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Friday, September 2, 2011

Should we pay our debts?

Should we pay our debts?

On 7/15/2011, "Real Time With Bill Maher" described the debt ceiling issue as one party -- the republicans -- saying that we should not pay our bills.

I'm aware that this is humor. But that's a little extreme. Lets look at it better.

Both parties say "Pay our bills". One party says "And, lets increase our income so we can pay future bills". The other says, "And, lets reduce our spending so we don't have future bills to pay".

The problem? Those "future bills" are things that the U.S. government has promised to pay.

Democrats want to pay all bills, both those that we've already gotten the billing invoice for, and those that we owe but have not yet gotten the paper work for. This is pretty close to Accrual accounting -- you incur a debt when it happens, regardless of when it is due or when you get the paper. The republicans, on the other hand, want to treat things as cash accounting -- if you haven't gotten the bill yet, then it isn't a debt.

The problem? This has been going on, *in both parties*, since at least 1950. We've seen it in "Underfunded pension plans", where private employers were allowed to not pay people what they had promised to pay. Now we're seeing it in social security, where the government wants to say that we won't pay what we promised to pay.

And the democrats are finally saying "Enough".
The republicans want to keep on saying "We lied".

If you agree that promises to pay by the federal government are binding, then you have no other choice but to say we have to raise taxes.

If you say "Raising taxes will kill the economy", then you're looking at a different problem -- our money supply system is broken. That's a different problem, with a different fix.

Now, is there a long-term solution to government expense? Yes. Military spending is well beyond any reasonable amount needed for defense. But trying to find what you can cut and what you cannot is probably very hard at this point. Essentially, we need to audit the defense department, and that will be expensive. Yes, we need to spend a large amount of money to examine defense spending in detail, so that we can save a large, ongoing amount of money. So what's the problem?

You're trying to audit classified information. That's kinda hard.

And as long as the only solution to the biggest piece of government spending is to audit classified information, and that does not get done, then the only option available is to raise taxes. Or, say that we won't pay our bills.

1 comment:

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