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The problem with this assessment is a large part of our debt is owed to a shell game.

Raising taxes has proven ineffective when it comes to generating large amounts of revenue. Look at history and tax revenue as a % of GDP remains remarkably steady despite the top tax rate falling almost 70%(http://tinyurl.com/3dgkupq). So the old saying that you can't raise taxes higher than the amount it would cost a rich guy to cheat the tax system holds pretty true.

Maybe we'll find some miraculous way to fix that problem but as of right now we can't expect huge gains by raising taxes.

That means the roughly 43% we owe ourselves either (a) can't be paid back or (b) will have to be borrowed from foreign countries. Because we can't raise the revenue in time to pay out the debt to pension funds, Social Security and private citizens saving for retirement.

So the People/Government who owns America is really whoever will be willing and able to loan us money when the U.S. citizens we owe come to collect their money.




Did you read your own chart? It clearly shows that tax revenues as a percentage of GDP vary a lot. Between 1942 and today, it ranges from ~14% to ~21%. I don't know if you're aware of this, but 7% of GDP represents over a trillion dollars. Incidentally, the same chart you point to shows how tax income is about as low of a share of GDP as it's been since 1950.


Being able to produce additional revenues of 1 or 2% from an economy of trillions is not my measure of ineffective tax increases.


It is when your debt is approaching 100% of your GDP and you owe 40% of it to yourself. Think about it. If GDP and our Debt are roughly equal how is 1 or 2% a year increase in revenue going to be able to pay 40% + interest of debt?


10 year Treasury interest rate: 3%

interest on 40% of GDP: 1.2% of GDP

QED.


If you owe money to yourself why can you not write that debt off?


Self = same economic system/country. Or would you have America writing off loans from American citizens?


Unless spending also rises by 1-2% of GDP.

http://reason.com/archives/2011/02/14/the-19-percent-solutio...


By that logic, when China comes to claim its debt, whoever we borrow from then to pay off China is who owns the US. Since ultimately we're going to pay it off (maybe in decades, but eventually), we're always the last in line and thus the "owner". No, we have to look at who we owe money to now and assume we won't be able to pay it off. The game is too circular otherwise.




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