Tuesday, February 5, 2013

Actually Paying the National Debt

Numbers never lie, but they can be used to misrepresent.  Even if with a clear definition, numbers may be unfathomable: how big (or small) is a quark?-how long (or short) is a unit of Planck time?  How could one actually write out the numbers in a googolplex? 

On a more practical level for most people, let us look at money and more specifically imagine actually setting a schedule to pay off the national debt (as it stands now) at a mere 3% interest rate, to be paid off in 30 years:
$16,500,000,000,000 debt
$8,543,280,000,000 total interest
$25,043,280,000,000 total paid
$69,565,000,000 in 360 monthly payments

There is a point when numbers can become so large, that they no longer seem real.  Picture an egg, and it is an easy task.  Now picture two eggs, and it is still an easy task.  Continue to add eggs so there are three, four, five, a dozen - even a dozen can be pictured without too much difficulty for we're used to a dozen as a marketable, and a grouped amount even though it is composed of 12 units. 

The normal amount that we humans can track in individual units is 7 +/-2.  We're still physical entities (organisms), and have necessary biological and cognitive limitations.  This affects man and animal, for even crows have been found to be able to count to three.

What happens when what we're supposed to be paying attention to goes beyond those seven individual units, or goes beyond such understandable groups?-how many measure in Plancks?  

Try and picture 1,651 individual eggs, or picture the units that compose a million, and then how to transport them.  Those individual units cannot be visualized; they can be theoretically understood, but not seen.  (Theoretically here to simply mean though a definition may be clear, the actual amount may be different, such as an operational definition of 1,651 eggs for a shipment may be definite, but counting them to fill that definition - how many were missed, double-counted or broken may not be considered and reflect the actual amount). 

How much space do 1,651 eggs fill?-how much do they weigh?-how can that mass be transported?  It's possible for one who deals with eggs en masse to be able to answer those questions and use logistics to ship the eggs about, while minimizing loss.  For those who don't have such experience with eggs, we can only guess.  And that is with only 1,651 eggs - how would we deal with a million eggs?-what about more than a million eggs?

Let us now change the focus from eggs to something that affects us all: money.  Going to a fast food restaurant to use a dollar to buy something, and we can easily see the single dollar and the item we are buying.  If we go to the store to buy a book, we can see the number of bills exchanging hands, though it is becoming more difficult to visualize individual bills - that's why we have other denominations and not just singles, like in the way we have a dozen for eggs.  As we continue to get larger purchases, the individual units of money are lost and we return to theoretical units that we do not count individually for we know what they represent: hundreds, thousands etc.  (Theoretically, money is supposed to represent a stable value).

To further confound things, we don't just buy eggs, but also kitchen furnishings to store the eggs and cook them, living and dining room furniture to eat and relax in, bedroom furniture to sleep in, clothes to wear, cars to drive about, a continuous supply of food to sustain ourselves and families, and we pay bills to keep water and electricity, among the multitudinous factors that require money that we continue to need to earn to pay for things. 

Is each and every individual unit present and accounted for?  If you were good enough to count what you touched (not skipping or double-counting), what about those who also have an effect, whether a spouse, other family member or business partner?-can the same be said for every single unit they touched?-what about when you or them are rushed, sick or are multitasking?

Now, let us look at earning and more in particular spending - not just our family, but the country as a whole.  While we consider earning and spending, let us keep in mind the time and scope: decades, and across millions of people (billions if we consider foreign entanglements).  Earning is part of the issue, but the greater issue is the spending; that is why we have a debt - we (we here referring to the State) spend more than we take in. 

(The [im]morality of State actions is a valid concern, for another article).

The issue is then further compounded by blending the duration with the millions affected as well as political promises being offered that increases the amount of spending from an undefined spigot.  Some of the spending is legitimate and according to what the State should be doing, and some of it is not legitimate; the difference between national defense and nation-building or policing the world.  Some of the spending on some people is proper, and some of it isn't; the difference between giving people back their money that was taken (a process that needs to be stopped, such as returning one's income tax) and welfare (corporate or individual).

Let us return to the first numbers: a snapshot of the debt under the fanciful idea that the debt would not increase.  Again, at the improbable 3% interest rate with the goal of actually paying off the debt over 30 years (like a home loan), the results would be:
$16,500,000,000,000 as an initial loan (debt)
$8,543,280,000,000 total interest charged on the loan
$25,043,280,000,000 total paid of principle and interest
$69,565,000,000 each month for a total of 360 monthly payments

If the percentage rate increased, say to 6%, the results would be:
$19,113,301,000,000 total interest charged on the loan
$35,613,301,000,000 total paid of principle and interest
$98,926,000,000 each month for a total of 360 monthly payments

These numbers are TRILLIONS of dollars in loans and interest paid, with approaching $100 BILLION paid monthly.  This is if the debt doesn't increase from the current $16.5 trillion that it is, and doesn't include unfunded liabilities that raise the total debt over $100 TRILLION.

We now return to the numbers deception - the seemingly 'unreal' numbers that have very real consequences.  The deception happens in two ways: 1) by dismissing the amount that a thing starts out as, or how much a thing increases, such as the top income tax rate when the income tax was created, was 7% and is now in the 30s; 2) by dealing with numbers so large that people will not be able to fully comprehend the amounts, such as the thousands of pages of tax code and the numerous exceptions and qualifications for those exceptions.  If anyone does have a concern, they themselves can be disregarded through ad hominem for having those concerns about the spending when the costs tomorrow are to be ignored in favor of gains today - if one isn't for Obamacare it's because they 'want people to suffer.'

There is no way to pay the debt.  If it was just $16.5 trillion now, and we would not increase it, we would pay between $25 & $35 trillion.  The debt limit has been raised before, and there are talks about raising it again.  This is all on top of the unfunded liabilities, and continued political promises of more.

The debt amount isn't the only thing to consider, for the debt grew to what it has become for a reason.  From the 'small' amounts that some pay, to the small amounts that everyone expects; from the small-scale actions of repressing a dictator at one area, to bolstering an entire country elsewhere; from handing out money to the single mother who refuses to get a job, to the corporate executive who refuses to let his company take the loss from his mismanagement for his company being 'too big to fail', and the ever-increasing amount that all of it adds up to, it only adds to the height the whole economy will have to crash from.

Our crash is coming; our debt is unsustainable and is not payable.  However, we can prepare for the crash and protect against it returning - at least in our lifetimes.

We must not let those who want to rule deceive us with the small changes, or discount the large numbers.  Even if we don't know what the consequences are, their effects are still felt; gravity and thermodynamics were every bit as efficacious before our ignorance of them was removed.  Removing our ignorance and naiveté leaves us in a better position after the correction to not let those who want to bribe us with our own funds convince us they know better, that they can override economics, or that it will only be a small piece that they will take, or allow them to guilt us into following their path as the only way to help.  Their way isn't the only way, and is likely one of the worst ways for in a small step the whole process will begin again.