never be able to eliminate them and it is a useless function to engage in trying to do that.
Debt and debt servicing is not in the interest of the middle class. Just like paying interest on a credit card does not add to the prosperity of an individual, but actually subtracts from his prosperity and perpetuating this only makes the individual a slave to his debt service as he makes himself live a lower standard of living as he works only to service his debt. This has an extreme where all work and earnings go to debt service and the individual is in fact a slave by the definition of a slave is one whose entire life’s labors belong to another.
Now where is the average middle class American today? The average middle class American has no net worth and only owes another. Each average 80% of America is in debt to another in excess of all that he has accumulated in his lifetime through his entire life of working and producing. About $50K for each has accumulated by deliberate design. Yes, he has worked his entire life and all his labors belong to another. This is a fact and by definition above is defined as a slave.
I also stated that this factual reality of today did not come about by magic nor accident. It came about by deliberate design. It has been called many things and here it has most recently been called Voodoo Economics. I will not argue that that name is inappropriate.
It is a deliberate, enacted into law, method that cut the tax on the super rich and borrowed from them in place of them paying their fair share of tax with the promise to pay them back more than what was borrowed. This is the fact of our current debt servicing and our currant average middle class American being a slave as defined above. Fact, the top 5% net wealth Americans own 90% of all individually owed American debt. Yes, the governmental largess of voodoo has made a slave holding class of American middle class slaves.
This obviously is not a well functioning Democracy of, by and for the 80% middle class Americans.
Lets look at it a little differently. Four possibilities.
1) An humongous spend thrift government giving it all away and NOT taxing the super rich fairly = slavery of the middle 80%.
2) A puny not functioning government not providing essential services to the 80% and NOT taxing the super rich fairly = slavery.
3) An humungous spend thrift government giving it all away and taxing the super rich fairly = freedom for the 80%
4) A puny non functioning government not providing essential services to the 80% and taxing the super rich fairly = freedom of the 80% and Democracy of, by and for the 80% not perishing from the Earth.
Lets take an historical look.
Once upon a time there were non Democratic governments only. Kings, emperors and dictators only and what did they possess and pass down to each successive generation in perpetuity, slaves. Now this is still the norm and an example of that is Kim of North Korea. Duration of his office is perpetual by law and yes, if you do not like his way of slave mastering there are many death camps for his slaves to starve to death as they labor to aggrandize him. Sorry that is “The Peoples Democratic Republic” and yes, all conservatives like Kim always call things what they are not. Yes, conservative, Kim does not want any change and even has outlawed the teaching “It is eagerer for a camel to pass through the eye of a needle than for a slave master (rich man) to get into my heaven”.
Eventually slaves/subjects revolted and, yes in 1776 there was a Revolutionary war that established a Democracy of, by and for the people. Reaffirmed in the 1860 Civil war of the middle class and slaves against the slave masters and again in 1940 WW 2 against the slave master Nazi by their proposed slaves.
This is the norm for man and the exception is a functioning Democracy of, by and for the 80%.
Now I stated that the current state of the average 80% American did not get this way by magic nor accident. It was a deliberate conservative action of the norm of man doing what it has always done, make slaves and keep the conservative slave making process in perpetuity as all previous conservatives (kings, emperors, Hitlers) have always done in the past and do today (Kim and all the rest of the conservatives that wish to perpetuate a system of slave making without change)..
Lets look at another fact. All middle class students borrowing to attend school, so they can perform the needed tasks of a functioning Democracy, have been, by newly enacted law, compelled to pay for the exclusive benefit of the debt holders, as outlined above, all their debt service. Yes, by newly enacted law all their labors of debt service are the exclusive property of the debt holder class as outlined above. Yes, this is the norm and not an exception of conservative law that seeks to make slaves and perpetuate this. All conservatives think alike, weather king, emperor, Hitler or Kim and no one ever taxes the king.

No inheritance tax, after all no king gets taxed and this is how the norm of slavery gets passed down in perpetuity. Yes, Hitler's dream come true. All conservatives think alike and those thoughts are never in the interest of the 80% who need to defend their Democracy of, by and for the 80%.or suffer the consequences of being a slave, where all politicians are bought by slave masters and all news organizations are owned by slave masters. Yes, this current situation of debt servicing is not magic nor done by accident, it is the norm of conservatives making and perpetuating the masking of slaves as they always have done through out history and wars have been fought to prevent.
Now I also said that I decline to predict the future. However, the question is what is in the best interest of the 80%.and I said that it has to do with the financial debt accumulation and servicing. as performed by our Democracy of, by and for the 80%, and if you look at the 3 charts, this deliberate process of making slaves by the super rich slave owning and making class created by conservative orchestrated governmental largess has consequences and none of them are in the best interest of the 80%. Currently there is over 34 trillion dollars held by the super rich in off shore tax havens and many trillions of the government largess obtained dollars have been used to export jobs from America to slave holding non Democratic countries where their slaves work in an environment close to that outlined above with Kim as an example. Yes, all conservatives think alike when it comes to making slaves and perpetuating the process.

Studies have shown that merely thinking about money makes a person more inclined to cheat his fellow man. Man is hard wired to do this and that is why conservatives do the only game they know, make slaves. Now I am not forgetting the bottom 10 %, but they do not make slaves, because they have no money to think about.

Suggestions for real change that is in the interest of the 80%. Well obviously it has to do with how the 80% govern themselves by electing representatives that actually represent their interests by making a real Democracy work in a fiscally sound, stable and fair way. It must address the non Democratic norm of making slaves and perpetuating that through the enactment of conservative laws that are deliberately designed to make and perpetually keep slaves. It will never be obtained by electing conservatives that consistently call things, what they are not, like Kim, Cruz or Bachmann as examples (We stopped the functioning of our Democracy, we won.) and enact laws that perpetuate the current system as outlined above.

Starting in the eighties, the tax system was overhauled from bad to worse with deliberate and real consequences as outlined above. That needs to be changed to the best interests of the 80% from the best interests of conservative slave makers. A top income tax of 96% would leave those top income earners making 50 times the earnings of their average worker. Now some may argue that 50 times is immoral and the rate would be too low just on moral grounds alone, but what I suggest is a workable fiscally sound system that does not borrow from the super rich in place of fair taxes and then promises to pay them back more than what was borrowed.
Inheritance tax of 99% after 1 million dollar deduction indexed to inflation, so the king does actually get taxed in our Democracy. Some may argue that it is immoral to have some borne millionaires and others start out, in our Democracy, in an immorally perverse uneven playing field, but I address only a fiscally sound and working Democratic government.
Now these proposed changes would have real consequences and, if you use your calculators, you may see that this would cut the average middle class 80% tax bill in ½. Yes, the lowering of the tax rate of the average 80% middle by 50% and still have all the per-sequestered Democratic governmental services. Of course this is assuming that no borrowing in place of fair taxes is allowed and all governmental largess is negated. Yes, in the interest of the 80%.
The 80% also escapes the conservative austerity as done to Greece over the last 6 years, that has left a smaller economy, higher unemployment and a higher ratio of debt to GDP. Yes, more modern day slavery with all conservatives thinking alike on how to make and keep slaves perpetually.
The end goal it to keep Democracy of, by and for the 80% FREE and viable on our planet, where, although the exception, it is still championing freedom of speech, association and the pursuit of happiness that does not include slavery. Doctor D (Sorry none of the charts showing the dynamics would transfer.)
Added by sydney0719
December 5, 2013

It brings a smile to my face to know there is someone out there thinking. Please send the charts to the moderator email and one of us will figure out how to post them here. You have such passionate points thata we may (with your permission) make it into a document.

I would like to summarize a few things and perhaps add my flavor to your points:

- America is a republic and not a democracy. Except for one municipality in New England (it escapes me for now), the local and state governments are also representative rather than democratic. The point is important in that we relegate our decision making to our elected officials rather than vote on all legislation directly

- America is governed by and with the lobbyist rather than the people. This is another reason for the dysfunction. As an example, the accounting lobby is made up of associations and IRS employees union which are the biggest influence to keep the america's tax code as complex and cumbersome as possible. Every crook (corporate and human) who has gotten a special provision inserted in the tax code wants to keep it that way

- Conservative does not mean fiscally responsible and personal accountability anymore. Why? The people have allowed it to mean social conservative doctrines rather than fiscal and personal responsibility. I know of many people who would rather have a dysfunctional representative who supports their single view. I know many smart people who vote for anyone who claims to oppose abortion. Rather than work through their religious organizations to reduce or eliminate the curse of abortion, they destroy the government into a gridlock for this one issue. Current day Americans love to be distracted by a nonsensical fight rather than fix the problems. -- life's solutions are simple if a fix is the key demand- complexity is the other parent of dysfunction)

- When store front churches (I put all faiths in this category) outnumber retail stores in most towns in America, we have a problem. When these same churches own many other businesses and don't pay taxes, we have a problem. When the same people who own these churches are mega millionaires and at times billionaires and don't pay taxes, we add to the problem. All the while we are getting rid of the original houses of worship which used to serve the community and replacing them with organized criminals spreading the fake gospels! We let them create the dysfunctional society.

- I can go on, but I will make one more point. Voyeuristic Apathy! Americans are so dumb downed by the lack of spirit and seek salvation via TV evangelists, moldy views spread by the store front gurus and reality shows that the people just don't care about change or even getting back to the future.

Islands of active thinkers need nurturing, hence this website and the foundation. Even here, we have people who have great thoughts like you, but we can only get you and couple of others to comment. The change starts with one person. Let's start these types of conversations to educate and get others to think.

Thank you for commenting and we hope others will join in!
Added by rcomeau
December 19, 2013

I was hoping more readers might jump in and respond to Dr D’s comment, but absent that, here is my reply. I have problems with this post and disagree with most of it.

First I find the use of the word “slave” to be emotional, unsupported, unnecessary, and not enlightening to the discussion. Most US workers do not consider themselves slaves to their jobs, at least not in the classic sense of the word, and I would agree with them. Real slaves, such as those in the south in the 18th and 19th century had no choice at all about what task they would perform and they could be beaten if they did not perform it. Clearly that is not going on here. If by the work “slave” the author meant “we have you by the short hairs and you have to do this”, well, to the extent that we all need a job to generate income to feed ourselves, in this narrow and largely impertinent sense, we may be considered to be “enslaved”. But, if a caveman did not get up out of the cave and go hunt on certain days, or gather berries, he would starve. He chose to get up and go do his job, or else he would not have survived. You could say in this sense he was enslaved by his need to eat and survive, but I don’t know anyone who considers this an important point of view.

As far as the emphasis on tax policy and distribution of wealth as the cause of middle class angst in America, I think it is a small contributing factor, but not nearly the main one. Statistical correlation does not prove causation, certainly not by itself. In other words, just because two events occurred in close time proximity does not mean one caused the other.

We have this from CNN:
“Many people think that the rich are able to weasel their way out of taxes, but they actually pay an overwhelming majority of the taxes in the United States.

What's more, their share of the tax burden is increasing.

The top 10 percent of taxpayers paid over 70% of the total amount collected in federal income taxes in 2010, the latest year figures are available, according to the Tax Foundation, a think tank that advocates for lower taxes. That's up from 55% in 1986.

The remaining 90% bore just under 30% of the tax burden. And 47% of all Americans pay hardly anything at all “


There has been a trend to reduce the top tax rate on the richest Americans, but when this is done they also usually reduce deductions available to them and the Alternative Minimum Tax (AMT) was introduced to force the richest to at least pay something into the IRS.

As far as raising the top marginal income tax rate to 96% and the inheritance tax to 99% after the first million, I think this is a bad idea. This would destroy the incentive to work hard and save to pass on to your children (something I know I feel very strongly about, as I can attest it has been a huge motivator in my life). The family farms that are left in many cases are worth much more than a million dollars and you would be forcing them to sell the family farm to pay their inheritance tax. If the top IRS rate was 96%, how would California collect their 10% on your earnings? You would have nothing left if you lived in California.

There would be NO INCENTIVE to work hard or to TAKE RISK and start a business. You would have the communist Soviet Union, which failed in 1990 and adopted a capitalistic system. The Russian form of capitalism has some problems, but from what I can tell most people don’t want to go back to the 1970’s in Russia. China also is moving toward a capitalistic economic model as it tries to transition from a 19th century agrarian economy to a 21st century manufacturing/information economy. China is trying to do that without a democratic political system, but it remains to be seen how long the politicians can resist democratic changes also. That process will march on as citizens have access to information about how the rest of the world works, via the internet.

If you read my decade by decade analysis of the last hundred years on major economic events, I mention many major trends that are affecting the structure and functioning of the economy, and tax policy does not make my list because it is minor compared to the impact of technology and population growth (mainly the addition of China and India to the worlds integrated workforce over the last 30 years).
Added by JMac
February 9, 2015


May I add a little "perspective" to the conversation.

Our current National Debt sits north of eighteen trillion dollars; here is a very clear analogy of how great that figure really is:

If you take dollar bills and lay them end-to-end, 18 trillion of them would "circumnavigate" the earth over 55,000 times.

Our daily interest rate on our debt has reached in the billions. This is NOT sustainable!

If not for being "masters of the printing press" and the WORLD reserve currency, the US would have gone the way many third world countries have gone.

Exponential growth is a great thing; but not when it comes to the debt we owe, particularly to foreign
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