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March 28, 2015

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Letter to the editor:

Don’t expect the borrowing to end

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In the wake of the election, regardless of who wins; when the winners are through crowing and the losers are through complaining, the politicians will begin ginning up the next crisis, i.e. the impact of the tax increases from the lapsed Bush tax cuts, the end of the payroll tax holiday, the cutting of defense spending by 10 percent and likely tax increases of the Affordable Care Act.

The public will be invited to join the crisis mentality and demand relief. Here are a few facts to remember when it all starts. Foremost, it’s a government problem. Politicians committed the unforgivable sin of spending more than they had available or had the means to pay back. It’s not the citizenry’s problem because politicians have the ability to solve it themselves in Congress.

It’s a little-known fact that the Constitution makes no limitation on the collection of taxes; the sky’s the limit. Similarly, there is no constitutional limit on borrowing, and of course, there is no limitation on government’s power to cut its spending. Any of these will solve the problem.

What to do? Well, raising taxes will create howls of protest, as will cuts in government spending, so what does that leave? Just the politicians’ favorite solution: put it on the card.

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  1. There are implications that could be disastrous effect on the US. For one, our dollar could lose its status as the reserve currency.

    There are also financial market effects that make the interest on our borrowing increase.

    There is also global pressure that is significant.

    We don't have the ability to use an endless credit card without suffering a critical result.

    Frankly, I get a bit weary of the oversimplification of solutions of austerity measures. It isn't working in Europe, so they finally agreed with the US that growth had to occur, even if small to begin with.

    I am also weary of thinking that ignores the reality of what was occurring in our economy as the recession began. We were headed for collapse and a depression greater than the Great Depression. Nobody recovers from such a disaster in a short time.

    We have to come to grips with that, and realize that we are in this recovery process for a long time. We need some reasonable cuts, growth, and increased taxes.

    There may be both backward and forward movement. That is the nature of our market driven system of ups and downs, hills and valleys, bumps and potholes. ;-)

  2. The President we elect must go to the American people, tell us we cannot continue to borrow money and buy our own debt like we do, and propose a 'real' fiscal plan that includes economic growth initiatives, higher taxes and 'real' spending cuts, not just slowed increases. He then needs to ask for our support in getting it through Congress. If all that is not done, our country will continue toward a fiscal disaster.

    Either Romney or Obama 'could' do this. If one does, we won't like what has to be done, but at least we'd 'start' down a different path. I have grave doubts that either man will do this and I 'know' Congress will not do it on its own.


  3. There's a proverb that says "if you're not part of the solution, you're part of the problem." This is pretty much applies with the Federal Debt. We assign the responsibility to the president, congress, and/or generic Washington DC while personally accepting none of the responsibility. Many are great at giving directions to the location of other folks who should make sacrifices to solve the problem, while offerring no material sacrifices of their own.

    The responsibility for the borrowing is OURS. We demand thing we don't want to pay for and then try to pawn off the responsibility on others. No one else is piling debt onto the next generations. WE ARE!

  4. Hard choices must be made to save and ensure the longevity of our nation for future generations. Tell me who will make these choices. President Obama? Mitt Romney? Answer is obvious, at least to me.


  5. CarmineD

    Tell me what hard choices you would persomally make "to save and ensure the longevity of our nation for future generations".

  6. The diagnosis is in: our American government needs "heart" surgery. What ails our country is a weak and infirm heart---of those who must craft legislative solutions that are not popular nor comfortable, and of those who must live with the sacrifice of "going through the operation."

    The needed change will be both unpleasant and PAINFUL. It has to happen for our country to carry on with a quality life, for the duration. It will require a resolve, a mindset, that there are no other alternatives, that to live on, absent a phenomenal miracle, the procedure or course of action to save our collective lives must go forward.

    Going through this heart surgery will means different things to different people, depending on their own personal state of "health" going into the procedure. Some will sail through the operation, and some will require extra support, but get the surgery done is a must for survival. After the surgery comes the slow recovery, taking the medicine, and prescribed physical therapy to build strength once again. The pain will happen, is temporary, and will eventually leave, given a full recovery. One thing is for sure, EVERYONE wants good health, so everyone is on the same page there.
    We hope and pray that for all the efforts, the best outcome will eventually manifest. Have faith in yourself, in your abilities, have credible guidance and support, and trust that the doctors are qualified (by the voters) to do a good job.

    Blessings and Peace,

  7. Jim, Haven't you heard? Carmine is for hard choices to make cuts...that don't affect him personally.

    More importantly, Ed Dornlas' letter assumes borrowing is morally bad but I would venture a guess that he doesn't realize that the closest the worldwide economy came to collapsing was when short term borrowing by business almost ended. People would also do well to look up what happened to our economy when President Andrew Jackson paid off the national debt. All this hyperventilating is over nothing and the conservatives posting here have all used debt as an instrument to buy homes, cars, and for business purposes.

    Large businesses do not hesitate to use strategic default even with money in the bank to liquidate debt and Wall Street applauds loudly when they do. But woe to individuals if they walk away from debt as they are immoral and bad.

    Let me ask if anyone here has calculated how much the total pay off on their mortgage is versus the accrued value of their homes? Why is the interest paid off before the principal and who benefits from this artificial construction?

  8. @RefNV,

    "Ed, you might be part of the problem if you're voting for the candidate who doesn't propose or back a viable solution to solve our debt/deficit spending problem." (ReFreeman)

    ReFreeman is correct!

    Identifying a problem and not becoming involved, or presenting solutions to help correct the problem is not responsible.

    The logic, if you can see a problem, you must help in some way to correct the problem. Seeing the problem means you understand the problem is some way. Voting helps correct problems such as the spending in Washington. A responsible voter will select responsible people to follow the law, people who understand the issues we are currently facing.

    Voting is a serious responsibility. If your register to vote, you must vote. You must vote responsibly.

    If we are to get control of the spending in Washington, we must first vote for, and elect people who advocate responsible spending, and have a history of reasonable and responsible actions in relationship to spending activity.

  9. @wtplv,

    "The President we elect must go to the American people, tell us we cannot continue to borrow money and buy our own debt like we do." (Michael Casler)

    Mr. Casler, both presidential candidates have said as much. The President and Mitt Romney has stated we need to stop borrowing and cut spending. This is not new.

    The question should be, "will" they stop borrowing and cut spending? Following the issue and the actions of congress, the answer is,... NO!

    No, because it cannot be done immediately. The President and John Bohener understand this. After the election we will see several compromises lead by Speaker Bohener. This is expected, this will happen.

  10. Longtimevegan,

    I don't know if you share Mark Schaffer's view that the debt doesn't matter or you just don't see what I see.

    I realize we cannot immediately cut spending in large amounts or raise taxes by large amounts.

    That said, the kind of compromises we have seen so far are not going to get the job done, and that goes whether Obama or Romney wins. Raising the debt ceiling and then continuing to spend as always is NOT the kind of compromise we need.

    We need someone who does not 'minimize' the seriousness of where we find ourselves and is willing to tell Americans the truth. I do not have much faith that either Obama or Romney will do that.


  11. Ed.. Let's look at this from the perspective of reality. Every dime the government spends goes into someone's pocket. The deficit is a function of 147 million people that stand in line for some type of assistance. Mainly medical care! It has absolutely nothing to do with the government and everything to do with an economic structure that doesn't allow people to be financially independent.

  12. In the stock market there is a phenomenon called the presidential election cycle. The stock market tends to rally going into an election because of all the promises that are made. When the elections over reality sets in. The poor will still be poor. The entitled will still be entitled. There will be another 35,000,000+ baby boomers retiring. The deficit will continue going up ad infinitum and there is nothing anyone can do about it.

    The market usually has its best year the year of an election. The worst year tends to be the year after the election.

    If the massive turmoil that is hitting Europe and Asia spreads to the United States were in for a few difficult economic quarters to say the least.

  13. It's unemployment that's the problem, thanks Mark Schaffer for offering real solutions instead of peddling conservative manipulation ! The Sun shouldn't complain about divided government and grid lock though because it encourages people to vote for it.

  14. Your correct, unemployment is the problem. Businesses increase employment when aggregate demand picks up. The $20 trillion worth of financial losses several years ago have depleted people's resources. Demand has been diminished because of the money lost. Industry is getting the desired level of profitability with the current labor force. We have entered an era where unemployment is going to be above trend for very long time.

    In Europe the average unemployment rate is 11.6% with Greece at 25%. In Asia unemployment is going up every day in nearly all countries.

    Economic contractions due to massive financial dislocations cause problems that drag on for many years. After the 1929 collapse asset classes didn't reach their 1929 levels until 1954. Sometimes these things take decades.

    In my humble opinion we will be very lucky if we can keep unemployment from going dramatically above 8% over the next year or two. Who is sitting in the White House has no bearing on the matter.

  15. Oh sure, borrowing can end by January 15, 2013. Get real. Eliminating spending on non- enumerated powers / programs that are NOT required of our federal government will take a few years to transition out of. But we must get SERIOUS ABOUT CUTS. If I wouldn't pay for it from my checking account, I don't want to pay for it via my taxes. ELIMINATE entire programs. And of course, we'll start with the no-brainer, easy to eliminate things.

  16. One person's easy to eliminate thing is another person's livelihood. It's not that easy.

  17. @mschaffer,

    "Let me ask if anyone here has calculated how much the total pay off on their mortgage is versus the accrued value of their homes? Why is the interest paid off before the principal and who benefits from this artificial construction?" (Mark Schaffer)

    Mr. Schaffer brings up a very strong point of discussion of why mortgage loans are so profitable for lenders. For one, mortgage loans are transferable between lenders and investors with little or no restrictions. This is a powerful tool for collateral or lending for investors and financial institutions.

    Mr. Schaffers question about interest is mainly an untold and unspoken topic between home borrowers and lenders. Yes, the lender provides a Truth and Lending packet, but not the real meat and potato of how the lending system works.

    The obvious,.. interest is not only what you paid for the cost of borrowing money, but this insures the borrower will commit to the loan for the long term. The bank wants to be paid first...Period! It matters not if the collateral declines in value. If you have a home loan, the banks got you hook line and sink no matter how your home value is during the loan term.

    Terms could be different when large loans come into play.

    Mainly loans involving commercial development, such as a major housing construction, will the lenders require the borrower to make an addition capital investment if the value of the project declines during construction or during the term of the loan.

    Interest is the shackle that keeps a borrower committed to pay. The collateral, no matter the value during the loan period, is the responsibility of the borrower, and market conditions dictate which way the value will go.

    No matter the value of your house (collateral) the lender will make sure they are paid first. The longer the loan, and the on time payments a borrower makes, the more valuable the loan becomes. Interest on the loan drives the value to the lender.

  18. "The President we elect must go to the American people, tell us we cannot continue to borrow money and buy our own debt like we do." (Michael Casler)

    That is a multilevel statement, Michael.

    Perhaps, on the individual level it would have a bigger message.

    Individuals or families must get out of debt and start saving in significant amounts for the future, to protect them through the many recessions we have of varying degrees.

    It starts at home, and is good for economic stability!

  19. longtimevega,

    We paid our home loan off very early, to reduce the interest costs on the loan.

    I sat at my programs diligently working out all the possibilities and planning, tracking, we refinanced at lower rates to speed it up, etc.

    I am very glad I did the work.

    There is something else that is important. I don't recommend that people follow their dreams. Buy a house you can afford and which you can continue to pay for if the family only has one income.

    People's desires are often unrealistic, and that is part of the reason for high foreclosures.

    My husband was excited to see the housing values increase when there was so much speculative buying going on. He was thinking of us buying another home.

    My response was NO, because I know how our economy works and the bubble would burst and many people would be very sorry.

    I cringed at watching all the buying using ARM's.

    I was right. We sit with our home paid for, and secure. We even added two additions paying cash.

    Without serious planning and taking actions that would be in our best interest, we could have been thrown into the pot that many people found themselves in.

    We cannot live in an impatient fantasy because it will eventually become a nightmare. Security must be the main focus.

  20. "CarmineD

    Tell me what hard choices you would persomally make "to save and ensure the longevity of our nation for future generations"."

    If you don't know, then you're not as smart as you think you are.


  21. Peacelily,

    Your a small percentage of smart planners. Many home buyers during the bubble years were chasing the shiny object.

    You know, you throw a ball out to a puppy, and what does the puppy do? The puppy will chase the ball each and every time. Just a little humor to a serious situation.

    Your story is a good example of what "Home Ownership" is about. Plus, your example shows the difference between "Home Owners" and "Home Buyers."

    A Home Owner is responsible, helps the community when the purchase is made by making a commitment to stay in the house long term.

    And your example of planning to reduce the loan, or escalate the monthly payments for a early pay off of the loan. Thereby reducing the cost of the loan to borrower.

    Peacelily, your smart. Your Husband is blessed to have your wisdom and advice. You stopped him from chasing the shiny object.

    Off topic: Just a friend reminder,
    President Obama wins re-election by 6 to 8 points.

  22. Carmine....Who are you responding to? Yourself..:)

  23. Elections have that affect on me. I talk to myself.

    All kidding aside, those hard choices are more front and center now than ever before. The second term is always about a legacy. It can make or break a president.


  24. Carmine,

    Your smart. I know the election is over, but I have large question for you!

    How did you conclude that President Obama would not win re-election, and you wrote that Mitt Romney would win by a huge margin and win the popular vote? How did you calculate your prediction?

    I just want to know. You have an insight on things, but how is your thinking approaching this election?