Tell me why this is a bad idea:

Rep. Bill Owens tackles the national debt

Washington -- Six months after taking office, U.S. Rep. Bill Owens is addressing one of the weightiest issues facing the nation.

Last week he declared war on the $12.8 trillion national debt. He proposed legislation, the “War on Debt Act,” aimed at reducing America’s dependence on foreign creditors in China and around the globe who own at least $3.7 trillion of the U.S. debt.

Rather than waiting for more senior colleagues to propose solutions, the Plattsburgh Democrat from the 23rd Congressional District took on the problem by himself. He came up with the idea of selling a type of savings bond to Americans specifically aimed at reducing foreign debt.

The 30-year bonds would be sold in increments of $10,000 and offer a variable interest rate. The bonds would begin paying interest after one year. Earnings would be exempt from state and federal taxes. Owens believes the bonds would be a solid retirement investment for baby boomers.

http://www.syracuse.com/news/index.ssf/2010/05/rep_bill_owens_tackles_the_nat.html

there is a reason we can't do anything about china misvaluing their money and all the other crap they have been doing. we owe them lots of money!

It simply is yet another program for govt to borrow money it doesn't have.

Getting out of debt is insanely simple.

If revenue > expenses then eventually it is impossible to not get out of debt.
If revenue < expenses no matter how you try to "magic" it up you will get further and further in debt.

If govt wants to get out of debt it can:
a) raise revenue = taxes
b) cut spending
c) do both (likely best solution)

The govt controls both aspects of debt it could get start getting out of debt at anytime it wants to.
The first year, month, week, day we budget (and stick to it) to spend less than we have in revenue the debt will shrink.

d) cut taxes and increase spending.

Option d was popularized by Ronald Raygun and was based on the solid economic theory of world renowned economist Arthur Laffer. This economic theory is known by many names. Some call it supply-side. Some call it trickle down. Some call it Raygunomics. Some call it the free lunch (after all, who could fuck up that?). Some call it voodoo. After it's brilliant success in the mid 1980's it was once again revived early in the 21st century by our 43rd presidunce, George W. Bush.

Because one dunce was President twice. Kind of a redundant Presiduncy, I suppose.

Or maybe 50th, or maybe even 58th. It could also be that he really wasn't really president at all because he never presided over anything other than the Executive Branch. Chief Executive seems like a more accurate title.

so only the rich can benefit from this tax free income, that's why.

Anybody who has been employed consistently that doesn't have that much available in a retirement account by the age of 30 is going to have a LOT of trouble down the road.

Lower middle class is more like it.

many people who work don't have a spare 10k just laying around to invest.

and if it is, 57% of this nation is "rich"...

http://money.cnn.com/2010/03/09/pf/retirement_confidence/index.htm

Maybe "rich" wasn't the best choice of words, but this is definitely slanted towards those who are better off, as opposed to well-off.

And savings for retirement are often already tied up in investments that can't easily be liquidated for this silly program.

$10,000 really isn't that much in a retirement account and unless it's already in bonds, it's typically pretty easy to move from one to another.

trying to cash out some of it. Maybe I misunderstood when Haele was telling me about it.

Either way, to us, 10k is a lot of money to be putting in an investment. And as others on this thread have said, I don't see how accumulating more debt is going to get the US out of debt.

retirement offered) to these bonds without penalty?

Twice in the past ten years I've seen my already meager 401k shredded, losing huge amounts of its value, but with it being the only thing offered in lieu of a real pension I'm pretty much stuck with it.

I'd much rather put the money into a lower earning something rather than a something that might earn more or might lose a lot.

Can only rollover 401K into IRA when you change jobs though.

In the meantime your 401K should offer a treasury bond fund as an option.
401K doesn't have to me stocks.

You won't make as much but you won't get "shredded" either.

Most people who have money to invest have $10K so lowering the bar doesn't open up the investment pool very much.

However lowering the bar does add significant accounting costs.

To borrow $1 billion w/ $10K bonds requires issuing 100,000 bonds. To borrow the same $1B with $500 bonds requires issuing 2 million bonds. Each bond needs to be tracked, interest issued, recorded, and paid back at maturity.

If you want to buy govt debt RIGHT THIS SECOND and have less than $10K there is an easy way to do it: Savings Bonds.

You got EE bonds which are fixed rate investments and you got I series savings bonds which are inflation adjusted.
http://www.treasurydirect.gov/indiv/products/prod_eebonds_glance.htm

It just gives the feds a new way to borrow money.

You still have to make up the debt, but you're paying interest to yourself.

If it was designed to REPLACE current debt, it would work as you describe. However, it could just as easily be used to merely borrow more money than we do. i.e. they sell these bonds to us, and continue to sell bonds to China.

once upon a time, the US actually paid for their wars!

This time, force all the republicans to buy war bonds to pay for their stupidity.

This generation wants tax cuts while they wage war.

and force them to stare at the war bonds and posters encouraging their grandparents to buy them. Surely, they were the greatest generation who actually PAID for things instead of reducing taxes to almost nothing and putting off the debt onto others.

The debt is already denominated in bonds. The only way to reduce debt is spend less than you take in.

This seems like a desperate gimmick to look like borrowing EVEN MORE money is somehow borrowing less money.

If we really wanted to balance the books, we could do it tomorrow: cut defense spending by 75% and restore the tax brackets to those of the Eisenhower administration.

Asking middle-class Americans to pay once again to funnel money to the wealthy just seems cruel.

17%

That's the percentage of the GDP that government took in during Eisenhower.

17%

That's the percentage of the GDP the government takes in now.

10%

That's the percentage of the GDP that we spent on defense during Eisenhower.

6%

That's the percentage of the GDP that we spend on denfense now.

You ignored the fact that we bring in just as much of the GDP in taxes as we did during Eisenhower and instead went to a snarky reply.

Brilliant.

Simple facts: we spend too much on the military and we tax the uber-wealthy too little. Cutting defense by 75% would save a bunch of money and not harm our national security one bit. How is that changed by the percentage of GDP devoted to the military?

Same for taxes. The tax burden on the wealthy has been shifted to the middle class since Reagan. No matter what percentage of GDP we take in taxes, raising taxes on the wealthy would bring in more revenue AND go a long way toward restoring a bit of equity in this society.

So yes, I was remiss in my response to you. Your numbers were not only misleading, they were pointless.

We spend less of what we make on the military and still send just as much to the government yet we're in such a fucking mess?

But tell me, are we still fighting the Cold War at the level we were in 1950? If not, why the fuck are we still spending like we're fighting it?

Let me guess, you're pretty young. Do you remember the BRAC process that took place almost immediately after The Wall fell? Do you not realize we spend about 40% less on a % of GDP basis on defense than we did in the 60s? If you think the military is big now, kid, you aint seen nothing yet. The military is one of the few parts of the government that's actually shrunk relative to the everything else since the 60s.

If you want to just ignore the fact that we are bringing in just as much of our GDP now as we did when we had the tax brackets you want as irrelevant, more power to you, wallow in that ignorance. Until you're willing to look one step further than face value you'll continue to think this all nothing more than a few one liners.

If we cut defense and raise taxes on the wealthy, we can easily pay down the debt.

Which part of that are you having trouble understanding?

And you have shown you have no historical perspective other than knowing when the highest marginal tax rate was.

Really? Your solution to fixing our situation is to lay off just about 2-million members of the military, not to mention the economies that depend on them?

Wallow in it all you want.

and keep throwing war spending down the shitter? Are you sure you're on the right board?

Here's an idea: if you want a jobs program, how's about we come up with one that doesn't involve killing people?

All the govt debt is issued in bonds, they are called treasury bonds. People can BUY THEM RIGHT NOW.

THIS VERY SECOND anyone can buy Treasury bonds. The Chines have bought abotu 1/5th of them but the vast majority of T-bonds are held by ..... <drumroll> AMERICANS.

Americans investing $10K or more are buying Treasury bonds. WTF do we need a "new program" to do the exact same thing.

If you don't have the money for Treasury bond you can buy a savings bond or invest in a T-bond fund.

This doesn't do jack shit other than give it a fancy name and pretend like it is a solution.

BTW: Treasury bonds can never be called. So if the Chinese govt buys a 30 year bond issued today we will be making interest payments until 2040. There is no way to "pay it down" or "pay it in full" early.

If it's debt that is paying interest on a bond, the accumulation of national debt continues.

Whether the obligation holders are US citizens or foreign countries, the US owes a debt and has to pay debt service on it.

And what's so bad about having US securities held by foreign countries? That's a convenient whipping boy, but it serves a purpose in our economics. It helps us finance our budget and allows us to pass off to other countries some of our risk of downturn.

The primary way to balance the budget: a roaring economy that yields record tax revenues to the US treasury. The budget will never be balanced by cutting spending. It won't be reduced by debt obligation schemes. It will only be balanced by increasing revenues to meet federal spending obligations.

once the money has been invested, the principle can just magically vanish and no interest ever be paid, because all investments involve risk. No explanation need be provided, but it can be indirectly blamed on poor people who borrow money to buy houses. Wink wink, nudge nudge.

So, it's secretly a tax on those who have $10K or more lying around to invest in sketchy gummint instruments.

Brilliant!

Yes, bad idea.

We just like to declare war on things. We don't really do anything about it, we just let people know it's there.