Federal Spending Is Beyond Insane

[Samofvt]

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But debt rose by nearly $7.8 trillion under President Donald Trump, according to a ProPublica analysis, despite his 2016 pronouncement to the Washington Post that he would eliminate the debt entirely over eight years. Much of that debt increase occurred even before Trump and Congress authorized—on a bipartisan basis—trillions of dollars in deficit-financed stimulus spending to contain the coronavirus pandemic and prevent an economic catastrophe.

In the three years Trump occupied the White House before the crisis, two rounds of tax cuts and two spending deals with Congress added some $4.5 trillion to the deficit, figures Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which advocates for a sustainable national debt.

To be fair, Presidents George W. Bush and Barack Obama also left behind bigger federal debts than they started with. The last time the debt as a share of GDP shrank was during the last years of the Clinton Administration; under pressure from the Republican-controlled Congress, he actually ran a surplus. Bush argued for his first round of tax cuts in 2001 on the grounds that the surplus was dangerous in government hands and should be returned to the American people. He pushed through another round of cuts in 2003. The Bush tax cuts would have expired at the end of 2010, but Obama agreed to extend them for two years, and ultimately, with the country still recovering from the Great Recession and Republicans by then in control of the House, agreed in 2012 to make most of them permanent.

I don't like any of the parties when it comes to Federal spending: None of them can be trusted to balance a budget.

However, the information you have about federal spending under trump may or may not be accurate. My financial advisor showed me clear, documented graphs that federal deficit declined measurably during trumps 2nd and 3rd year in office.

Still, trump ended up going along with spending huge amounts in his last year due to the false plague, erasing any gains we had made in the previous few years.

 

[g5000]

g5000

there are two sides to the books. So, yes, fair to look at spending, when trying to cure deficits.

But to look only or more at spending, when the revenue side is clearly the bigger problem?

Well, that's how politics fucks stuff up. A perfect example.

A 10th grader with a calculator would be more spot on than the average, bloviating politician or commentator. because, politics.

Tax expenditures decrease revenues by $1.4 trillion a year.

 

[g5000]

The reality of our monetary policy is this.

If the country does not go deeper into debt every year, the whole thing goes into a deflationary collapse under the weight of interest payments on existing Treasury bonds.

Debt extinguishes currency. Or, more clearly, currency and debt destroy each other.

You could just pay the principal only on all of those bonds, but then your currency supply would vanish by default.

There's interest due on every dollar in existence.

The system itself is finite. It requires ever-increasing debt just to continue.
And we're witnessing this reality now.

It's why politicians kick the can down the road and create more debt. Bringing down the debt would literally collapse the entire economy under the current model.

The country literally depends on the electorate paying tax just to have a monetary system.

That's the country simple version anyway.

I've read the 2000 white paper which theorizes the economy would collapse if we paid off our debt.

It is deeply flawed.

 

[Fort Fun Indiana]

Tax expenditures decrease revenues by $1.4 trillion a year.

So? Whose revenue? Federal tax revenue? Huh?

 

[Natural Citizen]

I've read the 2000 white paper which theorizes the economy would collapse if we paid off our debt.

It is deeply flawed.

Which paper was that? I'd be interested in reading it to see what you're talking about.

A white paper, in my own view, is only as good as a given author's capacity to understand and to place all of the pieces together and to present them in a relevant way, so I rarely read them, to be honest. At least the ones focused on economics and monetary policy anyway.

But I would be interested to see what paper you're referencing.

 

[g5000]

I agree we should look at both sides of the books. However, I disagree that our debt is somehow "normal": we have a debt that is over 107% of our yearly GDP. This is not healthy, unless you intend to invade several other countries to plunder their resources (as Putin is doing right now).

Our debt is above 120% of GDP now.

That creates a drag on economic growth, like a ball and chain.

 

[g5000]

Which paper was that?

https://media.npr.org/assets/img/2011/10/20/LifeAfterDebt.pdf

Having no debt would create interesting outcomes, but it would not collapse the economy.

 

[Fort Fun Indiana]

Our debt is above 120% of GDP now.

That creates a drag on economic growth, like a ball and chain.

Yep.

40 years of stupidity and of listening to crackpot right wing economic theories got us here.

Nothing is trickling down. Ever. We either increase our tax revenue or begin the decline as a country.

 

[g5000]

Natural Citizen

That white paper was written in 2000, back when a lot of people thought we were actually on track to pay off the debt by 2010 or so.

Good times.

 

[Lakhota]

Democrats can't let NaziCons spend ALL the money to enrich the rich!

 

[g5000]

I don't like any of the parties when it comes to Federal spending: None of them can be trusted to balance a budget.

However, the information you have about federal spending under trump may or may not be accurate. My financial advisor showed me clear, documented graphs that federal deficit declined measurably during trumps 2nd and 3rd year in office.

Still, trump ended up going along with spending huge amounts in his last year due to the false plague, erasing any gains we had made in the previous few years.

See the links in the OP. Trump doubled the deficit in his first two years, before the pandemic.

He also submitted the largest government spending bill in US history.

Trump Proposes a Record $4.75 Trillion Budget​

​

And when the Democrats proposed stimulus checks for everyone, Trump demanded even bigger checks.

Trump says he wants a bigger stimulus package than the $2.2 trillion amount that Democrats are seeking​

​

So don't let anyone hoax you into believing the self-annointed "King of Debt" was frugal.

 

[22lcidw]

Natural Citizen

That white paper was written in 2000, back when a lot of people thought we were actually on track to pay off the debt by 2010 or so.

Good times.

That was not going to happen. Most of the deficit reduction in the 1990's was smoke and mirrors. It was better than nothing. The peak earning years of the Baby Boomers which was twice the size of the older generation. They reduced spending by the year 2000 which caused a stock market collapse in the spring. We did not pay attention to that.

 

[Natural Citizen]

https://media.npr.org/assets/img/2011/10/20/LifeAfterDebt.pdf

Having no debt would create interesting outcomes, but it would not collapse the economy.

Dang, g. That's 43 pages. I'll give it a read in a little while, I'm not really up for a 43 page read at the moment.

But I will, though, thanks for linking it.

 

[Dont Taz Me Bro]

Funny, our spending as a percentage of our GDP is right about where first world countries fall. Kind of middle of the pack.

But our tax revenue, as a percentage of our GDP? Embarrassing and pathetic.

You are looking at the wrong side of the books.

I refuse to believe that $4 trillion in federal tax revenue is not enough to run this country. We don't have a taxation problem; we have a spending problem.

 

[g5000]

Dang, g. That's 43 pages. I'll give it a read in a little while, I'm not really up for a 43 page read at the moment.

But I will, though, thanks for linking it.

No problem.

My personal theory about deficit spending is that every politician knows that government spending is a big part of US GDP. So the quickest and laziest way to juice GDP growth is to increase government spending.

Gross Domestic Product - GDP

GDP includes all private and public consumption, government outlays, investments, private inventories, paid-in construction costs and the foreign balance of trade (exports are added, imports are subtracted). Put simply, GDP is a broad measurement of a nation’s overall economic activity – the godfather of the indicator world.

<snip>

A country's gross domestic product can be calculated using the following formula: GDP = C + G + I + NX. C is equal to all private consumption, or consumer spending, in a nation's economy, G is the sum of government spending, I is the sum of all the country's investment, including businesses capital expenditures and NX is the nation's total net exports, calculated as total exports minus total imports (NX = Exports - Imports).


By increasing government spending more and more, our politicians are artificially juicing GDP growth. This is an insane cycle of destruction.

 

[g5000]

The higher our debt goes, the more our GDP growth will be suppressed. A simple economic fact.


https://www.cato.org/cato-journal/fall-2021/impact-public-debt-economic-growth

The study finds that, across both advanced and emerging economies, high debt‐to‐GDP levels (90 percent and greater) are associated with notably less growth. Countries with debt‐to‐GDP ratios greater than 90 percent have median growth roughly 1.5 percent lower than that of the less‐debt‐burdened groups and mean growth almost 3 percent lower.


We crossed that threshold around 2000.



The results reveal that a 1 percentage point increase in the ratio of government debt to GDP would reduce real GDP growth by about 0.01 percentage point, while a 1 percentage point increase in the ratio of government consumption to GDP leads to a decline in real economic growth of about 0.1 percentage point, on average across countries. In terms of policy recommendations, restrictions on government debt are shown to be more important in preventing negative growth effects for countries with higher trade openness, lower inflation, or higher financial depth.


What this has caused is a snake-swallowing-its-tail effect. As our GDP growth is suppressed by more and more debt, our politicians have to artificially juice GDP by more government spending, which leads to more GDP growth suppression, which leads to even more government spending, ad infinitum until it all comes crashing down.

 

[JustAGuy1]

Yep.

40 years of stupidity and of listening to crackpot right wing economic theories got us here.

Nothing is trickling down. Ever. We either increase our tax revenue or begin the decline as a country.

This is a myopic view. If increased drives the need for increased taxation on the people (and of course it does) not curbing spending is equally as dangerous. You want never ending increases in taxation and I advocate spending controls.

 

[g5000]

Okay, so now we know that increasing government spending artificially juices GDP growth, right?

Take a look at the astronomical government deficits from 2020 and 2021.

Look at that as context for another thing Biden said in his SOTU:

Our economy grew at a rate of 5.7% last year, the strongest growth in nearly 40 years, the first step in bringing fundamental change to an economy that hasn’t worked for the working people of this nation for too long.


So...yeah.

 

[22lcidw]

Yep.

40 years of stupidity and of listening to crackpot right wing economic theories got us here.

Nothing is trickling down. Ever. We either increase our tax revenue or begin the decline as a country.

Perhaps looking at the sizes of the federal, state, local and city governments increasing should have alarmed you.

 

[g5000]

Perhaps looking at the sizes of the federal, state, local and city governments increasing should have alarmed you.

It certainly alarms me. It is like I have said many times on this forum, the Left keeps increasing the size of the government, and then whines when more money from special interests pours into politics in order to capture all that power.

They have yet to figure out the connection!

Amazing.