Iran nuclear deal: Saudi Arabia warns it will strike out on its own

[happyslug]

36. One of the problem is HOW do you define the Civil War Debt AND how it is paid off

Last edited Thu Nov 28, 2013, 10:11 AM - Edit history (2)

If you include the Pensions, then they were NOT paid in full till 2003 when the last Pension expired with the death of the last widow.

If you EXCLUDE Pensions, then the DEBTS issued during the Civil War were paid off in full by 1874 (When that was done, Congress in 1875 abolished the Civil War Income Tax, which had been passed by Congress in 1862, and ruled Constitutional by the US Supreme Court also in 1862, unlike 1894 when the Court ruled the Income Tax passed in the 1890s unconstitutional and ignored their decision of 1862).

Now, a complication to this is that the US issued "Fractional Currency" during the Civil War. This currency was down to three cent bills (and Stamps were used as currency). The reason for this was simple, people wanted to hold onto Gold and Silver coins in case of problem do to the Civil War. Thus Congress decided to issued paper money, and issued a law making it legal tender (that law is still on the books). Some of this Paper currency, including fractional currency has NEVER been turned in, thus outstanding debts from the Civil war period (most are held by collectors). Some of this money is still outstanding, and thus a "debt" from the Civil War.

Paying off the war debt was NOT enough for the Post Civil War Congress, it also wanted to return the value of the Dollar to its pre Civil War Value of $20 to an ounce of Gold. This was done by the Federal Government buying gold till the value of Gold was $20 to an ounce of Gold, and that was achieved in 1879 (At the tell end of the first recession of the Long Depression, The Recession ended in 1879, but then another recession started soon afterward, and this patten continued till 1897 when new Gold Fields in Alaska, South Africa and Australia opened up and started a new period of "Gold Inflation&quot .

Gold Inflation is when the value of Gold in terms of Dollars is steady, but what you can buy with that ounce of Gold or $20 declines. The decline in purchasing power in called Gold inflation, do to more Gold chasing less goods. The US and the World went through this in the 1850s do to the California Gold entering the world market, and again in the post 1897 period as Gold From Alaska, South African and Australia stated to enter the market (a similar period of "Gold Inflation occurred in the 1500s do to the massive importation of Gold ad Silver from the Conquest of Mexico and Peru). In between these Gold Inflation periods, you had deflation do to no or little gold entering the market (but a massive amount of Silver from Nevada after the Civil War, thus the demand to mint Silver Coins from the 1880s onward, to inflate the value of US Dollars, even if that meant the value of the US Dollars in term of GOLD would decline.

Back to the paying of the Civil War Debt. The last time the US paid off its entire debt was during the term of President Jackson (Which lead to a massive recession afterward). To pay off that debt, taxes had to be raised thus the Tariff was raised under Jackson. South Carolina hated the increase Tariffs for they imported most of their goods from England at that time period, and thus you had the Nullifications crisis, where South Carolina claimed the right to "Nullify" any federal law it disagreed with. To put down this rebellion, Jackson threaten to send in troops, and to get support from the nearest states to South Carolina to help him put down South Carolina, he agreed to let North Carolina, Tennessee and Georgia to sell the lands held by the Creeks, Cherokees and other tribes still in their states. Yes we paid off the Federal Debt on the backs of the Native Americans who had to move west in the trail of tears).

Since the time of Jackson, the Government has, at times, paid down the total debt but has never really paid it 100% off (No more valuable Native American land to steal, the Plains Native Americans land value did not come close to what the lands of Georgia, Tennessee and North Carolina came to thus not enough value to pay off the debt). Debt was issued all the time by the Federal Government, sometimes for nothing more then to pay ongoing debts (i.e. salaries of the troops and other Federal Employees) till the tax revenue came in.

On top of debts used to pay off ongoing debts (like wages), and some of this new debt was used to pay off old debts. This paying off of old debts by new debts occurs all the time. Except for WWI and WWII, and the post 1960 era, except for some exceptions (early 1930s are one), revenue exceeds new debts, thus part of the debt was paid off. There is two way to account for this excess of revenue over new debts, LIFO or FIFO.

Last in First Out (LIFO) in the accounting system that says any excess of revenue over payments is used to pay off the most recently incurred debts. LIFO became popular in the 1960s and 1970s, for it increased the cost of Goods Sold column in most accounting system, which is used to reduce the value of sales to get to Gross income. i.e Income less Cost of Goods Good equal "Gross Income" which in turn subject to other deductions become Taxable income. In times of inflation LIFO increases the Cost of Goods sold (for the most recent good purchased tend to be the highest priced) and thus decreases Taxable Income.
e
FIFO, First in first out, is the accounting system where you take the value of the oldest items in inventory and use that value to reduce sales to get to Gross income and then to Taxable Income.

Since the US has NEVER fully paid back its debts since the times of President Jackson, if you take a LIFO approach to the Civil War Debts, some of it is still outstanding, through the debts in more recent years have been paid in full. Remember, LIFO is Last In First Out. Thus any excess of revenue over the last 30 years is applied first to the debts incurred in the last 30 years NOT the Civil War Debts. Under LIFO the Civil War Debts may NEVER be accounted paid till the US pays off ALL of its debts as it did under President Jackson.

On the other hand if we use a traditional FIFO accounting system and states that any excess in revenue went to the oldest debts first, it was paid off in the 1870s. 1874 would be to early, some of the Civil War Debts would have been rolled over and paid by new debts, but those debts were all paid off while before 1879 when the Dollar returned to $20 to an ounce of Gold.

Just a comment, that there are many ways to look at debts. LIFO and FIFO are inventory accounting systems to allocate sales to the cost of those sales. Such allocation is the center of any Actual Accounting System, which is the system used by private businesses for it more accurately shows they income.

The Government does NOT keep an inventory of goods it later plans to sell (The Government may had items it does sell, but buying things to sell is NOT the main purpose of the US Government). The US Government uses a Cash Accounting system NOT an Accrual Accounting system.

Side Note: Silver Coins came back into general use in the 1870s, but there was resistance to it, for Silver had dropped in price from 1857 (In 1857 the US Congress revised the coins system of the US, do to the fact it could do so given the massive influx of Gold From California AND Silver from Nevada). These standards remained the Standard till Clad Coinage replaced Silver in 1964. There was never a change in Gold Coins since 1857, for they were all confiscated in 1934 and none minted since the early 1930s). The gold from California brought with it a drop in the value of Gold, the silver from Nevada brought with it a drop in the value of Silver. THe decline in both Gold and Silver Value ended during the Civil War, but the value of gold was stable after 1865, while the value of Silver continued to drop (By 1900, the Silver in a Silver Dollar had dropped to be only 55 cents, when in 1857 it had been one Dollar).
This drop in price of silver meant that dollars could be issued AND prevent the dollar from dropping to $20 to an ounce of GOLD,.

Thus we may BOTH be right, but using definition of Civil War Debt AND how it is paid off. The last time ALL debts of the US was paid off was under President Jackson in the 1820s (Which also lead to a massive recession the recession of the 1830s). Since that date part of the debt has been paid off by new debt. On the other hand most of the Civil War debt was paid off by 1874, just part of the debt was paid off by new debt (and most of that debt reflected paying current bills till the taxes came in to pay the debts back).

This was complicated by the Politics of Taxation from 1863 to 1913. The main source of income for the Federal Government was the tariff. The GOP supported HIGH Tariffs to protect domestic producers, even if the Tariff were so high, people did not import things. On the other hand the Democratic Party of that time period wanted to Lower Tariffs, to permit more imports AND MORE REVENUE TO THE FEDERAL GOVERNMENT. Thus the Democratic Party when it controlled Congress, had more money to spend do to the lower taxes and higher revenue. The GOP when it was in power RAISED tariffs that cut revenue and thus had to cut expenditures do to lack of income.

Now, every so often this is brought up today, as an example when taxes are so high that revenue drops. The problem is the Tariffs have NOT been that high since the 1930s. Neither party wanted High Tariffs after WWII, for we had to support out allies and a high Tariff would wreck those economies. I mention it only to show that the US had the ability to pay off those debts in the 1870s, and 1880s and did so. Some debts continued (like Pensions) but all were minor compared to what had been the debt after the Civil War. Thus the Government does NOT use LIFO or FIFO. I bring LIFO and FIFO up for similar systems are used by people who want to claim the US has not paid off its Civil War Debts. You do NOT use them in Government or Non-profit agencies for these should have no profit to pay taxes on.

On the other hand, I have seen people use LIFO accounting to show that the Civil War Debt is not paid off, for debts incurred more recently are viewed as being paid off as oppose to applying those payments to the Civil War debts. i.e $1 million dollar to pay off the debts is applied to the Debts incurred by Reagan NOT the Civil War Debts, thus the debt incurred under Reagan is reduced, but the debt left over from the Civil War remains "unpaid". i.e. an accounting game.

Side note: Another claims for unpaid Civil War Debts involved the 14th amendment. THe 14th Amendment has four section, Section 4 forbids the payment of any debt incurred in rebellion against the US. This comes up every so often by Credit Holders of debt of various Southern States incurred between 1861-1865. Every so often. People try to claim money raised by such States to pay such debt. The states site the 14th Amendment saying they can NOT pay off those debts. Such cases never gets to court in the US for the Federal Courts knows of Section 4 and will enforce it. On the other hand some people in England tries to bring it up in English and other Foreign Courts, but it is generally dismissed as soon as it is filed for lack of Jurisdiction. Under Section 4 of the 14th Amendment, these Civil War debts can NEVER be paid off. This includes debt of those Southern States incurred pre Civil War, if such debts (and all of them were), rolled over during the Civil War as those States look for revenue to fight the Civil War. Thus these debt will NEVER be paid for it is UNCONSTITUTIONAL to pay them, but at the same time an "Outstanding Civil War Debt".