Sunday, March 13, 2011

Debt Ceiling

I just sent the following letter to my representative:

I am deeply concerned about our nation's debt.

Looking at the national debt clock, it appears that the source of our problems is the unfunded liabilities.

The debt ceiling debate is about the amount of money that we are currently borrowing. Our nation is forced to automatically up the debt ceiling as the unfunded liabilities come due.

It seems to me that, to control the debt, we must begin by placing a cap on the unfunded liabilities.

We would do more to get our financial house in order if we used the 2011 budget battle to place a hard cap on unfunded liabilities opposed to spending all of our political capital on a one time decrease in the debt ceiling.

I propose that the Senate replace the debt ceiling with a dual program that included an aggressive cap on unfunded liabilities with a modest increase in the debt ceiling.

Kevin Delaney


RD said...

Careful how you read that, They leave out the fact that they are adding 70 years of interest onto their project!

It is a 70 year projection, so the actual number should not be read to much into, that is a scale of time that a 0.1% change in wage growth from what they assume in their model could drastically cut that scary sounding number down(between difference in interest and principal easily 1/4 of the total liability).

The number needs to be further taken into context of gdp growth and inflation, another 2 variables they leave out on that site. In 70 years growth and inflation will have pushed the yearly GDP to around $70 trillion dollars, Of course noting again that a 70 year projection has little real value.

y-intercept said...

Conversely, a drop in wages can make the debt question dramatically worse. Personally, I don't see any great upward pressure on wages. I notice I have to work significantly harder for less.

The game being played in Washington is that politicians will load the books with unfunded liabilities in backroom deals.

Each time the debt ceiling debate comes around, Congress finds it cannot cut the unfunded liabilities made through backroom deals; so they are forced to cut those programs funded through deliberative legislative process.

There needs to be a cap on the ability to create unfunded liabilities.

The calculation of unfunded liabilities in The Debt Clock may not be the best figure. The figure would be something devised by the CBO.

Calculating unfunded liabilities based on some rosey scenario of wage growth is probably unrealistic.