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Study: "Debt Problem Began Four Decades Ago"

Chris2189 Wrote: Jan 22, 2013 6:57 AM
PhillupSpace2 sez..... "And if the interest on our debt rises 1%, just 1%, the interest on the debt will be more than the Defense Budget. Defense spending is not bankrupting us!!!!!!!!!!!!" Why should defense spending be left alone, especially at a time when wars have ended or are winding down? The 3 biggest expenditures are Medicare/Medicaid ($825bn in '11), Social Security ($725bn in '11), and defense ($700bn in '11). Large scale near term cuts to Medicare and/or Social Security would be nearly impossible in a political sense. Many of the same people that consider themselves very conservative would go into meltdown if their Medicare was to be cut back. That's why every proposal so far only changes the rules for those 55 and less.
Chris2189 Wrote: Jan 22, 2013 7:03 AM
Medicaid could be altered politically, but that's less than $300bn, so even a 50% cut would only dent the deficit by 10%.

That leaves defense (and discretionary spending ($646bn in '11)) as the biggest possible place to cut. A cut of $140bn to defense would be significant, but would still leave the US as the strongest military in the world. Couple that with some significant cuts in discretionary spending and some reforms to Medicare/Medicaid and SS and problems aren't solved, but things look better. Then the reality is that revenue is going to have to increase unless you can get people to vote for giving up their SS and Medicare entirely (or at least in large part). I'm guessing that isn't even sort of going to happen.
Chris2189 Wrote: Jan 22, 2013 7:07 AM
By the way Phillup, current debt service is at $227bn (in '11). There's no way to calculate that a 1% increase in the interest rate will cause that $227bn to suddenly become more than $700bn. Defense spending is 3.5x the interest cost. Not saying that the interest cost is to be ignored, just that the idea of a 1% rate increase causing the interest cost to outstrip defense spending is a bit off.
A new report from the Federal Reserve Bank of St. Louis reminds Americans that, contrary to the narrative that huge deficits and debt are merely a recent product of the Great Recession, the problem began over forty years ago.

Daniel Thornton, the St. Louis Fed's Vice President and economic adviser, finds what conservatives have been saying all along is true: it's steadily increasing government spending, not a lack of tax revenues, that's causing all of this.

[A]fter 1970, both revenues and expenditures increased on average relative to the previous two decades; however, revenue increased marginally while...
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