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As an American citizen, does it make any financial sense to donate money in hopes of helping to reduce the US national debt?

Thanks.

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6 Answers6

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I think it would have the same effect as paying off a compulsive gambler's debts. Until Congress and the people who vote for them can exercise some fiscal responsibility sending more money to Washington is pointless.

In fact, I'd argue that if you were a multi-trillionaire and could pay off the whole thing through a donation, we'd be back to deficits within a decade (or less).

JohnFx
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    This is the problem. And it is not a one sided problem. Both sides point across the aisle saying they are spending too much with one hand while raising their hand to spend more with the other. The only thing I take issue with is thinking it would be anywhere near a decade before we were back in the same exact position. –  Mar 26 '12 at 20:39
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    @Chad - the problem is that there are only two sides. Minority is always disregarded, variety of opinions cannot exist, and everything is black and white. As long as the votes are "one district = one representative", nothing is going to change. The US has to have multi-party system, and proportional representation in the House. What was good 250 years ago doesn't work any longer. – littleadv Mar 27 '12 at 04:07
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    @littleadv - actually 200 years ago there were 4 active parties plus a few others with small pieces. It made it hard for any one group to get too much power. Now we are pretty much guaranteed to have one side or the other over represented because we only have 2 real choices. Imagine if the parties had to actually give us good choices to win elections. –  Mar 27 '12 at 12:25
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At its heart, I think the best spirit of "donation" is helping others less fortunate than yourself.

But as long as the US remains solvent, the chief benefit of paying down the national debt is - like paying off a credit card - lowering the future interest payments the U.S. taxpayer has to make.

Since the wealthy pay a disproportionately large portion of taxes (per capita), your hard earned money would be disproportionately benefitting the wealthy.

So I'd recommend you do one or both of the following:

  1. instead target your donations to a charity whose average beneficiary is less fortunate than yourself

  2. take political action with an aim towards balancing the federal budget (since the US national debt is principally financed in the form of 30 year treasuries, the U.S. will be completely out of debt if it can maintain a balanced budget for 30 years recanted, see below)

Jon S
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    Bonds typically have interest payments but also the principal must be repaid at the end. Normally if you talk about a balanced budget that would include the interest payments on debt, but not the principal repayments on maturing debt. So a balanced budget for 30 years would just keep the debt flat, not eliminate it completely. Inflation would likely erode the real value of the debt substantially over that time, though. – GS - Apologise to Monica Dec 11 '10 at 17:07
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    Slight correction to your answer: currently, 83% of marketable US debt is financed by bills and notes (debt that matures in under 10 years) - not 30 year bonds (http://www.treasurydirect.gov/govt/reports/pd/mspd/2010/opds112010.prn). The US continues to issue short term debt (under 10 years) since it can't afford the financing on longer term debt. This makes the US more vulnerable to fluctuating interest rates. – Muro Dec 13 '10 at 20:03
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    The US will NOT be out of debt if it maintains a balanced budget for 30 years. Even if expenditure exactly equalled income, we would still have the debt. Expiring bonds would have to be replaced by new ones. – DJClayworth Sep 06 '11 at 19:24
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    DJClayworth I think your comment echoes the initial response from @GaneshSittampalam – Jon S Dec 07 '11 at 21:47
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    The best thing you can do with your money for the country is invest it in a company that is creating jobs in your area. Giving to less fortunate is not a bad thing.. Giving to those who can do but choose not to is a horrible thing for the country and those people. –  Mar 26 '12 at 20:43
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    A nitpick. While the wealthy pay a disproportionate amount of the nations' taxes at the moment, it is plausible that future tax increases to deal with the deficit may fall on the shoulders of the middle class if taxes on the rich are not adequate to address budgetary shortfalls. This is the "eventually, you run out of other peoples' money" problem. –  Mar 29 '12 at 15:48
  • While your view of what is the "best" donation is completely reasonable, I don't think it has a place in this question. I also think that your statement that the wealthy would disproportionately benefit from paying down any debt is unfounded -- that is completely up to the politicians who would decide what to do with any new-found surplus. In any case, don't take it personally -- this question was a honey trap for opinion and I'm voting to close it. – Nicole Apr 16 '12 at 05:26
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The US national debt isn't the problem. If the Bush-era tax cuts had been allowed to expire then US debt would have been paid off reasonably quickly.

The CBO’s “baseline” budget forecast, which assumes that the cuts do indeed expire as planned, sees the deficit falling from 9.1% of GDP in 2010 to 2.5% in 2014.

These are just the debts the US has already incurred. The problem is the future entitlements the US is promising to its soon-to-be-retired generation of Baby Boomers. Medicare, health insurance, and so on are all future costs that can be calculated fairly accurately when considering the size and earnings of the work-force relative to the size, longevity and health of the newly-retired.

Governments can "solve" the problems of entitlements simply be reneging on their promises.

The concern that investors have is that either entitlements will be paid by raising taxes (and so cutting profits and investment returns) or countries will simply default on their existing debts as their tax receipts run out.

As Europe has shown (from French workers rioting about having to retire at 62, to British students rioting about paying their tuition fees), breaking promises has consequences for elected politicians too.

Europe is already going rather painfully through this process of economic restructuring. The US will eventually come round as well. Just don't expect it to be painless.

So keep your money and invest it wisely. No doubt that tax collectors will be round in a while to take their cut so you can make your contribution.

Turukawa
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    I dispute the idea that the only thing between us and a debt-free country is the Bush tax cuts. If so, how do you explain the fact that the debt existed and was steadily growing long before those tax cuts? The issue is that Government spends more than it takes in. If tax revenue goes up, spending will go up proportionally (or more). The trouble is that we keep expecting the Govt to do more and more for us, but don't have the stomach to pay for it. Of course given that an increasing % of people in this country pay a net 0 or negative taxes, why wouldn't they vote in increased spending? – JohnFx Dec 11 '10 at 17:42
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    Of course, as we all know, raising the tax rate doesn't do anything to hurt the economy at all. Especially not when you raise taxes on people investing large sums of money into businesses that would employ lots of people. No effect whatsoever. And those people certainly aren't going to use tax shelters and the like to avoid paying taxes. So the CBO numbers are completely accurate, I tell you. COMPLETELY ACCURATE. LA LA LA LA LA I CAN'T HEAR YOU. –  Dec 11 '10 at 17:48
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    If Europe showed us something then it's that "tax and spend" isn't going to work, as government spends much quicker than it can raise tax revenues. And while it's easy and pleasant to add entitlements, it is very hard to roll them back when tax revenues fall. Enter riots and strikes and general mayhem. – StasM Dec 11 '10 at 21:22
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    As for "soaking the rich" as a solution for all budget problem, unfortunately, it's not going to work. Regardless of top tax margins, tax revenues stayed about 19-20% of GDP for decades, so raising top margins won't do anything to raise revenues - people would evade, shift incomes, move, work less, donate more, anything - but the tax revenue will stay in the same relation to GDP as before. The only way to grow it is to grow GDP, and this is not done by raising taxes. – StasM Dec 11 '10 at 21:25
  • I hear you, you don't like raising taxes. However, raising taxes is a way of balancing a deficit. The alternative is cutting expenses or hoping for growth. Any deficit can only be ended by some combination of all three. As for ending the Bush tax cuts, they're certainly not the best way to end the deficit but that wasn't the question. – Turukawa Dec 11 '10 at 21:51
  • Right now the US is not growing fast enough, not raising taxes and not cutting expenditure. You're going to have to pick some combination. Extending the Bush tax cuts acts as a sort of stealth stimulus so maybe you'll catch a break and that will lead to growth, but the demographic shift is going to catch up with you at some stage. – Turukawa Dec 11 '10 at 21:59
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    The CBO produces good numbers, but you have to understand what they mean. Usually these figures exclude most "off budget" items, little things like Social Security, Medicare and the war. If you're going to take Bush to task, forget about the political yammering about the taxes -- Medicare Part D, Medicare and Social Security obligations are going to rock our world from a budget perspective. – duffbeer703 Dec 11 '10 at 23:37
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    I think the terms "debt" and "deficit" are getting confused here. Even if the Bush Tax Cuts expired, and the CBO projections held true, there would still be $trillions of debt outstanding. It would take decades before the US became debt free. – myron-semack Mar 27 '12 at 16:48
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    @msemack You're right, and to be exact, it would take decades of a surplus to become debt free. – Nicole Apr 16 '12 at 05:31
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No, it makes no sense. The US national debt is different from other debt on TWO KEY WAYS :

1.) The national debt is not money we owe to our government IT IS MONEY WE OWE TO OURSELVES. 2.) If the GNP of our country can grow at a rate equal to or greater than the national debt interest, then the figure of national debt has no bearing on anything.

So a more philanthropic endeavor would be to help grow the economy.

Ash Machine
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No. Unless you are ten Bill Gates rolled into one man, you can not possibly hope to make a dent in the 14 trillion debt. Even if you were and paid off whole debt in one payment, budget deficits would restore it to old glory in a short time. If you have some extra money, I'd advise to either choose a charity and donate to somebody who needs your help directly or if you are so inclined, support a campaign of a financially conservative politician (only if you are sure he is a financial conservative and doesn't just tell this to get elected - I have no idea how you could do it :).

StasM
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    By your argument, we shouldn't vote either. – Nicole Apr 16 '12 at 05:32
  • Not true. Voting is very strictly defined procedure, with every person having exactly one vote, and each vote being counted in the same way. There's no way, unlike with US dollars, to create a trillion votes out of thin air, or to redistribute votes from one candidate to another by whim of a politician - that would be a felony. If it starts happening, I would agree that is such circumstances voting has no meaning and is a waste of time. Fortunately, things are different right now. – StasM Apr 16 '12 at 06:47
  • Maybe you misunderstood. My point is the advice that a single person shouldn't do something because they alone cannot make a dent would apply to voting as well. – Nicole Apr 16 '12 at 07:05
  • I understood your point but the analogy does not work here because voting and federal budgets work in very different way. – StasM Apr 18 '12 at 23:54
  • That's yet another red herring. One person's contribution to an enormous system is exactly the same thing. – Nicole Apr 19 '12 at 00:52
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It doesn't make any financial sense for you personally, because the impact on the debt would be so little it would have no significant benefit to you, and you'd be out the money you donated.

GS - Apologise to Monica
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