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With congress unwilling to act, consumers should avoid unnecessary debt

Published: Thursday, July 19 2012 12:00 a.m. MDT

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Shaun
Sandy, UT

Once again the DNews has no clue how our monetary system works. Our money supply is debt, so there advice is to avoid debt, but borrowing money is the only way the money supply is created. Quantitative easing only works if people want to borrow money, which you are telling people not to do.

How about advocating the Federal Reserve pay for roads and infrastructure instead of buying bonds and securities? Our how about advocating that our own government actually take over what is rightfully ours, our money supply.

Tekakaromatagi
Dammam, Saudi Arabia

"What is indisputable, however, is that the economy has not regained its pre-recession strength."

Yes, that is correct. But the pre-recession strength was based on people borrowing on personal debt. People have gotten smarter and decided to pay down their personal debt. Once it is paid down they will go back to buying stuff. Hopefully, this time it will be based on money they saved rather than money they borrowed.

It is good I am not president. I would say, "I will tax everyone and use the money to payt off the debt and make sure that the working poor don't starve. We will all live like paupers until the debt is paid off. When that happens, then we can prosper . . . or at least, the next generation can prosper because it is going to take that long."

cjb
Bountiful, UT

I remember before the crash, being quite uncomfortable with the high level of debt of the federal government. Quite often when I would voice my concern, the type of reply I would get is that debt doesn't matter because the economy keeps growing and instead of focusing on debt, we should focus on economic growth.

I remember my cousin who had a home loan business during that time period saying, our church leaders tell us to get our house paid for if we can, but you know what?, If you owe $100,000 on your house and you have $100,000 in stocks, isn't that the same as having your house paid for? ... He said he made more money by leaving his house unpaid for and puting his money in the stock market.

I disagreed with both these lines of logic. Debt unless you pay it off is forever. Economic growth, nor the stock market can be counted on to last. I sensed this internally and history had bore this out, there are business cycles.

My cousins business tanked, the stock market went bust and he lost his house. The US is struggling with its debts.

Emajor
Ogden, UT

Three cheers to the Deseret News editorial staff for publicly recognizing that we have no idea what state the economy would be in had the economic stimulus spending not occurred. Spread the word on that one, there are a lot of armchair partisan "economists" on here.

Boo to the Deseret News editorial staff for perpetuating the belief that automatic ham-handed spending cuts are better than no cuts at all. That's ideology, not fact.

JoeCapitalist2
Orem, UT

EMajor: The belief that automatic spending cuts are better than nothing is no more ideological than the belief that jacking up the tax rates on rich people who already pay the lion's share of taxes, will lead to increased revenues for the government or will do anything to balance the budget or lower the debt.

CLM
Draper, UT

Our national banking system makes it impossible for the federal government to ever get out of debt. In the words of John K. Galbraith, "Rarely has economic circumstance managed more successfully to confound the most prudent in economic foresight. The Federal government could not pay off its debt, retire its securities, because to do so meant there would be no bonds to back the national bank notes. To pay off the debt was to destroy the money supply."

Every dollar of our currency was created by the act of lending. If all debt were to be repaid, our entire money supply would disappear. The national debt is the primary foundation on which money is created for private debt. Our nation, by its central banking system, is locked into perpetual debt.

patriot
Cedar Hills, UT

Congressman Paul Ryan said that UNLESS our debt is cut and we have an actual plan to reduce - drastically - our long term national debt (now sitting at nearly 16 trillion) then those who lend to us are going to change the lending rules within 2 years time. What does that mean to us - that interest rates now at historic lows will spike upward - WAY UP - possibly into the teens simply because the US will be charged much higher interest on its debt since those who lend to us - China - have lost confidence in us as a client. We know where our debt is headed with 4 more years of Obama - 20 trillion !!!! 20 trillion is based on the NEW borrowing and spending OBama has already projected going forward. 20 trillion will SINK all of us as a nation and individually. Think for a moment what 15% interest would do to your car loan - your home loan - buying anything new etc..... not to mention what it would do to the overall economy - probably 15% unemployment as well.

So 4 more years of Obama looks pretty darn grim to say the least. Romney is ALL about debt cutting - right on!!!

CLM
Draper, UT

DN, don't be so quick to jump to the conclusion that the hike in credit card debt is the result of irresponsible consumerism. In this wretched economy with so many still jobless and unemployment benefits expired, people burn through all their savings, then in desperation, turn to their credit cards to buy groceries and pay the utility bills. And not because they're slackers, because they cannot find work despite tireless searching. You can argue the responsibility of this decision, but when people and their children are hungry and turn to credit cards it's simply not the same kind of irresponsibility as a new computer or a fancy vacation beyond one's means.

cjb
Bountiful, UT

re CLM
Draper, UT

While that may be true, people are still wise to use debt with caution. Recognising it is a snake that if we are not careful, will bite and hurt you.

Roland Kayser
Cottonwood Heights, UT

To Patriot: If we were to enact Ryan's budget right now, the debt in 2016 would be higher than it wold be if we continued Obama's policies. The Ryan plan doesn't get debt down until the mid 2030's, when the huge cuts to Medicare would start to really kick in.

Makid
Kearns, UT

Patriot,

That projection is based on nothing changing from the current political landscape in DC.

If Obama is re-elected and Democrats gain a majority in the House while keeping a Majority in the Senate, taxes will go up on those making more that $250K yearly. Defense spending will decrease back to what it was at the beginning of George W. Bush's presidency.

These 2 changes alone would reduce the national debt by nearly $1 Trillion each year. We are currently on track to borrow $1.25 Trillion this year.

Now, if they were to reduce or remove loopholes and deductions, these changes added to the previous savings would bring our savings to approximately $1.45 Trillion a year.

That puts us at a $0.20 Trillion or rather $200 Billion a year positive. If that is applied to the deficit, that is a reduction of $2 Trillion every 10 years.

Now, the budget already has money set aside for debt repayment. As we no longer budget in debt, the debt decreases each year, so the debt would be paid off faster each year than the year before it.

This is without spending cuts, imagine adding in cuts.

John20000
Cedar Hills, UT

There are some interesting definitions of debt in the comments. A deficit is the result of spending more than you have. Money that you borrow and promise to pay back is debt. The national debt is money that the nation has borrowed and promises to pay back. If you "buy" a US bond, you are lending the US government money that they will pay back with interest. A one year bond is paid back in one year. Your bond is the US government's debt.

The current state of the US debt: $15.8 trillion in debt (money the US government is obligated to pay back). Over that last 3 years, the US government has spend between $1 trillion and $1.9 trillion more each year than it has in revenues meaning we have deficit spending. In order to spend more than we have, we borrow more to make up the difference. So, in the last three years we have borrowed about $5 trillion more, which increased our nation's debt. In order to pay this debt off, we need to have a surplus, which is the opposite of a deficit meaning we spend less than we have in revenues.

Perfice
South Jordan, UT

I wonder why the idea is constantly perpetuated that Democrats spend more than Republicans. Most of our accumulated national debt took place under Republican presidents from Reagan onward, and the largest debt increases came from defense spending.

At the time that Obama took office, Defense spending was about .9 Trillion per year, nearly twice the amount we spent during the height of Vietnam (adjusted for inflation). This current government has brought it down to .7 trillion, but reducing that kind of spending is like trying to turn an aircraft carrier around.

Imaging the kind of jobs that could be generated at home and the infrastructure that could be created if we actually turned those swords into the proverbial plow shares!

Yes, Romney is talking about reducing debt and in the next breath committing to strengthening the military. That's insane. We spend 5 times as much as China on defense and 10 times as much as Russia. It's time to get real.

NedGrimley
Brigham City, UT

Makid: "If that is applied to the deficit,.." Hmmm. Let me see. Utah just went through a primary election where one of the candidates spent $10 million+ just to get through the primary election. And you think any of these jokers is going to apply anything to the deficit? That's what I call a positive mental attitude.

atl134
Salt Lake City, UT

The problem is people paying down debts slows the recovery. Take me for instance. Over the past 3 years I've paid down a ton of student loan debt, enough that I easily could've bought a car instead. So paying down student loans is good for me since that's less interest I have to pay later... but as far as the economy is concerned in the short term I basically witheld thousands from being put into the economy to spur demand. When a lot of people do that, that's a lot of money being diverted from driving the economy to getting out of debt. Good thing long term, but in the short term it means the economy is going to progress more slowly.

atl134
Salt Lake City, UT

@Makid
"Defense spending will decrease back to what it was at the beginning of George W. Bush's presidency."

That's not going to happen. Heck, Obama is getting pushback just trying to stop the growth of defense spending, we haven't even gotten to cuts yet. I expect savings to be no more than 200 billion a year (most of that being from ending the Afghanistan war) and even that might be an overestimate. As for the Bush tax cuts, the CBO values the entirety of them at 4 trillion over 10 years (400 billion a year) but the tax cuts for those over 250k is 800 bilion over 10 years or 80 billion a year so...

"These 2 changes alone would reduce the national debt by nearly $1 Trillion each year. "

Realistically, we're only going to save about 250-300 billion a year. If we pretend defense spending will drop to pre-bush levels that's still only a savings of 550-600 billion a year.

Hemlock
Salt Lake City, UT

The Keynesians love public debt. It means the all-wise government has spent our money and we are left to pay for Solyndra, Government Services Agency parties in Las Vegas, Fast and Furious, etc. When all of our income is paid in taxes, it will be a socialist utopia with all of us equally indebted to our government. It may be a Brave New World, but we are behind schedule and this should have happened in 1984.

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