<\/p>\n
Debt and Debt Service Considerations<\/strong><\/span><\/p>\n <\/p>\n <\/p>\n <\/p>\n 1. \u00a0Given the present rate environment, move the maturity of the debt out as far as possible including consideration of 50 year bonds.<\/p>\n <\/p>\n 2. \u00a0Use debt judiciously.\u00a0 In good times, pay off the debt.\u00a0 In times of national emergencies such as major wars (WW II not Korea or Iraq) or economic calamities (the Depression or the Great Second Contraction we are suffering thru presently), use debt as one of the means to solve the crises.\u00a0 As Robert J. Samuelson noted in a recent article,\u00a0 since the 60\u2019s we have forgotten this wisdom and have abused debt and by so doing have limited our flexibility when we face a real crisis.\u00a0\u00a0 In other times, do not run a deficit.\u00a0 Either increase taxes or decrease expenditures.<\/p>\n <\/p>\n 3. \u00a0Set a target of debt as a percentage of GDP.\u00a0 The Simpson Bowles Plan suggests a\u00a030% target.\u00a0 United We Stand suggests 10% or less in normal times.\u00a0 It is a matter\u00a0of\u00a0 risk and flexibility.\u00a0 According to the economists Reinhart and Rogoff in their\u00a0book This Time Is Different,\u00a0 a ratio of Debt to GDP of 90% or more puts the country at risk in terms of a weak slow growing or no growth economy.\u00a0 This finding is still true despite the spreadsheet errors recently discovered. The latest run up in debt has been from the low 30\u2019s to the mid 80\u2019s in terms of GDP to Debt ratio.\u00a0\u00a0 Many economists would suggest we need further stimulation via further debt spending by the Federal Government.\u00a0 If we do that, it puts us in the range where we damage our economy.\u00a0 If we had started out at a 10% ratio of Debt to GDP, we would still have considerable flexibility.<\/p>\n <\/p>\n 4. \u00a0Robert J. Samuelson, in his editorial of February 25, 2013, had a constructive\u00a0 discussion of the US Debt and the complexity in counting it.\u00a0 He notes that there are 5 different figures that a reasonable person could use in establishing the level of US debt depending on what was included.\u00a0 The five are as follows:<\/p>\n <\/p>\n <\/p>\n Not counted are the Medicare, Social Security, Medicaid, and other liabilities which are not debts but future liabilities that are subject to change by the acts of Congress.\u00a0 In an accounting sense, the management of the Federal Government (the President and his Chief Financial Officer)\u00a0 may choose to book these on their financial statements or only in the footnotes to those financial statements.\u00a0 The\u00a0 audit opinion on the US Federal Government given by their outside auditors will depend on their choice in this matter.<\/p>\n <\/p>\n Remember Reinhart and Rogoff and their economic analysis above.\u00a0\u00a0 When debt exceeds 90% of GDP, growth is slowed.\u00a0 Clearly on 4 of the 5 measures of debt in FY2012, we exceed this slow growth cutoff.\u00a0 Perhaps this, in part, explains our slow expansion since our major recession in 2008.\u00a0 It also makes it imperative we take action swiftly.<\/p>\n","protected":false},"excerpt":{"rendered":" Debt and Debt Service Considerations 1. \u00a0Given the present rate environment, move the maturity of the debt out as far as possible including consideration of 50 year bonds. 2. \u00a0Use debt judiciously.\u00a0 In good times, pay off the debt.\u00a0 In times of national emergencies such as major wars (WW II […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":19,"menu_order":0,"comment_status":"open","ping_status":"open","template":"debtnav.php","meta":{"footnotes":""},"class_list":["post-96","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/www.unitedwestandllc.com\/uws\/wp-json\/wp\/v2\/pages\/96","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.unitedwestandllc.com\/uws\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.unitedwestandllc.com\/uws\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.unitedwestandllc.com\/uws\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.unitedwestandllc.com\/uws\/wp-json\/wp\/v2\/comments?post=96"}],"version-history":[{"count":21,"href":"https:\/\/www.unitedwestandllc.com\/uws\/wp-json\/wp\/v2\/pages\/96\/revisions"}],"predecessor-version":[{"id":182,"href":"https:\/\/www.unitedwestandllc.com\/uws\/wp-json\/wp\/v2\/pages\/96\/revisions\/182"}],"up":[{"embeddable":true,"href":"https:\/\/www.unitedwestandllc.com\/uws\/wp-json\/wp\/v2\/pages\/19"}],"wp:attachment":[{"href":"https:\/\/www.unitedwestandllc.com\/uws\/wp-json\/wp\/v2\/media?parent=96"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n\n
\n Category<\/td>\n FY2012*<\/td>\n GDP%<\/td>\n<\/tr>\n \n Treasury Debt Held by the Public<\/td>\n $11.3<\/td>\n 73%<\/td>\n<\/tr>\n \n Gross Treasury Debt<\/td>\n 16.0<\/td>\n 103%<\/td>\n<\/tr>\n \n Category 2 plus Federal Guarantees or Loans<\/td>\n 18.9<\/td>\n 122%<\/td>\n<\/tr>\n \n Category 3 plus Housing Debt<\/td>\n 24.0<\/td>\n 155%<\/td>\n<\/tr>\n \n Category 4 plus FDIC<\/td>\n 31.3<\/td>\n 202%<\/td>\n<\/tr>\n \n * in Trillions<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n