whats up with the deficit? no one has ever explained to me who we owe 3 trillion dollars. do we really owe someone this money, and if we do f**k um, don't pay deficit solved.
- Anonymous1 decade agoFavorite Answer
There's a few related topics that you might want to understand, that sometimes people get confused with.
* Trade Deficit
* Budget Deficit
All of us get income from some place ... family, jobs, bank account, stock market, whatever ... we use this income to struggle to pay our bills, keep a roof over head, decent meals, medical care, taxes, occasional entertainment. Our goal each year is to spend less money than we make, so that we are able to save something towards retirement, a rainy (sick) day, big expenses in the future (new car, new home, education) and perhaps an inheritance to our kids, our family.
You might think that the government does the same thing.
With the taxes they collect from us, pay for various things to run the government, not take a whole lot more taxes than there are expenses, not spend a lot more money than get in. Well you would be wrong.
The BUDGET DEFICIT is combination of what the government spends in excess of money coming in (like you carrying a negative $ balance in your bank accounts ... what the bank calls "over-drawn") and the INTEREST on that debt. When WE make a mistake and spend more money than is in our bank account, the bank socks us with all kinds of penalties and interest charges. The government is doing that ALL THE TIME.
The way it works, you need to understand the role of THE FED. Various government agencies are authorized by the Congress budget, and special permissions from the President, to spend various sums of money. They use THE FED like a check-book ... need money, write a check, and send it to THE FED electronically. THE FED issues government bonds to banks all across the USA in the form of "gimme" as in "gimme the money" for thes bonds. The banks have to give THE FED the money to buy the bonds ... you cannot be a bank in America unless you agree to this system. The banks then turn around and sell the bonds to various places they have contracts with, such as people in other nations that are not exactly friendly with us, to use as LOBBYING COLLATERAL ... so for example, if we say to Japan or India that we need to renegotiate some trade tarriff, they can hold over our heads what will happen if they dump on the market a few trillion $ of our bonds that they had bought.
The largest computer disaster in the USA prior to Y2K was when THE FED ran out of numbers for the bonds. No one had paid any attention to how the software was designed to notice that they were running out of numbers. Under the rules of the game, when the "gimme" notices are issued, you gotta pay, but they could no longer issue bonds because no #s may be re-used, so they had to borrow the money needed to run the government, and the banks loaning trillions of $ on short term loans could charge anything they liked in interest.
What is amazing to me is that they got the software fixed in one week. (that fast)
Note that during the Bill Clinton Presidency, the US government took that debt down to nothing, zero, nada.
The Democrats say Bill Clindon was responsible.
The Republicans say the Republican Congress should get the credit.
Actually it is worse than partisan politics ... they took a heck of a gamble with short term bonds.
You know that investing in the stock market is like rolling the dice ... you can win big, or lose big ... well the BUDGET DEFICIT was ended under Bill Clinton administration by taking one of these humongous dice rolling gambles and they won. Actually if you look back on the careers of the Clintons, they are rather experienced in this kind of thing.
The TRADE DEFICIT is another animal.
We import stuff from Europe, China, India, all over the world, such as oil and manufactured goos.
We export stuff all over the world.
If you total up the value of all imports and all exports the difference is the trade balance ... some nations have a trade surplus, meaning they are getting more wealth through trade, while others have a trade deficit, meaning they are getting poorer, and more deeply into debt with the rest of the world each year ... the USA is one of those nations.
If you were to add up all the trade imbalances between all the nations of the world, in theory it should all come out to zero, balancing each other. It does not in fact balance. It is off by mind boggling sums of money. This is because of the crooks in the system, the drug cartels, the illegal arm sales, terrorists laundering money, etc.Source(s): I am a computer professional interested in computer disaster stories.
- coragryphLv 71 decade ago
The national "debt" is over 8 trillion. The "deficit" is just how much we've overspent any given year -- how much the debt has increased.
Some of the debt is owed to banks and corporations, some to other countries, and a lot of it to US citizens in the form of govt bonds.
And yes, the US govt could just tell everyone that it was refusing to pay the debt -- it's called declaring bankruptcy. But it also means that very few people or countries would ever loan money to the US again, which given how often we use deficit spending, that means drastic changes to govt operations.
- 1 decade ago
The government sells Savings Bonds as well as Treasury Notes. These accrue interest to the holder. The biggest deficit is through trade. We in the US get stuff from other countries, oil from the mid-east, toys and other things from china, etc. We in the US in-turn send stuff we make to them in-trade. When what we get is greater than what we send there is a deficit. If we just write the deficit off then every country in the world would stop sending us the things we need. In today's society we in the US need the other countries more than we need them.
- geegeeLv 61 decade ago
Sorry, we can't do that! We are in debt to other countries & before it is over, we probably will owe them more money than the 3 trillion you quote. We are living beyond our means. We are waging a war we cannot afford, we are driving cars that use energy that will soon be too expensive for us to buy. Much of the food that we consume is grown out of this country. Almost everything we purchase is imported. We have lost our ability to be a self sustaining nation. The politicians do not want to speak of raising taxes or paying more into Social Security but if we are to remain afloat, these things must be done. The cost of medicine is outragious, yet the drug companies will not cut prices to Americans but will sell to other counties cheaper than to it's own people. Insurance companies find ways to pay little toward your bills, instead asking you to pay a co-pay, yet they don't lower their insurance cost to us. Our government turns a blind eye to all of this even though they know that we will be paying these debts into the lives of our great grandchildren & that they will be receiving far less in the way of material goods for all of their effort. It is time for all of us to wake up to the fact that we must start to pay more in taxes & Social Security or those who come after us will have nothing.
I know, it seems that we pay a lot in taxes, but compared to other countries; we pay a lot less than they do. Much that we pay into taxes goes to projects that we have no say in & a lot of it is gravy for the politicians so they can be re-elected. These expenditures must be stopped. We can't affort them any longer.
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- zenLv 61 decade ago
Our government just keeps takin' the shirts off OUR backs!! People are dying everyday because they can't afford their meds, heating and air, food!!! All the while, our governments starts wars (brainwashing the public to make them think it's okay to send their babies to a battlefield). While most of us struggle just to put gas in our tanks and keep our homes out of foreclosure...Bush' lifestyle NEVER misses a beat. When there's a draft, his daughters will never be on the frontline, except at the A's game! Betcha he's not got one stitch of clothing from Walmart. And why do we spend so much on NASA, really? We need to take care of the earth before we destroy it. And it's people. And we should start first in our own backyard.....
- SageandscholarLv 71 decade ago
Ok - so we don't pay it - then who do we borrow from to shore up this year's round of irresponsible spending from Bush? And then watch the value of the US dollar fall really quickly (it is plummetting now but that is nothing). Then we'll see how much everyone whines when gas is $6 a gallon.
- 1 decade ago
The deficit is almost gone due to the tax cuts. Tax cuts produce investment=spending=jobs- revenue.
- Anonymous1 decade ago
There's something ****** up about the government for all interests, from homos to accountants. Ignore it and be happy.
- Anonymous1 decade ago
read economics 101
- Anonymous1 decade ago
we owe it to ourselves. so we wind up f**king ourselves. like to see you try it.