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Old 12-09-2018, 10:31 PM
survinga survinga is offline
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How big of a problem is our Federal Debt?

See this from the CBO:
https://www.cbo.gov/system/files?fil...9-2018ltbo.pdf

I would say it's something we should be concerned with. But it's not a crisis. Currently, the net federal debt held by the public is 78% of GDP, and it's projected to be 96% of GDP in a decade. That's not exactly an imminent crisis. Also, 10-year US Treasuries have a 2.87% yield. If we were in a debt crisis, or about to enter a debt crisis, then markets wouldn't lend the US government money for less than 3% yield. Instead, they would demand much more.

I think over time, we should try to bring the debt down to 60% or so. It would give us a little more space in case we enter another recession. And all things being equal, I think more debt load is associated with lower growth if it gets too large.

So, we should raise taxes, and lower spending some. Now is a decent time to do that, since the economy is fairly strong. Pay down debt in good times and borrow more when things go bad.
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Old 12-10-2018, 12:11 AM
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The short answer is: "It's not a problem ... until it is."

I don't think it's obvious which debt figure to focus on. By gross government debt as a percent of GDP, the U.S. is in fifth place among OECD countries, behind Japan (with more than double the U.S.' figure), Greece, Italy, and Portugal. So, should U.S. be compared to fiscally sound Japan, or to three countries in trouble: Greece, Italy, Portugal?

A relevant question is: To whom is the debt owed? Or, more generally: Do we have a lien on foreign assets, or do foreigners own us?

If you examine Net Int'l Investment Position (NIIP) you see the U.S. has a whopping $8.1 Trillion deficit compared with Japan's $3.1 Trillion surplus. Germany, China, Taiwan, U.K. also have large NIIP surpluses. The Eurozone collectively has less than $0.7 Tril investment deficit compared with U.S.' $8.1 Tril. As a percent of GDP, several countries have bigger NIIP ratios than U.S. including Iceland, Ireland, Greece, Portugal, Spain and New Zealand.

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So, we should raise taxes, and lower spending some. Now is a decent time to do that, since the economy is fairly strong. Pay down debt in good times and borrow more when things go bad.
Twenty-five years ago Bill Clinton and the Democrats followed your advice, and pushed the government budget into surplus. Look how that ended: When the GOP regained the White House they reversed this vigorously, deliberately pushing the debt to record levels in pursuit of their 'Starve the Beast' agenda.
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Old 12-10-2018, 12:20 AM
Little Nemo Little Nemo is offline
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I feel the debt to GDP ratio is way overhyped. It's just a comparison of two big things that aren't directly connected. It's like comparing your annual income to your mortgage.

That said, the national debt is a lot bigger than it should be. We should be paying it down. The problem is we're weak willed and we don't want to make the efforts this would take.
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Old 12-10-2018, 12:23 AM
Wesley Clark Wesley Clark is offline
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I'm not an economist, but the US has over 100 trillion in wealth and 20 trillion a year in GDP.

If it were a household, and you had 100k in assets and earned 20k a year, but had 22k in debt it would be a problem, but not an insurmountable one. Especially if you had decades to pay off the debt.

During and after WW2 we had far higher tax rates to deal with our debt. The real problem is Americans want lots of government services but we don't want to pay for them with taxes.

An effective way to lower the debt long term is to make the US health care system more cost effective. That would reduce how much programs like medicare and medicaid have to pay.
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Old 12-10-2018, 02:23 AM
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I feel the debt to GDP ratio is way overhyped. It's just a comparison of two big things that aren't directly connected. It's like comparing your annual income to your mortgage.
Assuming you don't want to claim that Germany has a bigger debt problem than Lebanon, you have to compare debt with something. Do you have an alternative to GDP that's preferable? The "total wealth" of the country might make sense but I think that's exceedingly hard to define, let alone measure. Gross production seems like the obvious proxy.

Assuming a fixed interest rate, the debt-to-GDP ratio tells you exactly what percent of total production must be given to the bondholders as interest. (But interest rates are not fixed; they may rise rapidly while debt also continues to rise. The total annual interest on federal debt is less than half a Trillion now, but our children will call these the "good old days.")

As for comparing personal income and mortgage, didn't there use to be a rule-of-thumb: You should buy a house that costs 2½ times your annual income? (* - this "2½" was a very old rule of thumb!)
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Old 12-10-2018, 03:19 AM
SenorBeef SenorBeef is offline
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If we were investing it properly, getting a loan at under 3%, as T-bonds do, is a net positive for our country. We could invest that money to turn into economic growth greater than 3%, increasing our net gain. But we don't, of course. We're throwing a ton of it at subidies for big businesses, a bloated military budget, etc. The US is in a unique position where the world confidence in our stability and our currency gets us better borrowing rates than any other country. Running a debt while investing that money in our future would be capitalizing on that advantage. But, again, we're not really doing that.

Although this highlights the absolute insanity of the debt ceiling hostage situations the Republicans like to create. Threatening to default on our debt, if considered seriously, would be a huge shock to world markets. It would crash the world economy by itself. The amazing amount of trust built on the reputation of the US as the world's most stable currency and economy would collapse. Not only that, but it would be counterproductive in as far as the debt goes. Our debt is essentially a rolling debt - as some entities cash in their t-bills, new ones are issued out to cover it. Which means that a sudden shock to confidence in our T-bills would mean that we wouldn't get the very cheap payback rates we get now - suddenly, unsure of the value of our debt, we'd be paying a much higher interest rate on the new debt. Which means that our existing debt - not even considering new debt - would suddenly cost much more to service as the rolling debt went from a 2.5% interest rate to something like 8%+. It's absolute insanity on their part and is basically the Republicans walking into a room with dynamite on their chest saying "give us what we want or we blow us all up" - the problem is that it can shake the world's confidence in our ability to govern even if we give in to their demands.

Anyway, there's one thing that's pretty clear, though. When we're in the middle of an economic boom, the deficit should be trending downwards. When the next recession or depression hits, the deficit could easily spike a trillion or more dollars. We ran huge deficits after 2008 because revenues were down due to the crash, but we managed to recover well after that and reduce the deficits by a huge amount every year. But we're doing the opposite now. We're in an economic boom - an artificially propped up economic boom by stock buy-backs due to a giveaway to corporations and the rich. And we just voluntarily increased the deficit by leaps and bounds even in the middle of a boom. So what happens when we have the inevitable crash which we've ensured will be harsher because of all the artificial propping up we've done? What do you do when you're suddeningly running 4 trillion dollar deficits in the middle of a recession?

The GOP answer is going to be austerity. Sorry, we wrecked the economy on purpose, so you're no longer going to get social security or medicaid or medicare or highway funds or a hundred other things. Which then actually digs us deeper into a depression because of the disruption to our economy such a drastic cutting back would cause.

An outside observer would probably say that the GOP is looting the rest of the country to give our wealth to a handful of people at the cost of what will likely be a severe harm to the quality of our life. But much like climate change, they don't even care if everyone else burns - hell, a lot of them are probably looking forward to it - if they feel like they're sufficiently insulated from it or they'll die before the consequences get here, as long as it makes them a few extra bucks.
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Old 12-10-2018, 05:01 AM
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It's been a few months since I looked, but I believe that we're at a level where we have been before - and came back alright. The difficulty, however, is that we were there before because we had spent a bunch fighting a war. Our current debt load is entirely a function of day-to-day, normal operation and that's causing an expanding debt load (as percentage of GDP). And, moreover, neither of our two political parties has any desire to reduce spending on the military, only one party has any desire to reduce health care spending, neither party has any idea of how to reduce health care spending except by letting people die, and all of the political incentives are for the status quo.

Fundamentally, the issue is less about the debt as it is about the quality of our representatives and the freedom they have to legislate wisely. With both of those being in a poor state, a rising debt is only one of a variety of possible ailments to come.
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Old 12-10-2018, 06:55 AM
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... I believe that we're at a level where we have been before - and came back alright.
I believe you're referring to a time when American citizens owned many billions in war bonds — Now we owe trillions to foreign central banks. Then foreign countries owed huge sums to the American government and American companies — Now we are, by far, the world's biggest debtor. Then America's manufacturing power was the envy of the world — Now laid-off workers, like Germans during the Depression, have turned in despair to a populist demagogue. Then America was so flush with wealth it could spend more than 4 times as much on the Marshall Plan to help Europe recover from the War as it spent on the Manhattan Project to ensure victory — Now we have a President who insists he's owed money for NATO. Then the country had two political parties working together toward common goals — Now the political impasse is so extreme that government shutdowns are more common-place than on-time spending authorizations. Then repaying the debt was a political goal (and astronomical tax rates were installed to ensure it) — Now one party actively encourages debt to serve its 'Starve the Beast' agenda.

No, I don't think we have been here before.
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Old 12-10-2018, 07:13 AM
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I believe you're referring to a time when American citizens owned many billions in war bonds — Now we owe trillions to foreign central banks. Then foreign countries owed huge sums to the American government and American companies — Now we are, by far, the world's biggest debtor. Then America's manufacturing power was the envy of the world — Now laid-off workers, like Germans during the Depression, have turned in despair to a populist demagogue. Then America was so flush with wealth it could spend more than 4 times as much on the Marshall Plan to help Europe recover from the War as it spent on the Manhattan Project to ensure victory — Now we have a President who insists he's owed money for NATO. Then the country had two political parties working together toward common goals — Now the political impasse is so extreme that government shutdowns are more common-place than on-time spending authorizations. Then repaying the debt was a political goal (and astronomical tax rates were installed to ensure it) — Now one party actively encourages debt to serve its 'Starve the Beast' agenda.

No, I don't think we have been here before.
I'm not strongly inclined to disagree with your statements individually, but I would hold by my point that I don't believe that we're doomed economically, but we may be doomed economically for non-economic reasons. And granted, I don't have the depth of economic knowledge to strongly commentate on the size of the debt, but I do note that the CBO is not issuing dire reports of famine and horror, not are there any politicians issuing denialistic statements against them like the USGCRP. The experts don't seem to be crapping their pants.

I would be inclined to believe that your analysis shows that we could not pay down the debt so quickly and easily as we did after WWII, not that we can't pay it down eventually. That's true. But good leadership could get us on that path and good leadership could get us turned around on some of the metrics you enumerate.

Last edited by Sage Rat; 12-10-2018 at 07:13 AM.
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Old 12-10-2018, 07:51 AM
spifflog spifflog is offline
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I think it's a huge problem, arguably in my mind the biggest problem in America today. I think this is true for a number or reasons:

- The fed borrows money essentially for free, at least historically. And even with that, interest on the debt is between 9-10% of the federal budget. When we consider that entitlements make up two-thirds of the budget, that is a big problem. I remember locking in on a mortgage at 16% in the 1980's and thinking I did a good job. If we ever see interest rates like that again and we actually have to pay real money to service the debt, that 9-10% will sound like the good old days.

- Many state government are in a similar situation, which only compounds this problem.

- No one seems to care that that debt in skyrocketing. In the 1980s when I became an adult, some were talking about the debt, but it's a non-issue now with both parties and that's problematic to say the least.

-To pay this off, we'll have to cut entitlements and good luck with that in our society today. It's too large to tax our way out of it, and the 1/3 left over isn't enough to cut our way out of it.
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Old 12-10-2018, 08:10 AM
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-To pay this off, we'll have to cut entitlements and good luck with that in our society today. It's too large to tax our way out of it, and the 1/3 left over isn't enough to cut our way out of it.
We know that the cost of health care can be halved without affecting the level of health in the country (in fact, it can be guaranteed universally and still come in at half the rate). That knowledge offers a pretty bright ray of sunshine. But it's a ray of sunshine through the steel bars of a very small window in a jail cell on death row.
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Old 12-10-2018, 08:18 AM
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Well, we apparently have enough money to give people already oozing with money huge tax cuts, so it must not be a problem at all. I find that interesting because, as soon as we get a Democratic administration, the Republicans start screaming about the national debt and how they should be in power because they are so much more fiscally responsible.

Of course, they have a "solution", and that is to cut anything that benefits the common American, like Social Security, Medicare, etc.

"The problem has never been feeding the poor, it's been satisfying the rich."
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Old 12-10-2018, 08:42 AM
spifflog spifflog is offline
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Well, we apparently have enough money to give people already oozing with money huge tax cuts, so it must not be a problem at all.
I think we should raise taxes myself, and I wasn't a fan of the recent tax cuts. Having said that, and I know this will go over like a lead balloon, but the top 1% pay 40% of all income taxes - while the bottom 50% pay less than 4%. I don't know where the balance is, but having "The Rich" pay all the taxes will not solve the problem.

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I find that interesting because, as soon as we get a Democratic administration, the Republicans start screaming about the national debt and how they should be in power because they are so much more fiscally responsible.
I can't disagree with that.

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Of course, they have a "solution", and that is to cut anything that benefits the common American, like Social Security, Medicare, etc.
Understand the benefits of all of those programs. But it still doesn't mean they're affordable.

Last edited by spifflog; 12-10-2018 at 08:44 AM.
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Old 12-10-2018, 09:00 AM
survinga survinga is offline
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The short answer is: "It's not a problem ... until it is."

I don't think it's obvious which debt figure to focus on. By gross government debt as a percent of GDP, the U.S. is in fifth place among OECD countries, behind Japan (with more than double the U.S.' figure), Greece, Italy, and Portugal. So, should U.S. be compared to fiscally sound Japan, or to three countries in trouble: Greece, Italy, Portugal?

A relevant question is: To whom is the debt owed? Or, more generally: Do we have a lien on foreign assets, or do foreigners own us?

If you examine Net Int'l Investment Position (NIIP) you see the U.S. has a whopping $8.1 Trillion deficit compared with Japan's $3.1 Trillion surplus. Germany, China, Taiwan, U.K. also have large NIIP surpluses. The Eurozone collectively has less than $0.7 Tril investment deficit compared with U.S.' $8.1 Tril. As a percent of GDP, several countries have bigger NIIP ratios than U.S. including Iceland, Ireland, Greece, Portugal, Spain and New Zealand.



Twenty-five years ago Bill Clinton and the Democrats followed your advice, and pushed the government budget into surplus. Look how that ended: When the GOP regained the White House they reversed this vigorously, deliberately pushing the debt to record levels in pursuit of their 'Starve the Beast' agenda.
I think that our situation might be more comparable to Japan than to Greece, Portugal & Italy. Like Japan, we have our own central bank and borrow in our own currency. Debt loads are more difficult for the European PIIGS countries to manage because they don't have control of their own monetary policy. Essentially, Germany is in charge in that regard. This is one of the problems that came about from the Euro.

Japan has a very large debt to GDP ratio, much higher than the US (on a gross basis, it's over 200%). And they can borrow for essentially zero. This tells me that we can withstand a much higher debt/gdp in the US without a crisis situation. See the below link on the likelihood of a debt crisis and lessons from Japan:

https://www.marketwatch.com/story/he...sis-2018-05-14
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Old 12-10-2018, 09:30 AM
SenorBeef SenorBeef is offline
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I think we should raise taxes myself, and I wasn't a fan of the recent tax cuts. Having said that, and I know this will go over like a lead balloon, but the top 1% pay 40% of all income taxes - while the bottom 50% pay less than 4%. I don't know where the balance is, but having "The Rich" pay all the taxes will not solve the problem.
Why do you put "The Rich" in scare quotes? Are the rich not real people? Are those people who you say are paying 40% of income taxes not the richest people in the history of the world?

Do you know why "THE RICH" pay the majority of income taxes? Because the top 1% in this country have more wealth than the bottom 90%. Does the 40% they pay in taxes seem so egregious now? Whenever I hear someone say "the rich already pay X" in taxes, I have to wonder - okay, what percentage of the money do they have? If they have the vast majority of the money, and pay half the taxes, well, they're not even paying their own share, let alone being so burdened that we couldn't possibly ask more of them.

Secondly, yes, it literally would solve the problem. You could, today, simply increase tax rates on the rich until there was no deficit. Why is that impossible? They have the money. It's only when we treat them as some sort of gods who will withhold their blessings from us if we ask too much that you get this attitude. The vast majority of deficit increases we've seen this year were from the disastrous tax cuts to people who are already sitting on record amounts of cash. If we reversed those, and added some more on for good measure, why wouldn't that solve the issue?

The rich aren't going to flee anywhere. Where are they going to go? France? Germany? Any other first world nation? Those countries aren't afraid to tax their rich people.

So yes, we need money, they have it, literally, boom, solution. The idea that America is too broke to do anything - when it is literally, and by far, the richest country in the history of the world - is a myth made up entirely by the rich so that they can continue screwing us.

Austerity, in general, is not a great solution to curing debt. The sort of things that get cut, like transfer payments to people who desperately need them to stay alive on a daily basis, tend to get re-injected into the economy with quite a lot of velocity. To use an extreme example, if we stopped out sending social security checks, it ultimately would likely not save the government any money because the sudden removal of the spending power, meager as it may be, of tens of millions of people would crash the economy and reduce income.

More than any time in history we are in a peaceful, prosperous, productive, resource-rich, open global market. The money is there. It's just being hoarded like a bunch of Eboneezer Scrooges who want to increase their high score while the rest of us scrape by.
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Old 12-10-2018, 09:54 AM
Jonathan Chance Jonathan Chance is offline
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Having said that, and I know this will go over like a lead balloon, but the top 1% pay 40% of all income taxes - while the bottom 50% pay less than 4%.
That's really only true in the slimmest of definitions of 'pay' and 'taxes'. When one calculates the true cost of taxation the poor pay much, much more than 4%. You need to factor in state taxes, sales tax, property tax and so forth.

Not to mention that the top quintile received 53% of all income while the bottom quintile received 5% of all income.

https://www.cbo.gov/publication/51361
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Old 12-10-2018, 09:55 AM
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I find that interesting because, as soon as we get a Democratic administration, the Republicans start screaming about the national debt and how they should be in power because they are so much more fiscally responsible.
And the trouble is, that argument has worked for them. The voters don't care about and don't remember history. All they know is that when Democrats are in power, the deficit becomes a big fucking deal and when Republicans are in power it is completely forgotten.

The Bush tax cuts were a huge mistake. The GOP tax cuts of 2017 were an even bigger one. You can make an argument for cutting taxes to stimulate a flagging economy. You can't make that same argument for the 2017 tax cuts, it was simply a matter of appeasing the rich GOP donor class. Want to fix it? Raise taxes, particularly the estate tax. Close loopholes for corporations. Cut military spending. None of this will get done, the deficit will never go down.
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Old 12-10-2018, 10:00 AM
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I think that our situation might be more comparable to Japan than to Greece, Portugal & Italy. Like Japan, we have our own central bank and borrow in our own currency. Debt loads are more difficult for the European PIIGS countries to manage because they don't have control of their own monetary policy. Essentially, Germany is in charge in that regard. This is one of the problems that came about from the Euro.

Japan has a very large debt to GDP ratio, much higher than the US (on a gross basis, it's over 200%). And they can borrow for essentially zero. This tells me that we can withstand a much higher debt/gdp in the US without a crisis situation. See the below link on the likelihood of a debt crisis and lessons from Japan:
The US is more like Japan in that particular regard. However that would be more fundamentally reassuring if there was any apparent way for Japan out of the its economic stagnation and continued growth of the debt burden. Although, there are also other pretty important differences between Japan and the US (US economy more dynamic, Japanese society more cohesive, etc).

The Japan example is valid IMO in indicating that a US debt crisis probably isn't just around the corner, but not as much that there won't be one eventually.

Also aside from other differences, the examples in Europe and Japan show how this is a global rich country problem not just a US problem. And it's not limited to countries with relatively slightly lower taxes in the developed world (such as the US and Japan both). Also the more highly taxed countries do not tax more progressively than the US, they tax less progressively if anything, a lot of the extra revenue is via flat/regressive VAT's, fuel taxes etc. In which context BTW it's ridiculous to compare only US federal taxation to other countries which basically only tax at a national level. For example in a recent Economist that 'paper' (as it quaintly calls itself) pointed out new academic evidence that revenue doesn't start decreasing (from disincentives to work and produce) till you raise marginal tax rates to around 44%. And the US one is well below that it pointed out...wrongly because it's over 44% state+federal already in a lot of the states where high earners are concentrated.

The reality is the US would have to institute broad consumption taxes like a VAT if it didn't greatly lower the future growth (not 'cut', from now's level) of entitlement spending. Only the US left thinks it can finance the whole govt from rich people. The left/right consensus in Europe isn't under that delusion. There's somewhat (it's often exaggerated how much more) more social welfare spending there, everyone pays through the nose for it, and a lot of those countries are still on unsustainable fiscal paths like the US is. The Euro is a reason the shit might hit the fan sooner there, it's not the basic reason it will eventually.

Last edited by Corry El; 12-10-2018 at 10:01 AM.
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Old 12-10-2018, 10:29 AM
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Want to fix it? Raise taxes, particularly the estate tax. Close loopholes for corporations. Cut military spending. None of this will get done, the deficit will never go down.
Unfortunately, we've reached a point where the things you want to do, cut military spending, and taxing the rich won't get us out of this without taking a bite out of entitlements. Won't come close. The debt is $21 trillion; DOD's budget is ~$750 billion.

And our corporate taxes are already the highest in the world. So you can't increase jobs in America to a large degree while increasing those taxes.
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Old 12-10-2018, 10:40 AM
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If it were a household, and you had 100k in assets and earned 20k a year, but had 22k in debt it would be a problem, but not an insurmountable one. Especially if you had decades to pay off the debt.
Not insurmountable in the sense that you won't go bankrupt. But if you are using the money you borrowed to consume rather than to invest, it's not good policy.

If your sample household paid back that 22K by paying $100 a month (probably a hardship for this family that is below the poverty line) at even a modest 3% interest, it would take 27 years to pay off with total payments of $32,400. This household paid a premium on its desire to consume what they couldn't afford.

My concern about the debt is not the level of debt per se but the cost of servicing the debt. In the 1970s my econ professor spent an entire lecture trying to prove to us that we shouldn't care how big the debt it because the interest was just paid to US bond holders, pumping it back into the US economy. That is no longer true. Foreign investors, mostly governments, hold more than 40 percent of the total. We are just giving money away.
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Old 12-10-2018, 12:41 PM
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Assuming you don't want to claim that Germany has a bigger debt problem than Lebanon, you have to compare debt with something. Do you have an alternative to GDP that's preferable? The "total wealth" of the country might make sense but I think that's exceedingly hard to define, let alone measure. Gross production seems like the obvious proxy.

Assuming a fixed interest rate, the debt-to-GDP ratio tells you exactly what percent of total production must be given to the bondholders as interest. (But interest rates are not fixed; they may rise rapidly while debt also continues to rise. The total annual interest on federal debt is less than half a Trillion now, but our children will call these the "good old days.")

As for comparing personal income and mortgage, didn't there use to be a rule-of-thumb: You should buy a house that costs 2½ times your annual income? (* - this "2½" was a very old rule of thumb!)
The problem I see is that continuously talking about what percentage of the GDP that national debt is makes people see a threshold that isn't really there. Some people are going to be thinking "Okay, so disaster happens when the national debt gets bigger than the GDP. Got it. But our national debt is only 80% of the GDP. So we're safe. We can keep borrowing more money until we hit 99%."

A related problem is that we are weak as I mentioned above. We're almost certainly going to keep borrowing more money and we will cross the GDP line. And the world won't end. That will cause some of these same people to think "Great! Those so-called experts were wrong. We were able to borrow more than the GDP and survive. I guess this means we can borrow all the money we ever want and there will never be any bad consequences."

The reality is the experts aren't saying this. It's just non-experts wanting a simple answer.

The debt ratio isn't something where 99% is good and 101% is bad. It's more like smoking cigarettes; the more cigarettes you smoke, the greater your chances of getting cancer. But no doctor can tell you which cigarette is the one that will kill you. Smoking a hundred cigarettes a day is worse than smoking ten cigarettes a day. But there's no strict limit that says you're safe if you only smoke twenty-five a day but you'll die if you smoke twenty-six.
  #22  
Old 12-10-2018, 12:49 PM
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I think we should raise taxes myself, and I wasn't a fan of the recent tax cuts. Having said that, and I know this will go over like a lead balloon, but the top 1% pay 40% of all income taxes - while the bottom 50% pay less than 4%. I don't know where the balance is, but having "The Rich" pay all the taxes will not solve the problem.
I don't know what your political alignment is, but the clause I've bolded is a perfect example of the deliberately misleading silliness we've come to expect from right-wingers.

WHY do the top 1% pay so MUCH in taxes? Spoiler alert: It's because they have so MUCH in income. The "high" taxes they pay do NOT redress the huge (and growing) income and wealth inequality in the U.S.A. — they are a symptom of it.

As the rich get richer, they pay (due to GOP tax cuts and loopholes) less and less percentage-wise, but more and more when expressed the way you have, as a percent of total taxes. That figure (40%) seems huge because their income is huge.

@ spifflog — Forget, for the moment, the question of whether taxes on the rich are too high and answer me this: Do you see why framing the statistic as you did is misleading?

And of course, as Jonathan Chance points out, the right-wing misleaders who came up with that stat carefully ignore regressive sales and payroll taxes.

The Top 0.001%, BTW, pay, all by themselves, about 6% of ALL federal personal income taxes. Billionaires must really be oppressed, hunh?
  #23  
Old 12-10-2018, 12:58 PM
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The problem I see is that continuously talking about what percentage of the GDP that national debt is makes people see a threshold that isn't really there....

The debt ratio isn't something where 99% is good and 101% is bad. It's more like smoking cigarettes; the more cigarettes you smoke, the greater your chances of getting cancer....
Fair enough. I certainly wasn't implying such a "step function"; indeed I suggested that Japan, with its Debt/GDP > 2, may be in much better financial shape than the U.S. The point is that a debt quote ($16T or $21T) is meaningless — and cannot be compared with that of other countries, nor with the U.S. historically — until divided by some denominator. GDP is a logical, readily available denominator.
  #24  
Old 12-10-2018, 01:00 PM
BobLibDem BobLibDem is offline
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Unfortunately, we've reached a point where the things you want to do, cut military spending, and taxing the rich won't get us out of this without taking a bite out of entitlements. Won't come close. The debt is $21 trillion; DOD's budget is ~$750 billion.

And our corporate taxes are already the highest in the world. So you can't increase jobs in America to a large degree while increasing those taxes.
I don't buy that our corporate taxes are the highest in the world. Many companies pay no tax at all

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Among the roughly half of Fortune 500 companies that were consistently profitable between 2008 and 2015, the effective federal income tax rate was 21.2 percent over that eight-year period, according to a study from the Institute on Taxation and Economic Policy. Eighteen of them, including General Electric (GE) and Priceline.com (PCLN), paid no federal income taxes during that time.
So I, with my middle class income, paid more tax from 2008 to 2015 than GE did.

Regarding the military, the US spends almost as much as the rest of the world combined. That's nuts. We spend all this money on military hardware and Vladimir Putin takes over the US government without one shot being fired. We could cut Medicare spending by simply allowing them to negotiate drug prices, but thanks to Big Pharma, that will never happen. We gotta stop being nuts.
  #25  
Old 12-10-2018, 01:05 PM
HurricaneDitka HurricaneDitka is offline
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Yes, the debt is a problem, but it's really only going to show itself in a fiscal emergency, and by then it may be too late. It's a bit like the US.gov has a credit card, with an unknown limit. We've charged $21T to it, and we're not sure how much more we can charge. While the economy is cruising along relatively happily, that's not a critical problem, but if there's an emergency expense that arises, we may find that we've finally hit the limit.
  #26  
Old 12-10-2018, 01:16 PM
Little Nemo Little Nemo is offline
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Fair enough. I certainly wasn't implying such a "step function"; indeed I suggested that Japan, with its Debt/GDP > 2, may be in much better financial shape than the U.S. The point is that a debt quote ($16T or $21T) is meaningless — and cannot be compared with that of other countries, nor with the U.S. historically — until divided by some denominator. GDP is a logical, readily available denominator.
If you want an interesting statistic, check the rate of change of the percentage. The United States is the only country where the national debt:GDP ratio is rising. Every other country is working on lowering the percentage of their GDP which is equivalent to their national debt. We're the only country where the problem is getting worse.
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Old 12-10-2018, 01:19 PM
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Yes, the debt is a problem, but it's really only going to show itself in a fiscal emergency, and by then it may be too late. It's a bit like the US.gov has a credit card, with an unknown limit. We've charged $21T to it, and we're not sure how much more we can charge. While the economy is cruising along relatively happily, that's not a critical problem, but if there's an emergency expense that arises, we may find that we've finally hit the limit.
Jesus Christ, it is nothing at all like that. You're trying to interpret the nations economy through the only economic lens you're familiar with, a credit card. And that's absolutely wrong. For you, money can only be spent if it can be earned. For you, every dollar you become indebted, you must eventually pay back. For you, money is a tangible asset, a store of value, which you must trade something else of value for -- your labor, your property, your skill, etc. None of this is true for a government like the United States.

The United States issues it's own currency. It also only spends it's own currency. To you, money is a store of value. To the US government, it is not a store of value. How could it be a store of value, when the government can alter the amount of it at will, either by increasing taxes and destroying it, or by creating and spending more of it into the economy, thereby increasing its supply? to the US government, money is a tool, not a store of value. The governments role is to use the supply of money to regulate the economy. In a recession, it can use its enormous power to connect idle labor with idle resources to create real economic growth by spending money into the economy. Government can will dollars into creation, and then use it to buy things from people and businesses that are otherwise experiencing no demand in a down economy. This isn't financial voodoo, it's using money as a tool, the way a government is supposed to use it. When the economy is hot, and unemployment is low, then government can do the opposite, take money out of the economy to avoid inflation.

The major point here is that government is not revenue constrained, and that debt to the government is absolutely irrelevant, because, and this is the real kicker if you've followed me this far -- the national debt is an account artifact, an irrelevant holdover from the days when we spent in a currency we did not control, like gold. Today, the national debt reflects the number of dollars the government has spent into the economy -- and each one of those dollars exists as savings in the non-government sector. In other words, if the government spends $1mn into the economy, it's you and I who are the beneficiaries. That money is used to buy real goods and services, and we are now $1mn richer. The call to "pay down the debt" is literally a call to say "we want the government to remove money from the economy to reduce an irrelevant accounting artifact that scares us because we're ignorant."

The only problem we have is the idiots who block spending when the economy is bad while spending like sailors when its good, the literal opposite of what the government should be doing.
  #28  
Old 12-10-2018, 01:19 PM
Little Nemo Little Nemo is offline
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Yes, the debt is a problem, but it's really only going to show itself in a fiscal emergency, and by then it may be too late. It's a bit like the US.gov has a credit card, with an unknown limit. We've charged $21T to it, and we're not sure how much more we can charge. While the economy is cruising along relatively happily, that's not a critical problem, but if there's an emergency expense that arises, we may find that we've finally hit the limit.
To use my cigarette analogy, you have to quit smoking before you get cancer.
  #29  
Old 12-10-2018, 01:23 PM
HurricaneDitka HurricaneDitka is offline
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To use my cigarette analogy, you have to quit smoking before you get cancer.
Yup, your cigarette analogy seems like a good one to me.
  #30  
Old 12-10-2018, 01:27 PM
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Jesus Christ, it is nothing at all like that. You're trying to interpret the nations economy through the only economic lens you're familiar with, a credit card. And that's absolutely wrong. For you, money can only be spent if it can be earned. For you, every dollar you become indebted, you must eventually pay back. For you, money is a tangible asset, a store of value, which you must trade something else of value for -- your labor, your property, your skill, etc. None of this is true for a government like the United States.

The United States issues it's own currency. It also only spends it's own currency. To you, money is a store of value. To the US government, it is not a store of value. How could it be a store of value, when the government can alter the amount of it at will, either by increasing taxes and destroying it, or by creating and spending more of it into the economy, thereby increasing its supply? to the US government, money is a tool, not a store of value. The governments role is to use the supply of money to regulate the economy. In a recession, it can use its enormous power to connect idle labor with idle resources to create real economic growth by spending money into the economy. Government can will dollars into creation, and then use it to buy things from people and businesses that are otherwise experiencing no demand in a down economy. This isn't financial voodoo, it's using money as a tool, the way a government is supposed to use it. When the economy is hot, and unemployment is low, then government can do the opposite, take money out of the economy to avoid inflation.

The major point here is that government is not revenue constrained, and that debt to the government is absolutely irrelevant, because, and this is the real kicker if you've followed me this far -- the national debt is an account artifact, an irrelevant holdover from the days when we spent in a currency we did not control, like gold. Today, the national debt reflects the number of dollars the government has spent into the economy -- and each one of those dollars exists as savings in the non-government sector. In other words, if the government spends $1mn into the economy, it's you and I who are the beneficiaries. That money is used to buy real goods and services, and we are now $1mn richer. The call to "pay down the debt" is literally a call to say "we want the government to remove money from the economy to reduce an irrelevant accounting artifact that scares us because we're ignorant."

The only problem we have is the idiots who block spending when the economy is bad while spending like sailors when its good, the literal opposite of what the government should be doing.
No, I think he's got a valid point. The issue here isn't the amount of money, which as you point out is theoretically unlimited. The issue here is the amount of credit.

Any entity, individual or organization or nation, has an ability to borrow money. The amount is flexible but it isn't unlimited. The amount of money we've borrowed on a normal basis will reflect the amount of money we'll be able to borrow in an emergency.

If you use up a lot of your credit on your day-to-day living, you may not have enough credit available when you need to pay for some unexpected major car repairs. If a country uses up a lot of its credit on its year-to-year programs, it may not have enough credit available when it needs to pay for some unexpected major war.
  #31  
Old 12-10-2018, 01:28 PM
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Regarding the military, the US spends almost as much as the rest of the world combined. That's nuts. We spend all this money on military hardware and Vladimir Putin takes over the US government without one shot being fired. We could cut Medicare spending by simply allowing them to negotiate drug prices, but thanks to Big Pharma, that will never happen. We gotta stop being nuts.
I'm not going line by line on these things. We have a global military, and the American people generally seem to enjoy the world shaped by the west or the United States. You seem more confident than I that it's easy to trim medical costs significantly as well. If it was all hand wave-able and easy, it would have been done already. The debt has been a growing issue for 50 years, with both Democrat and Republican Congresses and Presidents. The only common denominator is the American people. We seem unwilling to sacrifice or compromise.

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I don't know what your political alignment is, but the clause I've bolded is a perfect example of the deliberately misleading silliness we've come to expect from right-wingers.
I'm sorry that you're frustrated that I'm not clearly a Republican so that you can open fire on me. I'm a middle of the road independent. I guess it's easier if I was right wing for you. As I stated, I don't think there is an easy solution. I think we need more tax dollars and a smaller federal budget. But I don't think taxing the rich and cutting DoD in half are the golden eggs that you think they are.
  #32  
Old 12-10-2018, 01:57 PM
Ravenman Ravenman is offline
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WHY do the top 1% pay so MUCH in taxes? Spoiler alert: It's because they have so MUCH in income.
To put a finer point on this, the top 1% have average annual incomes in the general neighborhood $1.5 million (though the starting threshold for joining the 1% is substantially lower). The bottom 50% all have incomes under $40,000.

Or to put it another way, if you put all the annual income of the top 1% in one bucket, and all the annual income of the bottom 50% in another bucket, and then weigh each bucket; the rich people bucket would weigh about 50% more than the lower income bucket.

The inequality of the income tax system is at best a severely watered-down imitation of the inequality of incomes in America.

(To say nothing of the fact that non-wealthy people pay other types of taxes, like social insurance taxes, that aren't included in this discussion.)
  #33  
Old 12-10-2018, 02:00 PM
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No, I think he's got a valid point. The issue here isn't the amount of money, which as you point out is theoretically unlimited. The issue here is the amount of credit.

Any entity, individual or organization or nation, has an ability to borrow money. The amount is flexible but it isn't unlimited. The amount of money we've borrowed on a normal basis will reflect the amount of money we'll be able to borrow in an emergency.

If you use up a lot of your credit on your day-to-day living, you may not have enough credit available when you need to pay for some unexpected major car repairs. If a country uses up a lot of its credit on its year-to-year programs, it may not have enough credit available when it needs to pay for some unexpected major war.
You are still thinking of the Government as a person or household when that comparison is not in any way valid.
  #34  
Old 12-10-2018, 02:04 PM
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(To say nothing of the fact that non-wealthy people pay other types of taxes, like social insurance taxes, that aren't included in this discussion.)
Don't wealthy people pay other types of taxes like social security that aren't included in this discussion?
  #35  
Old 12-10-2018, 02:28 PM
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Don't wealthy people pay other types of taxes like social security that aren't included in this discussion?
Yes, like corporate income taxes for example. But I'm raising this as an issue of how talking about income taxes as being representative of all taxes is more misleading on the state of taxation of lower incomes.

So, a wealthy person may pay income, corporate, excise, and social insurance taxes, and everyone agrees that it adds up to a good chunk of their income (even though people may disagree whether that overall tax rate should go up or down).

And a poor person may pay income, excise, and social insurance taxes, but because they generally pay nothing in income taxes, people often misread that and end up thinking that poor people pay nothing in Federal taxes. So in fact, there isn't an agreement among Americans that poor people pay Federal taxes, because some people mistakenly think that income taxes are the only kind of Federal taxes.
  #36  
Old 12-10-2018, 02:36 PM
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The debt is like a pile of gravel - you can keep dropping pebbles on the pile, and the pile keeps getting taller - until suddenly the pile collapses. The collapse is completely unredictable, as it is the result of a complex distribution of stresses throughout the pile. You can predict that you are getting near a point where a collapse *could happen, but you can't predict which pebble will cause it. This is why financial crises are never predicted with certainty. All you can know is that as you get nearer the point of collapse instability and risk grows.

Another problem with high debt is that it constricts government options when there is a crisis. For example, 'Stagflation' in the 70's was eventually curbed through the Fed imposing high interest rates. But when you have a 21 trillion dollar deficit, each point of interest causes the government to incur another 210 billion dollars in interest payments. Raise interest rates by 3%, and after the debt is refinanced the interest on the debt will go up by about as much as the entire military budget. And raising it to 10%, say to compensate for inflation or a collapsing US dollar would bankrupt the government. So that option is now off the table.

One of the triggers for a debt crisis would be a treasury auction that fails to clear in a big way. A Chinese recession or cash crisis could easily result in something like that. Which brings me to yet another bad effect of a huge debt that requires foreign financing - it creates a coupling that increases risk in that an economic failure in any of the connected countries could bring the whole house of cards down. Systemic risk goes way up.

The debt and deficit are critical problems. They won't be addressed until there is a crisis.

Last edited by Sam Stone; 12-10-2018 at 02:38 PM.
  #37  
Old 12-10-2018, 02:42 PM
Jonathan Chance Jonathan Chance is offline
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No, anyone who works pays social security taxes. But the wealthy stop paying at around $110,000 in wages. So they pay a smaller amount as a percentage than the bottom feeders.

In addition, if the investor class earns income through bond interest and dividends there’s no social security tax at all.

Also, if the earn income via capital gains on investments they pay 10% and not the general income tax rate.
  #38  
Old 12-10-2018, 03:03 PM
Delayed Reflex Delayed Reflex is offline
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Jesus Christ, it is nothing at all like that. You're trying to interpret the nations economy through the only economic lens you're familiar with, a credit card. And that's absolutely wrong. For you, money can only be spent if it can be earned. For you, every dollar you become indebted, you must eventually pay back. For you, money is a tangible asset, a store of value, which you must trade something else of value for -- your labor, your property, your skill, etc. None of this is true for a government like the United States.

The United States issues it's own currency. It also only spends it's own currency. To you, money is a store of value. To the US government, it is not a store of value. How could it be a store of value, when the government can alter the amount of it at will, either by increasing taxes and destroying it, or by creating and spending more of it into the economy, thereby increasing its supply? to the US government, money is a tool, not a store of value. The governments role is to use the supply of money to regulate the economy. In a recession, it can use its enormous power to connect idle labor with idle resources to create real economic growth by spending money into the economy. Government can will dollars into creation, and then use it to buy things from people and businesses that are otherwise experiencing no demand in a down economy. This isn't financial voodoo, it's using money as a tool, the way a government is supposed to use it. When the economy is hot, and unemployment is low, then government can do the opposite, take money out of the economy to avoid inflation.

The major point here is that government is not revenue constrained, and that debt to the government is absolutely irrelevant, because, and this is the real kicker if you've followed me this far -- the national debt is an account artifact, an irrelevant holdover from the days when we spent in a currency we did not control, like gold. Today, the national debt reflects the number of dollars the government has spent into the economy -- and each one of those dollars exists as savings in the non-government sector. In other words, if the government spends $1mn into the economy, it's you and I who are the beneficiaries. That money is used to buy real goods and services, and we are now $1mn richer. The call to "pay down the debt" is literally a call to say "we want the government to remove money from the economy to reduce an irrelevant accounting artifact that scares us because we're ignorant."

The only problem we have is the idiots who block spending when the economy is bad while spending like sailors when its good, the literal opposite of what the government should be doing.
Can you help me understand the bolded comment? I get most of the first part of your post but am struggling with the second half.

I just want to make sure I understand what options a government has regarding its existing debt obligations - 1) pay them off with taxes collected, 2) print new money to pay them off, 3) default on the debt, or 4) issue new debt to pay off the old debt. Is there something else they can do? It seems like each of these in isolation has some sort of drawback - 1) reducing money supply, possibly having negative effect on economy, 2) reducing value of existing dollars in circulation and existing government debt, possibly causing inflation, 3) erodes confidence in the government's ability to pay back its debts, and 4) depends on finding buyers for the debt. I am sure there is a balancing act of these that can be struck, but wouldn't a government having a larger debt result in the balancing act being more precarious? In particular, if a government isn't able to use option 4 to cover its debts and has to resort to one of the first 3 options, wouldn't that further reduce the value of that government's debt in potential buyer's minds, resulting in a vicious feedback loop?

Also, I don't really understand your last sentence - if the debt is really "absolutely irrelevant", what is the downside of "spending like sailors" when the economy is good?
  #39  
Old 12-10-2018, 03:54 PM
spifflog spifflog is offline
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Yes, like corporate income taxes for example. But I'm raising this as an issue of how talking about income taxes as being representative of all taxes is more misleading on the state of taxation of lower incomes.

So, a wealthy person may pay income, corporate, excise, and social insurance taxes, and everyone agrees that it adds up to a good chunk of their income (even though people may disagree whether that overall tax rate should go up or down).

And a poor person may pay income, excise, and social insurance taxes, but because they generally pay nothing in income taxes, people often misread that and end up thinking that poor people pay nothing in Federal taxes. So in fact, there isn't an agreement among Americans that poor people pay Federal taxes, because some people mistakenly think that income taxes are the only kind of Federal taxes.
Copy that. That makes sense, thanks.

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No, anyone who works pays social security taxes. But the wealthy stop paying at around $110,000 in wages. So they pay a smaller amount as a percentage than the bottom feeders.
Let's be careful on this one though. Yes social security is capped at his income capped at $128,400, but the payment of social security is capped as well.

I recently ran some numbers for a friend who was trying to decide if he would work one more year before he retired. His contributions would be capped (at $127,000) and he would pay about $8,800 for social security that year and his employer would match that. His net benefit for this additional one year? About $590 per year.

The benefit of social security is very progressive due to the pay out structure. Using social security to argue that the poor are being taken advantage of isn't a good argument.
  #40  
Old 12-10-2018, 03:57 PM
Little Nemo Little Nemo is offline
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You are still thinking of the Government as a person or household when that comparison is not in any way valid.
In this particular case, the government does act like a person or a household.
  #41  
Old 12-10-2018, 04:15 PM
Ravenman Ravenman is offline
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The benefit of social security is very progressive due to the pay out structure. Using social security to argue that the poor are being taken advantage of isn't a good argument.
It should all be put in context, of course, but in general, poor people pay a higher percentage of their incomes (~8%) in payroll taxes than do wealthy people (~6.5% or so). I wouldn't go so far to say that the poor are taken advantage of, but it's a quirk that results in payroll taxes being somewhat regressive, when for the most part the rest of the Federal tax system is progressive.
  #42  
Old 12-10-2018, 04:47 PM
Little Nemo Little Nemo is offline
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Can you help me understand the bolded comment? I get most of the first part of your post but am struggling with the second half.
If I'm understanding his views correctly, he's saying debt is not a problem for a government because it (unlike private entities) has the ability to print more money as needed.

This is technically true but it misses an important point. Governments don't want money; they want wealth. Wealth is generally equivalent to wealth but it's not an absolute relationship. Governments can create money but they can't create wealth. If they overproduce money, they will end up reducing its value and not gaining the wealth they were seeking.

To make it more clear, a government doesn't want a hundred billion dollars. What it wants is the things it can buy with a hundred billion dollars. If the government simply fires up its printing presses and creates a hundred billion dollars out of nothing but paper and ink, it will find that the hundred billions they now have will no longer buy the things they wanted.

Last edited by Little Nemo; 12-10-2018 at 04:48 PM.
  #43  
Old 12-10-2018, 04:56 PM
Sam Stone Sam Stone is offline
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And the same is true of the peopke who lent the U.S. the money in the first place. They expect the wealth represented by their money to grow at the interest rate promised to them. If you are in the habit of devaluing your currency by printing money to pay your debt, you will soon find that no one will buy your debt. That's how you create a financial crisis.

Last edited by Sam Stone; 12-10-2018 at 04:57 PM.
  #44  
Old 12-10-2018, 05:01 PM
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It should all be put in context, of course, but in general, poor people pay a higher percentage of their incomes (~8%) in payroll taxes than do wealthy people (~6.5% or so). I wouldn't go so far to say that the poor are taken advantage of, but it's a quirk that results in payroll taxes being somewhat regressive, when for the most part the rest of the Federal tax system is progressive.
But look at how the payout is structured. Currently, of the Primary Insurance Amount, one receives 90% of the first $926; only 32% of the amount between that and $5,583 and only 15% of that over $5,583. How is this not progressive?

Last edited by spifflog; 12-10-2018 at 05:03 PM.
  #45  
Old 12-10-2018, 05:07 PM
Ravenman Ravenman is offline
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But look at how the payout is structured. Currently, of the Primary Insurance Amount, one receives 90% of the first $926; only 32% of the amount between that and $5,583 and only 15% of that over $5,397. How is this not progressive?
I don't understand the question -- you're saying because payouts are structured a certain way, FICA isn't a regressive tax? That doesn't make sense to me.
  #46  
Old 12-10-2018, 05:13 PM
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these conversations always rotates around the same ways individuals tend to think of the government debt via their household experience. It never changes...

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Originally Posted by Little Nemo View Post
In this particular case, the government does act like a person or a household.
No, not even in analogy.

If there is a private analogy for the modern state, it is much closer to the modern corporation. It is not the household at all.

the reasoning on the government debt from the personal is an act that is economically illiterate.

the perpetual in effect nature of the modern state has the similarities to the modern corporation including the inter-generational aspect.

Excepting the ability to issue currency, there are similarities (more to the oligopoly than the competitive market company, but it is only the analogy).

In fact for those who analyze the government securities for the actual investment, in particular for the borrowers outside of the zone of doubt - that is like the USA - the questions posed are similar in effect to those to the corporate bond.

Is the spending of the borrower (the state, the company) aimed at the productive investment (in the state, it is the infrastructure, the R&D if there is a credible reputation, etc)? Or funding the current operations / the current consumptive type actions? (social benefits is an example)

If there borrower is borrowing heavily to fund the current expenditures that can not readily be characterized as the investment, it is a warning.

the capacity to potentially raise income (in the state, the historical capacity to effectively raise tax revenues - effectively being the important word as many states with the high theoretical rates of taxation have a very poor collection, so it being often argued they would do better to lower the taxes but collect aggressively on the lower rates... of course corruption is usually some part of the explanation for what seems at the state level irrational policies.)

in any case, for the people - the investment bankers and the economists backing them who do this primarily professionally, the analysis I assure you is closest to a Company (close is not identical to avoid the misunderstand), no rational person in this kind of business would analyze the state borrowings in the fashion being talked about here.

Quote:
Originally Posted by Delayed Reflex View Post
Can you help me understand the bolded comment? I get most of the first part of your post but am struggling with the second half.
it is an assertion from a certain Left oriented economics, it is not widely supported.

A more modest form of the statement is that the modern monetary management has substantially changed the capacity to manage and maintain the debt at the state level. This is certainly a true observation if compared to the 19th century or the classic metallic standards but the argument then becomes "how much has it changed?" That is not obvious.

Quote:
I just want to make sure I understand what options a government has regarding its existing debt obligations - 1) pay them off with taxes collected, 2) print new money to pay them off, 3) default on the debt, or 4) issue new debt to pay off the old debt.
it is almost never economically rational for a state to "pay off" its issued debts since they serve other economic purposes. the pay down rather than pay off.

The challenge you perhaps face in the USA is whether your ideological positions presently will prevent a rational management of your position.

if this occurs, it is purely a political result, it is not from any fundamental economic situation.
  #47  
Old 12-10-2018, 05:35 PM
Sam Stone Sam Stone is offline
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There is plenty of evidence, and some well regarded economic papers that show the harm caused by government debt once it crosses a certain threshold. I believe their was a pretty good paper by Reinhart and Rogoff (or maybe it was Romer and Romer - can't look it up now) that found that debt in excess of 90% of GDP costs around 1% of GDP growth. They concluded that therefore once your debt was this large, paying down the debt with government revenue had a better stimulative effect than cutting taxes - or that you could raise taxes and use the money to pay down debt without hurting GDP, because the benefit of reducing debt offsets the economic loss from increased taxation.

Christina Romer also pointed out that the stimulus bill would cost the U.S. about 1% of GDP per year because of the increased debt after the stimulus was over, but she felt it was worth it anyway because the stimulus effect would more than offset the cost of the debt over 10 years. Her numbers turned out wrong all over the place, but this was the position of mainstream economists, and Romer was at the time the chair of Obama's council of economic advisors.

Right wing economists have traditionally been even more hawkish about the debt, but right wing politicians don't seem to care. And Trump especially doesn't seem to care. He's wrong.
  #48  
Old 12-10-2018, 06:14 PM
SenorBeef SenorBeef is offline
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Quote:
Originally Posted by spifflog View Post
The debt has been a growing issue for 50 years, with both Democrat and Republican Congresses and Presidents. The only common denominator is the American people. We seem unwilling to sacrifice or compromise.
Under Clinton, we ran a surplus. Under GWB, we issued a completely unnecessary tax cut for the rich, which alone drove up the deficit significantly, not counting the wars. Under Obama, after the crash, we started with a 2T deficit. By 2015, that deficit had been reduced to 400B. Trump's tax cuts put us back up to 1000B (1T) in deficits and increasing.

Now, it's not quite as simple as who is president, but there can be no doubt that the democrats have pursued deficit-reducing policies, and the republicans have pursued deficit-increasing policies.

Take a look at this chart. You say we can't possibly tax our way out of this deficit, but why not? Simply reversing the Bush tax cuts, combined with winding down his wars, combined with recovering from the great recession would've reduced the deficit to almost nothing. And that's just going back a few years on tax policies, not enacting some sort of draconian cash grab. If, instead of simply reversing it, you added a few percentage points to the tax rates, now you're running a surplus.

Quote:
I'm sorry that you're frustrated that I'm not clearly a Republican so that you can open fire on me. I'm a middle of the road independent. I guess it's easier if I was right wing for you.
A guy who puts "the rich" in scare quotes as if they don't exist is almost certainly not middle of the road. For someone who is middle of the road, you sure do spout Republican talking points a lot, and when you're not doing that, you're playing the "both sides are the same" card when the Republicans are worse, which is the same as defending them.

Quote:
Originally Posted by spifflog View Post
Unfortunately, we've reached a point where the things you want to do, cut military spending, and taxing the rich won't get us out of this without taking a bite out of entitlements. Won't come close. The debt is $21 trillion; DOD's budget is ~$750 billion.
Do you think we have to pay off the debt in one year, or something? Imagine, for a moment, that all we did was reverse the Trump tax cuts an the Bush tax cuts. Since the Bush tax cuts account for about a trillion in lost revenue, and the Trump ones the same, suddenly we go from a 1T deficit to a 1T surplus. Boom, we're on track to pay off the national debt in 21 years. And this isn't with some huge new wealth tax or anything of the sort - this is simply returning our tax code to how it was 20 years ago.

The idea you're trying to sell us - that the rich just don't have the money and we're all screwed and there's nothing we can do but stop issuing social security checks - is complete bullshit. Our current deficit can be entirely attributed to the tax cuts made in recent times. The myth that we simply can't afford anything is absurd. The world is the wealthiest it has ever been, and so is the country. We could probably run a 4 trillion dollar surplus while still being on the left side of the Laffer curve pretty easily. (Not that it would be a good idea, but just to say that we're not even close to straining).

The idea that we can't afford anything, and that we're going to have to tighten our belts is starve the beast propaganda by the people who actually run this country. It has no basis in fact. We're rich enough that we could be doing so much more.

Quote:
And our corporate taxes are already the highest in the world. So you can't increase jobs in America to a large degree while increasing those taxes.
In the US, we control effective tax rates through deductions to a much greater degree than most countries. So yes, technically our marginal corporate tax rates may be higher than elsewhere, but since we allow a lot more deductions, the actual effective corporate tax rate is actually much lower. Sure, they may have to pay 28% or whatever the number is, and maybe that's higher than 25% in another country, except they're only paying 28% on maybe half their profit, which ends up being less than a country where you pay 25% on, say, 90% of your profit. (Numbers made up for example).

The idea that corporations are straining from their tax load is ridiculous. Corporate cash reserves are at a record high. The corporate tax cuts, which were promised to increase salary for regular people and all that (which it did not, and why would it?) just caused their cash reserves to go higher, and having nothing else to do with the money, they just bought back their own stock.

This is a completely artificial crisis. The US has a 20 trillion dollar economy. Eliminating our deficit and eventually debt would require just a small fraction of that to be moved around.

Last edited by SenorBeef; 12-10-2018 at 06:15 PM.
  #49  
Old 12-10-2018, 06:22 PM
Ramira's Avatar
Ramira Ramira is offline
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Quote:
Originally Posted by Sam Stone View Post
There is plenty of evidence, and some well regarded economic papers that show the harm caused by government debt once it crosses a certain threshold.
no, there is uneven evidence about the record of the government debt.

there is plenty of the evidence that the debt crises when the government debt is unsustainable is harmful.

the evidence about "harm" is not however clear at all [relative to the just carrying a certain debt level - not the harm from crisis, that is very clear]. Although among the ideological they draw straw conclusions.


Quote:
I believe their was a pretty good paper by Reinhart and Rogoff (or maybe it was Romer and Romer - can't look it up now) that found that debt in excess of 90% of GDP costs around 1% of GDP growth.
It was the first - however they had a serious error that excluded the historical data which rendered their conclusions not strong. It was a very serious data error.

It is more clear that the debt to GDP ratios over the 100 percent at least historically have been very dangerous and tended to lead to crisis.

[it is much safer and non ideological to say that the carrying of debt levels close to historical carrying capacity of the country for sustained periods, is dangerous and raises chances of a debt or a financial crisi]

Quote:
They concluded that therefore once your debt was this large, paying down the debt with government revenue had a better stimulative effect than cutting taxes - or that you could raise taxes and use the money to pay down debt without hurting GDP, because the benefit of reducing debt offsets the economic loss from increased taxation.
no, this is not supported as a blanket statement of economics.

It may indeed be true in some circumstances, it is incorrect to assert as a conclusion broadly.

that is not to say that large debt is a good idea or that it is not wise to not carry debt all the time near the maximum carrying capacity.


Quote:
Christina Romer also pointed out that the stimulus bill would cost the U.S. about 1% of GDP per year because of the increased debt after the stimulus was over, but she felt it was worth it anyway because the stimulus effect would more than offset the cost of the debt over 10 years.
the cost to GDP proposition is not a strong conclusion due to the data errors.

Last edited by Ramira; 12-10-2018 at 06:26 PM.
  #50  
Old 12-10-2018, 06:23 PM
HurricaneDitka HurricaneDitka is offline
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Quote:
Originally Posted by SenorBeef View Post
... Under Obama, after the crash, we started with a 2T deficit. By 2015, that deficit had been reduced to 400B. Trump's tax cuts put us back up to 1000B (1T) in deficits and increasing. ...
Here's what the numbers actually are, according to the CBO:

2000: 236.241
2001: 128.236
2002: -157.758
2003: -377.585
2004: -412.727
2005: -318.346
2006: -248.181
2007: -160.701
2008: -458.553
2009: -1412.688
2010: -1294.373
2011: -1299.599
2012: -1086.955
2013: -679.542
2014: -484.6
2015: -438.496
2016: -584.651
2017: -665.372

It was never as high as $2T nor as low as $400B during Obama's administration. Also, projections near the end of the Obama administration had us scheduled to hit trillion-dollar deficits again, regardless of who won the 2016 election.

Last edited by HurricaneDitka; 12-10-2018 at 06:23 PM.
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