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Old 04-29-2020, 09:43 AM
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If Biden wins, he will have to make big, unpopular tax increases in his 1st term


This Yahoo Finance article notes that the massive amount of stimulus spending during this coronavirus, combined with the fact that Medicare will run low on money by 2023, disability insurance by 2024, and Social Security by 2028, will require tax increases within the next five years. It also notes that although Biden was already planning to raise taxes anyway if he won, his proposals will come nowhere close to what is needed.

Of course, the same could be said of Trump, but if Trump is reelected, America has a lot more things to worry about than taxes.
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Old 04-29-2020, 09:46 AM
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I'm, I suppose upper middle class whatever the hell that means anymore. And that would be fine with me.
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Old 04-29-2020, 09:47 AM
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Perhaps by the old way of thinking -- that somehow deficits matter, politically speaking. But the last few decades have definitively demonstrated, IMO, that deficits don't matter at all, politically speaking. Several presidents have already gotten this memo (most notably Reagan, Bush II, and Trump). Maybe Democrats should get it too.
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Old 04-29-2020, 09:52 AM
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It'd be folly to raise taxes. That's when we're going to need stimulus, not now.
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Old 04-29-2020, 09:55 AM
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Perhaps by the old way of thinking -- that somehow deficits matter, politically speaking. But the last few decades have definitively demonstrated, IMO, that deficits don't matter at all, politically speaking. Several presidents have already gotten this memo (most notably Reagan, Bush II, and Trump). Maybe Democrats should get it too.
In other words......"The other party allowed water to leak into the boat without suffering consequences, so we'll allow water to leak into the boat, too."
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Old 04-29-2020, 09:57 AM
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In other words......"The other party allowed water to leak into the boat without suffering consequences, so we'll allow water to leak into the boat, too."
Isn't that how politics works? If deficits don't matter politically, why would anyone expect politicians to care about deficits?
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Old 04-29-2020, 10:07 AM
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Isn't that how politics works? If deficits don't matter politically, why would anyone expect politicians to care about deficits?
Sure, "that's how politics works." And it's little solace to say when the ship's sinking is finally felt.
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Old 04-29-2020, 10:08 AM
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I expect some modest tax increases after the recovery picks up steam. It's the adult thing to do. The Bush tax cuts blew up the deficit and this administration's tax cuts put the pedal to the metal on increasing the deficit. If Biden can get a tax hike through, great. But then I fully expect Republicans to throw themselves on the floor and stomp the floor with their hands and feet and cry "WAAAAAAAAAH!" at the top of their lungs. That's what Republicans do. I also fully expect Republicans to return to their old habits of holding the president hostage over the debt ceiling. At some point we have to return to sanity, and we can only do so with a Democratic president.
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Old 04-29-2020, 10:17 AM
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Sure, "that's how politics works." And it's little solace to say when the ship's sinking is finally felt.
Republicans winning is sinking the ship far, far more than the possibility that Democrats may not pay quite as much attention to the deficit. If paying less attention to the deficit will help Democrats beat Republicans, then that's a tradeoff that helps the country.
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Old 04-29-2020, 10:40 AM
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The only way we're going to end wealth inequality is to have high taxation of the wealthy. I admit that I don't see Joe Biden being some savior in this sense. He exists to stop the oligarchs from running away with total control of the government. I'll be happy if he can just stabilize the economy and build a normal cabinet.

But I suspect that whether it's now or 10 years from now, the unfortunate fact is that things will have to get so bad for the average person that we demand a radical overhaul of the country.
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Old 04-29-2020, 10:43 AM
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Biden has spent decades trying to cut all of those things. Why would he now increase taxes to pay for them?
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Old 04-29-2020, 11:10 AM
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If Biden wins, he will have to make big, unpopular tax increases in his 1st term


Let's hope he does. The problem is that he is probably going to propose massive spending increases as well. And Democrats will not push against spending, and will push against tax increases. See: Bush era tax cuts.

Both sides do, in fact, do this. Which is why we had a massive deficit during Obama, during Trump, and will under Biden (if he is elected).

This is a problem that can't be spun away by blaming someone else. And that will be the only response. It's like global warming - real solutions are too hard, and finger-pointing is too easy.

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Old 04-29-2020, 11:26 AM
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Money isn't real. It's a shared delusion that we all maintain because it helps society function better. Deficits are only a problem if people think they're a problem. It's like a run on toilet paper -- it's a problem because (and only because) people think it's a problem, and they're worried they might run out. The solution isn't to make more toilet paper -- it's to educate people that there's plenty of toilet paper and they don't need to hoard it.

So maybe the solution for national deficits is to convince people that they're really not that important, since money is fictional anyway.
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Old 04-29-2020, 11:32 AM
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Fuck that. Ever since Reagan (at least), Republicans have busted the budget with huge tax cuts, and Democrats have had to clean up their mess with unpopular tax increases, thereby giving Republicans talking points to win elections. Clinton and Obama both did the responsible thing and got the economy going in the right direction, and all it got us was Bush and Trump who not only took credit for the economy they inherited, but drove it off a cliff with huge budget deficits from tax cuts and corporate welfare, while excoriating Dems for having the temerity to want to spend money on health care.

No more. Biden should spend whatever it takes to get universal health care, infrastructure rebuilding, and green energy going, and to hell with the hypocritical hand-wringing from Pubs about deficits. By all means, raise taxes on the wealthy. For starters, remove the cap on Social Security taxes, which would instantly fix that program. Plug the loopholes that allow huge corporations and wealthy investors to pay little or no tax. Put real teeth into penalties for companies who are American in all but name, but avoid taxes by having a drop box in the Caymans. Restore the inheritance tax for multi-millionaires.

But there is no need to raise taxes on anyone making less than six figures.
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Old 04-29-2020, 11:34 AM
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Why will Biden have to do this? I don't get it -- we were running large deficits when Trump and McConnell pushed through a massive tax cut that did little for the economy, but did blow up the deficit.

Shodan, federal spending as a percent of GDP decreased under Obama and under Clinton (cite), so please stop already with the both sides must forever be equally bad, forever and ever, amen. GWB cut taxes and increased spending, as did Reagan and Trump. If Biden pushes tax and spending increases, you have to agree that's better than spending increases and tax cuts, right?
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Old 04-29-2020, 11:55 AM
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Both sides do, in fact, do this. Which is why we had a massive deficit during Obama, during Trump, and will under Biden (if he is elected).
That's bullshit.

Obama's deficits came directly from the Great Recession inspired by GWB's tax cuts and unfunded war. He inherited $1.6T and reduced the deficit every year down to $442B. That's still not a good thing but it's 65% or so less than what he inherited.

Ditto WJC who brought us to a surplus, for heaven's sake.

Trump, meanwhile, has expanded the deficit every year he's been in office. It's climbed from $779B to $Some unknown T now.

https://www.thebalance.com/deficit-b...s-hide-3306151

I know, I know. Soi-disant 'fiscal conservatives' sometimes subscribe to the 'Starve the Beast' theory propounded by weird Grover Norquist - I've interviewed the man - but it's nonsense. Deficits DO matter. Because the more you have, and the more debt you have, the harder it becomes to fund government. Great, say these people, we can shrink government. Except we WON'T because voters don't WANT government to shrink. Instead, we'll be stuck with rising interest rates, the dollar losing its reserve currency status and high inflation.

Cocksuckers. 'Fiscal conservatives' and neither fiscal nor conservative.
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Old 04-29-2020, 12:11 PM
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Money isn't real. It's a shared delusion that we all maintain because it helps society function better. Deficits are only a problem if people think they're a problem. It's like a run on toilet paper -- it's a problem because (and only because) people think it's a problem, and they're worried they might run out. The solution isn't to make more toilet paper -- it's to educate people that there's plenty of toilet paper and they don't need to hoard it.

So maybe the solution for national deficits is to convince people that they're really not that important, since money is fictional anyway.
And that is absolutely untrue. I'm not saying you're lying, get me. Just that you're wrong.

Money isn't wealth. You're sort of right about that. Money is an accounting vehicle to help lubricate transactions and allow markets to set value. Fine.

But, as I said above, the only reason - I believe, please correct me - you believe deficits don't matter is because they haven't had a serious impact yet. Correct?

If so, that's an illusion created by post-WWII economic prosperity in the United States combined with the lack of alternatives to house currency and markets. That era - a genuine era of American exceptionalism - is coming to an end. There are other currencies where capital can flow to that don't include the dollar. The Euro, provided they get through their chaos and the Yuan are fine places to hide. And in terms of markets? I can now buy shares on the Hang Sen and Footsie and avoid New York completely.

So don't be blithe about deficits not mattering. At some point - some tipping point that can't quite be seen ahead of time - the Treasury will offer $100B worth of T-Bills and there'll be no buyers and they'll have to raise rates. Then they'll have to do it further and higher and we're all fucked.
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Old 04-29-2020, 12:13 PM
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No, it isn't bullshit. The recession was not caused by tax cuts or war; it was caused by the housing market collapse. Obama did not inherit the $787B stimulus package and Clinton did not create a surplus - his budgets envisoned "$200B deficits as far as the eye could see" and he vetoed the balanced budget proposal more than once.

From your own cite -
Quote:
President Obama had the largest deficits. By the end of his final budget, FY 2017, his budget deficits totaled $6.781 trillion. That's a 58% increase.

Obama took office during the Great Recession. He immediately needed to spend billions to stop it. He convinced Congress to add $253 billion from the economic stimulus package to Bush’s FY 2009 budget. The American Recovery and Reinvestment Act added another $534 billion over the rest of Obama’s terms.6

In 2010, the Obama tax cut added $858 billion in deficits in its first two years. Federal income decreased due to lower tax receipts from the 2008 financial crisis.
Also from your cite -
Quote:
Trump did not have to fight a recession during his term.
Like hell he doesn't.

Regards,
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Old 04-29-2020, 12:26 PM
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And that is absolutely untrue. I'm not saying you're lying, get me. Just that you're wrong.

Money isn't wealth. You're sort of right about that. Money is an accounting vehicle to help lubricate transactions and allow markets to set value. Fine.

But, as I said above, the only reason - I believe, please correct me - you believe deficits don't matter is because they haven't had a serious impact yet. Correct?

If so, that's an illusion created by post-WWII economic prosperity in the United States combined with the lack of alternatives to house currency and markets. That era - a genuine era of American exceptionalism - is coming to an end. There are other currencies where capital can flow to that don't include the dollar. The Euro, provided they get through their chaos and the Yuan are fine places to hide. And in terms of markets? I can now buy shares on the Hang Sen and Footsie and avoid New York completely.

So don't be blithe about deficits not mattering. At some point - some tipping point that can't quite be seen ahead of time - the Treasury will offer $100B worth of T-Bills and there'll be no buyers and they'll have to raise rates. Then they'll have to do it further and higher and we're all fucked.
In my lay understanding, deficits and debt become a problem when "too much" money is printed in order to make up for the deficit/debt, and thus the users of this money start to believe that, because there is suddenly so much more of it available, it is suddenly less valuable, and thus everyone's wealth is reduced because the currency they hold is seen as worth less. If this is accurate, this is just part of this shared illusion -- there's nothing special about a dollar now, except that everyone perceives it as having a certain value. There is something special about land, and cars, and machines, and food, etc. -- this stuff has real use and thus real value. But money isn't like that -- it's something we all agree to see as valuable, just because it's good for society that we all see it as having value, since it makes it much easier to exchange goods and services than without it.

So, in my understanding, the only difference with a large national deficit and without it is perception. Perception is still real, and it may be just as hard to combat this perception as it is to combat the perception that we're running of toilet paper, but fighting this perception might still be easier than actually reducing the deficit.
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Old 04-29-2020, 12:38 PM
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Yup, and it'll suck but its necessary. Even during good times Obama was running 300-400 billion deficits. Trump ballooned that to a trillion with his supply side tax cuts and military spending, all before the virus hit.

But after we're in a better place and deficits are back down to 2-3% of GDP, then higher taxes will be necessary and its fine. Especially if we increase spending on education and health care.
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Old 04-29-2020, 12:50 PM
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JFC.

Deficits do not matter, they have never mattered, and they will never matter in the future. I can only hope that Biden acts accordingly.
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Old 04-29-2020, 12:56 PM
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Also from your cite -

Quote:
Trump did not have to fight a recession during his term.
Like hell he doesn't....
WTF kind of disingenuous response is this? Jonathan Chance used the past tense and you respond in the present tense? I'm sure JC is aware that we're probably falling into recession now, but his point was that the deficit was ballooning before, when Trump didn't have a recession to deal with. Maybe this will help.

Sure would be nice to have all those billions of tax dollars that Trump's tax cut removed from federal coffers.
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Old 04-29-2020, 01:06 PM
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WTF kind of disingenuous response is this? Jonathan Chance used the past tense and you respond in the present tense? I'm sure JC is aware that we're probably falling into recession now, but his point was that the deficit was ballooning before, when Trump didn't have a recession to deal with. Maybe this will help.

Sure would be nice to have all those billions of tax dollars that Trump's tax cut removed from federal coffers.
No shit. There was absolutely no reason for the last round of tax cuts. Remember they were done in the back room with absolutely ZERO input from Democrats. Big corporations looted the treasury and used it, not to buy equipment or hire, but to buy back their own stock. Cutting taxes while the economy is humming is the height of stupidity, like eating all the seed corn after a good harvest. Yes, we're fighting a newborn recession/depression, but cutting taxes will not do a damn thing to help it.
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Old 04-29-2020, 02:12 PM
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This Yahoo Finance article notes that the massive amount of stimulus spending during this coronavirus, combined with the fact that Medicare will run low on money by 2023, disability insurance by 2024, and Social Security by 2028, will require tax increases within the next five years. It also notes that although Biden was already planning to raise taxes anyway if he won, his proposals will come nowhere close to what is needed.

Of course, the same could be said of Trump, but if Trump is reelected, America has a lot more things to worry about than taxes.
Then why isnt Moscow Mitch and Trump raising them now?

Socsec is a easy fix- take away the cap on taxing, while not increasing the cap on benefits. And that is mostly painless.

Increase the taxes on the rich, Taxable income of $200K or more. Note that is TAXABLE INCOME, not what you earn. Often your TI is half of your gross.
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Old 04-29-2020, 02:42 PM
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OP, are you coming back?

The US debt/GDP at the end of 2019 was 106% and is expected to go to 110%. Cite.

Japan's debt/GDP is at 238% and is expected to go to 255%. Cite.

Japan bond yields are about 0.30% at 25 year maturities, and negative until the 7 year point.

I'm not suggesting we follow Japan's path in terms of debt to GDP, but it really doesn't seem like Biden needs to shoot his first term in the foot by raising taxes, unless the economy is really booming.
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Old 04-29-2020, 03:32 PM
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OP, are you coming back?

The US debt/GDP at the end of 2019 was 106% and is expected to go to 110%. Cite.

Japan's debt/GDP is at 238% and is expected to go to 255%. Cite.

Japan bond yields are about 0.30% at 25 year maturities, and negative until the 7 year point.

I'm not suggesting we follow Japan's path in terms of debt to GDP, but it really doesn't seem like Biden needs to shoot his first term in the foot by raising taxes, unless the economy is really booming.
I've been at work, sorry. Still a few more hours to go. But I'll reply here.

One reason Japan's debt situation isn't that precarious is because it is almost all internally held debt (by the nation's own citizens), which is considered more stable than external debt (owed to foreign nations/lenders.) America's debt is more diverse, and hence more risky.
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Old 04-29-2020, 03:47 PM
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...America's debt is more diverse, and hence more risky.
Can you provide a cite for this?
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Old 04-29-2020, 03:55 PM
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In other words......"The other party allowed water to leak into the boat without suffering consequences, so we'll allow water to leak into the boat, too."
It's more like... "The other party said that boat leaks would kill us all, but didn't hesitate to make a few of their own leaks when they gained power. So maybe they're lying about this like they lie about everything else."
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Old 04-29-2020, 04:05 PM
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In my lay understanding, deficits and debt become a problem when "too much" money is printed in order to make up for the deficit/debt, and thus the users of this money start to believe that, because there is suddenly so much more of it available, it is suddenly less valuable, and thus everyone's wealth is reduced because the currency they hold is seen as worth less. If this is accurate, this is just part of this shared illusion -- there's nothing special about a dollar now, except that everyone perceives it as having a certain value. There is something special about land, and cars, and machines, and food, etc. -- this stuff has real use and thus real value. But money isn't like that -- it's something we all agree to see as valuable, just because it's good for society that we all see it as having value, since it makes it much easier to exchange goods and services than without it.

So, in my understanding, the only difference with a large national deficit and without it is perception. Perception is still real, and it may be just as hard to combat this perception as it is to combat the perception that we're running of toilet paper, but fighting this perception might still be easier than actually reducing the deficit.
Look, yes, the value of money is a vaguely agreed upon belief. Fine. Congratulations, you've just discovered super basic economics and theory of money.

But you're making the argument - that I pointed out above - that water runs downhill and will never find a bottom.

Extremely simplistic scenario:

We have a national income of $1000.
We have a national spending level of $1100.
We need to borrow $100 per year.
We send that out for T-Bills at 3%. They are purchased.
Barring something outside the system occurring - growth, war, whatever - this is stable...for a while.
But now we have a national spending level of $1103.

Issues:
This comes with opportunity cost. Things we can't do with that extra $3. Doesn't sound like much but right now the interest on the national debt - the sum total of deficits - is about $479B (that's going to be higher now, of course, but those are the numbers a dug out of Pew Research.

So that's $479B that isn't in people's wallets nor spent on things the government might want to spend it on. According to 'Where Does the Money Go' the 2015 discretionary spending - everything not debt or entitlements - came to $1.11T. Absent the military spending - which I'd bet you'd cut but give me this one - the entire rest of the discretionary budget was $442.89B.

So if we weren't spending that money on interest we could, literally, more than double the money spent on Education, Healthcare, Transportation, Science, the Arts, Food and Agriculture, new Energy Development, the VA (doesn't count as defense), foreign aid, diplomacy, Housing and Development.

Next issue:

We borrow ever greater sums of money to finance the debt. Great. But recall, we're borrowing it. You seem to be assuming that we will always be able to borrow. But that only continues so long as lenders believe they will be paid back. So far that has always been the case. But it needn't continue forever.

When it comes - and it will come - that we need to persuade lenders to finance our debt interest rates will rise quickly and that $479B figure, above, will rapidly climb by tens or hundreds of billions of dollars. Since the debt is denominated in dollars the only way to deal with that will be to either raise taxes - which no one wants - or inflate the currency and pay off the debt in devalued dollars.

Which will be terrible for everyone but less so for holders of stocks and mutual funds. If you have $50,000 in the bank and inflation spikes to say, 20% after a year your bank account is worth $40,000. If your savings are in stocks and mutual funds (not bonds) they can inflate in value (after the depression) to maintain their apparent value. Guess who owns most of the stocks and bonds? About 45% of Americans don't, last I heard. No savings or brokerage accounts, no 401k or pensions. They'll be screwed.

Remember this basic fact: When you repeat 'Deficits don't matter' you're repeating something that Dick Cheney said. And Cheney is clearly an evil, self-centered man with little to no regard for everyday people. Don't be like Dick.
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Old 04-29-2020, 04:33 PM
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Or we could just print more money.

I'm not a finance professional, and I accept that there are negatives to debt and deficit. In my personal finances, I very carefully avoid debt when at all possible. But I'm unconvinced national finances follow the same rules, especially when there seems to be zero political incentive to reduce the deficit. But we'll see. I think beating Republicans is more important then reducing the deficit, in general.
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Old 04-29-2020, 04:36 PM
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I've been at work, sorry. Still a few more hours to go. But I'll reply here.

One reason Japan's debt situation isn't that precarious is because it is almost all internally held debt (by the nation's own citizens), which is considered more stable than external debt (owed to foreign nations/lenders.) America's debt is more diverse, and hence more risky.
I looked it up and it looks like 70% of US debt is held domestically and 90% of Japanese debt is. Is it your claim that this 20% difference means that Japan can issue more than twice as much as a percent of GDP than the US without having a credit crisis, but the US is heading towards one?

While you're answering that, can you provide a cite for historical examples of countries that issue debt in their own currency, where they control their own currency, have faced this problem?
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Old 04-29-2020, 04:56 PM
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Or we could just print more money.

I'm not a finance professional, and I accept that there are negatives to debt and deficit. In my personal finances, I very carefully avoid debt when at all possible. But I'm unconvinced national finances follow the same rules, especially when there seems to be zero political incentive to reduce the deficit. But we'll see. I think beating Republicans is more important then reducing the deficit, in general.
I haven't spent the time looking into this but I think we can just borrow it from ourselves. As opposed to simply printing money we pay it back on a schedule and reduce the money supply by the amount paid back. We don't even have to charge interest because we have good credit with ourselves.

I'm not sure that works, but I don't see that much difference in how we do it now borrowing from others. I know banks will squawk about reducing the money supply but I think it prevents the inflationary effect of simply printing money.

Maybe someone will point out the flaw in that reasoning.
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Old 04-29-2020, 04:56 PM
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We send that out for T-Bills at 3%. They are purchased.
Barring something outside the system occurring - growth, war, whatever - this is stable...for a while.
But now we have a national spending level of $1103.
I would just point out here that currently the interest rate on a 10-year T-bill is 0.62%. In terms of interest rates, there is no better time than now to take on debt.

Quote:
This comes with opportunity cost. Things we can't do with that extra $3.
I don't think it's news to anyone that paying interest sucks. We borrowed the money, we realized the benefit, now we're faced with what feels like a wasteful chore of throwing money down a black hole. But we can't forget how we were facing disaster and were so grateful to get that cash at the time And again, interest rates are currently low and will likely go lower.

Quote:
When it comes - and it will come - that we need to persuade lenders to finance our debt interest rates will rise quickly and that $479B figure, above, will rapidly climb by tens or hundreds of billions of dollars. Since the debt is denominated in dollars the only way to deal with that will be to either raise taxes - which no one wants - or inflate the currency and pay off the debt in devalued dollars.

Which will be terrible for everyone but less so for holders of stocks and mutual funds. If you have $50,000 in the bank and inflation spikes to say, 20% after a year your bank account is worth $40,000.
Presumably, interest rates will rise to compensate for erosion of cash holdings. But you're right, inflation undermines cash savings, dollar-denominated debt, and wages.

quote]If your savings are in stocks and mutual funds (not bonds) they can inflate in value (after the depression) to maintain their apparent value.[/quote]
So that's great! I want my money in instruments that inflate in value. That's incentive to pull that cash out of the mattress and put it into the economy or some productive investment. Frankly it would be healthy to have a few points of inflation up on the board.

Quote:
Guess who owns most of the stocks and bonds? About 45% of Americans don't, last I heard. No savings or brokerage accounts, no 401k or pensions. They'll be screwed.
People with no holdings should be unaffected by inflation. They will get paid bigger wages and they'll have bigger bills to pay. They have nothing to lose but their debts, and let's be frank, we have a big problem with all sorts of debt peonage in the US. Inflation also does a good job on tamping down wages of people who have been getting automatic raises for years and are overpaid relative to their contributions; it allows firms to reallocate their compensation to younger, more productive workers.

This is the time to take on debt and print money. This is what we need to do in crises. Obviously there are fine points to tweak, and some restraint to be shown, but this is the right thing to do.
  #34  
Old 04-29-2020, 07:49 PM
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JFC.

Deficits do not matter, they have never mattered, and they will never matter in the future. I can only hope that Biden acts accordingly.
They don't matter now because Republicans are in power. If Biden is elected, Republicans will consider deficits to be an existential crisis again.
  #35  
Old 04-29-2020, 08:11 PM
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Or we could just print more money.

I'm not a finance professional, and I accept that there are negatives to debt and deficit. In my personal finances, I very carefully avoid debt when at all possible. But I'm unconvinced national finances follow the same rules, especially when there seems to be zero political incentive to reduce the deficit. But we'll see. I think beating Republicans is more important then reducing the deficit, in general.
Argh!

Printing money IS inflation. That's exactly what inflation is! Inflation is the difference between population/economic growth and expansion of money supply. Why is this so hard? If the money supply expands faster than economic activity expands things end up costing more and hurting everyday people.

This is classic short-term thinking. It's like CEOs not worrying about anything beyond beating next quarter's earnings expectations. You win in the short term but lose in the long.

And beating Republicans has nothing to do with this. It's postulating that Biden has to raise taxes after Trump is already beaten.

You're correct that your personal finances are not the same as national finances. You are not sovereign and can't create money to get yourself out of debt. That's a good thing. But it doesn't mean there's no consequences to nation-states doing so. Those consequences tend to be higher interest rates and less flexibility to deal with crises like the great recession or the current dislocations? Eventually the ability to cope becomes so lessened that major crises would simply be impossible. Imagine Katrina with no real federal response. Or no stimulus right now. Banks would be foreclosing left and right already.
  #36  
Old 04-29-2020, 08:39 PM
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Presumably, interest rates will rise to compensate for erosion of cash holdings. But you're right, inflation undermines cash savings, dollar-denominated debt, and wages.
That, my friend, is an enormous presumption and one not borne out by fact. Interest rates are never commensurate with inflation. Interest rates are always higher than inflation and the rise proportionate to risk. Why lend at all if you're going to be paid back in devalued dollars?

Quote:
So that's great! I want my money in instruments that inflate in value. That's incentive to pull that cash out of the mattress and put it into the economy or some productive investment. Frankly it would be healthy to have a few points of inflation up on the board.
Well, that's true. Except in this scenario prices are rising quicker than your pay (see above) so you'll quickly be faced with a situation where you'll find it harder to save money. Pay - as we've found out over the last 40 years - does not keep pace with inflation, particularly in certain high-demand areas like healthcare, college education and so forth.

Fun fact: I went to a school in the Appalachians for four years in the 80s. Total cost: $22,000 rack rate. My oldest is going to a different small school in the Appalachians: $48,000 rack rate per year. or $192,000 for four years. General inflation since 1989 SHOULD make that $45,794.50 but, because not all sectors inflate at the same rate, there we are.

Quote:
People with no holdings should be unaffected by inflation. They will get paid bigger wages and they'll have bigger bills to pay. They have nothing to lose but their debts, and let's be frank, we have a big problem with all sorts of debt peonage in the US.
Here, we get interesting. As described above, inflation isn't a 'get out of jail free'. If inflation wasn't a net negative we wouldn't worry about it. Yes, in an expanding economy requires a certain level of inefficiency that allows for inflation. But to say that people's pay would keep up with inflation is to simply deny the facts on the ground.

Here's something I pulled out of a book. Since 1975 we'd had periods of high inflation and low inflation. According to your theory, above, that should work out OK because inflation will rise both prices and costs and everything balances out.

1975 New House AVG: $48,000
Adjusted to 2015 dollars: $209,417
Actual cost of New House AVG: $270,000

1975 New Car AVG: $3,800
Adjusted to 2015 dollars: $16,578
Actual cost of New Car AVG: $31,252

1975 Median Income: $12.686
Adjusted to 2015 dollars: $55,347
Actual 2015 Median Income: $51,759

Oh, look at that! Even though we've had both high and low inflation cost of homes and cars went up while income went down. Huh, sure sucks to be those people. Oh, wait, that's us. I was 8 in 1975 and since then real wages have gone backwards or stayed flat for the vast majority of Americans. Your thesis doesn't hold up in the face of evidence.

Quote:
Inflation also does a good job on tamping down wages of people who have been getting automatic raises for years and are overpaid relative to their contributions; it allows firms to reallocate their compensation to younger, more productive workers.
Well, now. Perhaps the elderly could go out on ice floes as well. We could shut down social security as well. That's certainly a drain on the national economy. Ditto Medicare. If they haven't saved enough to pay for their own healthcare they can die and 'reduce the surplus population'.

Quote:
This is the time to take on debt and print money. This is what we need to do in crises. Obviously there are fine points to tweak, and some restraint to be shown, but this is the right thing to do.
You're not wrong that - in a low interest rate environment - adding debt can be the right move to make. But as my original thesis up there stated - to make that work you have to be willing to stop taking on debt in a higher interest rate environment. And my thesis is that it will never happen given the incentives currently at work in elected officials.
  #37  
Old 04-29-2020, 11:20 PM
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Nit: Presidents don't levy federal taxes on Americans (except tariffs) - Congress does.
  #38  
Old 04-29-2020, 11:39 PM
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While you're answering that, can you provide a cite for historical examples of countries that issue debt in their own currency, where they control their own currency, have faced this problem?
None that I know of, but again, the Yahoo Finance article states that Social Security, Medicare, and other programs are slated to run short of money by 2023-2028. You can't fix that without raising revenue steeply.
  #39  
Old 04-30-2020, 04:45 AM
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(...)
1975 New House AVG: $48,000
Adjusted to 2015 dollars: $209,417
Actual cost of New House AVG: $270,000

1975 New Car AVG: $3,800
Adjusted to 2015 dollars: $16,578
Actual cost of New Car AVG: $31,252

1975 Median Income: $12.686
Adjusted to 2015 dollars: $55,347
Actual 2015 Median Income: $51,759
(...)
This is because inflation as a flat % is oversimplifying: It works OK for comparing one year to the next. But it gives weird results over decades. Inflation is calculated with a basket of goods and services. We are comparing the price of a quart of milk, a bread, a movie ticket, a gallon of gas (made up on the spot) in 1975 and 1976. Great! We can calculate that the inflation is 3% and the avg. increase in pay was 4%. This is a useful calculation in 1977.
But now we remove the bread and the movie from our inflation basket and add an iPhone, a Big Mac and a broadband subscription. Great if you want to compare 2017 with 2018; those are the things people spend their money on. Not so great if you want to compare 2017 with 1976.

There is no way to go from 1975 dollars to 2015 dollars directly because the value of a 1975 dollar is defined completely different than the value of a 2015 dollar, even the weighing factor of goods and services that remained (like milk and bread) are completely different. With your 2015 salary you can buy an absolute shitton of 1975 staples, you can rent 3 1975 houses -- they're the ones labelled "condemmed" --you can buy more processing power than the whole of NASA had in 1975 for ~200 "2015"dollars, 10.000 2015 dollars will buy a 2nd hand car that blows anything built in 1975 out of the water in terms of performance, reliability, comfort, luxury, safety and any other metric you can think of. I mean to show that the comparison of "1975 New Car AVG:" with a "2015 New Car AVG" is utterly useless. a 1975 car was expected to last maybe 5 years or 100k miles. A 2015 car is expected to last 2-3 times that.
  #40  
Old 04-30-2020, 06:43 AM
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Interest rates are never commensurate with inflation. Interest rates are always higher than inflation and the rise proportionate to risk.
No. Interest rates vascillate depending on how central bankers are trying to influence it. In 1979 they weren't higher than inflation. We're about to enter another such period.

Quote:
Why lend at all if you're going to be paid back in devalued dollars?
You offer an interest rate that compensates for it. (Or, edge case, you're a retailer like a car company that needs to move inventory in a hurry).

Quote:
Well, that's true. Except in this scenario prices are rising quicker than your pay (see above) so you'll quickly be faced with a situation where you'll find it harder to save money. Pay - as we've found out over the last 40 years - does not keep pace with inflation, particularly in certain high-demand areas like healthcare, college education and so forth.
This is a political problem. Funny coincidence that you mentioned the exact 2 areas that wouldn't have needed to inflate if they were socialized to some extent like other western countries.

Quote:
Here, we get interesting. As described above, inflation isn't a 'get out of jail free'. If inflation wasn't a net negative we wouldn't worry about it. Yes, in an expanding economy requires a certain level of inefficiency that allows for inflation. But to say that people's pay would keep up with inflation is to simply deny the facts on the ground.
You're right, wages broadly haven't kept up with inflation. This is an indictment of our economic system in which a CEO makes 300x the pay of the lowest paid worker and is working hard to make this ratio more lopsided. Again, this is not a monetary problem, this is a political problem, as evidence by the fact that many other countries don't have this problem.

Quote:
Well, now. Perhaps the elderly could go out on ice floes as well. We could shut down social security as well. That's certainly a drain on the national economy. Ditto Medicare. If they haven't saved enough to pay for their own healthcare they can die and 'reduce the surplus population'.
Please cut the hysteria. Nobody is suggesting sending Grandma to a Viking funeral (except maybe Tucker Carlson and Ben Shapiro). Certainly not me.

I am pointing out that elderly workers get welfare in the form of automatic raises that continue long past commensurate raises in their productivity. They get paid more than younger workers for doing the same job. Inflation helps tamp down that form of misallocation so everyone's wages is more in line with their productivity.

I suggest a robust safety net with universal healthcare, UBI, and retirement benefits that phase in before the age of 60. Capitalism's solution is to work these people until they're 70 before they're eligible for any retirement benefits. Still think I'm the insensitive bastard?

This was really a cavalcade of false choices, misinformation, and fundamental attribution error. Let's do better next time.
  #41  
Old 04-30-2020, 07:47 AM
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None that I know of, but again, the Yahoo Finance article states that Social Security, Medicare, and other programs are slated to run short of money by 2023-2028. You can't fix that without raising revenue steeply.
Why? Why couldn't they roll them into the regular budget and pay with debt? Then, you could cut, say, military spending substantially to pay for it, right? Or, issue more debt -- raising spending without raising revenue was the plan under Trump and Bush, why not under Biden?

Now, if enter an economic boom and taxes could be made without hurting the economy, maybe we should consider it. But, the markets have been begging the US to borrow, borrow, borrow, with negative real rates -- we should be borrowing at negative real rates and investing in infrastructure (fixing bridges and roads, data infrastructure, pre-K education, etc.).

I'm sure that Yahoo! author has many pieces decrying the Trump and Bush tax cuts, right? Maybe I'll take a look and see what I can find.
  #42  
Old 04-30-2020, 07:53 AM
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If Biden wins, he will have to make big, unpopular tax increases in his 1st term
...
Of course, the same could be said of Trump, but if Trump is reelected, America has a lot more things to worry about than taxes.
Although your final sentence offers a partial retraction, OP's title suggests you've bought into the meme that Democrats are supposed to balance the budget, but not Republicans. In a related thread someone raised the example of the wife who needs to economize by re-using toilet paper to make up for hubby's squandering a fortune on strippers and cocaine.

In any event, this faulty claim has been addressed repeatedly in prior threads. I'll let iiandyiiii do the honors:

Quote:
Originally Posted by iiandyiiii View Post
Perhaps by the old way of thinking -- that somehow deficits matter, politically speaking. But the last few decades have definitively demonstrated, IMO, that deficits don't matter at all, politically speaking. Several presidents have already gotten this memo (most notably Reagan, Bush II, and Trump). Maybe Democrats should get it too.
Quote:
Originally Posted by Jonathan Chance View Post
... Interest rates are always higher than inflation and the rise proportionate to risk....
Always? I believe one can find plenty of exceptions in the historical record. For starters, let's look all the way back to the year 2020.
  #43  
Old 04-30-2020, 01:44 PM
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Originally Posted by HMS Irruncible View Post
....
I am pointing out that elderly workers get welfare in the form of automatic raises that continue long past commensurate raises in their productivity. ...
That's not "welfare' in any way shape or form.

In fact welfare as it used to be is gone since the Clinton administration.
  #44  
Old 05-03-2020, 03:23 PM
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Originally Posted by Shodan View Post
Also from your cite -
Quote:
Trump did not have to fight a recession during his term.
Like hell he doesn't.
LOL.

You understand, I assume, the difference between "did not" and "doesn't." When the article was written, the Coronavirus lockdown had not begun, and Trump himself had spent much of his term bragging about the fantastic economy. And yet during that time, he had managed to oversee not only large, but constantly increasing deficits despite the overall health of the economy.

Obama, by contrast, saw basically the steepest and most consistent decline in budget deficits of the past 60 years. He might not have inherited the stimulus package, but he inherited the economic conditions that made the stimulus necessary.

Also, as I've tried to point out to you before (and was ignored, as usual when you don't like the facts), the discussion about the deficit is not just an economic discussion, but a political one, and is not just about what parties do; it's about the connection (or otherwise) between what they say and what they do. Obama promised to halve the deficit in his first term in office, and he "only" managed to REDUCE the deficit by about $500 billion. Trump promised to reduce the deficit, and eliminate the debt, and he managed to ADD over $300 billion to the deficit in his first three years, with the promise of even greater deficits thereafter.

And now "regular" deficits are blown all to hell by the $3 trillion+ we're spending to deal with the current crisis. I'm not blaming Trump for that; it's been a bipartisan spending spree. But given your relentless bothsidesism and whataboutism and false equivalencies, I have no doubt that, if it were a Democratic president, you'd be just as fair.
  #45  
Old 05-03-2020, 03:38 PM
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I haven't spent the time looking into this but I think we can just borrow it from ourselves. As opposed to simply printing money we pay it back on a schedule and reduce the money supply by the amount paid back. We don't even have to charge interest because we have good credit with ourselves.

I'm not sure that works, but I don't see that much difference in how we do it now borrowing from others. I know banks will squawk about reducing the money supply but I think it prevents the inflationary effect of simply printing money.

Maybe someone will point out the flaw in that reasoning.
isn't that basically our bond market ?
  #46  
Old 05-03-2020, 07:40 PM
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Biden should spend whatever it takes to get universal health care, infrastructure rebuilding, and green energy going, and to hell with the hypocritical hand-wringing from Pubs about deficits. By all means, raise taxes on the wealthy. For starters, remove the cap on Social Security taxes, which would instantly fix that program. Plug the loopholes that allow huge corporations and wealthy investors to pay little or no tax. Put real teeth into penalties for companies who are American in all but name, but avoid taxes by having a drop box in the Caymans. Restore the inheritance tax for multi-millionaires.

But there is no need to raise taxes on anyone making less than six figures.
Biden doesn't need to make unpopular tax increases, but he does need to make popular tax increases.

Roll back all the unfunded tax cuts under trump and bush, increase taxable income on everyone that makes a couple hundred k, inheritance taxes, increase the corporate tax rates to pay for universal health care, rebuilding america's infrastructure, and lead in green technologies to stop the planet from melting down.

I think the above would be very popular tax increases at least for the democratic base. The top 5 or 10 percenters won't like it much but they don't create jobs.

Americans should change from how little can my shelters and lawyers let me get away with paying in taxes, to competitive patriotic bragging "ya numbnut, I make so much money I pay 60% in taxes! What are you a 40 percenter? ha ha"
  #47  
Old 05-03-2020, 08:06 PM
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What I don't understand about America is why would you want Biden as your President? He already ran two previous times and lost. If he wasn't good enough to win before, then having him as President now is like saying, "well, there's no one else to choose from so let's just give it to him since he's been trying the longest".

Where is the new blood? Why do you always want the same old people running all the time? It's like an old gang that just keeps hanging around and hanging around and you don't want that....time to clean out and get some fresh new blood in there. America feels like it's been run by the same old groupies for 40 years and it's unchanged. All they do is take turns swapping seats. The next President's after Biden will be the return of Hillary Clinton, Jeb Bush, but my money says Mike Pence is being set up for the next candidate, and and Sanders may run again just as the token fall guy....and Americans will feel like they have new candidates? It smells old and something is not right about having the same people in office all the time. Trump was actually refreshing. He was unexpected and he's definitely not part of the cronies or groupies that have been running America for a century.
  #48  
Old 05-03-2020, 08:47 PM
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cornflakes2, why to you hate America?

We've had primaries and Biden is the one that got the votes. I have yet to find anyone out there that believes "just give it too him since he's been trying the longest."

If trump is "re-elected" in 2020, then say hello to president eric or jared or ivana in 2024 because democracy in the US will be dead by then. pence is hired help to bring in the anti abortion right wing christian vote.
  #49  
Old 05-03-2020, 08:53 PM
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He was unexpected and he's definitely not part of the cronies or groupies that have been running America for a century.
LOL. This is hilarious.

On the one hand, you complain about Biden because he's just another seat-swapper, another member of the the old gang. There's some merit to this concern, for sure. But complaining about the old gang loses all of its force when your next point seems to be that anyone else is better, even Trump.

Not only that, but the only way that Trump is different from the "old gang" is in sheer brazenness of his corruption and his unbridled narcissism. He hasn't really done anything to change the way that the country runs, and he certainly hasn't "drained the swamp" of Washington like he said he was going to. What we've got right now is basically Mitch McConnell's politics overlaid by Trump's temperament. That's just the old gang, with extra asshole.
  #50  
Old 05-04-2020, 01:01 PM
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Reading this thread cracks me up. All the conservative types wringing their hands worrying about the deficit under Biden is such a laugh.

The only time conservatives are concerned about the national debt is when a D is in the WH. When the GOP is in power all they care about is cutting taxes and increasing military spending. It’s been that way since at least Reagan. The only times there have been serious attempts to cut the debt have been under Clinton and Obama.
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