# Why is the Debt/Deficit issue #1 for so many people? **URL:** \ **Category:** Great Debates\ **Created:** [June 6, 2012, 6:31pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297 "2012-06-06T18:31:30Z")\ **Posts on this page:** 20\ **Page:** 6
**Author:** ![furt](https://avatars.discourse-cdn.com/v4/letter/f/439d5e/32.png) [@furt](https://boards.straightdope.com/u/furt)\ **Post date:** [June 11, 2012, 2:42am UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/101 "2012-06-11T02:42:47Z")
> [@Procrustus](#): > > Decades before the republican plan would succeed I don’t know which “Republican Plan” you’re referring to. There is no singular plan; but Rand Paul has proposed a budget that balanced the closed the deficit in ten years, an Paul Ryan’s in 20. Ron Paul has also offered multiple balanced-budget plans, though mostly in outlines. None got much support, and you may not like those plans, but they exist as serious proposals for a serious problem. Obama has offered nothing similar, nor AFAIK has any Democrat. ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [June 11, 2012, 3:11am UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/102 "2012-06-11T03:11:27Z")
To answer the OP, I think it is alarming to many people that the debt is rising so quickly to such dizzying heights. Just the interest alone is in the billions of dollars, which might as well be counted as tax money flushed down a toilet. And none of the approaches proposed appears capable of 1) passing Congress and 2) also addressing the problem. Is the debt just a big scam then? Because when you have $250,000, you need to get a sizeable return before your investment amounts to permanent wealth. When you have over a billion dollars, 1.6% is perfectly acceptable, especially if it is guaranteed like a US treasury bond investment. If the government stops selling bonds and pays back what they issued, billionaires will have to make their money from investments that function in some other way than sucking tax dollars from the system without threat of loss. Frankly the debt functions like socialism for billionaires, who go on to argue that their ‘risky’ investing in the economy earns them a tax break. The whole issue is fishy if you look at it a certain way, but considering the entire global economic context is borrowing really that bad or not? ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [June 11, 2012, 5:45am UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/103 "2012-06-11T05:45:07Z")
> [@furt](#): > > _All the deficit hawks in the thread have agreed that tax hikes will probably be needed to end the deficit._ Perhaps not Dopers in this thread, but among U.S. political figures those denouncing increasing debt are often the very same ones who denounce the idea of raising taxes back to Reagan-era levels. (Of course I refer to denunciations when a Democrat is in the White House. Debt incurred bringing freedom to Iraqis is well spent if the GOP Payola team is in charge.) > [@furt](#): > > … our debt approaching the perilous 100% of GDP level in about a decade. To be clear. “100% of GDP” is just an arbitrary figure. Is a baseball player with a .301 batting average significantly better than one with a .299 average? No. Let’s banish diction like “perilous 100% level” to the same trash-dump where we left “hyperinflation.” > [@Snag](#): > > But all I hear about is the so called pain and economic slowdown we’ll incur raising the rates 3% on the wealthiest and closing enough corporate loopholes to squeeze something like 1/2 of what’s owed in annual taxes on the biggest corporations in the US. One would think that with the free rides some of the largest corporations get paying no taxes while winning huge subsidies, and with the wealthiest ‘job creators’ earning [93% of income gains](http://www.washingtonpost.com/blogs/ezra-klein/post/in-2010-93-percent-of-income-gains-went-to-the-top-1-percent/2011/08/25/gIQA0qxhsR_blog.html) going to the top 1%, all that would have produced plenty of jobs to have turned around the economy after 12 years. Nothing like that has remotely happened. The Republican model is a complete bust for everyone else in the nation. Why don’t you just take your Communist ideas and go back to North Korea, or France, or wherever you came from. 😉 ---
**Author:** ![furt](https://avatars.discourse-cdn.com/v4/letter/f/439d5e/32.png) [@furt](https://boards.straightdope.com/u/furt)\ **Post date:** [June 11, 2012, 12:13pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/104 "2012-06-11T12:13:31Z")
> [@septimus](#): > > Perhaps not Dopers in this thread, but among U.S. political figures those denouncing increasing debt are often the very same ones who denounce the idea of raising taxes back to Reagan-era levels. (Of course I refer to denunciations when a Democrat is in the White House. Debt incurred bringing freedom to Iraqis is well spent if the GOP Payola team is in charge.) This is all true. Many on the right talk about the deficit, without it actually being high on their priority list. > [@](#): > > To be clear. “100% of GDP” is just an arbitrary figure. Is a baseball player with a .301 batting average significantly better than one with a .299 average? No. Let’s banish diction like “perilous 100% level” to the same trash-dump where we left “hyperinflation.” \ No, it’s not. History tells us that extremely high levels of debt, especially those approaching 100% of GDP are a very bad problem. There is no universally-agreed on figure – [some say 85%](http://www.bis.org/publ/othp16.pdf), [some say 90%](http://crfb.org/blogs/90-percent-debt-gdp-threshold-and-cbo%E2%80%99s-new-debt-estimates), [some say 100%](http://www.huffingtonpost.com/michael-pento/the-anatomy-of-sovereign-_b_1431276.html) – but everyone agrees that at some point along the upward spiral, high debt levels make robust growth levels difficult, and creditors lose confidence. It’s not an ironclad rule – Japan being an obvious current exception – but it’s a useful benchmark. Similarly, hyperinflation is not some myth; it’s a standard [economics term](http://en.wikipedia.org/wiki/Hyperinflation) used to describe a historical phenomenon. You can argue that it won’t happen in the US (I think it’s unlikely), but your suggestion that it must not be discussed is absurd. ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [June 11, 2012, 12:55pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/105 "2012-06-11T12:55:04Z")
> [@furt](#): > > No, it’s not. History tells us that extremely high levels of debt, especially those approaching 100% of GDP are a very bad problem. Ultimately, we do need to deal with our debt. But it is not our first priority now, and we’re going to have to add more debt before we get things moving again. Whegher we do so productively or not is the question. But historically, the US debt as a percentage of GDP was higher by the end of the 1940s than today, and the 1950s were one of the best periods of economic prosperity the US has ever seen. > [@](#): > > There is no universally-agreed on figure – [some say 85%](http://www.bis.org/publ/othp16.pdf), [some say 90%](http://crfb.org/blogs/90-percent-debt-gdp-threshold-and-cbo%E2%80%99s-new-debt-estimates), [some say 100%](http://www.huh.ffingtonpost.com/michael-pento/the-anatomy-of-sovereign-_b_1431276.html) – but everyone agrees that at some point along the upward spiral, high debt levels make robust growth levels difficult, and creditors lose confidence. It’s not an ironclad rule – Japan being an obvious current exception – but it’s a useful benchmark. Japan’s debt as a percentage of GDP is presently well over 200%. Either they are some exception or the 100% benchmark doesn’t mean that much. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [June 11, 2012, 1:00pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/106 "2012-06-11T13:00:52Z")
One factor is interest on the debt. One thing Japan and America share in common along with non-freefalling economies is very low interest rates on their public debt. If we had to pay Greek levels of interest rates, it would probably [del]have a deleterious effect on[/del] mess up our economy badly. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [June 11, 2012, 1:10pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/107 "2012-06-11T13:10:23Z")
The Greeks are paying high rates in order to (try and) entice people and agencies into buying their bonds and treasury instruments. We pay less because, for the time being at least, US treasury instruments are in demand world wide…we still have the tacit confidence of the world financial community and are still seen as a safe haven for investment. That might change if we don’t get our debt under control at some point. Japan has low interest (and is an ‘exception’) because of the extremely high level of their public debt being owned by their own citizens. The Japanese are mad about saving and investment, and aren’t so keen on personal consumption which is why their economy has sort of staggered along for the last few decades without much overall improvement while their interest rates have stayed so low (they actually have the opposite problem to inflation). -XT ---
**Author:** ![furt](https://avatars.discourse-cdn.com/v4/letter/f/439d5e/32.png) [@furt](https://boards.straightdope.com/u/furt)\ **Post date:** [June 11, 2012, 1:59pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/108 "2012-06-11T13:59:16Z")
> [@Hentor\_the\_Barbarian](#): > > But historically, the US debt as a percentage of GDP was higher by the end of the 1940s than today, and the 1950s were one of the best periods of economic prosperity the US has ever seen. Yes. One of the main factors here was that the rest of the planet’s manufacturing capacity was destroyed. Another was that over a two-year period after WWII federal government spending was cut by 2/3. What is the practical lesson we should draw from this precedent: Incite global catastrophe, or massive spending cuts? > [@](#): > > Japan’s debt as a percentage of GDP is presently well over 200%. Either they are some exception or the 100% benchmark doesn’t mean that much. Yes, the Japanese exception has been noted. You know who else has a lower debt-GDP ratio than Japan? Greece, Spain, Portugal, Ireland … Several people have survived falling out of planes without a parachute. Nonetheless, in plotting a course of action, it may not be prudent to pick the most extreme outlier and assume one can safely follow their course. ---
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [June 11, 2012, 2:03pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/109 "2012-06-11T14:03:03Z")
> [@furt](#): > > Yes, the Japanese exception has been noted. You know who else has a lower debt-GDP ratio than Japan? Hitler? ---
**Author:** ![Snag](https://avatars.discourse-cdn.com/v4/letter/s/94ad74/32.png) [@Snag](https://boards.straightdope.com/u/Snag)\ **Post date:** [June 14, 2012, 7:39am UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/110 "2012-06-14T07:39:05Z")
> [@furt](#): > > If you want to argue that higher taxs are the way to get the deficit down, go ahead. If Obama or any other prominent democrat were advancing a plan to get the deficit down to zero, or even close to it, by massive tax hikes, I’d disagree with the method and maybe his forecasts, but I’d certainly concede that at least they were taking the issue seriously. > > AFAIK, they have proposed no such plan. Ergo, they are not taking it seriously. And no, most Republicans aren’t either. > > _All the deficit hawks in the thread have agreed that tax hikes will probably be needed to end the deficit._ Nobody here is advocating a cuts-only approach. > > Lower taxes, by themselves, don’t affect the deficit. Higher taxes, by themselves, don’t affect the deficit. To state the bleeding obvious, what makes a deficit is the \*gap \*between revenue and spending, and George Bush was an enormous spender. Sincere small-government people said so at the time; if you didn’t hear it, it’s because there aren’t really many of us. > This is not a red-team/blue-team issue: from the standpoint of the deficit, Bush sucked. Obama does, too. So do the vast majority of the people in office, and frankly a lot of the voters. > > Meanwhile, while we argue donkey-vs-elephant, the CBO’s realistic forecast now has our debt approaching the perilous 100% of GDP level in about a decade. I think we can get the deficit under control in about 5 or 6 years if we really want to. I mostly agree with your statement about political will. Although more than anything when there is something wrong with government I first place blame on the citizenry. If we got on their asses, in ways the Internet provides that we didn’t have even five years ago, we’d scare the bejezus out of them. The eligible voters that always sit it out have numbers enough on their own to throw the current electoral system into upheaval. They’re worse than some of the voters. First we have to get the money out of Washington and it has to be as close to being a ban (itself impossible) as we can. We pay for every other aspect of elections with tax dollars. If we got serious with public funded elections with lots of shame, distrust, and bad mojo for people who try to buy a seat we could buy back Washington from the lobbyists and fat cats. At cut rate prices to and we’k keep it low along with the political with the competition on a level playing field. I’d like to see people who only get one vote for their seat on any issue compete with one another with no money advantage during the campaign season. But that’s another issue that isn’t on anybodies radar. How convenient. Just like the public apathy. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [June 14, 2012, 3:39pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/111 "2012-06-14T15:39:00Z")
Why is the Debt/Deficit issue #1 for so many people? Because common sense dictates it. The greater the debt, the less money available to spend. We’ve talked about the inevitable problems it will cause for years and now we are seeing countries like Greece and Spain circling the drain. It’s happening in front of our eyes. ---
**Author:** ![SmartAlecCat](https://avatars.discourse-cdn.com/v4/letter/s/67e7ee/32.png) [@SmartAlecCat](https://boards.straightdope.com/u/SmartAlecCat)\ **Post date:** [June 14, 2012, 3:54pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/112 "2012-06-14T15:54:04Z")
> [@Magiver](#): > > Because common sense dictates it. The greater the debt, the less money available to spend. We’ve talked about the inevitable problems it will cause for years and now we are seeing countries like Greece and Spain circling the drain. It’s happening in front of our eyes. Does this “common sense” concern itself with the debt as an absolute number, or a percentage of GDP? Perhaps that’s the problem? “common sense” doesn’t understand or consider the difference relevant? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [June 14, 2012, 3:58pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/113 "2012-06-14T15:58:14Z")
> [@SmartAlecCat](#): > > Perhaps that’s the problem? “common sense” doesn’t understand or consider the difference relevant? That’s why it’s called “common sense” instead of “exceptional sense”. ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [June 14, 2012, 4:32pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/114 "2012-06-14T16:32:58Z")
Unfortunately that is the common sense these days. Common sense is why austerity is being tried all over the place, despite failing everywhere. Common sense also appears wholly ignorant of the special problems involved when a country does not control its own currency. Tacking away from common sense is why Iceland is recovering so much better than other European countries. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [June 14, 2012, 4:41pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/115 "2012-06-14T16:41:21Z")
> [@SmartAlecCat](#): > > Does this “common sense” concern itself with the debt as an absolute number, or a percentage of GDP? Both. As an absolute number the maintenance of debt (not the repayment) is 8% of the federal government and a great deal more for various state and local governments who are approaching default. > [@SmartAlecCat](#): > > Perhaps that’s the problem? “common sense” doesn’t understand or consider the difference relevant? Common sense understands deficit spending just fine. As a percentage of GDP the gross debt in the United states is now [over 100%](http://en.wikipedia.org/wiki/List_of_countries_by_public_debt#cite_note-2). The time to worry about turning into another country like Greece is before it happens. ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [June 14, 2012, 4:46pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/116 "2012-06-14T16:46:43Z")
> [@Magiver](#): > > Both. > > As an absolute number the maintenance of debt (not the repayment) is 8% of the federal government and a great deal more for various state and local governments who are approaching default. > > Common sense understands deficit spending just fine. As a percentage of GDP the gross debt in the United states is now [over 100%](http://en.wikipedia.org/wiki/List_of_countries_by_public_debt#cite_note-2). > > The time to worry about turning into another country like Greece is before it happens. We are not remotely like Greece. The thread already contains all you need to know about the relative importance of our present debt situation versus the need to get the economy going again. I’d suggest giving that info more of your consideration. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [June 14, 2012, 4:51pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/117 "2012-06-14T16:51:05Z")
> [@Magiver](#): > > The time to worry about turning into another country like Greece is before it happens. The only way we become Greece is with an austerity budget that ruins the economy. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [June 14, 2012, 5:02pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/118 "2012-06-14T17:02:03Z")
> [@Hentor\_the\_Barbarian](#): > > We are not remotely like Greece. The thread already contains all you need to know about the relative importance of our present debt situation versus the need to get the economy going again. I’d suggest giving that info more of your consideration. our debt exceeds GDP. Our credit rating has taken a hit. These are not semantics. We are like every other country who has gone down the road Greece went down. It will eventually happen if we continue to spend more than we take in. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [June 14, 2012, 5:03pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/119 "2012-06-14T17:03:18Z")
> [@Fear\_Itself](#): > > The only way we become Greece is with an austerity budget that ruins the economy. So if we increase the debt we’ll be OK. ---
**Author:** ![CJJ](https://avatars.discourse-cdn.com/v4/letter/c/ecc23a/32.png) [@CJJ](https://boards.straightdope.com/u/CJJ)\ **Post date:** [June 14, 2012, 5:15pm UTC](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297/120 "2012-06-14T17:15:01Z")
> [@Magiver](#): > > Why is the Debt/Deficit issue #1 for so many people? > > Because common sense dictates it. The greater the debt, the less money available to spend. We’ve talked about the inevitable problems it will cause for years and now we are seeing countries like Greece and Spain circling the drain. It’s happening in front of our eyes. In Spain at least (and there’s a similar story in Ireland), the problem was not the level of sovereign debt, but the sudden rise of interest rates thanks to a banking crisis. The crash reduced the value of real estate held by the banks some 30-50% ; in total Spanish banks are looking at [a 300 billion euro loss](http://money.cnn.com/2012/05/25/investing/spain-banks/index.htm). Spain’s government organized FORB in 2009 to deal with the crisis and started implementing austerity measures around the same time. Austerity has caused high unemployment, and the recent admission by Bankia that it needed 19 billion euro in recapitalization (sure to be the tip of the iceberg) essentially caused it to be nationalized–the Spanish government took on its debt to avoid risking another crisis. The inevitable sovereign debt downgrades have [raised Spain’s borrowing costs to 7%](http://money.cnn.com/2012/05/25/investing/spain-banks/index.htm)–arguably through no fault of their own, or at least not because the government was overspending. [Previous page](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297.md?page=5) [Next page](https://boards.straightdope.com/t/why-is-the-debt-deficit-issue-1-for-so-many-people/624297.md?page=7)