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Politicians try to make the national debt look really scary in election years, wanting us to believe that our national debt is the same as a family taking out a home mortgage that is way too big for them to afford.  The fact is, we need some debt in order to have sufficient leverage amongst our trading partners.  Click on the Paul Krugman link in the blogroll and check some of his op-eds and blog posts for a better understanding.  Our national debt is nothing at all like personal debt; not even close.

Over 70% of the national debt is simply money we owe ourselves.  China doesn’t hold all of our national debt, some campaign (and other) statements notwithstanding.  Wikipedia has some recent and relevant figures.  For a simplified view, let me tell you a short but true tale about some personal debt of mine.

A number of years ago, my wife and I decided that we needed some renovations and updating done to our home.  The kitchen was small, the dining room was small, and the carpet was getting old and faded.  We decided that taking out the dividing wall between the kitchen and dining room would be a great improvement.  We would have one large combination kitchen/dining room that would be the width of the house, and consequently the largest room in the house.

When we started discussing how we would pay for these renovations, I told my wife that we could borrow the money from my IRA.  My IRA had provisions for a limited number of specific loans; buying a new home, or renovating/repairing an existing home was listed.  The terms were simple and straightforward.  The funds would come directly from my IRA, and be repaid with monthly payroll deductions.  Interest would be charged at a rate of 1% above the prime rate at midnight, June 30^th of each year.  The interest would go back into my IRA.  There were no other fees or charges.  I would borrow money from myself, pay myself back, and also pay myself interest for the duration of the loan.  The national debt is much like that.

We had the renovations done, put in new carpet, and were quite pleased with the results.  The loan payments were modest, not missed since they were deducted before I ever got my check, and were paid in full in three years.  The quarterly statements on my IRA listed the loan as receivable.  Bottom line, we got what we wanted, were not burdened by it in any noticeable way, and still retained the full value of my IRA as if it had never been touched.

My IRA was all in mutual funds, no stocks, with very little risk, but there is always some risk with any investment.  Such it is with our national debt.  We owe about 70% of it to ourselves, not foreign countries.  Yes, China owns quite a bit of it, but they are not going to demand payment, because it would cause them more trouble than it would cause us.  They are one of our trading partners, you know.  “Cashing out” would be a lot like cutting off their nose to spite their face.  They’re just not going to do it; it’s not in their best interests.

Any given amount of dollars that our grandchildren supposedly will have to pay at some point in the future will change tomorrow or next week or next month.  As the economy improves, government revenue increases, the national debt goes down, and the individual share each of our grandchildren owe (to themselves, primarily) gets smaller even before they have made their first “payment”!

And remember, many of us are making installment payments on our national debt by April 15th.

I got a reply, of sorts, to my last post, which is a bit humorous.  It’s the second blurb down, beginning with “My correspondent quotes me and then comments”.  The humorous part is in what follows in that sentence; “I dislike that form of dialogue, in part because it doesn’t require that the critic demonstrate he has understood what I said”, which makes the title of my post, “Response to an insular, unassailable pontificant” seem all the more fitting.

Well, I do understand what he said.  He is, after all, a conservative, and conservatives are not all that difficult to understand.  However, the fact remains that several million jobs have simply disappeared, and there is a very reasonable and largely consensus explanation for why they disappeared.

I do not believe for one moment that unemployment can be made comfortable enough for all of the folks who lost all those jobs to be satisfied with being unemployed.  I firmly believe that the vast majority of those people would much prefer to be gainfully employed.  No doubt there are a number who are old enough for retirement, but that doesn’t necessarily mean that they prefer retirement, or considered themselves ready for retirement.

The bane here is not in that unemployment has been made more pleasant and appealing, and that is why there are so many unemployed, but that economic policies were put in place a number of years ago that led to the disappearance of several million jobs in a few short months, the majority of which, I believe, as do others, will not be coming back.  Deregulation in the financial sector and unsound loans being bundled into derivatives (some of which were shorted by the very companies issuing them, betting that they would fail) “disappeared” those jobs, and it will take a number of years for those millions of jobs to be replaced in the best of economic circumstances.

We don’t need to read the history of past decades or centuries in order to know what has happened and what needs to be done.  We mainly need to read the history of this past decade and try to fully understand what has transpired.  Greed will out, and deregulation will speed that process considerably – we have proof.

We don’t by any means need a command economy; but we certainly don’t need widespread deregulation, either.  That’s what got us here, and whistling past the graveyard won’t change that one whit.

Government “getting out of the way” will not repair our infrastructure that is literally falling apart in many places across the country; government owns the infrastructure that is falling apart.  I worked in maintenance for a number of years.  My motto then was, “let’s fix it now while it’s still relatively cheap, because the costs go up as time goes by.”  A systematic and comprehensive repair of our infrastructure nationwide would be quite a kick-start for the economy.

I recently emailed the following to Jerry Pournelle, but I don’t expect to see it on his blog: 

I keep hearing that dual mantra of “Job-Killing Regulations” and “Tax Breaks to Stimulate the Economy”, and both are, quite frankly, BS.  More and more independent studies are pointing out the ignorance of those and similar statements. 

http://www.centurylink.net/news/read.php?id=18692574&ps=1014&cat=&cps=0&lang=en 

“Consider proposed cuts in taxes and regulation, which nearly every GOP candidate is pushing in the name of creating jobs. The initiatives seem to ignore surveys in which employers cite far bigger impediments to increased hiring, chiefly slack consumer demand. 

“Republicans favor tax cuts for the wealthy and corporations, but these had no stimulative effect during the George W. Bush administration, and there is no reason to believe that more of them will have any today,” writes Bruce Bartlett. He’s an economist who worked for Republican congressmen and in the administrations of Presidents Ronald Reagan and George H.W. Bush. 

As for the idea that cutting regulations will lead to significant job growth, Bartlett said in an interview, “It’s just nonsense. It’s just made up.” 

Government and industry studies support his view.” 

And: 

“”I don’t care about that,” Texas Gov. Rick Perry told The New York Times and CNBC, referring to tax breaks for the rich. “What I care about is them having the dollars to invest in their companies.” 

“Many existing businesses, however, have plenty of unspent cash. The 500 companies that comprise the S&P index have about $800 billion in cash and cash equivalents, the most ever, according to the research firm Birinyi Associates.” 

They need more cash to sit on?  That will stimulate the economy?  Sounds like BS, doesn’t it? 

“The rating firm Moody’s says the roughly 1,600 companies it monitors had $1.2 trillion in cash at the end of 2010. That’s 11 percent more than a year earlier. 

Small businesses rate “poor sales” as their biggest problem, with government regulations ranking second, according to a survey by the National Federation of Independent Businesses. Of the small businesses saying this is not a good time to expand, half cited the poor economy as the chief reason. Thirteen percent named the “political climate.” 

I’ve said it before, and I’ll say it again: Consumers create jobs.  We need more consumers.  That’s what most of the businesses and companies that actually do the hiring are saying.  But you can ignore them, can’t you, ‘cause you have a PhD in politics; the business community doesn’t understand what they’re talking about.  All they understand is dollars and cents.

but I think he missed.  I sent him a couple of links to the Warren Buffett Op Ed piece, the original and an edited version, but from his response, I don’t think he read it.

I sent him another email asking about “Job-Killing Regulations”.  Usually he just ignores me; on occaision I’ll get a reply email.  But then on rare occaisions, he’ll actually use my letter, and this time he used three!

Here’s what he had to say.

He’s all for it…