Saturday, April 22, 2006

Why the debt as a percentage of GDP is irrelevant

Before I talk about why the debt as a percentage of GDP is irrelevant I'd like to update you on the ads that I have placed on my site. While ads are not the most pleasant thing to look at I have decided to donate a portion of the proceeds from them to help lower the debt and perhaps to also fund other anti-debt activities. All just depends on how much they make. If you would be interested in making a contribution to lower the debt, something I would encourage you to do, you can visit the Bureau of the Public Debt. Even if it is only to make a statement about your views on the debt your contribution matters.

Often times I hear politicians and their supporter trying to defend government spending with the argument that since the debt as percentage of GDP is relatively low compared to past levels that it is not a big deal. This is not true for several reasons, the debt as a percentage of GDP was high either because we were suffering a from economic hardships (i.e: the Great Depression) and had a lower GDP or because of emergency one time spending (and no despite what the President says the spending in Iraq is neither emergency or one time), during these periods of high debt to GDP ratios taxes where high, and the economy was booming. Unfortunately those facts do not hold true today. The more important issue is how much are debt is growing (or shrinking) by. Right now we are experiencing record deficits each year. In fact, at the rate we are going every cent of tax revenue that goes to Washington will be used to pay interest on the debt. That is the point at which, at least in theory, that the price of our debt collapses along with our economy. That is not exactly a pleasant scenario and since 90% of our debt is held overseas we wouldn't be able to call on patriotic Americans to forgive the debt that they held. The fact in this matter is the debt is to our country much like steroids are to an athlete, in the short term we will enjoy a minor boost in our performance but, in the long term we are killing ourselves. There are many more scary statistics on the debt but, I think I have given you enough information to see that the debt is a bigger problem than we make it to be so I will spare you the long list. Just remember: as long as we take tax breaks and spending increases from politicians in exchange for our votes this problem will not get better.

After these first few posts about the debt I hope I can start blogging about my journey fighting it. That will be a lot more interesting than statistics predicting our doomsday.

I'd also like to share with you how much certain economic groups got from the Bush tax cuts.
Cost of the Bush Tax Cuts 2001-2005
Economic Group ____2001____ 2002____ 2003 ____2004____ 2005
(In billions of dollars)
Lowest 20%_______ $1____ $2______ $2____ _$2_____ $2

Second 20%_______ $7 ____$7______ $8_____ $8____ $10

Middle 20%____ ___$11 ____$11 ____ $11 ____$12 ____$14

Fourth 20%_______ $15____ $16____ $17____ $19____ $22

Next 15%_________ $15____ $18____ $19 ____$24____ $27

Next 4%__________ _$5 ____ $9 ____$9 ____ $13 ____$10

Top 1%__________ $4____ $15____ $15____ $26____ $25


Saturday, April 15, 2006

Link to me

This is the entry page for everyone following one of these links. For my recent posts (they are a little more interesting than this) please click here.

For those of you who would like to place a link to my site you can put the above button in your sidebar by copying and pasting the following html code.
I will place a link to everyone's site that displays the button from this page and lets me know by sending me an e-mail at

Below are links to the 17 websites that have linked so far
18. Knit worth a _______
17. Empty Words For Empty Minds
16. Make Money From Home
15. Smart Investing
14. Meme Of The Moment
13. Hayden for President of YNA
12. All About Investment
11. Smart Investing
10. Time to Write
9. Mike Salsbury's Web Site
8. Antibogon
7. The Truth Is Out There
6. Beer Blog
5. An online Journal of Numismatics
4. My View
3. Coin Lobby
2. Smart Investing
1. My Journey Through Politics

A weak reply

I received the following response from my letter to Sen. Burr today:

"Dear Mr. Rose,

Thank you for contacting me with your thoughts on the President's proposed budget for Fiscal Year (FY) 2007. I appreciate hearing from you.

On February 6, 2006, the President released his proposed budget for FY 2007. While this budget is only a starting point for the budget process, with no obligation that Congress implement its proposals, it does establish the President's priorities for 2007 and beyond. I am pleased the President has again made it his top priority to defend America both at home and abroad. I also strongly support the President's goals of continuing to strengthen our economy, focus on educating the next generation, and tackle difficult problems such as the high cost of health care.

In line with the steps of toward greater fiscal stability Congress achieved last year, the President has again proposed steps aimed to cut the federal deficit in half by 2009. These steps include Congress holding the growth of discretionary spending (the spending which Congress determines year to year through appropriations) to no more than the rate of inflation. These steps also include the further reduction if the rate of growth for mandatory spending (those programs like like Medicare, scheduled to grow each year without constant Congressional approval).

Last year Congress passed the Deficit Reduction Act of 2005 (P.L 109-171) which will save over $39 billion from mandatory spending over the next five years. I voted for this legislation because I am concerned about the growth of mandatory spending and the long-term liabilities such spending will create for the federal government. This spending currently compromises 56% of the annual budget and primarily includes the costs of Medicare, Medicaid, and Social Security programs. It is estimated that in only ten years the financial demand on theses mandatory programs will account for almost two-thirds of the total federal budget. While, reforms to Social Security generally must be made outside of the annual budget resolution, I believe Congress should take another hard look at Medicaid, Medicare, and other programs during this year's budget process. Congress must take steps to slow the rate of growth of our spending and find cost savings by eliminating wasteful spending end inefficiency in these programs.

I believe that our federal budget should promote a strong domestic economy by encouraging growth and managing spending to prevent waste and an unfair tax burden on hard working citizens. I don't believe that by simply raising taxes we will be able to reduce our national deficit. Instead, a strong economy will provide greater overall revenues for the government. In FY 2005 for instance, total federal revenues saw their largest increase in 24 years. This was achieved without new taxes, and was spurred by recent tax cuts. Responsible federal spending should encourage growth in businesses which foster economic expansion. This growing economy will create new jobs.

Congress has a responsibility to spend taxpayer dollars wisely or not at all, and I believe we should not leave future generations a legacy of debt. I look forward to colleagues to make sure the federal budget is responsible and funds priorities important to North Carolinians. As Congress begins its budget process, I will keep your concerns in mind. If I can be of further assistance on this, or any other issue, please do not hesitate to contact me or visit my website at


Richard Burr
United States Senator


This letter makes it perfectly clear to me that Senator Burr is either unwilling or unable to address the question of the budget. Burr cites the budget's commitment in educating the next generation as one of the reasons he supports it but, this budget will see the biggest cut in funding to the Department of Education since that agency was supported and it will also cause the biggest increase in the cost of student loans ever. He also talks about the steps the President will take to cut the deficit in half by 2009 unfortunately, the President's plan to cut the budget deficit in half by 2009 is only rhetoric. It has gone up every years since he took office and will probably continue to do so until he leaves office. The only steps that he outlines in cutting the deficit is to reduce spending on Medicare and Medicaid and to reduce the increase in annual spending to the rate of inflation. Neither of which has had any serious support by Senator Burr. He tells me that future generations should not be left with a legacy of debt but, he does not show any commitment to making that happen. Senator Burr's empty promises and meaningless rhetoric has not impressed me. I therefore feel that it is appropriate to conclude that Burr will move only when the President changes his position on this issue and that he is not willing to stand up to anyone and fight the deficit.

Congressman John Tierney sums up how many Americans, including myself feel about the wasteful tax cuts that both Sen. Burr and the President tout as an economic stimulus like this:

As we entered 2001, there existed a projected ten-year budget surplus of $5.6 trillion. Now the projected deficit after several months of this Administration’s policies will run over $3 trillion turning the $5.6 trillion surplus into $8 trillion of debt. In response, the President proposed a second round of tax cuts for high income earners, even though his first round of cuts are largely seen as responsible for much of the disappearance of the surplus. These policies have not created jobs or economic growth!

Wednesday, April 12, 2006

Paying back the debt will not be easy

Paying back the debt will be a lot harder that it was to incur it. Here are a few ideas on how we can start and how much revenue the suggestion will generate annually.

Roll back the Bush Tax Cuts. ($200 billion)

Raise postage rated by three cents ($6 billion)

Cut all pork from the budget ($200 billion)

End the Prescription Drug Plan. ($100 billion)

Impose a 5% national sales tax (Variable but, at least several hundred billion)

Roll back the tax cut on stock dividends (difficult to estimate but, at least several billion)

Increase minimum wage by 15 cents an hour (variable but significant)

Impose a 1o cents a gallon national tax on gasoline. ($13 billion)

Impose a $2 a pack national tax on cigarettes. ($2 billion every year from the tax but, the end goal here is to discourage smoking and cut medical costs later on)

Revenue from these new taxes would cause negative economic impact in the short run but, once the economy adjusts it will not hamper the it at all. Obviously these measures will never pass because in addition to raising taxes on individuals they poke at some powerful lobbying groups including oil. tobacco, and retail. Theses new taxes would give us about a $100 billion surplus. Reducing the deficit is more important than reducing the debt so this would offer a long term solution to our budget problems.


These quotes all come from Rep. Sue Myrick's website. I realize that politicians will say whatever it takes to get elected but, nothing will ever be accomplished on this issue as long they say one thing and do another.

"Rep. Myrick has advocated for more spending cuts in the 108th Congress than any other Member of Congress or Senator"

"Rep. Myrick is a true fiscal conservative"

"Rep. Myrick has voted to lower personal income taxes for ALL Americans. Rep. Myrick has voted to eliminate the Death Tax that effects small business and family farmers Rep. Myrick has voted to end the Alternative Minimum Tax that would have effected millions of middle class Americans. Rep. Myrick has voted to eliminate the Capitol Gains Tax. Rep. Myrick has voted to end the Marriage Penalty Tax that effects every married couple in the U.S."
I have some unfortunate news for Rep. Myrick: you cannot support support cutting both taxes and the debt at the same time.

Monday, April 03, 2006

Some Statistics on the Debt

Just thought that I would shed some light on why I am so concerned over the debt. I hope you can find these statistics useful.

16% of tax revenue goes to pay interest on the debt

Over $2 trillion of the debt is held overseas

At the current rate every cent of tax revenue will go to pay interest on the debt in the year 2040

Although the deficit for FY 2005 was reported at $319 billion the actaul cost was hidden by shady accounting practices involving Social Security. The actaul amount of the deficit, per a newly released government report, rings in at $760 billion.

The federal government owes $27,000 for every U.S citizen

The national debt is $8,300,000,000,000

The United States is responsible for about 22% of all debt owed by all governments

The U.S government will borrow over $350,000,000,000 this year

Interest on the debt costs us $55 billion every year

The debt is worth almost fifty times the government's gold supply at Fort Knox
The U.S government owes $80,000 for every citizen in the workforce

The debt is more than four times greater than tax revenue

The U.S has one of the highest deficits as a percentage of GDP among the developed world