Saturday, November 28, 2009

War Tax, Our National Debt, And The Illusive Terrorist

This is one of the few times I actually want more taxes! Read the full article on a proposed war tax here. The average American doesn’t recognize the immense cost of maintaining an expeditionary force overseas. I would rather have to fork out the extra money in taxes than continue to grow our astronomical national debt, the majority of which lies in the hands of the Chinese.

"There ain't going to be no money for nothing if we pour it all into Afghanistan," House Appropriations Chairman David Obey told ABC News in an exclusive interview. "If they ask for an increased troop commitment in Afghanistan, I am going to ask them to pay for it."

Obey, a Democrat from Wisconsin, made it clear that he is absolutely opposed to sending any more U.S. troops to Afghanistan and says if Obama decides to do that, he'll demand a new tax -- what he calls a "war surtax" -- to pay for it.

"On the merits, I think it is a mistake to deepen our involvement," Obey said. "But if we are going to do that, then at least we ought to pay for it. Because if we don't, if we don't pay for it, the cost of the Afghan war will wipe out every initiative we have to rebuild our own economy."

There was another article on MSN regarding the immense costs of borrowing that we as Americans are dealing with. Not only is it an immense cost now but it may get much worse in the near future.

“The government is on teaser rates,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates lower deficits. “We’re taking out a huge mortgage right now, but we won’t feel the pain until later.”

The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true.

But that happy situation, aided by ultralow interest rates, may not last much longer.

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.

The potential for rapidly escalating interest payouts is just one of the wrenching challenges facing the United States after decades of living beyond its means.

Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.

With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.

I am always amazed at the propensity for government officials and political pundits to try and defy the laws of finance based on the premise that government spending is different than personal finance. I disagree. There are some obvious differences, however basic principles like the cost of capital, the power of compounding interest, and spending more than you make aren’t moot just because a sovereign government is doing the spending. That is why I think developing a clear “end state” or perhaps more accurately an “exit state” for Afghanistan is so important. Right now we are likely going to bolster troops in a war that to my knowledge has no clear goal other than to prevent the harboring of terrorists. That argument might be enough if the majority of the terrorists in the 9-11 attacks hadn’t masterminded in Europe. A more recent example is the Ft Hood tragedy. It is a new world out there with bolstering interconnectivity of those worldwide. And if we continue to treat these terrorists as if they are actors of a nation state we will continue to be behind the eight ball when it comes to combating them. Terrorist activity, as has been proven time and again, can arise from anywhere. It can cross any border into any nation and is more of a mental disposition than a national association. If we are going to continue financing a war without an end state in mind we may as well do it from our own pockets vice the interest bearing dollars of other nations.

1 comment:

Cameron Schaefer said...

I continue to wonder if the nation we should most consider rebuilding is our own - we look outside our borders for the threat that will topple America when, just maybe, we should be turning our gaze inward.