CDZ How important is spending and debt in government?

[Slade3200]

The US owns the treasury, it can't default. The more concerning issue would be a market crash caused by massive loan defaults in the private sector like what happened in 2008.

Yes it can default when it can no longer pay its debts with money that has any value.

What would it take to make the dollar worthless?

When our credit rating continues to deteriorate--remember that we lost our sterling AAA rating after Obamas first spending spree that sent the deficits soaring--and our creditors, both domestic and foreign start losing money because the value of the bonds they hold deteriorate in value because our money becomes less and less trustworthy and therefore it is of less and less value. The collapse won't happen overnight, but it is simply impossible to run anything on credit indefinitely when there is no feasible way to repay what is borrowed.

Fallacy of Composition
Over Simplification


You seem to be placing all your eggs in one basket, that of the federal budget deficit, which, as Moody's notes below, has been "declining steeply." Even if one characterizes the spending in the early years of Mr. Obama's Presidency as "spending sprees," that so-called spree has ebbed.

• Moody's credit rating of the USA -- AAA, as of 2015 -- The rating was supported by factors including a strong record of gross domestic product growth and the status of the U.S. dollar and Treasuries as the global reserve currency and bond market benchmark.
  • From September 2014:
    
    "Supporting the Aaa rating are the very large and diverse economy, a strong record of GDP and productivity growth, and the status of the dollar and the Treasury bond as global reserve currency assets, allowing the US government to carry a higher level of debt relative to other countries
    
    With budget deficits declining steeply in recent years, debt ratios are stabilizing and should remain at or near current levels over the remainder of the decade. The outlooks for near-term economic and fiscal performance are also favorable.
    
    Although debt levels in relation to GDP are likely to remain close to flat, they are also relatively high. After doubling from 35.1% of GDP in 2007 to 72.0% in 2013, the ratio of federal government debt to GDP is projected to peak at the end of 2014 at 74.4% and to stabilize at just below that level for the remainder of the decade. These high levels give the US government less flexibility to respond should it face another financial shock."

• Fitch's credit rating of the USA -- AAA, as of 2015 -- "The U.S.’ AAA rating is underpinned by the sovereign’s unparalleled financing flexibility as the issuers of the world’s pre-eminent reserve currency."
• S&P's credit rating of the USA -- AA+, as of 2011 (which is when S&P downgraded it from Aaa -- "The U.S. is on better footing, that the deficit situation has been reduced over the last year and that the amount of the money the Treasury borrows has declined. Ultimately the fundamental fiscal situation in the U.S. has improved and the credit quality of the U.S. is in very good shape right now."

Blue:
That's so for individuals, non-profits, and companies. It's not so for governments like the U.S.

I'm not suggesting that governments can just spend "willy nilly." I'm saying that the debt we carry as a nation is within our means. With AAA and AA+ ratings, the three ratings agencies seem to feel that way too. Who are you or I to disagree? I know I sure haven't audited the U.S.' to find out the details behind all its financing arrangements, income streams, and spending requirements. I know only what I come by in the news or look for, and I know that is an incomplete story, even when it isn't biased by partisanship.

Reducing deficits from the astronomical heights of 2009 and 2010 but deficits remaining well above historical highs of previous administrations bears some scrutiny don't you think?

From your cited article printed in June, 2014, 22 months ago:

. . .In 2011, when S&P stripped America of its top grade, it cited political wrangling about the debt limit and the lack of a plan to reduce deficits. . .​

The national debt June, 2014, was $17, 685 billion + and counting.

The national debt now is $19, 200 billion + and counting even faster. That is more than 1.5 trillion dollar increase due to deficits. The guy on the buy gold ad this morning said we are adding more than $4 billion a day to the debt. Even the most left leaning economists agree that deficits will shoot up soon after Obama leaves office due to fiscal policy including Obamacare among others.
CBO Warns Federal Budget Deficit will Increase in 2016 - 2016 - Washington Highlights - Government Affairs - AAMC

So where is the plan to reduce the deficits? I'm not seeing them.

I have nothing against reducing deficits and the national debt, but the timing has to make sense. With interest rates as low as they are and our economy still in need of growth it is a smart move to simulate the economy with smart investments. Infrastructure and education would be a good focus. Once we see more growth in GDP and a hike in interest rates we can switch gears to a more conservative agenda, I just don't believe it is the right time.

 

[320 Years of History]

The US owns the treasury, it can't default. The more concerning issue would be a market crash caused by massive loan defaults in the private sector like what happened in 2008.

Yes it can default when it can no longer pay its debts with money that has any value.

What would it take to make the dollar worthless?

When our credit rating continues to deteriorate--remember that we lost our sterling AAA rating after Obamas first spending spree that sent the deficits soaring--and our creditors, both domestic and foreign start losing money because the value of the bonds they hold deteriorate in value because our money becomes less and less trustworthy and therefore it is of less and less value. The collapse won't happen overnight, but it is simply impossible to run anything on credit indefinitely when there is no feasible way to repay what is borrowed.

Fallacy of Composition
Over Simplification


You seem to be placing all your eggs in one basket, that of the federal budget deficit, which, as Moody's notes below, has been "declining steeply." Even if one characterizes the spending in the early years of Mr. Obama's Presidency as "spending sprees," that so-called spree has ebbed.

• Moody's credit rating of the USA -- AAA, as of 2015 -- The rating was supported by factors including a strong record of gross domestic product growth and the status of the U.S. dollar and Treasuries as the global reserve currency and bond market benchmark.
  • From September 2014:
    
    "Supporting the Aaa rating are the very large and diverse economy, a strong record of GDP and productivity growth, and the status of the dollar and the Treasury bond as global reserve currency assets, allowing the US government to carry a higher level of debt relative to other countries
    
    With budget deficits declining steeply in recent years, debt ratios are stabilizing and should remain at or near current levels over the remainder of the decade. The outlooks for near-term economic and fiscal performance are also favorable.
    
    Although debt levels in relation to GDP are likely to remain close to flat, they are also relatively high. After doubling from 35.1% of GDP in 2007 to 72.0% in 2013, the ratio of federal government debt to GDP is projected to peak at the end of 2014 at 74.4% and to stabilize at just below that level for the remainder of the decade. These high levels give the US government less flexibility to respond should it face another financial shock."

• Fitch's credit rating of the USA -- AAA, as of 2015 -- "The U.S.’ AAA rating is underpinned by the sovereign’s unparalleled financing flexibility as the issuers of the world’s pre-eminent reserve currency."
• S&P's credit rating of the USA -- AA+, as of 2011 (which is when S&P downgraded it from Aaa -- "The U.S. is on better footing, that the deficit situation has been reduced over the last year and that the amount of the money the Treasury borrows has declined. Ultimately the fundamental fiscal situation in the U.S. has improved and the credit quality of the U.S. is in very good shape right now."

Blue:
That's so for individuals, non-profits, and companies. It's not so for governments like the U.S.

I'm not suggesting that governments can just spend "willy nilly." I'm saying that the debt we carry as a nation is within our means. With AAA and AA+ ratings, the three ratings agencies seem to feel that way too. Who are you or I to disagree? I know I sure haven't audited the U.S.' to find out the details behind all its financing arrangements, income streams, and spending requirements. I know only what I come by in the news or look for, and I know that is an incomplete story, even when it isn't biased by partisanship.

Reducing deficits from the astronomical heights of 2009 and 2010 but deficits remaining well above historical highs of previous administrations bears some scrutiny don't you think?

From your cited article printed in June, 2014, 22 months ago:

. . .In 2011, when S&P stripped America of its top grade, it cited political wrangling about the debt limit and the lack of a plan to reduce deficits. . .​

The national debt June, 2014, was $17, 685 billion + and counting.

The national debt now is $19, 200 billion + and counting even faster. That is more than 1.5 trillion dollar increase due to deficits. The guy on the buy gold ad this morning said we are adding more than $4 billion a day to the debt. Even the most left leaning economists agree that deficits will shoot up soon after Obama leaves office due to fiscal policy including Obamacare among others.
CBO Warns Federal Budget Deficit will Increase in 2016 - 2016 - Washington Highlights - Government Affairs - AAMC

So where is the plan to reduce the deficits? I'm not seeing them.

The point I hoped you'd glean from my remarks in my last post is one I'd hoped not to have to hit you over the head with. Alas, I don't get everything for which I wish. The point is not that deficits aren't something to pay attention to; they are but they are not the "be all, end all" element of the story. It's not that buying things on credit isn't something that must be done sensibly. It's that your representation of the U.S. deficits is in accurate. (Click on the images below to view their sources.)

On October 15, The Wall Street Journal reported on the Treasury's deficit numbers and noted that the deficit as a percentage of GDP is now below the average for the last 40 years, and has been consistently declining since 2009. The budget shortfall fell to its lowest level since 2007 during the fiscal year that ended Sept. 30, 2015. The deficit declined 9% from the prior year to $439 billion--around 2.5% of gross domestic product and below the average the U.S. has run over the past 40 years.





If you click on either of the two charts below, you'll be taken to a site that identifies the deficits/surpluses since the 18th century.

​

Do I need more of a plan than what you can see from the above?


RE: the CBO report you linked:
That the government will spend more that it takes in is all well and good. The nation has been doing that for nearly as long as it's existed. The CBO report is merely a prediction of how much deficit spending will occur in 2016. What's relevant, and what that report does not say, is what will be the impact of doing so to the extent noted in 2016.

What the forward looking report does say is:

The substantial increase that CBO expects in net interest spending, $32 billion, results from two factors; interest rates are beginning to rise, and federal debt is growing. But interest rates remain quite low by historical standards, so net interest spending is anticipated to equal only 1.4 percent of GDP in 2016, still well below its 50-year average of two percent.

In CBO’s baseline projections, which assume that current laws will generally remain the same, growth in spending, particularly for Social Security, health care, and interest payments on federal debt, will outpace growth in revenues over the coming 10 years.

CBO projects the budget deficit to increase modestly through 2018 but then start to rise more sharply, reaching $1.4 trillion in 2026. The projected deficits would push debt held by the public up to 86 percent of GDP by the end of the 10-year period, a little more than twice the average over the past five decades.​

Reading that, the careful reader will also not that while the CBO writes specifically about deficits and debt, its report is completely silent on revenue. Surely you realize that how much debt one can carry without worry depends on income. Without knowing what income will be, the CBO's remarks about the deficit aren't more than informational.

To illustrate the importance of income in determining whether the deficits are "too much," let's look at the following simple scenarios.

• Have you ever owed more money to creditors (carried total debt) than you earn in a year? If you have bought a house and aren't a pretty high income earner, which is the case for most folks, you most certainly have. Now ask yourself why you think the government cannot do the same thing? Ask yourself, are the government's prospects of having ever increasing income better than yours are to experience the same phenomenon?
• If you earn $300K (after taxes in order to keep the analogy comparable seeing as the gov't doesn't pay taxes) in a year how much do you think you can spend to service your debt?
  • Do you think you could handle paying $48.3K in debt payments? I can tell you for a fact that you could.
  • Do you think you could ten years from now afford to make $258K in debt payments if you aren't required to save money for the future when you won't have active income, which also is something the government doesn't have to do because it does not retire. Again, of course you could, and you'd still have $40K left over.
  • Do you think you could carry a total debt load of $258K, which would correspond to your carrying debt equal to 86% of your "GDP?" Again, you definitely could.
  • How about carrying a total debt load of $558K, which corresponds to 86% more than your annual income?

Now, you'll surely say, "Well, sure, but, none of that corresponds to my spending more than my annual income." You are correct, and that's what different between you and the government.

I understand the measures of frugality to which you and I are subject. We cannot spend more than we earn. But there's a reason for that. Sooner or later, we stop earning at our maximum income level (hopefully sooner), and we die (hopefully later). That is not at all the earning pattern the government faces. As GDP grows, so to does the government's income. And that is why the government can keep spending roughly as it has.

 

[320 Years of History]

If you've read the Harvard paper to which I liked much earlier in this thread, you may now be ready to read and find the document noted below helpful in understanding deficit spending.

• GOOD DEFICITS: PROTECTING THE PUBLIC INTEREST FROM DEFICIT HYSTERIA

 

[Foxfyre]

Yes it can default when it can no longer pay its debts with money that has any value.

What would it take to make the dollar worthless?

When our credit rating continues to deteriorate--remember that we lost our sterling AAA rating after Obamas first spending spree that sent the deficits soaring--and our creditors, both domestic and foreign start losing money because the value of the bonds they hold deteriorate in value because our money becomes less and less trustworthy and therefore it is of less and less value. The collapse won't happen overnight, but it is simply impossible to run anything on credit indefinitely when there is no feasible way to repay what is borrowed.

Fallacy of Composition
Over Simplification


You seem to be placing all your eggs in one basket, that of the federal budget deficit, which, as Moody's notes below, has been "declining steeply." Even if one characterizes the spending in the early years of Mr. Obama's Presidency as "spending sprees," that so-called spree has ebbed.

• Moody's credit rating of the USA -- AAA, as of 2015 -- The rating was supported by factors including a strong record of gross domestic product growth and the status of the U.S. dollar and Treasuries as the global reserve currency and bond market benchmark.
  • From September 2014:
    
    "Supporting the Aaa rating are the very large and diverse economy, a strong record of GDP and productivity growth, and the status of the dollar and the Treasury bond as global reserve currency assets, allowing the US government to carry a higher level of debt relative to other countries
    
    With budget deficits declining steeply in recent years, debt ratios are stabilizing and should remain at or near current levels over the remainder of the decade. The outlooks for near-term economic and fiscal performance are also favorable.
    
    Although debt levels in relation to GDP are likely to remain close to flat, they are also relatively high. After doubling from 35.1% of GDP in 2007 to 72.0% in 2013, the ratio of federal government debt to GDP is projected to peak at the end of 2014 at 74.4% and to stabilize at just below that level for the remainder of the decade. These high levels give the US government less flexibility to respond should it face another financial shock."

• Fitch's credit rating of the USA -- AAA, as of 2015 -- "The U.S.’ AAA rating is underpinned by the sovereign’s unparalleled financing flexibility as the issuers of the world’s pre-eminent reserve currency."
• S&P's credit rating of the USA -- AA+, as of 2011 (which is when S&P downgraded it from Aaa -- "The U.S. is on better footing, that the deficit situation has been reduced over the last year and that the amount of the money the Treasury borrows has declined. Ultimately the fundamental fiscal situation in the U.S. has improved and the credit quality of the U.S. is in very good shape right now."

Blue:
That's so for individuals, non-profits, and companies. It's not so for governments like the U.S.

I'm not suggesting that governments can just spend "willy nilly." I'm saying that the debt we carry as a nation is within our means. With AAA and AA+ ratings, the three ratings agencies seem to feel that way too. Who are you or I to disagree? I know I sure haven't audited the U.S.' to find out the details behind all its financing arrangements, income streams, and spending requirements. I know only what I come by in the news or look for, and I know that is an incomplete story, even when it isn't biased by partisanship.

Reducing deficits from the astronomical heights of 2009 and 2010 but deficits remaining well above historical highs of previous administrations bears some scrutiny don't you think?

From your cited article printed in June, 2014, 22 months ago:

. . .In 2011, when S&P stripped America of its top grade, it cited political wrangling about the debt limit and the lack of a plan to reduce deficits. . .​

The national debt June, 2014, was $17, 685 billion + and counting.

The national debt now is $19, 200 billion + and counting even faster. That is more than 1.5 trillion dollar increase due to deficits. The guy on the buy gold ad this morning said we are adding more than $4 billion a day to the debt. Even the most left leaning economists agree that deficits will shoot up soon after Obama leaves office due to fiscal policy including Obamacare among others.
CBO Warns Federal Budget Deficit will Increase in 2016 - 2016 - Washington Highlights - Government Affairs - AAMC

So where is the plan to reduce the deficits? I'm not seeing them.

I have nothing against reducing deficits and the national debt, but the timing has to make sense. With interest rates as low as they are and our economy still in need of growth it is a smart move to simulate the economy with smart investments. Infrastructure and education would be a good focus. Once we see more growth in GDP and a hike in interest rates we can switch gears to a more conservative agenda, I just don't believe it is the right time.

Well if the 8.6 trillion dollars added to the national debt since Obama was inaugurated hasn't produced more growth in the GDP, maybe it is time for the government to back off, stop all but absolutely essential spending, and implement policies favorable to the producers of goods and services.

It took more than 200 years for the national debt to reach 1 trillion. It took 28 years to get to from 1 trillion to 10.6 trillion. It has taken less 7 years and 2 months to get from 10.6 trillion to 19.2 trillion. That should be enough 'stimulus' spending to satisfy the most dedicated Keynesian.

 

[320 Years of History]

What would it take to make the dollar worthless?

When our credit rating continues to deteriorate--remember that we lost our sterling AAA rating after Obamas first spending spree that sent the deficits soaring--and our creditors, both domestic and foreign start losing money because the value of the bonds they hold deteriorate in value because our money becomes less and less trustworthy and therefore it is of less and less value. The collapse won't happen overnight, but it is simply impossible to run anything on credit indefinitely when there is no feasible way to repay what is borrowed.

Fallacy of Composition
Over Simplification


You seem to be placing all your eggs in one basket, that of the federal budget deficit, which, as Moody's notes below, has been "declining steeply." Even if one characterizes the spending in the early years of Mr. Obama's Presidency as "spending sprees," that so-called spree has ebbed.

• Moody's credit rating of the USA -- AAA, as of 2015 -- The rating was supported by factors including a strong record of gross domestic product growth and the status of the U.S. dollar and Treasuries as the global reserve currency and bond market benchmark.
  • From September 2014:
    
    "Supporting the Aaa rating are the very large and diverse economy, a strong record of GDP and productivity growth, and the status of the dollar and the Treasury bond as global reserve currency assets, allowing the US government to carry a higher level of debt relative to other countries
    
    With budget deficits declining steeply in recent years, debt ratios are stabilizing and should remain at or near current levels over the remainder of the decade. The outlooks for near-term economic and fiscal performance are also favorable.
    
    Although debt levels in relation to GDP are likely to remain close to flat, they are also relatively high. After doubling from 35.1% of GDP in 2007 to 72.0% in 2013, the ratio of federal government debt to GDP is projected to peak at the end of 2014 at 74.4% and to stabilize at just below that level for the remainder of the decade. These high levels give the US government less flexibility to respond should it face another financial shock."

• Fitch's credit rating of the USA -- AAA, as of 2015 -- "The U.S.’ AAA rating is underpinned by the sovereign’s unparalleled financing flexibility as the issuers of the world’s pre-eminent reserve currency."
• S&P's credit rating of the USA -- AA+, as of 2011 (which is when S&P downgraded it from Aaa -- "The U.S. is on better footing, that the deficit situation has been reduced over the last year and that the amount of the money the Treasury borrows has declined. Ultimately the fundamental fiscal situation in the U.S. has improved and the credit quality of the U.S. is in very good shape right now."

Blue:
That's so for individuals, non-profits, and companies. It's not so for governments like the U.S.

I'm not suggesting that governments can just spend "willy nilly." I'm saying that the debt we carry as a nation is within our means. With AAA and AA+ ratings, the three ratings agencies seem to feel that way too. Who are you or I to disagree? I know I sure haven't audited the U.S.' to find out the details behind all its financing arrangements, income streams, and spending requirements. I know only what I come by in the news or look for, and I know that is an incomplete story, even when it isn't biased by partisanship.

Reducing deficits from the astronomical heights of 2009 and 2010 but deficits remaining well above historical highs of previous administrations bears some scrutiny don't you think?

From your cited article printed in June, 2014, 22 months ago:

. . .In 2011, when S&P stripped America of its top grade, it cited political wrangling about the debt limit and the lack of a plan to reduce deficits. . .​

The national debt June, 2014, was $17, 685 billion + and counting.

The national debt now is $19, 200 billion + and counting even faster. That is more than 1.5 trillion dollar increase due to deficits. The guy on the buy gold ad this morning said we are adding more than $4 billion a day to the debt. Even the most left leaning economists agree that deficits will shoot up soon after Obama leaves office due to fiscal policy including Obamacare among others.
CBO Warns Federal Budget Deficit will Increase in 2016 - 2016 - Washington Highlights - Government Affairs - AAMC

So where is the plan to reduce the deficits? I'm not seeing them.

I have nothing against reducing deficits and the national debt, but the timing has to make sense. With interest rates as low as they are and our economy still in need of growth it is a smart move to simulate the economy with smart investments. Infrastructure and education would be a good focus. Once we see more growth in GDP and a hike in interest rates we can switch gears to a more conservative agenda, I just don't believe it is the right time.

Well if the 8.6 trillion dollars added to the national debt since Obama was inaugurated hasn't produced more growth in the GDP, maybe it is time for the government to back off, stop all but absolutely essential spending, and implement policies favorable to the producers of goods and services.

It took more than 200 years for the national debt to reach 1 trillion. It took 28 years to get to from 1 trillion to 10.6 trillion. It has taken less 7 years and 2 months to get from 10.6 trillion to 19.2 trillion. That should be enough 'stimulus' spending to satisfy the most dedicated Keynesian.

All that sounds good to the ears of proles who don't actually know something about economics or rational argumentation. To the rest of us it's just you ranting.

 

[jwoodie]

The biggest problem we face is that excessive short-term borrowing has turned our national debt into an ARM with no upper limit. As a result, debt service payments could go up by multiples while GDP growth is limited to a few percent. Once we start borrowing just to pay the interest, we will have entered asymptotic curve territory.

 

[Slade3200]

What would it take to make the dollar worthless?

When our credit rating continues to deteriorate--remember that we lost our sterling AAA rating after Obamas first spending spree that sent the deficits soaring--and our creditors, both domestic and foreign start losing money because the value of the bonds they hold deteriorate in value because our money becomes less and less trustworthy and therefore it is of less and less value. The collapse won't happen overnight, but it is simply impossible to run anything on credit indefinitely when there is no feasible way to repay what is borrowed.

Fallacy of Composition
Over Simplification


You seem to be placing all your eggs in one basket, that of the federal budget deficit, which, as Moody's notes below, has been "declining steeply." Even if one characterizes the spending in the early years of Mr. Obama's Presidency as "spending sprees," that so-called spree has ebbed.

• Moody's credit rating of the USA -- AAA, as of 2015 -- The rating was supported by factors including a strong record of gross domestic product growth and the status of the U.S. dollar and Treasuries as the global reserve currency and bond market benchmark.
  • From September 2014:
    
    "Supporting the Aaa rating are the very large and diverse economy, a strong record of GDP and productivity growth, and the status of the dollar and the Treasury bond as global reserve currency assets, allowing the US government to carry a higher level of debt relative to other countries
    
    With budget deficits declining steeply in recent years, debt ratios are stabilizing and should remain at or near current levels over the remainder of the decade. The outlooks for near-term economic and fiscal performance are also favorable.
    
    Although debt levels in relation to GDP are likely to remain close to flat, they are also relatively high. After doubling from 35.1% of GDP in 2007 to 72.0% in 2013, the ratio of federal government debt to GDP is projected to peak at the end of 2014 at 74.4% and to stabilize at just below that level for the remainder of the decade. These high levels give the US government less flexibility to respond should it face another financial shock."

• Fitch's credit rating of the USA -- AAA, as of 2015 -- "The U.S.’ AAA rating is underpinned by the sovereign’s unparalleled financing flexibility as the issuers of the world’s pre-eminent reserve currency."
• S&P's credit rating of the USA -- AA+, as of 2011 (which is when S&P downgraded it from Aaa -- "The U.S. is on better footing, that the deficit situation has been reduced over the last year and that the amount of the money the Treasury borrows has declined. Ultimately the fundamental fiscal situation in the U.S. has improved and the credit quality of the U.S. is in very good shape right now."

Blue:
That's so for individuals, non-profits, and companies. It's not so for governments like the U.S.

I'm not suggesting that governments can just spend "willy nilly." I'm saying that the debt we carry as a nation is within our means. With AAA and AA+ ratings, the three ratings agencies seem to feel that way too. Who are you or I to disagree? I know I sure haven't audited the U.S.' to find out the details behind all its financing arrangements, income streams, and spending requirements. I know only what I come by in the news or look for, and I know that is an incomplete story, even when it isn't biased by partisanship.

Reducing deficits from the astronomical heights of 2009 and 2010 but deficits remaining well above historical highs of previous administrations bears some scrutiny don't you think?

From your cited article printed in June, 2014, 22 months ago:

. . .In 2011, when S&P stripped America of its top grade, it cited political wrangling about the debt limit and the lack of a plan to reduce deficits. . .​

The national debt June, 2014, was $17, 685 billion + and counting.

The national debt now is $19, 200 billion + and counting even faster. That is more than 1.5 trillion dollar increase due to deficits. The guy on the buy gold ad this morning said we are adding more than $4 billion a day to the debt. Even the most left leaning economists agree that deficits will shoot up soon after Obama leaves office due to fiscal policy including Obamacare among others.
CBO Warns Federal Budget Deficit will Increase in 2016 - 2016 - Washington Highlights - Government Affairs - AAMC

So where is the plan to reduce the deficits? I'm not seeing them.

I have nothing against reducing deficits and the national debt, but the timing has to make sense. With interest rates as low as they are and our economy still in need of growth it is a smart move to simulate the economy with smart investments. Infrastructure and education would be a good focus. Once we see more growth in GDP and a hike in interest rates we can switch gears to a more conservative agenda, I just don't believe it is the right time.

Well if the 8.6 trillion dollars added to the national debt since Obama was inaugurated hasn't produced more growth in the GDP, maybe it is time for the government to back off, stop all but absolutely essential spending, and implement policies favorable to the producers of goods and services.

It took more than 200 years for the national debt to reach 1 trillion. It took 28 years to get to from 1 trillion to 10.6 trillion. It has taken less 7 years and 2 months to get from 10.6 trillion to 19.2 trillion. That should be enough 'stimulus' spending to satisfy the most dedicated Keynesian.

Do you understand what the National Debt is? Can you explain it?

I do agree that we should focus on policies favorable to the producers of goods in this country. Services is dominating our job force and we need a boost in production and exporting so we can balance some of the enormous trade deficits. I don't think simple cuts in spending is necessarily going to do the trick, as that will increase unemployment and give the private sector less resources to work with. I also think grants and support for small business needs to be a priority... Too much of our wealth is getting funneled straight to the infamous 1% and the pie needs better distribution.

 

[Slade3200]

The biggest problem we face is that excessive short-term borrowing has turned our national debt into an ARM with no upper limit. As a result, debt service payments could go up by multiples while GDP growth is limited to a few percent. Once we start borrowing just to pay the interest, we will have entered asymptotic curve territory.

Borrowing to pay the interest... What do you mean by this? Who are we borrowing from?

 

[Foxfyre]

When our credit rating continues to deteriorate--remember that we lost our sterling AAA rating after Obamas first spending spree that sent the deficits soaring--and our creditors, both domestic and foreign start losing money because the value of the bonds they hold deteriorate in value because our money becomes less and less trustworthy and therefore it is of less and less value. The collapse won't happen overnight, but it is simply impossible to run anything on credit indefinitely when there is no feasible way to repay what is borrowed.

Fallacy of Composition
Over Simplification


You seem to be placing all your eggs in one basket, that of the federal budget deficit, which, as Moody's notes below, has been "declining steeply." Even if one characterizes the spending in the early years of Mr. Obama's Presidency as "spending sprees," that so-called spree has ebbed.

• Moody's credit rating of the USA -- AAA, as of 2015 -- The rating was supported by factors including a strong record of gross domestic product growth and the status of the U.S. dollar and Treasuries as the global reserve currency and bond market benchmark.
  • From September 2014:
    
    "Supporting the Aaa rating are the very large and diverse economy, a strong record of GDP and productivity growth, and the status of the dollar and the Treasury bond as global reserve currency assets, allowing the US government to carry a higher level of debt relative to other countries
    
    With budget deficits declining steeply in recent years, debt ratios are stabilizing and should remain at or near current levels over the remainder of the decade. The outlooks for near-term economic and fiscal performance are also favorable.
    
    Although debt levels in relation to GDP are likely to remain close to flat, they are also relatively high. After doubling from 35.1% of GDP in 2007 to 72.0% in 2013, the ratio of federal government debt to GDP is projected to peak at the end of 2014 at 74.4% and to stabilize at just below that level for the remainder of the decade. These high levels give the US government less flexibility to respond should it face another financial shock."

• Fitch's credit rating of the USA -- AAA, as of 2015 -- "The U.S.’ AAA rating is underpinned by the sovereign’s unparalleled financing flexibility as the issuers of the world’s pre-eminent reserve currency."
• S&P's credit rating of the USA -- AA+, as of 2011 (which is when S&P downgraded it from Aaa -- "The U.S. is on better footing, that the deficit situation has been reduced over the last year and that the amount of the money the Treasury borrows has declined. Ultimately the fundamental fiscal situation in the U.S. has improved and the credit quality of the U.S. is in very good shape right now."

Blue:
That's so for individuals, non-profits, and companies. It's not so for governments like the U.S.

I'm not suggesting that governments can just spend "willy nilly." I'm saying that the debt we carry as a nation is within our means. With AAA and AA+ ratings, the three ratings agencies seem to feel that way too. Who are you or I to disagree? I know I sure haven't audited the U.S.' to find out the details behind all its financing arrangements, income streams, and spending requirements. I know only what I come by in the news or look for, and I know that is an incomplete story, even when it isn't biased by partisanship.

Reducing deficits from the astronomical heights of 2009 and 2010 but deficits remaining well above historical highs of previous administrations bears some scrutiny don't you think?

From your cited article printed in June, 2014, 22 months ago:

. . .In 2011, when S&P stripped America of its top grade, it cited political wrangling about the debt limit and the lack of a plan to reduce deficits. . .​

The national debt June, 2014, was $17, 685 billion + and counting.

The national debt now is $19, 200 billion + and counting even faster. That is more than 1.5 trillion dollar increase due to deficits. The guy on the buy gold ad this morning said we are adding more than $4 billion a day to the debt. Even the most left leaning economists agree that deficits will shoot up soon after Obama leaves office due to fiscal policy including Obamacare among others.
CBO Warns Federal Budget Deficit will Increase in 2016 - 2016 - Washington Highlights - Government Affairs - AAMC

So where is the plan to reduce the deficits? I'm not seeing them.

I have nothing against reducing deficits and the national debt, but the timing has to make sense. With interest rates as low as they are and our economy still in need of growth it is a smart move to simulate the economy with smart investments. Infrastructure and education would be a good focus. Once we see more growth in GDP and a hike in interest rates we can switch gears to a more conservative agenda, I just don't believe it is the right time.

Well if the 8.6 trillion dollars added to the national debt since Obama was inaugurated hasn't produced more growth in the GDP, maybe it is time for the government to back off, stop all but absolutely essential spending, and implement policies favorable to the producers of goods and services.

It took more than 200 years for the national debt to reach 1 trillion. It took 28 years to get to from 1 trillion to 10.6 trillion. It has taken less 7 years and 2 months to get from 10.6 trillion to 19.2 trillion. That should be enough 'stimulus' spending to satisfy the most dedicated Keynesian.

Do you understand what the National Debt is? Can you explain it?

I do agree that we should focus on policies favorable to the producers of goods in this country. Services is dominating our job force and we need a boost in production and exporting so we can balance some of the enormous trade deficits. I don't think simple cuts in spending is necessarily going to do the trick, as that will increase unemployment and give the private sector less resources to work with. I also think grants and support for small business needs to be a priority... Too much of our wealth is getting funneled straight to the infamous 1% and the pie needs better distribution.

Yes, I know what makes up the national debt, but the reason it is called 'debt' is that sooner or later it will have to be paid in U.S. dollars. It is real. And it is tangible.

So what do you suggest we do about that imfamous 1%? Kill it? Confiscate all its wealth and hand it out to everybody else? Or maybe we just need to implement policies that will create a lot bigger pie?

 

[Wry Catcher]

Both sides accuse the other.

The Democrats accuse the Republicans of irresponsibly cutting taxes and spending but massively increasing the national debt.

The Republicans accuse the Democrats of irresponsibly increasing taxes and spending and massively increasing the national debt.

So which is it? Does cutting taxes and spending increase the debt? Or does more taxes and spending increase the debt?

And what is most important? Spending on what is considered important? Or the debt?

How much national debt can we stand?

And what, if anything, should be done about it? Can be done about it?

Macroeconomists are divided on the matter of debt and the role it plays in an economy and what be impacts of that role. There are strong arguments on each side of the matter. The questions posed in the OP, however, are not new; they are the very questions asked in every basic economics class.

I'm not going to discuss the answer personally; plenty of others have already done so. Read the linked paper, "Government Debt," to get a comprehensive view of both sides of the topic and form whatever opinion most appeals to you.

Like everyone who thinks about politics and economics, I'm required sooner or later to take a position about the roles and impact of government debt. Because there is no clear consensus among economists, and because I have not invented any macroeconomic models of my own, nor have I the training needed to do so, and because I see the merit in both sides of the argument, I find it more useful to choose a stance based on what I know to be the body of consequences wrought by the nation's assuming greater and lesser amounts of debt and debt spending.

Some of the things I keep in mind when considering the matter are:

• The U.S. government is not an individual; therefore, debt assumed by the government plays a very different role than debt assumed by a person or company. First and foremost, unlike me and my firm, the government can print money to pay its debts. While it cannot do that with abandon, it can do it to some extent before the nation's creditors will deem it unacceptable. That a nation can do that, no matter how detrimental it may be to actually do that, is never far from the minds of creditors.
  
  
  
• By the same token some of the same rules that apply to you and me also apply to the government. For example, a dollar now is worth more than a dollar in the future; thus if the sum one must pay is fixed (either by interest rate or in total), it makes financial (as contrasted with economic) sense to pay for "whatever" we obtain/use/do now with dollars earned/collected in the future. Put another way, debt spending is what maximizes the taxpayers' money.
• Much of what the government buys doesn't have an immediate empirically measureable value. That's hugely different from what you, I and companies buy. For example, when a company spends X dollars to buy a piece of equipment, it can use the price of the equipment along with the annual revenue streams, interest on invested cash, debt on borrowings, etc. to calculate how much is too much to spend on the item, what is a good price to seek in negotiations, etc. The government, on the other hand, cannot necessarily so "cleanly" quantify the return on its expenditures.

In light of the preceding remarks, the nature and extent of debt the U.S. carries, or more precisely, what I think about it, has more to do with whether we need to carry/assume the debt we do in order to accomplish the things I feel we as a nation should or should not accomplish. Consequently, what I think about the national debt and its size does not depend purely on economic principles.

Do I think the current levels of debt the U.S. carries are problem today or will be in the next lustrum? Largely no. I will think it's a problem when the U.S. economy, and therefore revenue, actually stops growing. I think of it much as I consider financial position. If one earns $100K/year after taxes, how much debt can you reasonably handle? Could you afford a 30 year mortgage on a $600K home (assuming interest rates comparable to what the U.S. pays in its debt), for example? Clearly one can. That's another way in which the U.S.' debt is similar to yours or mine. The national debt is ~$18 trillion which is about six times the government's income.

Let's take a simple example, one I'm using solely for the sake of the availability of data and to illustrate the nature of "hard to quantify" returns: food stamps. For each tax dollar spend on providing food stamps, the return to the U.S. economy is ~$1.70. Given that, does it make more sense to spend one's own money today or borrow someone else's money in order to provide a food stamp? It doesn't take a financial wizard to realize that even after paying interest on a borrowed dollar to buy a food stamp, that one is going to have a net gain not a net loss. Quite simply, there is no other use of that same dollar that can obtain guaranteed returns of ~70% or anything close to it. Thus it makes more sense to spend the dollar on a food stamp than on something else.

Of course, with food stamps, there's a limit. If "everyone" stops working, then nobody can be given a food stamp. However, as long as the proportion of the population needing food stamps is small enough (i.e., the economy is growing, which is not what it'd do if "everyone" needed a food stamp), the government spending a dollar on a food stamp provides the best long term return on the use of that dollar. Therefore, if a food stamp were the only thing causing the country to borrow money, it'd make more sense to borrow the money and give the food stamp than it would to not so do.

So you see, my answer given above, that I'm okay with the debt as it and the nation stand now and for the foreseeable future, is what I think now. I may think something different a lustrum or decade from now. There is no single/simple answer that is the "right" answer for all time.

Your final comment was most enlightening: "There is no single/simple answer that is right for all time". Thank you for a well thought out and thought provoking post.

 

[320 Years of History]

Thank you for a well thought out and thought provoking post.

YW; TY.

 

[Slade3200]

Fallacy of Composition
Over Simplification


You seem to be placing all your eggs in one basket, that of the federal budget deficit, which, as Moody's notes below, has been "declining steeply." Even if one characterizes the spending in the early years of Mr. Obama's Presidency as "spending sprees," that so-called spree has ebbed.

• Moody's credit rating of the USA -- AAA, as of 2015 -- The rating was supported by factors including a strong record of gross domestic product growth and the status of the U.S. dollar and Treasuries as the global reserve currency and bond market benchmark.
  • From September 2014:
    
    "Supporting the Aaa rating are the very large and diverse economy, a strong record of GDP and productivity growth, and the status of the dollar and the Treasury bond as global reserve currency assets, allowing the US government to carry a higher level of debt relative to other countries
    
    With budget deficits declining steeply in recent years, debt ratios are stabilizing and should remain at or near current levels over the remainder of the decade. The outlooks for near-term economic and fiscal performance are also favorable.
    
    Although debt levels in relation to GDP are likely to remain close to flat, they are also relatively high. After doubling from 35.1% of GDP in 2007 to 72.0% in 2013, the ratio of federal government debt to GDP is projected to peak at the end of 2014 at 74.4% and to stabilize at just below that level for the remainder of the decade. These high levels give the US government less flexibility to respond should it face another financial shock."

• Fitch's credit rating of the USA -- AAA, as of 2015 -- "The U.S.’ AAA rating is underpinned by the sovereign’s unparalleled financing flexibility as the issuers of the world’s pre-eminent reserve currency."
• S&P's credit rating of the USA -- AA+, as of 2011 (which is when S&P downgraded it from Aaa -- "The U.S. is on better footing, that the deficit situation has been reduced over the last year and that the amount of the money the Treasury borrows has declined. Ultimately the fundamental fiscal situation in the U.S. has improved and the credit quality of the U.S. is in very good shape right now."

Blue:
That's so for individuals, non-profits, and companies. It's not so for governments like the U.S.

I'm not suggesting that governments can just spend "willy nilly." I'm saying that the debt we carry as a nation is within our means. With AAA and AA+ ratings, the three ratings agencies seem to feel that way too. Who are you or I to disagree? I know I sure haven't audited the U.S.' to find out the details behind all its financing arrangements, income streams, and spending requirements. I know only what I come by in the news or look for, and I know that is an incomplete story, even when it isn't biased by partisanship.

Reducing deficits from the astronomical heights of 2009 and 2010 but deficits remaining well above historical highs of previous administrations bears some scrutiny don't you think?

From your cited article printed in June, 2014, 22 months ago:

. . .In 2011, when S&P stripped America of its top grade, it cited political wrangling about the debt limit and the lack of a plan to reduce deficits. . .​

The national debt June, 2014, was $17, 685 billion + and counting.

The national debt now is $19, 200 billion + and counting even faster. That is more than 1.5 trillion dollar increase due to deficits. The guy on the buy gold ad this morning said we are adding more than $4 billion a day to the debt. Even the most left leaning economists agree that deficits will shoot up soon after Obama leaves office due to fiscal policy including Obamacare among others.
CBO Warns Federal Budget Deficit will Increase in 2016 - 2016 - Washington Highlights - Government Affairs - AAMC

So where is the plan to reduce the deficits? I'm not seeing them.

I have nothing against reducing deficits and the national debt, but the timing has to make sense. With interest rates as low as they are and our economy still in need of growth it is a smart move to simulate the economy with smart investments. Infrastructure and education would be a good focus. Once we see more growth in GDP and a hike in interest rates we can switch gears to a more conservative agenda, I just don't believe it is the right time.

Well if the 8.6 trillion dollars added to the national debt since Obama was inaugurated hasn't produced more growth in the GDP, maybe it is time for the government to back off, stop all but absolutely essential spending, and implement policies favorable to the producers of goods and services.

It took more than 200 years for the national debt to reach 1 trillion. It took 28 years to get to from 1 trillion to 10.6 trillion. It has taken less 7 years and 2 months to get from 10.6 trillion to 19.2 trillion. That should be enough 'stimulus' spending to satisfy the most dedicated Keynesian.

Do you understand what the National Debt is? Can you explain it?

I do agree that we should focus on policies favorable to the producers of goods in this country. Services is dominating our job force and we need a boost in production and exporting so we can balance some of the enormous trade deficits. I don't think simple cuts in spending is necessarily going to do the trick, as that will increase unemployment and give the private sector less resources to work with. I also think grants and support for small business needs to be a priority... Too much of our wealth is getting funneled straight to the infamous 1% and the pie needs better distribution.

Yes, I know what makes up the national debt, but the reason it is called 'debt' is that sooner or later it will have to be paid in U.S. dollars. It is real. And it is tangible.

So what do you suggest we do about that imfamous 1%? Kill it? Confiscate all its wealth and hand it out to everybody else? Or maybe we just need to implement policies that will create a lot bigger pie?

If you want a bigger pie then you just put more money into circulation, that seems to be counter to your argument. With less spending the pie gets smaller so I'm unclear to how your proposal will make an impact. You also haven't explained what you mean by borrowing

 

[Foxfyre]

Reducing deficits from the astronomical heights of 2009 and 2010 but deficits remaining well above historical highs of previous administrations bears some scrutiny don't you think?

From your cited article printed in June, 2014, 22 months ago:

. . .In 2011, when S&P stripped America of its top grade, it cited political wrangling about the debt limit and the lack of a plan to reduce deficits. . .​

The national debt June, 2014, was $17, 685 billion + and counting.

The national debt now is $19, 200 billion + and counting even faster. That is more than 1.5 trillion dollar increase due to deficits. The guy on the buy gold ad this morning said we are adding more than $4 billion a day to the debt. Even the most left leaning economists agree that deficits will shoot up soon after Obama leaves office due to fiscal policy including Obamacare among others.
CBO Warns Federal Budget Deficit will Increase in 2016 - 2016 - Washington Highlights - Government Affairs - AAMC

So where is the plan to reduce the deficits? I'm not seeing them.

I have nothing against reducing deficits and the national debt, but the timing has to make sense. With interest rates as low as they are and our economy still in need of growth it is a smart move to simulate the economy with smart investments. Infrastructure and education would be a good focus. Once we see more growth in GDP and a hike in interest rates we can switch gears to a more conservative agenda, I just don't believe it is the right time.

Well if the 8.6 trillion dollars added to the national debt since Obama was inaugurated hasn't produced more growth in the GDP, maybe it is time for the government to back off, stop all but absolutely essential spending, and implement policies favorable to the producers of goods and services.

It took more than 200 years for the national debt to reach 1 trillion. It took 28 years to get to from 1 trillion to 10.6 trillion. It has taken less 7 years and 2 months to get from 10.6 trillion to 19.2 trillion. That should be enough 'stimulus' spending to satisfy the most dedicated Keynesian.

Do you understand what the National Debt is? Can you explain it?

I do agree that we should focus on policies favorable to the producers of goods in this country. Services is dominating our job force and we need a boost in production and exporting so we can balance some of the enormous trade deficits. I don't think simple cuts in spending is necessarily going to do the trick, as that will increase unemployment and give the private sector less resources to work with. I also think grants and support for small business needs to be a priority... Too much of our wealth is getting funneled straight to the infamous 1% and the pie needs better distribution.

Yes, I know what makes up the national debt, but the reason it is called 'debt' is that sooner or later it will have to be paid in U.S. dollars. It is real. And it is tangible.

So what do you suggest we do about that imfamous 1%? Kill it? Confiscate all its wealth and hand it out to everybody else? Or maybe we just need to implement policies that will create a lot bigger pie?

If you want a bigger pie then you just put more money into circulation, that seems to be counter to your argument. With less spending the pie gets smaller so I'm unclear to how your proposal will make an impact. You also haven't explained what you mean by borrowing

The only way to make the pie bigger without diluting the value of the pie itself is to encourage economic activity in which each dollar is backed by products and services bought and sold. Encourage that activity--create a climate in which it will thrive--and the pie grows enormously.

 

[Slade3200]

I have nothing against reducing deficits and the national debt, but the timing has to make sense. With interest rates as low as they are and our economy still in need of growth it is a smart move to simulate the economy with smart investments. Infrastructure and education would be a good focus. Once we see more growth in GDP and a hike in interest rates we can switch gears to a more conservative agenda, I just don't believe it is the right time.

Well if the 8.6 trillion dollars added to the national debt since Obama was inaugurated hasn't produced more growth in the GDP, maybe it is time for the government to back off, stop all but absolutely essential spending, and implement policies favorable to the producers of goods and services.

It took more than 200 years for the national debt to reach 1 trillion. It took 28 years to get to from 1 trillion to 10.6 trillion. It has taken less 7 years and 2 months to get from 10.6 trillion to 19.2 trillion. That should be enough 'stimulus' spending to satisfy the most dedicated Keynesian.

Do you understand what the National Debt is? Can you explain it?

I do agree that we should focus on policies favorable to the producers of goods in this country. Services is dominating our job force and we need a boost in production and exporting so we can balance some of the enormous trade deficits. I don't think simple cuts in spending is necessarily going to do the trick, as that will increase unemployment and give the private sector less resources to work with. I also think grants and support for small business needs to be a priority... Too much of our wealth is getting funneled straight to the infamous 1% and the pie needs better distribution.

Yes, I know what makes up the national debt, but the reason it is called 'debt' is that sooner or later it will have to be paid in U.S. dollars. It is real. And it is tangible.

So what do you suggest we do about that imfamous 1%? Kill it? Confiscate all its wealth and hand it out to everybody else? Or maybe we just need to implement policies that will create a lot bigger pie?

If you want a bigger pie then you just put more money into circulation, that seems to be counter to your argument. With less spending the pie gets smaller so I'm unclear to how your proposal will make an impact. You also haven't explained what you mean by borrowing

The only way to make the pie bigger without diluting the value of the pie itself is to encourage economic activity in which each dollar is backed by products and services bought and sold. Encourage that activity--create a climate in which it will thrive--and the pie grows enormously.

By incentives are you referring to tax cuts or loopholes to encourage spending or are there other measures you'd like to see implemented?

 

[Foxfyre]

Well if the 8.6 trillion dollars added to the national debt since Obama was inaugurated hasn't produced more growth in the GDP, maybe it is time for the government to back off, stop all but absolutely essential spending, and implement policies favorable to the producers of goods and services.

It took more than 200 years for the national debt to reach 1 trillion. It took 28 years to get to from 1 trillion to 10.6 trillion. It has taken less 7 years and 2 months to get from 10.6 trillion to 19.2 trillion. That should be enough 'stimulus' spending to satisfy the most dedicated Keynesian.

Do you understand what the National Debt is? Can you explain it?

I do agree that we should focus on policies favorable to the producers of goods in this country. Services is dominating our job force and we need a boost in production and exporting so we can balance some of the enormous trade deficits. I don't think simple cuts in spending is necessarily going to do the trick, as that will increase unemployment and give the private sector less resources to work with. I also think grants and support for small business needs to be a priority... Too much of our wealth is getting funneled straight to the infamous 1% and the pie needs better distribution.

Yes, I know what makes up the national debt, but the reason it is called 'debt' is that sooner or later it will have to be paid in U.S. dollars. It is real. And it is tangible.

So what do you suggest we do about that imfamous 1%? Kill it? Confiscate all its wealth and hand it out to everybody else? Or maybe we just need to implement policies that will create a lot bigger pie?

If you want a bigger pie then you just put more money into circulation, that seems to be counter to your argument. With less spending the pie gets smaller so I'm unclear to how your proposal will make an impact. You also haven't explained what you mean by borrowing

The only way to make the pie bigger without diluting the value of the pie itself is to encourage economic activity in which each dollar is backed by products and services bought and sold. Encourage that activity--create a climate in which it will thrive--and the pie grows enormously.

By incentives are you referring to tax cuts or loopholes to encourage spending or are there other measures you'd like to see implemented?

I didn't say incentives. I am referring to hundreds or thousands of laws and regulations that are unnecessary and should be removed, to a tax code that doesn't make a lot of sense sometimes, to allowing business to use the capital it has without penalty, to mandates that sometimes don't allow a business to operate at maximum efficiency, tort reform to eliminate some of the more stupid liability exposure, etc. In other words, get government off the back of business and commerce and put government to work in ways that help business and commerce.

And none of that requires any additional government spending and, if we had an honorable government that looked at it that way, we would stop accumulating debt and would start paying it off.

 

[AdvancingTime]

It is no secret that Washington tends to spin the news, and in this case it is in an effort to tell you the deficit is under control and all is well. Fact is the leap from 18 to 19 trillion in government didn't take long. Many people have looked away but the National Debt Clock has not stopped ticking and has solidly passed the 19 trillion dollar threshold by 238 billion dollars.

One thing is crystal clear, it is far easier to run up debt than to pay it off. A major concern for this writer is that in 2017 entitlements are poised to balloon causing a massive spike in government spending. A big problem is that when money is poorly spent the debt still remains. More on the true numbers and size of this growing problem below.

http://brucewilds.blogspot.com/2016/02/national-debt-clock-solidly-past-19.html

 

[320 Years of History]

A major concern for this writer is that in 2017 entitlements are poised to balloon causing a massive spike in government spending. A big problem is that when money is poorly spent the debt still remains.

Can you please explain how "entitlement" spending is likely to balloon to the extent that its doing so will constitute a spike in any spending the government does? (Click on the pic for the discussion that accompanies the meme below.)



Add It Up: The Average American Family Pays $6,000 a Year in Subsidies to Big Business

 

[jwoodie]

The biggest problem we face is that excessive short-term borrowing has turned our national debt into an ARM with no upper limit. As a result, debt service payments could go up by multiples while GDP growth is limited to a few percent. Once we start borrowing just to pay the interest, we will have entered asymptotic curve territory.

Borrowing to pay the interest... What do you mean by this? Who are we borrowing from?

The point at which interest on the national debt exceeds the budget deficit. We are borrowing from anyone who will buy Treasury Notes and other debt instruments. Once we are issuing new debt just to service old debt (i.e., Ponzi Scheme), investors will demand higher interest rates and draconian budget cuts which further reduce our ability to repay them. Unlike Greece, we won't have same-currency big brothers to bail us out.

 

[jwoodie]

A major concern for this writer is that in 2017 entitlements are poised to balloon causing a massive spike in government spending. A big problem is that when money is poorly spent the debt still remains.

Can you please explain how "entitlement" spending is likely to balloon to the extent that its doing so will constitute a spike in any spending the government does? (Click on the pic for the discussion that accompanies the meme below.)



Add It Up: The Average American Family Pays $6,000 a Year in Subsidies to Big Business

I am surprised you would cite such a bogus article. For example, the author considers bank fees for retirement accounts to be "corporate welfare." How about the tax deductions for contributions to those accounts in the first place? Do you consider those to be "personal welfare?" And how about "green energy" tax credits? Do you want to get rid of them, too?

 

[Slade3200]

The biggest problem we face is that excessive short-term borrowing has turned our national debt into an ARM with no upper limit. As a result, debt service payments could go up by multiples while GDP growth is limited to a few percent. Once we start borrowing just to pay the interest, we will have entered asymptotic curve territory.

Borrowing to pay the interest... What do you mean by this? Who are we borrowing from?

The point at which interest on the national debt exceeds the budget deficit. We are borrowing from anyone who will buy Treasury Notes and other debt instruments. Once we are issuing new debt just to service old debt (i.e., Ponzi Scheme), investors will demand higher interest rates and draconian budget cuts which further reduce our ability to repay them. Unlike Greece, we won't have same-currency big brothers to bail us out.

We issue our own currency so we will never not be able to repay anything unless our entire economy crashes. Our economic system is more of a balancing act in which taxation and bond sales remove currency and borrowing creates currency. Unlike Greece we are not dependent on income to justify spending as our system is more about maintaining the value and demand for the dollar. Government deficit spending isn't necessarily a bad word as it creates a surplus in the private sector which increases employment and GDP...