How much debt is too much

[Bern80]

Your employer doesn't think so. I guarantee that he looks at those taxes and thinks that he is paying for them. If the darned taxes were lower, he'd have more profit.

Perhaps you are not getting the difference between real and nominal.

"The more debt our government takes on the less valuable our dollar gets."

How do you figure that? What, you read that on some conservative website and now anyone that knows differently must be a lib?

Do explain. Let me help.... NGDP = C + I + G + NX That is the same as MV=PQ.

The Fed Debt is just a number of a computer at the Federal Reserve bank. That is all. And, some one carries that debt. If not the gov then households, firms, or the financial markets. How is the government holding that debt somehow magically different?

The difference is simple. If I, as an individual, go into debt, I, as an individual owe that money. The difference with government is they went into debt with money they had to take from people and who are on the hook for the debt they chose to go into.

The fact is, that "the less valueable our dollar gets." is a statement of nominal prices, inflation. But, inflation has nothing to do with real GDP. Inflation doesn't affect real prices or real income. It can't. The only thing that affects real wages and real prices is employment level and production efficiency. People make stuff, people consume stuff.

Here is what investopedia says, "Unlike nominal GDP, real GDP can account for changes in the price level, and provide a more accurate figure."

The problem is, your thinking of it as an open economy, a household. Inflation is the result of more money in the supply. More money in the supply is both higher prices and higher income. Period. Inflation is always due to more money and nothing else. It has no real effect. Yeah, dude, you earn more to have the same effect.... duh... now your getting it, inflation means more dollars. More dollars means higher prices and higher earnings.

Now, that isn't to say that your not getting screwed by your employer as a wage earner. But it isn't because of inflation, government debt, the money supply, or taxes. It is because the labor market is competative. That is how it works, supply and demand for labor. Fundamentally, wages are driven down to the minimum. That is supply and demand for labor. It's got nothing to do with gov debt or taxes.

They are simple monetaryist notions. They are the result of classical economics, you know, the ones that Republicans subscribe to.

And you haven't presented shit to even imply any notion of not disliking paying any taxes. You have said nothing about an appropriate level of spending, taxes, or debt.

I've repeatedly said, they simply don't matter, neither good or bad, it all depends on what the gov does, not what taxes if collects.

You have consistently avoided the original question, whom should carry that debt? You've consistently avoided the entire notion of investment and leverage. You've avoided any direction except that you don't like the debt and taxes.

The government doesn't have to turn to you for money. The federal government is the fundamental source of all money. The FED marks up reserves, private banks lend it out. That is the monetaryist point.

The FED could increase the money supply by $10,000 per person per week and then the IRS collect and extra $10,000 per person per week. Nothing would change. people would still make as many widgets. People would still buy as many widgets. Real dollar costs would still be exactly the same. The only change would be that prices would be up by that $10,000 per person per week and every person would earn that $10,000 per person per week.

Inflation isn't ever going to be zero. Debt in the economy is required. The gov can carry it. Businesses can carry it. Whatever. The money supply can be $5 trill, the money supply can be $10 trill. It's all the same. It doesn't affect your standard of living.

Other wise, we could just have the Fed and banks increase the money supply to $100 trillion and we'd all be millionairs. We'd be able to own mansions, drive luxury autos, all own a jet.... Oh, yeah, can't because we have to make all those mansions, autos, and jets. It takes labor and capital equipment to do that and all the money that can be printed won't change that.

Just because the things you believe are wrong, doesn't make anyone else a "liberal". MV=PQ and GDP=C+I+G+NX aren't "liberal" concepts, they are simply facts.

Here is real GDP per capita since 1950.

Here is the real dollar value of the government debt since forever.

Here is government revenues.

Do them per cap. Do them per worker. The same thing.

Where is that increase in debt or deficit causing the standard of living to go down? Oh, it isn't. It is a straight line to the top, punctuated by recessions. Standard of living has nothing to do with government debt or deficit.

It isn't there, not by any measure, not by any sound macroeconomic examination.

"Common sense" is wrong, as wrong with macro econ as it is with Relativistic Physics.

GTG

None of the facts about inflation and GDP have anything to with the debt either. The fact that those concepts and relationships exist doesn't change the concept of the debt or that it's real or that it needs to be paid at some point. Obviously you know that or you wouldn't be asking me what does it matter who holds it and who 'should' hold it. The answer to that is similar to yours on whether our level of debt is good or bad. Who 'should' hold it, is a nonsensical question. The answer is either the private sector or the public sector and since the public sector's money is obtained from the private sector the answer is defacto, the debt is the private sectors. That's why it's a problem. The public sector made the decision to spend it, but the private sector is the one that has to pay for it at some point. Given that, we really shouldn't be asking why we're in debt. Why wouldn't we be? If you can rack up a credit card bill that you don't have to pay why wouldn't you spend till your heart's content.

If the debt doesn't matter, why doesn't the fed just print the 17 trillion or so and be done with it? We both know the answer to that and we know it means your wrong contending that it doesn't matter. Don't get on me about no answering questions. You're the one who has yet to explain why macro economics and money supply mean the debt isn't a problem.

 

[Shrimpbox]

As long as people who want to get to a balanced budget are considered wing nuts, extreme, radicals, and terrorists and the clowns that want to continue unchecked spending are portrayed as empathetic, smarter,having a soul, and more forward thinking, the prevailing culture will not address the debt problem. If someone like Nancy Pelosi, a geriatric bimbo who cannot even finish a sentence, can not only be taken seriously but is in a position of power, we will never move to solving real problems. Ditto for the only two men still living who have been embalmed, Harry Reid and Mitch McConnell. Where I am going with this is to the failure of republican and conservatives to pr this issue in the right way, not for their gain but for the countries gain. Until we can return to a selfless patriotism vs. what's in it for me, we will not out talk Obama or put a cap on the national debt.

 

[Shrimpbox]

Professorial economic arguments that posit that the national debt has no real significance in the macro picture don't factor in history. While it has been a while I seem to remember that massive govt debt and inflation lead to the rise of hitler and ww2. Let's get real.

 

[Bern80]

I don't know how to make it clearer....

Then you need to work on your communication skills. I get everything you've said about inlfation and what it has to do with nominal and real GDP. You can spout economic relationships that most of us already know to make yourself feel like you're the smart guy in the room, but the problem is you have yet to show how any of that regurgitation explains why our debt to revenue ratio is not a problem. You don't know how you can explain it any better? I'll tell you how you could have. You can explain why something like what inflation having no effect on real GDP has to do with the country's debt ratio and why that inflatioin to real GDP relationship means our debt isn't a problem.

About all I can figure is you don't consider it a problem because no one is really seeing how it effects their standard of living. If that's your argument, it's interesting that you say this is not the same as an individual or business with the same 'problem'. I can wrack up a lot of charges on my credit card and not have to see it's effects for a long time either. But to pretend that the government's debt won't effect standard of living ever if we continue this defecit exceeding revenue is pretty naive. And think logically for a second about what that means if you're right. If escalating debt doesn't matter, if it won't effect anyone's standard of living and they won't ever have to deal with it, that begs an aweful lot of questions. Why do we have a budget in the first place? Why do we have a debt ceiling? Hell, if the debt doesn't matter and we collect so little revenue to pay it back relatively speaking that we aren't even making a dent in it, why should the government collect taxes from anyone? If we can borrow forever and not have to pay it back as you seem to be contending why don't we just petition government to stop collecting taxes?

 

[itfitzme]

Your employer doesn't think so. I guarantee that he looks at those taxes and thinks that he is paying for them. If the darned taxes were lower, he'd have more profit.

Perhaps you are not getting the difference between real and nominal.

"The more debt our government takes on the less valuable our dollar gets."

How do you figure that? What, you read that on some conservative website and now anyone that knows differently must be a lib?

Do explain. Let me help.... NGDP = C + I + G + NX That is the same as MV=PQ.

The Fed Debt is just a number of a computer at the Federal Reserve bank. That is all. And, some one carries that debt. If not the gov then households, firms, or the financial markets. How is the government holding that debt somehow magically different?

The difference is simple. If I, as an individual, go into debt, I, as an individual owe that money. The difference with government is they went into debt with money they had to take from people and who are on the hook for the debt they chose to go into.

The fact is, that "the less valueable our dollar gets." is a statement of nominal prices, inflation. But, inflation has nothing to do with real GDP. Inflation doesn't affect real prices or real income. It can't. The only thing that affects real wages and real prices is employment level and production efficiency. People make stuff, people consume stuff.

Here is what investopedia says, "Unlike nominal GDP, real GDP can account for changes in the price level, and provide a more accurate figure."

The problem is, your thinking of it as an open economy, a household. Inflation is the result of more money in the supply. More money in the supply is both higher prices and higher income. Period. Inflation is always due to more money and nothing else. It has no real effect. Yeah, dude, you earn more to have the same effect.... duh... now your getting it, inflation means more dollars. More dollars means higher prices and higher earnings.

Now, that isn't to say that your not getting screwed by your employer as a wage earner. But it isn't because of inflation, government debt, the money supply, or taxes. It is because the labor market is competative. That is how it works, supply and demand for labor. Fundamentally, wages are driven down to the minimum. That is supply and demand for labor. It's got nothing to do with gov debt or taxes.

They are simple monetaryist notions. They are the result of classical economics, you know, the ones that Republicans subscribe to.

And you haven't presented shit to even imply any notion of not disliking paying any taxes. You have said nothing about an appropriate level of spending, taxes, or debt.

I've repeatedly said, they simply don't matter, neither good or bad, it all depends on what the gov does, not what taxes if collects.

You have consistently avoided the original question, whom should carry that debt? You've consistently avoided the entire notion of investment and leverage. You've avoided any direction except that you don't like the debt and taxes.

The government doesn't have to turn to you for money. The federal government is the fundamental source of all money. The FED marks up reserves, private banks lend it out. That is the monetaryist point.

The FED could increase the money supply by $10,000 per person per week and then the IRS collect and extra $10,000 per person per week. Nothing would change. people would still make as many widgets. People would still buy as many widgets. Real dollar costs would still be exactly the same. The only change would be that prices would be up by that $10,000 per person per week and every person would earn that $10,000 per person per week.

Inflation isn't ever going to be zero. Debt in the economy is required. The gov can carry it. Businesses can carry it. Whatever. The money supply can be $5 trill, the money supply can be $10 trill. It's all the same. It doesn't affect your standard of living.

Other wise, we could just have the Fed and banks increase the money supply to $100 trillion and we'd all be millionairs. We'd be able to own mansions, drive luxury autos, all own a jet.... Oh, yeah, can't because we have to make all those mansions, autos, and jets. It takes labor and capital equipment to do that and all the money that can be printed won't change that.

Just because the things you believe are wrong, doesn't make anyone else a "liberal". MV=PQ and GDP=C+I+G+NX aren't "liberal" concepts, they are simply facts.

Here is real GDP per capita since 1950.

Here is the real dollar value of the government debt since forever.

Here is government revenues.

Do them per cap. Do them per worker. The same thing.

Where is that increase in debt or deficit causing the standard of living to go down? Oh, it isn't. It is a straight line to the top, punctuated by recessions. Standard of living has nothing to do with government debt or deficit.

It isn't there, not by any measure, not by any sound macroeconomic examination.

"Common sense" is wrong, as wrong with macro econ as it is with Relativistic Physics.

GTG

None of the facts about inflation and GDP have anything to with the debt either. The fact that those concepts and relationships exist doesn't change the concept of the debt or that it's real or that it needs to be paid at some point. Obviously you know that or you wouldn't be asking me what does it matter who holds it and who 'should' hold it. The answer to that is similar to yours on whether our level of debt is good or bad. Who 'should' hold it, is a nonsensical question. The answer is either the private sector or the public sector and since the public sector's money is obtained from the private sector the answer is defacto, the debt is the private sectors. That's why it's a problem. The public sector made the decision to spend it, but the private sector is the one that has to pay for it at some point. Given that, we really shouldn't be asking why we're in debt. Why wouldn't we be? If you can rack up a credit card bill that you don't have to pay why wouldn't you spend till your heart's content.

If the debt doesn't matter, why doesn't the fed just print the 17 trillion or so and be done with it? We both know the answer to that and we know it means your wrong contending that it doesn't matter. Don't get on me about no answering questions. You're the one who has yet to explain why macro economics and money supply mean the debt isn't a problem.

You are incorrect. Debt alone serves the purpose of investment. Who should hold it is a required question simple because it must be held by some sector. There is no economy without debt. So, somewhere it must be held. As such, one must be defined as "better" than another or there is no point. Debt alone is neither good or bad, it depends on how it is used.

If you are stupid enough to just charge up your credit card for frivilous items, yeah, you're an idiot. If you take out a mortgage or homeloan, your doing it right. Regardless, you aren't a national goverment. Your not a closed economy. Home economics isn't an analogy for the government.

You are clearly biased against any objective consideration in that you have this invalid subjective position that somehow the government debt and deficit is something you owe. Your clueless and refuse to be otherwise. And the shame of it is that, in fact, it has absolutely nothing to do with current or future standard of living because money doesn't make stuff, people do. The only way that standard of living goes up and down is by increasing and decreasing employment level and equipment.

It is clearly not bad. Here is the govt debt since as far back as available.

So, where is the bad? There is none. The government debt has existed since 1940 and nothing has happened in 73 years of it.

If you want to claim it to be bad, simply saying "it must be" isn't an objective answer. Something has to be defined, identified, and counted.

That is 73 years of counting it and and no distiquishing difference between no debt and debt.

"why doesn't the fed just print the 17 trillion or so and be done with it?"

Now, that is a stupid question and reveals your complete refusal to grasp the objective reality. It is the typical mindless idiot response that demonstrates no clear examination of reality.

Why doesn't the fed print 17 trillion? You really need someone to explain the simple stuff?Because that isn't how the economy works, for one thing. Printing 17 trillion would add 17 trillion to M in MV=PQ and without a mechanism to create output, it would simply be inflationary. Money alone doesn't increase productivity. Productivity is dependent on employment level and equipment. It is the exact same answer as why, fundamentally, that debt isn't summarily "bad".

That is such a fucking stupid question.

 

[Bern80]

Your employer doesn't think so. I guarantee that he looks at those taxes and thinks that he is paying for them. If the darned taxes were lower, he'd have more profit.

Perhaps you are not getting the difference between real and nominal.

"The more debt our government takes on the less valuable our dollar gets."

How do you figure that? What, you read that on some conservative website and now anyone that knows differently must be a lib?

Do explain. Let me help.... NGDP = C + I + G + NX That is the same as MV=PQ.

The Fed Debt is just a number of a computer at the Federal Reserve bank. That is all. And, some one carries that debt. If not the gov then households, firms, or the financial markets. How is the government holding that debt somehow magically different?

The difference is simple. If I, as an individual, go into debt, I, as an individual owe that money. The difference with government is they went into debt with money they had to take from people and who are on the hook for the debt they chose to go into.

The fact is, that "the less valueable our dollar gets." is a statement of nominal prices, inflation. But, inflation has nothing to do with real GDP. Inflation doesn't affect real prices or real income. It can't. The only thing that affects real wages and real prices is employment level and production efficiency. People make stuff, people consume stuff.

Here is what investopedia says, "Unlike nominal GDP, real GDP can account for changes in the price level, and provide a more accurate figure."

The problem is, your thinking of it as an open economy, a household. Inflation is the result of more money in the supply. More money in the supply is both higher prices and higher income. Period. Inflation is always due to more money and nothing else. It has no real effect. Yeah, dude, you earn more to have the same effect.... duh... now your getting it, inflation means more dollars. More dollars means higher prices and higher earnings.

Now, that isn't to say that your not getting screwed by your employer as a wage earner. But it isn't because of inflation, government debt, the money supply, or taxes. It is because the labor market is competative. That is how it works, supply and demand for labor. Fundamentally, wages are driven down to the minimum. That is supply and demand for labor. It's got nothing to do with gov debt or taxes.

They are simple monetaryist notions. They are the result of classical economics, you know, the ones that Republicans subscribe to.

And you haven't presented shit to even imply any notion of not disliking paying any taxes. You have said nothing about an appropriate level of spending, taxes, or debt.

I've repeatedly said, they simply don't matter, neither good or bad, it all depends on what the gov does, not what taxes if collects.

You have consistently avoided the original question, whom should carry that debt? You've consistently avoided the entire notion of investment and leverage. You've avoided any direction except that you don't like the debt and taxes.

The government doesn't have to turn to you for money. The federal government is the fundamental source of all money. The FED marks up reserves, private banks lend it out. That is the monetaryist point.

The FED could increase the money supply by $10,000 per person per week and then the IRS collect and extra $10,000 per person per week. Nothing would change. people would still make as many widgets. People would still buy as many widgets. Real dollar costs would still be exactly the same. The only change would be that prices would be up by that $10,000 per person per week and every person would earn that $10,000 per person per week.

Inflation isn't ever going to be zero. Debt in the economy is required. The gov can carry it. Businesses can carry it. Whatever. The money supply can be $5 trill, the money supply can be $10 trill. It's all the same. It doesn't affect your standard of living.

Other wise, we could just have the Fed and banks increase the money supply to $100 trillion and we'd all be millionairs. We'd be able to own mansions, drive luxury autos, all own a jet.... Oh, yeah, can't because we have to make all those mansions, autos, and jets. It takes labor and capital equipment to do that and all the money that can be printed won't change that.

Just because the things you believe are wrong, doesn't make anyone else a "liberal". MV=PQ and GDP=C+I+G+NX aren't "liberal" concepts, they are simply facts.

Here is real GDP per capita since 1950.

Here is the real dollar value of the government debt since forever.

Here is government revenues.

Do them per cap. Do them per worker. The same thing.

Where is that increase in debt or deficit causing the standard of living to go down? Oh, it isn't. It is a straight line to the top, punctuated by recessions. Standard of living has nothing to do with government debt or deficit.

It isn't there, not by any measure, not by any sound macroeconomic examination.

"Common sense" is wrong, as wrong with macro econ as it is with Relativistic Physics.

GTG

None of the facts about inflation and GDP have anything to with the debt either. The fact that those concepts and relationships exist doesn't change the concept of the debt or that it's real or that it needs to be paid at some point. Obviously you know that or you wouldn't be asking me what does it matter who holds it and who 'should' hold it. The answer to that is similar to yours on whether our level of debt is good or bad. Who 'should' hold it, is a nonsensical question. The answer is either the private sector or the public sector and since the public sector's money is obtained from the private sector the answer is defacto, the debt is the private sectors. That's why it's a problem. The public sector made the decision to spend it, but the private sector is the one that has to pay for it at some point. Given that, we really shouldn't be asking why we're in debt. Why wouldn't we be? If you can rack up a credit card bill that you don't have to pay why wouldn't you spend till your heart's content.

If the debt doesn't matter, why doesn't the fed just print the 17 trillion or so and be done with it? We both know the answer to that and we know it means your wrong contending that it doesn't matter. Don't get on me about no answering questions. You're the one who has yet to explain why macro economics and money supply mean the debt isn't a problem.

You are incorrect. Debt alone serves the purpose of investment. Who should hold it is a required question simple because it must be held by some sector. There is no economy without debt. So, somewhere it must be held. As such, one must be defined as "better" than another or there is no point. Debt alone is neither good or bad, it depends on how it is used.

If you are stupid enough to just charge up your credit card for frivilous items, yeah, you're an idiot. If you take out a mortgage or homeloan, your doing it right. Regardless, you aren't a national goverment. Your not a closed economy. Home economics isn't an analogy for the government.

You are clearly biased against any objective consideration in that you have this invalid subjective position that somehow the government debt and deficit is something you owe. Your clueless and refuse to be otherwise. And the shame of it is that, in fact, it has absolutely nothing to do with current or future standard of living because money doesn't make stuff, people do. The only way that standard of living goes up and down is by increasing and decreasing employment level and equipment.

It is clearly not bad. Here is the govt debt since as far back as available.

So, where is the bad? There is none. The government debt has existed since 1940 and nothing has happened in 73 years of it.

If you want to claim it to be bad, simply saying "it must be" isn't an objective answer. Something has to be defined, identified, and counted.

That is 73 years of counting it and and no distiquishing difference between no debt and debt.

"why doesn't the fed just print the 17 trillion or so and be done with it?"

Now, that is a stupid question and reveals your complete refusal to grasp the objective reality. It is the typical mindless idiot response that demonstrates no clear examination of reality.

Why doesn't the fed print 17 trillion? You really need someone to explain the simple stuff?Because that isn't how the economy works, for one thing. Printing 17 trillion would add 17 trillion to M in MV=PQ and without a mechanism to create output, it would simply be inflationary. Money alone doesn't increase productivity. Productivity is dependent on employment level and equipment. It is the exact same answer as why, fundamentally, that debt isn't summarily "bad".

That is such a fucking stupid question.

I really don't know why you're missing this point as I've only said it half a dozen times now; Never I have said even one single dollar of debt is bad. In fact at least twice I've said it's a good thing. So please stop pretending that's my argument because it isn't. The question is WHEN is it bad and given the government's debt to revenue are we there now? If a debt to revenue ratio of 6 to 1 doesn't effect standard of living, at what point does it start to effect it? And if your answer is never I would say you need to think about that a little more.

Let's tackle some of your statements; 'It's not bad because it's not my debt'. Okay, who's debt is it. If it's not mine as a citizen it must be the government's, right? And where does government get the money to pay the debt they you claim is theirs and not mine?

What you're basically saying is the debt doesn't matter because it doesn't effect standard of living. The simple fact is the only evidence you have for that is because it hasn't so far. You also essentially state the amount of money someone has is really the only thing that effects their standard of living and the amount of money they have has nothing to do with the debt. You're right and you're wrong. The amount of money people have has nothing to with debt creation, obviously. We can't even pretend anymore that the government somehow bases its expenditures on its revenues. But you can't keep spending more without taking more in, but that is what our government has done. YOU make the mistake of thinking that since it has been okay in terms of standard of living it will remain okay if we just keep piling on it.

P.S. I thought I indicated well enough that 'why doesn't the government print 17 trillion dollars'? was a sarcastic question. Apparently that escaped your otherwise vast intelligence.

 

[itfitzme]

Maybe a concrete example will help.

The equation of exchange is MV=PQ, which we can simplify to M=PQ by using the right time period.

If M is increased, either P or Q goes up. The only way that Q can go up is if there is labor and equipment. Otherwise, all we have is inflation.

Also, income is M/employment. Output is Q=wl+rK. That is wages times labor plus capital equipment times rental rate.

So what happens if everyones taxes are lowered?

1) Well, first of it doesn't change M. Why not? Because there was no new money, it only changed where it was used. Wait...no new money but the same people? Yeah, M/Employment is the same. Taxes are lower but spendable income is the same? Yeah, output shifts and prices adjust.

There are the same amount of people. M didn't change. There is no change to efficiency. Q isn't different if employment level and efficiency remain the same. Ergo, no increase in the standard of living or inflation.

Of course, it really depends on what happens with the people that were once providing gov services. Let us suppose that they were performing a neutral task. That is, they weren't performing a task that increased or decreased efficiency. They simply output a service that is part of Q.

2) If they all die, then everyone has more money but the employment level went down and as such, Q goes down. Standard of living is the same because there is the same output per person. Price levels for the remaining Q goes up because there is more money per Q. Income goes up because there is more M per person.

3) Lets suppose they all start working elsewhere, the market now producing the same services as before, only by private sector rather than public. M is the same. Employment is the same. Q is the same. No change. Only the money once taxed is now used to buy the same service in the private markets.

4) Let us suppose that, instead, they start working elsewhere producing more of the stuff that private markets now make. Supposing that the gov services weren't really necessary. Well, Q is overall the same, now just more of the private market stuff and none of the public market stuff. Employment hasn't changed. The money supply, M, hasn't changed. Oh, wait, nothing changed. The product mix changed, prices rebalanced to reflect the change in product mix. More people in each business, the same money as before per worker. Other than that, no change in standard of living. More of one thing and less of another. Sure, more bananas but less roads. More apples but less schools. More cars but no military. More bicycles but less bike paths.

So, there are three specific scenarios. One does nothing because employment just moves to provide that same stuff differently. One remains the same because people die. One remains the same in general but the product mix changes. More beef but no beef inspection. More private market contracts but no contract enforcement.

If they are all necessary, either output decreases because efficiency goes down or nothing changes because the services are supplied and paid for. Some surely are. Military is to some degree. FDA?

The last one is the candidate for an actual change. The product mix changes. Same standard of living, same spendable income, but the product mix has to be different. Now it's not so simple as lower taxes mean I can buy more stuff. Over all, no. Q/employment is the same. More of a particular stuff, if the decrease in gov services don't result in lower efficiency of production. But, there is the question. What are the taxes paying for? Are they necessary? Which ones? Why? What is and isn't necessary?

Oh, and an additional complication is that lower taxes means more supply of labor. More supply of labor means lower income per person. So, suddenly, lower taxes means lower wages because there is a surplus of labor. So, income adjusts as well.

So, really it comes down to, not lower taxes guarantee being able to buy more stuff but rather what do those taxes buy in services. The issue isn't on the money side, it is on the detailed supply side. Focusing on the money side is useless. If you mean lower taxes rather than no taxes, then the question is what taxes and it becomes a production/service side issue. For example, cut taxes in half and eliminate the military and now there are 1.5 million additional people in the labor force. That has to go somewhere. Choose the other half of the budget. All those people have to go somewhere. They sill eat and occuply houses.

Money just accounts for stuff. It is simply too generalize to have any meaning. And the most likely scenarios, from blind application, results in either lower efficiency thus lower standard of living or simply nothing at all. The simplest answer to what happens if taxes are lowered is the most probable effect, nothing or less than nothing. MV=PQ is the identity and unless there is more labor or efficiency, nothing happens to output. Simply, cutting taxes doesn't change M.

So the question isn't if they should be lowered but exactly what and why?

This is the real dollar per capita government spending.

It has gone up consistently since 1950, with one decline during the Bush I/Clinton period. And curiously, it ended up going right back to where it was headed before Bush I.

What reason is there for that? That isn't going to be answered with simple minded focus on "My taxes should be lower." It is answered on the production side, not the money/tax side.

 

[Ernie S.]

You libs never can provide an answer so here's another chance

current debt 17 T
when obama leaves office 20 T

At what point must the govt stop spending more than it takes in?

25 T
50 T
100 T

?

When a Republican takes office, of course.

 

[Redfish]

Very good discussion and some really good points made on both sides---and some typical idiotic partisan talking points as usual.

But it seems that no one can answer definitively when the national debt becomes too large and when it begins to damage the economy rather than help it.

Also, no one has adequately addressed the problem that we are not paying anything on the principal of our debt but only servicing it by paying the interest-----does anyone think that is good fiscal policy?

I submit for consideration that we are very close to the point where the debt is too large. We are borrowing money in order to pay the interest---------THINK ABOUT THAT------borrowing money to pay the interest., or said another way ----creating more debt to pay the interest on old debt.

Now, there is another option, cut spending in other places and use those savings to pay the interest AND THE PRINCIPAL on our existing debt, and stop borrowing completely, that will necessitate higher taxes on almost everyone and will mean cutting some govt programs that some people like.

If there are other options, lets hear them.

 

[itfitzme]

"The simple fact is the only evidence you have for that is because it hasn't so far. "

Which is more than you've presented.

My statement, from the outset of the convo, was it is neither good or bad. It all depends.

"But you can't keep spending more without taking more in, but that is what our government has done."

Based on what?

"'It's not bad because it's not my debt'"

I never said that. That isn't the reason it's not "bad".

"And where does government get the money to pay the debt they you claim is theirs and not mine? "

Still, it isn't my debt or your debt. It is the government debt. Otherwise, by your reasoning, then as it is a circular flow, your credit card debt is your employers debt, after all, where do you get your money? If we are to start assigning the monies to entities down stream, then we are looking at the circular flow and simply "debt is bad" and "the public owes the money" is oversimplifying things. After all, a business get's its money from customers, ergo, the business debt is their debt.

The concept of "the governments debt is my debt" doesn't mean anything. It is just a misassignment in order to apply a false conclusion of "if it's my debt and I don't like it then it's bad." or "having to pay off that debt through taxes will mean less consumption."

Additionally, it is called Debt Held By The Public because it is borrowed from the public. It is far more correct to say that it is my asset than my debt. I have gov bonds and I am owed money by the government.

"And if your answer is never I would say you need to think about that a little more"

By what reasoning? Your saying that, inspite of any evidence, clealy now it's a problem. Really? Why now? Why wasn't it a real problem a decade ago? So, when does it suddenly become a problem.

I've thought more than you can possibly imagine.

"But you can't keep spending more without taking more in,"

It's been happening for seven decades. The only problem, the singular problem is that at some point the interst payments will equal the revenue and then either revenue is increased or it hits a holding pattern. So? Suppose revenues aren't increased and it hits a holding pattern. Before that occurs, interest will begin cutting into existing revenues and gov services will begin to decline until there is nothing except the treasury paying interest. Okay, so? How is that different than cutting services back now? It's not. So it is not a problem as the solution is exactly the same as the eventual outcome. The scenario that government decreases spending of goods and services is exactly the same if it does so by intent or it does so because servicing the loans takes up all revenue. And that is not a debt and deficit problem, that is a problem of reducing government spending on goods and services.

"If a debt to revenue ratio of 6 to 1 doesn't effect standard of living, at what point does it start to effect it?"

It doesn't suddenly jump from not an effect to an effect at some maginal number. Any effect is a continuous increase of "badness". There is no effect on standard of living, there won't ever be an effect on standard of living. No evidence of it starting to any degree, no deductive reason to conclude that it will, beyond declining gov services.

Really, the only deductive effect is that gove have to stop at some point. And if having to stop, at some point, causes a problem, then it would demonstrate the opposite.

Otherwise, the question is, as you say, then when? at what level?

Except that not only does empirical data show no effect. It doesn't show any beginnings of an affect. Was the recent recession caused by gov revenues, debt and deficit?

"YOU make the mistake of thinking that since it has been okay in terms of standard of living it will remain okay"

That isn't a mistake, it's an obvious conclusion. It is the basic obvious conclusion. Otherwise, we have all sorts of things that we may conclude are a problem though they never have been.

"What you're basically saying is the debt doesn't matter because it doesn't effect standard of living. "

Yeah, I am. What else would be "bad" in terms of economics? It's always standard of living, individually or as a whole.

And, yeah, standard of living is output per capita. It is the result of labor and capital equipment. The only thing that directly affects it is labor and capital equipment. Investment can also affect it, if indeed, there is a need for investment that isn't available.

But, simply concluding that taxes affect standard of living is entirely wrong, especially with no deductive reason to support it, in the face of empirical evidence to the contrary.

And the kicker is that, except in terms of very specific indirect circumstance, taxes do not affect standard of living. The reasons are simple.

1) Standard of living is the result of labor and equipment. Taxes and lowering taxes alone to not decrease either.

2) Neither will lowering taxes summarily increase real purchasing power. Except that the employment and capital equipment is indirectly increased, output cannot increase. Everyone's taxes get cut at the same time. That increase in nominal disposable income, unless somehow production is increased, simply raises prices. When everyones income and spending go up, without an increase in production, it is price inflation.

Sure, if your taxes got cut without anyone elses, then you'de have something. Spot decreased in taxes, particular goods and industries, particular income brackets, changes the relative balance. But that isn't what we are discussing here.

To even begin to follow some reasoning into a deducting conclusion that the gov debt, deficit, and taxes is bad, there has to first be a negative affect on employment, equipment or other efficiency. And if were gonna go to considering the real factors of output and standard of living, then we might as well just start there.

The debt alone doesn't mean anything. The deficit alone doesn't mean anything. Even taxes alone don't mean anything. Not at an across the board macro level.

It all comes down to these;

Standard of living is output per capita and requires employment level and equipment to be increased.

We cannot consume future goods or live in future houses. Everything that we produce now is consumed now.

The whole thing about the debt, deficit, and taxes argument is that it detracts from whatever the real issues are.
---------------------------------------------
"was a sarcastic question."

Why should I know that you were being sarcastic? No "sarcastic" emote...No tone or visual clues, it's the internet. I don't read minds.

 

[itfitzme]

Very good discussion and some really good points made on both sides---and some typical idiotic partisan talking points as usual.

But it seems that no one can answer definitively when the national debt becomes too large and when it begins to damage the economy rather than help it.

Also, no one has adequately addressed the problem that we are not paying anything on the principal of our debt but only servicing it by paying the interest-----does anyone think that is good fiscal policy?

I submit for consideration that we are very close to the point where the debt is too large. We are borrowing money in order to pay the interest---------THINK ABOUT THAT------borrowing money to pay the interest., or said another way ----creating more debt to pay the interest on old debt.

Now, there is another option, cut spending in other places and use those savings to pay the interest AND THE PRINCIPAL on our existing debt, and stop borrowing completely, that will necessitate higher taxes on almost everyone and will mean cutting some govt programs that some people like.

If there are other options, lets hear them.

It occurs to me that taxes specifically used towards paying debt off doesn't directly impact standard of living, if at all. It basically takes money from M1 and moves it into M2. As inflation is managed, it sits at what it sits.

I particularly dislike the money supply creation process, depending on a constant churn of investment. It creates an issue of; what if businesses don't borrow? What if consumer non-revolving credit isn't sufficient? Population increase constantly, so there is always a level of growth necessary besides increasing standard of living. But I am annoyed by the question of if businesses would be motivated to borrow funds on simply maintaining supply to population growth?

This isn't to say I think it is wrong. It is better than any historical method. Money has to be created and central planning to exogonously create it isn't going to work any better than central planning of production.

The process of money growth is necessary regardless of the gov debt and deficit.

Moving monies from circulation, as taxes, into what I can only assume would be some other form of savings, is definitively decreasing the money supply for purchases. It must be offset by borrowing to maintain the money supply.

The taxes don't directly impact standard of living. But, a decline in money creation, a lack of borrowing in the business and household sectors would. Paying down the debt as well as simply paying the interest necessitates more money creation through fed or someone is going to have to start spending their savings, whomever it is that holds the gov bonds.

The real process issue isn't the debt, deficit or taxes directly, it is the complications that arise when it has to be paid down. The real question is what happens to the money supply when the gov deleverages. Private sector deleveraging is basically what happended recently.

There is always the issue of the bigger they are, the harder they fall.

 

[Bern80]

Maybe a concrete example will help.

The equation of exchange is MV=PQ, which we can simplify to M=PQ by using the right time period.

If M is increased, either P or Q goes up. The only way that Q can go up is if there is labor and equipment. Otherwise, all we have is inflation.

Also, income is M/employment. Output is Q=wl+rK. That is wages times labor plus capital equipment times rental rate.

So what happens if everyones taxes are lowered?

1) Well, first of it doesn't change M. Why not? Because there was no new money, it only changed where it was used. Wait...no new money but the same people? Yeah, M/Employment is the same. Taxes are lower but spendable income is the same? Yeah, output shifts and prices adjust.

There are the same amount of people. M didn't change. There is no change to efficiency. Q isn't different if employment level and efficiency remain the same. Ergo, no increase in the standard of living or inflation.

Of course, it really depends on what happens with the people that were once providing gov services. Let us suppose that they were performing a neutral task. That is, they weren't performing a task that increased or decreased efficiency. They simply output a service that is part of Q.

2) If they all die, then everyone has more money but the employment level went down and as such, Q goes down. Standard of living is the same because there is the same output per person. Price levels for the remaining Q goes up because there is more money per Q. Income goes up because there is more M per person.

3) Lets suppose they all start working elsewhere, the market now producing the same services as before, only by private sector rather than public. M is the same. Employment is the same. Q is the same. No change. Only the money once taxed is now used to buy the same service in the private markets.

4) Let us suppose that, instead, they start working elsewhere producing more of the stuff that private markets now make. Supposing that the gov services weren't really necessary. Well, Q is overall the same, now just more of the private market stuff and none of the public market stuff. Employment hasn't changed. The money supply, M, hasn't changed. Oh, wait, nothing changed. The product mix changed, prices rebalanced to reflect the change in product mix. More people in each business, the same money as before per worker. Other than that, no change in standard of living. More of one thing and less of another. Sure, more bananas but less roads. More apples but less schools. More cars but no military. More bicycles but less bike paths.

So, there are three specific scenarios. One does nothing because employment just moves to provide that same stuff differently. One remains the same because people die. One remains the same in general but the product mix changes. More beef but no beef inspection. More private market contracts but no contract enforcement.

If they are all necessary, either output decreases because efficiency goes down or nothing changes because the services are supplied and paid for. Some surely are. Military is to some degree. FDA?

The last one is the candidate for an actual change. The product mix changes. Same standard of living, same spendable income, but the product mix has to be different. Now it's not so simple as lower taxes mean I can buy more stuff. Over all, no. Q/employment is the same. More of a particular stuff, if the decrease in gov services don't result in lower efficiency of production. But, there is the question. What are the taxes paying for? Are they necessary? Which ones? Why? What is and isn't necessary?

Oh, and an additional complication is that lower taxes means more supply of labor. More supply of labor means lower income per person. So, suddenly, lower taxes means lower wages because there is a surplus of labor. So, income adjusts as well.

So, really it comes down to, not lower taxes guarantee being able to buy more stuff but rather what do those taxes buy in services. The issue isn't on the money side, it is on the detailed supply side. Focusing on the money side is useless. If you mean lower taxes rather than no taxes, then the question is what taxes and it becomes a production/service side issue. For example, cut taxes in half and eliminate the military and now there are 1.5 million additional people in the labor force. That has to go somewhere. Choose the other half of the budget. All those people have to go somewhere. They sill eat and occuply houses.

Money just accounts for stuff. It is simply too generalize to have any meaning. And the most likely scenarios, from blind application, results in either lower efficiency thus lower standard of living or simply nothing at all. The simplest answer to what happens if taxes are lowered is the most probable effect, nothing or less than nothing. MV=PQ is the identity and unless there is more labor or efficiency, nothing happens to output. Simply, cutting taxes doesn't change M.

So the question isn't if they should be lowered but exactly what and why?

This is the real dolla per capita government spending.

It has gone up consistently since 1950, with one decline during the Bush I/Clinton period. And curiously, it ended up going right back to where it was headed before Bush I.

What reason is there for that? That isn't going to be answered with simple minded focus on "My taxes should be lower." It is answered on the production side, not the money/tax side.

That's a good lesson on on well established monetary theory. Thank you. One Problem. My argument here has nothing to do with whether I think taxes should be lowered. My question remains, how does this little lesson you've given above tie into and/or show that a 6:1 debt to revenue ratio is NOT a bad thing? Another thing I'm not seeing the connection to is at the very least I think we agreed that the above ratio would indeed pose problems for an individual or private business. The above monetary theory does not explain why government would be immune to those same problems. One difference we know of course is that the government has the power to print currency, but then again we also agreed that isn't a solution.

 

[JoeNormal]

You libs never can provide an answer so here's another chance

current debt 17 T
when obama leaves office 20 T

At what point must the govt stop spending more than it takes in?

25 T
50 T
100 T

?

When a Republican takes office, of course.

History begs to differ.

 

[Redfish]

A 6 to 1 debt to revenue ratio is risky, for the full faith and credit of the U.S. government is based on its ability to tax, not its ability to print.
The taxes serve as collateral for rpayment of the debt.
The fact that principal is rarely repaid would tell me that the federal government is in fiscal trouble.
An interest only loan must have some schedule for eventually repaying principal, or the loan is a sham.
Don Levit

Exactly,

I do object to the "full faith and credit of the USA......etc, ect, blah blah".. The truth is that the debt, or the interest on it, will always be paid. The US will not default on its debt.

The left uses the "default" word when they mean reduce spending, i.e. cut the amount spent on welfare would be "defaulting" in the liberal mind.

 

[itfitzme]

Okay, here are the ratios of the yearly interest payments on government debt to reciepts and outlays.



Nothing tricky going on, right? 100% is government shutdown, interest = revenue = outlays, right?

Outlays, receitpts, and interest data comes from

Historical Tables | The White House

Government - Interest Expense on the Debt Outstanding

The daily account statements are here;

Current and Back Issues: Daily Treasury Statement: Publications & Guidance: Financial Management Service