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Thread: What If We Paid Off The Debt? The Secret Government Report

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    What If We Paid Off The Debt? The Secret Government Report

    Planet Money has obtained a secret government report outlining what once looked like a potential crisis: The possibility that the U.S. government might pay off its entire debt.
    It sounds ridiculous today. But not so long ago, the prospect of a debt-free U.S. was seen as a real possibility with the potential to upset the global financial system.
    We recently obtained the report through a Freedom of Information Act Request. You can read the whole thing here. (It's a PDF.)
    The report is called "Life After Debt". It was written in the year 2000, when the U.S. was running a budget surplus, taking in more than it was spending every year. Economists were projecting that the entire national debt could be paid off by 2012.

    Source: CBO and OMB (Debt held by the public)
    Credit: Alyson Hurt and Jess Jiang / NPR



    This was seen in many ways as good thing. But it also posed risks. If the U.S. paid off its debt there would be no more U.S. Treasury bonds in the world.
    "It was a huge issue.. for not just the U.S. economy, but the global economy," says Diane Lim Rogers, an economist in the Clinton administration.
    The U.S. borrows money by selling bonds. So the end of debt would mean the end of Treasury bonds.
    But the U.S. has been issuing bonds for so long, and the bonds are seen as so safe, that much of the world has come to depend on them. The U.S. Treasury bond is a pillar of the global economy.

    What If We Paid Off The Debt? The Secret Government Report : Planet Money : NPR

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    Re: What If We Paid Off The Debt? The Secret Government Report

    the Clinton surplus myth is still going strong.

    ~brains...must eat brains.

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    Re: What If We Paid Off The Debt? The Secret Government Report

    Quote Originally Posted by ARealConservative View Post
    the Clinton surplus myth is still going strong.

    ~brains...must eat brains.
    Your trolling is still going strong. If you think that Clinton didn't leave with a surplus, how about actually providing proof?
    "And in the end, we were all just humans, drunk on the idea that love, only love, could heal our brokenness."

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    Re: What If We Paid Off The Debt? The Secret Government Report

    The economy was flat on its back after 9-11. It's a testament to Bush that it came back.

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    Re: What If We Paid Off The Debt? The Secret Government Report

    FederalDeficit(1).jpg
    Sure looks like Clinton balanced the budget and then took in more than was spent to me.

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    Re: What If We Paid Off The Debt? The Secret Government Report

    Quote Originally Posted by Mr. Invisible View Post
    Your trolling is still going strong. If you think that Clinton didn't leave with a surplus, how about actually providing proof?
    our total debt went up every year. I've been over the proof many times, I've come to understand zombies are all around me and want to believe what they want to believe.

    I think this guy explains it in a manner everyone should get if they actually cared to see the truth.

    The Myth of the Clinton Surplus

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    Re: What If We Paid Off The Debt? The Secret Government Report

    Interesting- thanks for posting this - this really shows how much of a bunch of incapable idiots were running the country under the Clinton Administration. Did you even READ that file? What an embarrassing mar on the Clinton Administration - so toxic were they!


    This following part is something I bet Clinton doesn't want to have surface:
    It is just FREAKING HILARIOUS considering all the tragedies that happened *since 2000* because of these EXACT Triple-A Plus bonds and Freddie/Fannie. Looks like they would have likely created the SAME problem we are experiencing right now but on a BIGGER SCALE!

    Ironic.
    The Fed, if granted authorization could use private securities to conduct monetary policy. Private institutions could provide a relatively sanitary solution to the Fed's problem of replacing Treasury securities in the conduct ofmonetary policy by creating new, very low-risk securities constructed from a pool of private debt securities. Such securities would be packaged in a way similar to mortgage-based securities currently issued by Government Sponsored Enterprises like Freddie Mac and Fannie Mae, but would not be as liquidity constrained and would be better diversified against certain market risks. To package the new instrument, a financial institution could buy a set of high-quality corporate bonds. It would then offer to sell a coupon bond called.

    The Triple-A Plus bond that pays a fixed annual interest rate for the life of the bond. The Triple-A Plus Fund would put up its equity capital and take on the default risk ofthe underlying corporate bonds. Although not completely risk-free, bonds like the Triple-A Plus bond would entail very little credit risk and would be close substitutes for Treasury securities. With the advent of such an instrument, liquid and transparent markets should develop, given the value of just such a low-risk security to both private markets and the Fed.
    So - good thing that didn't happen.
    Imagine if they actually DID pay off the national debt and put that SURPLUS in Fannie and Freddie - and those Triple-A Plus Bonds which have now been buried - they're so dead. But F and F weren't going to last that long, anyway . . . thankfully!

    And this:
    Of course it is possible to keep both the benchmark Treasury and allow fiscal surpluses to continue to pay down the national debt.
    The federal debt in it's entirety only increased under Clinton.
    The only portion of the debt that decreased was public debt ONLY (just one portion) - and because that was paid down with SSA overflow which has to be paid back with interest - it made the intragovernment debt rise.

    Smoke and mirrors - Clinton was in no way reducing the overall national debt.

    So this entire plan was based on a lie - they never did reduce the NATIONAL DEBT.

    But back to the Triple A bonds and Mortgage backed security funds . . .
    One vehicle for investment that might be. appealing as an asset is the "Triple A" bond described above. Such a bond would be relatively risk free and be could be constructed in relative abundance. Mortgage backed securities are another option as well. The two largest Government Sponsored Enterprises, Freddie Mac and Falmie Mae together account for nearly half of all of the mortgages issued in the United States home mortgage market.

    Any private instrument we consider will carry some risk. The housing market is unique; by providing substantial liquidity to a fundamentally supply constrained market, the housing market could experience substantial increases in demand and price. Sweden embarked on a similar course of action in the past with mixed results. In the 1960's the Swedish government purchased debt holdings of government-owned mortgage corporations. This subsidized the housing market with. Positive consequences for both home ownership rates and household wealth. . However, the financial system was very tightly regulated during this time.
    Well - we know what happend to the housing market: it folded in on itself - nevermind increases in demand and price. HAH!

    This annotated text is very funny, though:
    [This last sentence has to tone of suggesting that we're doing something stupid by running those darned surpluses.]
    Props, however - nearing page 21/22 for noting the dangers of Fannie and Freddie. A bit of wisdom - from Charles.
    Last edited by Aunt Spiker; 10-20-11 at 09:18 PM.
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    Re: What If We Paid Off The Debt? The Secret Government Report

    Quote Originally Posted by Mr. Invisible View Post
    Your trolling is still going strong. If you think that Clinton didn't leave with a surplus, how about actually providing proof?
    Moderator's Warning:
    What If We Paid Off The Debt? The Secret Government ReportIf you feel some one is trolling, use the report post button, don't accuse them inthread.
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    Quote Originally Posted by Fiddytree View Post
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    Re: What If We Paid Off The Debt? The Secret Government Report

    Quote Originally Posted by ARealConservative View Post
    the Clinton surplus myth is still going strong.

    ~brains...must eat brains.
    Quote Originally Posted by Frolicking Dinosaurs View Post
    FederalDeficit(1).jpg
    Sure looks like Clinton balanced the budget and then took in more than was spent to me.
    It's book keeping. If you look at total expenditures vs total revenue there was no surplus. To get the surplussed claimed, they IIRC did not count SS. Either way, it was under Clinton that we came the closest to a balanced budget.
    We became a great nation not because we are a nation of cynics. We became a great nation because we are a nation of believers - Lindsey Graham

    Quote Originally Posted by Fiddytree View Post
    Uh oh Megyn...your vagina witchcraft is about ready to be exposed.

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    Re: What If We Paid Off The Debt? The Secret Government Report

    Quote Originally Posted by Reg View Post
    The economy was flat on its back after 9-11. It's a testament to Bush that it came back.
    "Go out and go shopping"

    Thanks W. That was a great plan.
    Anyone wondering what I'm talking about start here:
    The Psychology of Persuasion

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