The Debt Clean-Up That Awaits Us

Congress and the Trump administration are rightly focused on the immediate task of limiting the harm from the COVID-19 pandemic and the economic contraction it has precipitated. The emergency measures put in place are not costless, however; the government is taking on trillions of dollars in additional federal debt, above and beyond the run-up that occurred in recent years when times were supposedly good. Whatever else is done to address the crisis should not substantially exacerbate the long-term fiscal problem. Further, when the crisis recedes, the entire federal budget needs recalibration to head off an intractable cycle of rising interest payments crowding out necessary public investments.

The Congressional Budget Office’s latest economic and budget forecast confirms that the pandemic, and Congress’ response, have reshaped fiscal projections. CBO expects the federal budget deficit to widen to $3.7 trillion in 2020 and to $2.1 trillion in 2021. Relative to the size of the economy, the 2020 deficit — 17.9 percnt of GDP — is the largest since 1945, when the country was completing its victory in World War II. Federal debt will grow to 108 percent of GDP at the end of 2021 — a level not reached during the war or the years that immediately followed it.

CBO’s projection may be optimistic (the agency stressed its forecast is unusually uncertain given how much is not known about SARS-CoV-2). It assumes a second quarter contraction of 11.8 percent, which if continued for a full year would reduce the nation’s total economic output by nearly 40 percent. In the third quarter, the economy is projected to bounce back with growth of 5.4 percent — the equivalent of a 24 percent expansion over a full year. CBO expects the rebound to continue in 2021 with annual growth of 2.8 percent. The labor market would heal more slowly, with the unemployment rate remaining above 10 percent at the end of 2021.

The recovery could be more halting if the public health crisis does not abate in the summer, or if a new, nationwide epidemic occurs in the fall and winter, in tandem with the normal flu season. Further, the current downturn could precipitate other crises, such as new pressures within the eurozone if creditors begin to doubt Italy’s ability to service its ballooning public debt.

Analysts, including those at CBO, have been warning policymakers for many years that an unexpected crisis could exacerbate an already challenging fiscal outlook. These warnings cited the possibility of another financial crisis, or perhaps a war or other unpredictable international event. While the probability of any one of the possible range of disruptions occurring was low, it was only a matter of time before something happened again (like 9/11 or the financial crash) that required expensive emergency measures by the government.

Both parties ignored these warnings and supported policies in recent years that widened deficits even though the economy was at or near full employment. The Trump administration is particularly at fault for pushing aside fiscal concerns when passing its tax policies and negotiating successive budget deals with Congress. From 2017 to 2019, the government ran an average deficit of 4.0 percent of GDP, well above the 2.7 percent average during the period 1962 to 2016.

Rising federal debt is problematic for numerous reasons. Among other things, more debt means higher annual interest costs. Historically low interest rates can ease the burden in the near term, but that is not assured permanently. Servicing more and more debt means diverting resources away from education, infrastructure, health research, and many other worthwhile public endeavors. The only way to do it all is by raising taxes, or borrowing still more, which is the path of least resistance. So borrowing begets more borrowing, and the problem worsens. Past a certain point, the only way out is painful austerity that risks a political backlash.

The U.S. has been protected from most of the problems rising debt can pose because the dollar remains the world’s reserve currency. There has been no shortage of willing purchasers of Treasury debt instruments because of the high demand for safe, dollar-denominated assets. Although it is hard to imagine how this favorable environment might shift against U.S. interests, that does not mean it will never happen. There is no immutable rule which protects the dollar’s pre-eminent position atop global finance.

Fortunately, there is no need for drastic cost-cutting in the near-term, or to ever balance the budget. The goal should be to stabilize debt accumulation and then bring it down to a more sustainable level over many years. For instance, Congress might try to push accumulated debt back below 100 percent of GDP in coming years, and then down to below 80 percent of GDP over a period of three decades.

These goals might sound unambitious until they are compared with current law projections. Before the current crisis, CBO projected federal debt would reach 180 percent of GDP in 2050. The pandemic will make this dire forecast even worse.

Neither party has the political strength to tackle this immense problem on its own. A solution will require bipartisan compromise, which means it will likely include tax hikes and entitlement reforms. The hardest challenge is reforming the rules for the major benefit programs. The retirement ages for both Social Security and Medicare should be raised to reflect the aging of the population, and Medicare’s expenses should be restrained by forcing providers of services to compete more vigorously on the prices they charge for the care they provide. The impending insolvency of the trust funds financing both major retirement programs will give Congress an opportunity to pursue sensible adjustments.

While in a crisis, it is difficult to look ahead. But our actions today have consequences; the bills will come due eventually. It is better to begin planning now for that day than to drift into another calamity that tests the nation’s resilience.

One way to put a dent in this debt is to hold China accountable and sue the snot out of them.

  1. The debt to China is wiped clean
    (1.8 trillion)
  2. Real Estate holdings by China State owned (2.7 trillion)
  3. Assets and forfeitures (3.5 Trillion)
  4. Outstanding WWII loans totalling (1.4 trillion) by today’s rates and still a valid debt
  5. Additional loses in trade close to (4 Trillion)

We could be talking close to over 10 trillion in value once it’s all tallied up that can be applied to our debt and significantly reduce it to a manageable size thus presenting an opportunity to put a plan in place to reduce it further over a period of time.

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Why not go a step further? Let’s categorize China the same way that we categorize Iran and North Korea. Let’s withdraw all diplomatic relations, enact trade embargoes, freeze all financial accounts, and sanction US companies or any other companies of our allies that do business with them. If our allies continue doing business with them we withdraw all military support and aid to those countries. It’s time to play hardball.

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Problem with that is we have made China our manufacturing source. With that we have given them all our technology to build everything we purchase. Walking away makes them our competitor in manufacturing and they are ahead as they have manufacturing today and w do not.

30% of military electronics are provided by china as well as 100% of computes and cell phones as well as almost everything we purchase for the most part.

I fully understand and agree with the point you were making. However I compare this situation to a bad drug addiction. It’s easier to give the addict what they need so they don’t go through withdrawal symptoms and all of the bad effects that come along with that. What I’m suggesting would cause a very hard time for us in the US for quite a long time. But it’s time to break the addiction and get back on the path of independence and self-sufficiency. if we keep this needle in the arm of our country then we are going to be in a similar boat when the next pandemic breaks out.

I don’t disagree, either take the medicine today or tomorrow.

The problem is people. Our citizens have the Walmart mentality, w want it cheap and today.

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Indeed. Although I am hopeful that many people who have been asleep to just how badly this country has been taken advantage of and sold out over the years are finally waking up and want absolutely nothing to do with China. The problem is, which you were hitting on, how much pain and difficulty are the American people willing to endure to achieve that.

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I’d like U.S.-C.O.V.I.D. recovery stimulus spending be done on universal health care insurance and universal basic income; this being paid with a national ten percent value-added tax as well as with a higher corporate income tax of twenty-nine percent. I’d like tax reform and universal health insurance with universal basic income be implemented as follows:

  1. Universal health insurance ( U…H.I.) affordably be done with insured cost sharing, ( Universal Medicare with a combined $4,000 Part A and B deductible, a 20 percent Part A and B co-insurance and a 50 percent prescription drug co-insurance ) costing taxpayers ca. $1.9 trillion in the fiscal year 2023.

  2. U.H.I being funded in large part with a 10 percent value-added-tax ( 10%V.A.T.) less VAT tax monthly rebates of $165 for each American citizen age 18 or over, this would net approximately 600 billion dollars of revenue in the year 2023; U…H.I. also being funded in part with an increase in the corporate income tax rate from 21 percent to 29 percent resulting in corporations paying U.S. corporate income taxes of ca. $500 billion, the imposition of financial transaction taxes ( remittance taxes and stock/bond trade taxes) generating ca. $200 billion, the implementation of tariffs resulting in ca. $135 billion of revenue in 2023 and federal estate taxes generating an additional ca. $35 billion in revenue., alcohol, cannabis and tobacco excise taxes generating ca. $80 billion of funding for U.H.I, and the remainder of funding for U. H.I. coming from Medicare payroll taxes of ca. $350 billion.

  3. Social security being fully funded by a doubling of the cap on social security taxes, so that all workers and employers would contribute 6.2 percent of social security taxes on every dollar of their earnings up to $320,000 of each individual wage earner’s income .In 2023, this would mean Americans would pay ca. $1.3 trillion in social security payroll taxes.

  4. U.S. military spending along with all other governmental agencies, save for U.H.I. social security the Department of Transportation and Homeland Security,being funded with a simplified income tax system, just a few income tax brackets beginning in year 2026, zero percent on the initial $12,000 of personal individual annual income, 12 percent on $12,001 to $51,000 of personal individual annual income, 32 percent on individual personal annual earnings in excess of $51,000. Capital gains taxed at same rate as ordinary income. No tax credits, save for a refundable $2,000 child tax credit as well as a $4,000 subsistence living allowance tax credit for each adult American citizen. In 2023, this would result in total personal federal income taxes amounting to an estimated $1.2 trillion.

  5. The implementation of excise taxes on railways, fuel, airports and aviation collectively adding up to $160 billion, which would fund the Department of Transportation and Homeland Security.

  6. Approved federal spending in 2023 at ca. $1.9 trillion for universal health care ( U.H.I. ) $1.3 trillion for Social Security, ( no change from status-quo on S.S. retirement benefits ), ca. 900 billion dollars towards the military and veteran services or veteran benefits, $494 billion on debt interest payments, an estimated $100 billion towards Medicaid, $62 billion spending on the U.S. Department of Agriculture, ( ca. $10 billion ) for the Department of Commerce, ( ca. $13 billion ) for the Center for Disease Control and Prevention, ( ca. $32 billion) for the Department of Energy, ( ca. $9 billion ) for the Environmental Protection Agency, ( $4 billion ). for the Food and Drug Administration, ( ca. $40 billion ) for the Department of Housing and Urban Development, ( ca. $23 billion) for the Department of Interior annual spending, ( ca. $50 billion) for the Department of Homeland Security, (ca. $30 billion) for the Department of Justice, ( ca. $10 billion ) for the Department of Labor, ( ca. $25 billion ) for N.A.S.A., ( ca. $45 billion ) for the State Department, ( ca. $110 billion) for the Department of Transportation, ( ca. $23 billion ) for the Department of Treasury; the above proposed federal spending resulting in total federal annual spending to be ca. $5.18 trillion…

  7. The above approved fiscal year 2023 federal spending being ca. $5.18 trillion and ca. $4.56 trillion of tax revenue would result in a federal deficit of ca. $620 billion for FY 2023; all new government spending would be balanced with incoming revenue; the only deficit spending should just be interest on our national debt.

What would you propose be done for spending in order to economically recover from the corona virus pandemic. How would you propose this be paid for?

If China were to have indeed closed off Wuhan to and from other parts of China while intentionally allowing the Wuhan corona virus to travel outside of China into other parts of the world, then I’d like to see China held accountable for having committed such an act of international bio-terrorism. Then, I’d agree we should cancel out American debt owed to China.

Better yet, you want universal healthcare why to pay your fair share instead of demanding everyone else pay for your healthcare.

A national sales tax where everyone pays their fair share.

Increase the SS tax via the cap. Will you also increase the amount paid as the max would certainly increase with the cap increased? Or do you want to end the facade and make it into the true entitlement that it is today?

Increase corporate taxes, a laughable suggestion as they would pass it along to the consumer in higher price. Maybe you could double their taxes and they would move off shore and you get nothing. At 29% it would be an incentive to begin that move. But then again w could increase the trade deficit from over 600 billion to a trillion.

The national debt will increase year after year regardless as there is no provision to pay it down not that anyone cares. Not to worry as that debt service will become the largest budget item.

Go ahead use the covid stimulus for UHC. Many small businesses will close then you can pay a UBI as people will certainly be unemployed and likely long term.

I find it appalling that we would think about ending all incentive to actually work and eliminate the incentives for bettering our lives for our families all so the world can cross the border and increase the number and lower the standard of living to the level of Mexico or any other central american nation.


I reckon most small businesses would favor getting rid of the burden of administering and cost of providing health care to their workers. I figure they’d come out ahead on that deal of paying a bit more in corporate taxes in exchange for not having to provide their employees with health insurance.

What you are suggesting here makes small businesses and their employees completely dependent upon the government. How in any way is that a good thing?

When I wanted a job with better health care I improved my skills so I could go get that job and negotiate a higher rate of pay and a more comprehensive benefit package. What you are talking about completely removes the incentive for people to work hard and improve themselves.

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Many small businesses do not provide healthcare to their employees. The ACA covers them with medicaid as that is what the democrats, progressives intended.

You got your ACA now live with it and belly up to the bar any pay your fair share instead of demanding everyone else pay for your healthcare.

Businesses do not and have never paid corporate income taxes.
Taxes like labor and material are a cost of doing business and are factoring into the price of goods and services.
Taxes get to high and the prices rise above what their foreign competitors charge they cut expenses. PEOPLE are the largest expense. Can’t cut enough pool, the nest option is off shoring operations. Still to high move off shore. Still to high, close the business and liquidate.

Why is it that people like you demand others pay for your healthcare and demand everyone fall in lockstep with your demands. Your choices are far greater, you can chose Canada or many EU nations for your free healthcare. Quit demanding we trash what’s left of our healthcare system so you can get FREEE.

I find it laughable as the universal healthcare would be provided by the same people that administer the VA healthcare system which is a mess, medicaid which is beyond a mess resulting in doctors who refuse to treat medicaid patients as well as medicare, fraud ridden system where many doctors refuse to service seniors do to low and delayed payouts from the government.
And sadly the cheerleaders for UHC refuse to address the reality that the best and brightest would no longer seek a medical career as to government mandated salaries and the reality that they would be on a salary instead of an incentive based income.

I’d take a stab and say because people like this don’t have an understanding of business and how it works.

It’s a common misperception that business owners are wealthy.

It’s the attitude of “you didn’t build this” so you should pay more to the people who did.

What small businesses? They are getting wiped out right now because of this silly shit. How does Coronavirus know it should not go into Wal Mart but that it should INFEST small businesses?

If you’re a small business, you are CLOSED, but if you’re a billionaire run mega chain, it’s business as usual (except for whatever bullshit you want to mind whip the people with, like one way aisles)

Corona is the consolidation virus. Communists like to keep it simple. They want one ONE EASILY CONTROLLED FEED TROUGH. Right now, with small businesses, there are too many feed troughs to keep track of, so coronavirus miraculously goes to the small places and makes them toxic waste holes that MUST BE SHUT DOWN, while it happily dances away from Wal Mart like a fairy.

The motives are obvious. With too many doctors now stating that they are falsifying death reports as corona, with too many doctors now saying they are murdering people to get the stats as well, corroborated by phone calls to husbands, videos of masked men announcing provably living people dead from corona right after those living people were carted away by police, and now DEAD NURSES who blew the whistle, the story line is obvious: Corona is a big fat hoax being fronted to destroy small business and hand everything over to centralized communist systems.

They destroyed America’s oil industry on purpose with this. They are destroying America’s small businesses on purpose with this. They are quarantining people while feeding them free money to invoke social change. They are destroying agriculture, with the meat sector now documented to be 45 percent wiped out. We need a rebellion STAT and NEVER FORGET WHO FRONTED THIS and how it happened.

This happened because Fauci and Bill Gates paid for the development of a virus that was supposed to be devastating but ended up being a failure because at least the final tweaks were done in China. They probably did smuggle the original out of Ft. Detrick but I don’t think we got an un-touched American product because if we did, it would have worked.

In conjunction with this, the media played the game and ram rodded a scam down everyone’s throats. And who were the main players in ALL OF IT? Answer: The Tribe. They have wormed their way into ownership of all the big corporations people are now feed troughed into. They own the media that fronted the ruse and ran with it as if it was a complete success and to top it all off, Gates and Fauci are also of the tribe, with the “cure” coming from a tribal company.

They then destroyed agribusiness by refusing to buy from agricultural sources they did not own with this enforced by the fact that they owned all the big feed troughs people are now forced to go to while non-tribal businesses die. If there are any efforts to put things right, people need to know who did this, it’s not going to work if people are stupid enough to think it was Muslims, Chicoms or god knows what else that caused it all.

Well said.

These people are totally clueless as to the cost of doing business and the reality that there are limits as to hw much can be demanded from the government before the reasons for having a business is eliminated by the costs imposed by government.

The PPP program has proven small businesses are indeed dependent on government. As previously mentioned, universal basic income as demonstrated in the case of the Alaska Permanent Fund does not take away incentives for people to work. A single payer universal health insurance system is tried and true in many nations where their workers are very productive and earn a very high standard of living.

That’s not true! Small businesses were doing just fine until the GOVERNMENT forced them to close down! The economy was doing fine too until the government got involved. If Americans were allowed to use their own common sense and small business owners were allowed to implement their own rules for their customers we would all be fine. This mess was created by the government.

Id like everybody, including myself, to pay taxes on the basis of our consumption in order to fund universal health insurance, which would also be funded in large part by individual cost sharing. Our employer-based health care system has indeed been trashed by the SARS-Cov-2 virus and will likely get trashed again by the next pandemic leaving millions upon .millions of Americans jobless.