Bait and Switch on National Debt Plans

President Obama and Republicans have put out competing debt reduction plans. Both are bait and switching the real problem, so be wary of each of them.

The competing debt reduction plans are in and the numbers look impressive. The Republicans want to cut $6.1 trillion while President Obama wants to cut $4.8 trillion. The approach to getting this done boils down to the same old argument. The Republicans want to slash spending. President Obama wants to do some trimming, but raise taxes on the rich as well.

At this point, you would probably get a diatribe in this article about how one or the other party has the wrong approach. Raising taxes is evil and will hurt the economy. Cutting benefits for seniors and the middle class is unfair. You know, something like that. This is perhaps what the politicians want. Why? Because this entire debate is a bait and switch that does not deal with the real problem.

Don’t get me wrong. Cutting big swaths of debt is great. The problem in this case is what are you cutting it from? Both plans cut it from the annual budget, not the total national debt. Neither plan reduces the annual budget deficit to zero or creates a surplus. As such, we will still be adding to our national debt each and every year under these plans. They are both much adieu about nothing.

This is incredibly important, so let’s cover it again. Let’s say it is year one. I start my government. I bring in 10 dollars in taxes, but need to spend $20. I borrow $10 from Canada. My annual deficit is $10 and so is my national debt. Now, the same thing happens the next year, but I need to borrow $15 from Canada. My annual deficit is $15 dollars, but my national debt is $25 because I was already carrying $10 from the first year.

Both plans being offered to us now do not cut the national debt. Instead, they cut money from the annual deficit over certain periods of time. This is good, but in no year does either plan cut the annual deficit to zero or create a surplus. As a result, there will be some amount we have to borrow each year and the national debt will continue to grow each and every year under both plans.

The political parties would have you believe they are serious about cutting the debt. The Ryan and Obama plans refute that. Once again, we are presented with a bait and switch.

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