Treasury earns $7 Billion on Citigroup

It looks like the Treasury is making about a $7 Billion profit from bailing out CitiGroup. Now if they only do something useful with the gains like pay down the debt...

The odds favor they'll use it on something stupid.

Back to 40 : Thinking and promoting long-term policy

The United States faces multiple long term crises.

• Health care, which we've finally started to address
• The Economy, the Budget, and the National Debt
  
• Environment, which we're still effectively ignoring
  

Obviously these are joined at the hip. They also face the same fundamental problem - we don't have any long-term strategy for any of them.

If we don't start creating long-term policies to solve these issues now the crises in the long term will be unimaginable. Health care costs are continuing to rise and will only be worse as the Baby Boomer effect gets more steam. The environmental issues are already facing a point of no-return according to many sources.
In a recent posting by Donald Marron, former CBO director and former economic advisor to President George W. Bush, suggested a multi-decade approach that focused on reducing our debt-to-GDP ratio (which on its current trajectory will reach 85% by 2020) to first 70% (by 2018), then 60%, then graduating down to 40%.

He suggested that we're going to have to go for the triple montage of:

1. Reducing spending - this is the number one priority - at least reducing the growth rate of spending, which is completely out of control. Reducing spending would have a more positive effect on the economy than increasing taxes.
   
2. Increasing taxes - A lower flat tax would widen the tax base (Gerry Brown, Attorney General, D-CA is running for Governor of California again - he proposed a flat tax when he ran for President in 1992) and a VAT tax (national sales tax) would eliminate a lot of the pain of increasing our already broken income tax system.
   
3. Promoting growth - We have to continue promoting growth, including increasing it areas that are going to further other goals like R&D in Health Care and Energy (like the National Ignition Facility's fusion reactor that finally seems like it's going to reach parity next month)
   

His essay points out - correctly in my opinion - that no single one of these is sufficient to achieve any significant reduction in the debt.

The budget issue is the easiest and most immediately critical of these issues. If we don't have the money or leverage, we can't do much about the other two. We'll be looking at a national collapse in more ways than one.

Imagine if you made $100,000 per year but had credit card debt of $80,000 (an 80% Debt-to-GDP ratio). Depending on your rate you would be paying over $1,000 a month just in interest on $8,333 in pre-tax income. If you had to go buy another car, no one is going to give you a loan. If you had a financial emergency, you'd be out of options. What happens if you get a pay cut (the economy hits a bump and tax revenues drop)? With that kind of debt load you wouldn't have much in savings or investments or retirement funds. Even credit card debt of $60,000 (a 60% Debt-GDP ratio) would be well beyond your means.

Politically, this is going to be a tough sell. We need to start thinking beyond the next quarter and the next election. As Americans we need to support the politicians who are willing to push for this kind of long-term strategy.