Bigger Burden: Federal Debt or Mass Unemployment?

[BakshisMouse]

Addendum: Also because of your posts in Charles' thread as well.

 

[rdean]

While my OP and comments are unfocused, I notice that no one as answered the pertinent question of the title:

Which is more of a burden for the current generation: a potential debt crisis or mass unemployment?

its an idiotic liberal question since both are very very negative

With mass unemployment, the debt can never be repaid. Thought it was obvious.

 

[Vidi]

they are unemployed because of a government bubble in housing and now you want a bubble in roads???? How stupid and liberal is that.

No one takes out a mortage for roads. It is not a burden spread throughout the whole economy. They are usually maintained by state and local governments. There are no corporation in the USA with a marketing department calling for people to purchase roads developed by them.

How does increased govrnment spending on roads create a bubble?

dear, whether the government builds houses or roads does not matter. It is artificial spending that creates an artificial non sustainable bubble that must burst and cause a recession or depression.

The entire beauty of capitalism is the it invests sustainably based on the real decisions of millions spending their own money on what they feel will improve their standard of living. Got it now?

Not entirely true, Ed.

Government spending CAN lead to private growth in which that growth becomes sustainable when government spending is removed. What we do NOT want is a permanent reliance on government spending to keep the economy afloat but in times of crisis, government spending can create the necessary economic puch to get things going again.

Its like jump starting a car after you left the lights on. Once the jump start happens the engine itself will recharge the battery and the jumper cables are no longer required.

So while I agree with you that we dont want permanent government support in the economy, government sopending is not always a bad thing, especially in times of economic stress.

 

[Joe Steel]

Washington Post Marc Theisson

Theisson is an American Enterprise Institute hack. Nothing he writes can be taken at face value.

For instance: Raser Technologies was heavily promoted by Sen. Orin Hatch (R-UT) and benefited greatly from tax credit legislation Hatch promoted. Nevada Geothermal Power was promoted by Nevada politicians from both parties.

The only thing worse than Theisson's selective research is someone else using his hackery to distort the issue.

 

[Oldstyle]

In counter to the argument posed by the strawman in the op, I would propose:
- large federal government spending on productive initiatives, such as new technology and medicines and infrastructure development,
-federal grants to close the budget shortfall in state in local governments in order for states and localities to rehire personnel.
- a higher inflation target set by the Federal Reserve

The federal stimulus enacted in 2009 did some productive work, but the funds from that bill are now spent, and real government spending per capita is falling year from year:

So I think my proposal is sensible, especially given the dire job market.

The government spending proposed would create government and government sponsored jobs for formerly unemployed people. As these people purchase private goods and services, the private economy will expand, further creating new jobs.

The higher inflation target would cause nominal revenues to firms to rise. The burden of the debt they took on before inflation would be comparatively smaller. As their employees' salaries are comparatively worth less, they can hire more workers at a lower cost. The workers themselves will probably see a wage increase because of the inflation, reducing the burden of their debts.

If the debt to GDP ratio rises from its current 100% to 150%, it would be no tragedy if the unemployment rate went sharply down as the debt ratio went down. Japan, for example, has a debt to GDP ratio over 200%, but they are nowhere near default, with their 10-year bond yield below 1%. Our own 10-year bond yields are historically low, but there is no politician in Washington proposing to take advantage of them.

As the economy becomes robust, revenues to the government will increase. When the jobs market is not dismal, the federal government can start to lower its spending to deleverage itself. You might say that lowering government spending is improbable, but don't you remember the late 1990's, when we had balanced budgets in a time of prosperity? Plus, it is a larger concern to energize the jobs market than worry about the debt.

Everything that the strawman and I propose is hypothetical.

What is very real is the dismal job market for young people. When millions are unemployed for long periods, people start to believe that they are losing valuable skills and are unlikely to hire them.

Paul Ryan, the architect of one of the most austere budget proposals ever, says that the bond market will give up on the USA in two years time. The historical example of Japan suggests he is wrong.

Why are the politicians in Washington worried about a hypothetical debt crisis rather than the real and present problem with the job market?

Did you by any chance sleep through that whole "US credit rating getting downgraded for the first time in our history thing", Bakhis? Why are the politicians in Washington worried about the debt? BECAUSE IT'S AT 15 TRILLION DOLLARS AND GROWING BY A TRILLION A YEAR PLUS!!!

I know that for you progressives there is no such thing as too much debt but for the rest of us rational people there is an understanding that we CAN'T keep piling huge debt on top of huge debt. We will get downgraded again if we don't address this problem which means that the interest we pay on our debt will only get more expensive.

 

[Joe Steel]

Did you by any chance sleep through that whole "US credit rating getting downgraded for the first time in our history thing", Bakhis? Why are the politicians in Washington worried about the debt? BECAUSE IT'S AT 15 TRILLION DOLLARS AND GROWING BY A TRILLION A YEAR PLUS!!!

No, the Republicans think they can use the debt for political advantage. They didn't care about it when Bush was starting wars, creating a Medicare drug benefit or cutting taxes.

I know that for you progressives there is no such thing as too much debt but for the rest of us rational people there is an understanding that we CAN'T keep piling huge debt on top of huge debt. We will get downgraded again if we don't address this problem which means that the interest we pay on our debt will only get more expensive.

Wrong again. Investors are willing to accept negative yields (interest rate less the rate of inflation is less than 0) to hold US Treasuries.

The debt is not a problem except to those who won't look beyond the political spin.

 

[Oldstyle]

Did you by any chance sleep through that whole "US credit rating getting downgraded for the first time in our history thing", Bakhis? Why are the politicians in Washington worried about the debt? BECAUSE IT'S AT 15 TRILLION DOLLARS AND GROWING BY A TRILLION A YEAR PLUS!!!

No, the Republicans think they can use the debt for political advantage. They didn't care about it when Bush was starting wars, creating a Medicare drug benefit or cutting taxes.

I know that for you progressives there is no such thing as too much debt but for the rest of us rational people there is an understanding that we CAN'T keep piling huge debt on top of huge debt. We will get downgraded again if we don't address this problem which means that the interest we pay on our debt will only get more expensive.

Wrong again. Investors are willing to accept negative yields (interest rate less the rate of inflation is less than 0) to hold US Treasuries.

The debt is not a problem except to those who won't look beyond the political spin.

The debt is not a problem? Are you REALLY that clueless? Do you have a concept of how much a trillion dollars is? We're adding a trillion a year plus to our deficit. It IS a problem and that isn't political "spin"...that's simply reality.

 

[Joe Steel]

Wrong again. Investors are willing to accept negative yields (interest rate less the rate of inflation is less than 0) to hold US Treasuries.

The debt is not a problem except to those who won't look beyond the political spin.

The debt is not a problem? Are you REALLY that clueless? Do you have a concept of how much a trillion dollars is? We're adding a trillion a year plus to our deficit. It IS a problem and that isn't political "spin"...that's simply reality.

So, make an argument. Give me some reasons for your opinion. Don't just say it is, it is, it is.

 

[itfitzme]

they are unemployed because of a government bubble in housing and now you want a bubble in roads???? How stupid and liberal is that.

No one takes out a mortage for roads. It is not a burden spread throughout the whole economy. They are usually maintained by state and local governments. There are no corporation in the USA with a marketing department calling for people to purchase roads developed by them.

How does increased govrnment spending on roads create a bubble?

dear, whether the government builds houses or roads does not matter. It is artificial spending that creates an artificial non sustainable bubble that must burst and cause a recession or depression.

The entire beauty of capitalism is the it invests sustainably based on the real decisions of millions spending their own money on what they feel will improve their standard of living. Got it now?

Dearie, like the dot.com bubble. And the housing bubble was no different. This is how capitalism works. A new growth opportunity comes along. Hundreds, if not thousands, of companies get in on the act, enjoying the market growth and competing to be the market leader. When the market becomes saturated, all the latent demand filled, demand tappers off to its steady state level. Companies begin to fall by the wayside, some being bought up by the market leaders, for there assest, most closing shop permanently. Workers leave the employment rolls for unemployment.

The housing bubble was no different. It was a free market opportunity for investors. The unique aspect of the housing market is that is also served as an investment opportunity for individuals who planned on occupying thier homes through the lifetime of the mortgage.

Unfortunately, when demand began to recede, flippers lost their opportunity for the expected ROI based on short term equity gains. They walked away from mortgages in record numbers, flooding the market with foreclosures and driving prices downward.

The housing bubble burst for the same reason that all capitalism opportunity markets collapse. It is nothing more then a typical free-market process.

Got it now?

 

[itfitzme]

Did you by any chance sleep through that whole "US credit rating getting downgraded for the first time in our history thing", Bakhis? Why are the politicians in Washington worried about the debt? BECAUSE IT'S AT 15 TRILLION DOLLARS AND GROWING BY A TRILLION A YEAR PLUS!!!

No, the Republicans think they can use the debt for political advantage. They didn't care about it when Bush was starting wars, creating a Medicare drug benefit or cutting taxes.

I know that for you progressives there is no such thing as too much debt but for the rest of us rational people there is an understanding that we CAN'T keep piling huge debt on top of huge debt. We will get downgraded again if we don't address this problem which means that the interest we pay on our debt will only get more expensive.

Wrong again. Investors are willing to accept negative yields (interest rate less the rate of inflation is less than 0) to hold US Treasuries.

The debt is not a problem except to those who won't look beyond the political spin.

The debt is not a problem? Are you REALLY that clueless? Do you have a concept of how much a trillion dollars is? We're adding a trillion a year plus to our deficit. It IS a problem and that isn't political "spin"...that's simply reality.

Yes, it's a really big number.

So make that case, present the mechanism?

Oh, and how do you propose to lower it?

S&P just announced a potential downgrade. So, what happens now? The debt begins to shrink as bonds come due and demand for new purchases falls of? Seems like a natural process.

What is the largest government, non-deficit neutral, expenditure? Perhaps we should cut that.

 

[Oldstyle]

Wrong again. Investors are willing to accept negative yields (interest rate less the rate of inflation is less than 0) to hold US Treasuries.

The debt is not a problem except to those who won't look beyond the political spin.

The debt is not a problem? Are you REALLY that clueless? Do you have a concept of how much a trillion dollars is? We're adding a trillion a year plus to our deficit. It IS a problem and that isn't political "spin"...that's simply reality.

So, make an argument. Give me some reasons for your opinion. Don't just say it is, it is, it is.

I have to make an "argument" that adding a trillion dollars plus a year to our debt is a bad thing? Are you serious?

 

[itfitzme]

Did you by any chance sleep through that whole "US credit rating getting downgraded for the first time in our history thing",

And what happened when the US credit rating was downgraded?

I know that for you progressives there is no such thing as too much debt but for the rest

Exactly where did this debt come from? What was the major expenses in outlays?

When was the one time in recent history that the debt was reduced?

The S&P just announced the expectation of downgrading the US debt again. Quick, what it your prediction of upcoming events?

 

[BakshisMouse]

Did you by any chance sleep through that whole "US credit rating getting downgraded for the first time in our history thing", Bakhis? Why are the politicians in Washington worried about the debt? BECAUSE IT'S AT 15 TRILLION DOLLARS AND GROWING BY A TRILLION A YEAR PLUS!!!

I know that for you progressives there is no such thing as too much debt but for the rest of us rational people there is an understanding that we CAN'T keep piling huge debt on top of huge debt. We will get downgraded again if we don't address this problem which means that the interest we pay on our debt will only get more expensive.

The S&P downgrade was a fucking joke. Our bond yields actually fell dramatically in the months after that decision.

August 5th (Day of Downgrade): 2.56%
August 8th (Next Monday): 2.34%
June 8th (Yesterday: 1.64%

Also, they downgraded Japan about a decade ago, and despite furthur downgrades since then, Japan's 10-year bond yields have stayed below 2.25% since 2000. Japan currently has government debt to gdp over 200%, but their ten year bonds currently yield is 0.86%.

The USA has debt to GDP of about 100% and 10 year bonds at 1.64%. Besides, about 1/3rd of our debt is held by the Federal Reserve.

This is not an endorsement to let the debt reach Japan levels, but only an indication of how far away the cliff is.

 

[itfitzme]

We will get downgraded again if we don't address this problem which means that the interest we pay on our debt will only get more expensive.

So, there is an argument. It seems intuitive enough. After all, when my credit score sucks, I pay higher interest.

I looked up the T-bill yields at the Treasury Department website. 52 week data didn't go back as far as 26 week data. I chose 26 week yields to show because they all track the same. Is there some other type of security we should be looking at?

The first is as far back as the data set goes. The second is about the August 5th 2011 data of the last S&P downgrade.

So, what happened to the rate on the S & P downgrade?

Did it get more expensive?

Is the debt more or less expensive now then it was in 2006?

So far, I can't find support for the argument.

 

[itfitzme]

Did you by any chance sleep through that whole "US credit rating getting downgraded for the first time in our history thing"

The S&P downgrade was a fucking joke. Our bond yields actually fell dramatically in the months after that decision.

August 5th (Day of Downgrade): 2.56%
August 8th (Next Monday): 2.34%
June 8th (Yesterday: 1.64%

Also, they downgraded Japan about a decade ago, and despite furthur downgrades since then, Japan's 10-year bond yields have stayed below 2.25% since 2000. Japan currently has government debt to gdp over 200%, but their ten year bonds currently yield is 0.86%.

The USA has debt to GDP of about 100% and 10 year bonds at 1.64%. Besides, about 1/3rd of our debt is held by the Federal Reserve.

This is not an endorsement to let the debt reach Japan levels, but only an indication of how far away the cliff is.

You know what did react, the stock market. The interesting reaction was in the volatility.

So the bond market didn't react but the stock market did, especially in terms of volatility.

Does this tell us something about the difference between the two investors?

 

[BakshisMouse]

The debt is not a problem? Are you REALLY that clueless? Do you have a concept of how much a trillion dollars is? We're adding a trillion a year plus to our deficit. It IS a problem and that isn't political "spin"...that's simply reality.

So, make an argument. Give me some reasons for your opinion. Don't just say it is, it is, it is.

I have to make an "argument" that adding a trillion dollars plus a year to our debt is a bad thing? Are you serious?

Adding trillions of dollars to the debt is a good thing if it so spurs the economy that unemployment falls to accepable levels and tax revenues rise. When prosperity is here again, we can worry about the budget.

Even if we don't address the budget, an economy with 5% unemployment and a government that has huge deficits is preferable to an economy with 10% unemployment and huge deficits, right?

I'll say it again: the evidence suggests that fiscal policy works!

 

[BakshisMouse]

I'm guessing that no one has read the first two posts in this thread, which is fine. They're long ones anyway.

I just find it telling that while I mention the word "inflation" four times in post #2, no one else except for Joe Steel has even written that word in his or her posts in this thread.

 

[EdwardBaiamonte]

The government spending proposed would create government and government sponsored jobs for formerly unemployed people.

for 100 years conservative/libertarians have called that mal-investment.

Why not look it up to begin your economic education. If you don't know the opposing argument your POV can't really prevail can it??

See why we are positive a liberal will be slow, very slow??

 

[Joe Steel]

The debt is not a problem? Are you REALLY that clueless? Do you have a concept of how much a trillion dollars is? We're adding a trillion a year plus to our deficit. It IS a problem and that isn't political "spin"...that's simply reality.

So, make an argument. Give me some reasons for your opinion. Don't just say it is, it is, it is.

I have to make an "argument" that adding a trillion dollars plus a year to our debt is a bad thing? Are you serious?

Seriously. Why is it a bad thing?

 

[EdwardBaiamonte]

So, make an argument. Give me some reasons for your opinion. Don't just say it is, it is, it is.

I have to make an "argument" that adding a trillion dollars plus a year to our debt is a bad thing? Are you serious?

Seriously. Why is it a bad thing?

1) our kids will have to pay it off and so suffer a decreased life style for your immoral behavior

2) government spending is wasted mal-investment Solyndra bridge to nowhere spending or crippling welfare payments that buy votes, subvert democracy, and destroy the soul