Does POTUS Really Think We Are This Stupid?

[TPS]

I get it that you are for continuing resolutions to fund the government with trillion dollar deficits and don't want to defund a proven job killing monstrosity of a bill, but just what are you for that will benefit this country?

We no longer have trillion dollar deficits. This year's fiscal year deficit is under $700 billion.

[3rdnlng]

We no longer have trillion dollar deficits. This year's fiscal year deficit is under $700 billion.

 

Is that from actual figures or from budget figures? So, that figure would be Obama's lowest deficit and higher than any other President's right?

[TPS]

Is that from actual figures or from budget figures? So, that figure would be Obama's lowest deficit and higher than any other President's right?

Final exact numbers aren't in for September, but it's estimated at $650 billion.

If you want to compare nominal numbers to make a point, that's up to you. If you want to be honest, then this year's deficit as a percent of GDP will be 4%. This will put Obama on par with Reagan, who also experienced 5 years of Deficit/GDP ratios of 4% or greater during his 8 years in office (yes, I'm expecting the next 3 years to be less than 4%, just as the CBO projects).

[....lybob]

Final exact numbers aren't in for September, but it's estimated at $650 billion.

If you want to compare nominal numbers to make a point, that's up to you. If you want to be honest, then this year's deficit as a percent of GDP will be 4%. This will put Obama on par with Reagan, who also experienced 5 years of Deficit/GDP ratios of 4% or greater during his 8 years in office (yes, I'm expecting the next 3 years to be less than 4%, just as the CBO projects).

Rick Ungar had a good piece on this in Forbes

 

http://www.forbes.com/sites/rickungar/2012/05/24/who-is-the-smallest-government-spender-since-eisenhower-would-you-believe-its-barack-obama/

[3rdnlng]

Final exact numbers aren't in for September, but it's estimated at $650 billion.

If you want to compare nominal numbers to make a point, that's up to you. If you want to be honest, then this year's deficit as a percent of GDP will be 4%. This will put Obama on par with Reagan, who also experienced 5 years of Deficit/GDP ratios of 4% or greater during his 8 years in office (yes, I'm expecting the next 3 years to be less than 4%, just as the CBO projects).

 

Well, let's be honest then. What was Reagan's deficit spending spent on and what impact did it have on the economy? Yes, let's not address and compare the two president's deficit spending in a vacuum. Let's look at the overall picture and see what Reagan accomplished for the future with his deficit spending versus what Obama is doing to our future. Sure you want to go there?

[TPS]

Well, let's be honest then. What was Reagan's deficit spending spent on and what impact did it have on the economy? Yes, let's not address and compare the two president's deficit spending in a vacuum. Let's look at the overall picture and see what Reagan accomplished for the future with his deficit spending versus what Obama is doing to our future. Sure you want to go there?

I guess changing the subject is an admission that you are wrong about trillion dollar deficits.

I find it ironic that a conservative wants to argue one government's deficit spending is "better" than another's...

[3rdnlng]

I guess changing the subject is an admission that you are wrong about trillion dollar deficits.

I find it ironic that a conservative wants to argue one government's deficit spending is "better" than another's...

 

Then let's go back to basics. Did Reagan ever have anything remotely like a trillion dollar deficit? Hasn't Obama run up the largest deficits of all time? The answers are "no" and "yes" in that order.

[DC Tom]

Then let's go back to basics. Did Reagan ever have anything remotely like a trillion dollar deficit? Hasn't Obama run up the largest deficits of all time? The answers are "no" and "yes" in that order.

 

It depends on whether you're talking about deficits as a percentage of GDP, or in actual non-adjusted dollars.

 

And everyone knows: Democratic deficits are measured as percentages. Republican deficits in non-adjusted dollars.

[3rdnlng]

It depends on whether you're talking about deficits as a percentage of GDP, or in actual non-adjusted dollars.

 

And everyone knows: Democratic deficits are measured as percentages. Republican deficits in non-adjusted dollars.

 

And TPS shied away from a meaningful discussion regarding the usefullness/wastefullness of deficit spending.

[DC Tom]

And TPS shied away from a meaningful discussion regarding the usefullness/wastefullness of deficit spending.

 

Wouldn't matter. He's an economist. His definition of "spending" is abstracted away from anything concrete like "money." You and him wouldn't even be having the same discussion.

[Azalin]

It depends on whether you're talking about deficits as a percentage of GDP, or in actual non-adjusted dollars.

 

And everyone knows: Democratic deficits are measured as percentages. Republican deficits in non-adjusted dollars.

I'm not trying to be a wise guy with this question.....I'm honestly curious about this because I don't understand.

 

if the GDP is the total market value of all good & services generated in the country in one year, how does that relate, in a practical sense, to the amount of money that the federal government overspends? I don't see how expressing a federal budget deficit in terms of a percentage to GDP makes any sense at all. isn't the most reasonable.....not to mention most accurate.....method of expressing a deficit done by comparing total expenditures to total receipts (revenue generated vs revenue spent)?

 

I'd really appreciate it if someone could enlighten me here.

[DC Tom]

I'm not trying to be a wise guy with this question.....I'm honestly curious about this because I don't understand.

 

if the GDP is the total market value of all good & services generated in the country in one year, how does that relate, in a practical sense, to the amount of money that the federal government overspends? I don't see how expressing a federal budget deficit in terms of a percentage to GDP makes any sense at all. isn't the most reasonable.....not to mention most accurate.....method of expressing a deficit done by comparing total expenditures to total receipts (revenue generated vs revenue spent)?

 

I'd really appreciate it if someone could enlighten me here.

 

In a hand-waving sense, it's a measure of debt to cash flow. A certain amount of leverage is actually healthy, in accounting terms, as it lets you leverage future cash flow into current capital.

 

It seems to be a roughly analogous principle that economists used to judge deficit spending against GDP: you're leveraging future economic productivity into current capital expenditure, so as long as you're not overdoing it it's no big deal. The problems therein lie in 1) are you talking about deficit spending or total debt ($400B in deficit spending against a $15T GDP may not be a big deal...$17T in debt against the same GDP most certainly is), and 2) even if your deficit spending is relatively low, you can't keep it up indefinitely. At some point, the piper has to be paid (as many homeowners learned - and many, unfortunately, were "protected" from learning - after 2008).

[TPS]

I'm not trying to be a wise guy with this question.....I'm honestly curious about this because I don't understand.

 

if the GDP is the total market value of all good & services generated in the country in one year, how does that relate, in a practical sense, to the amount of money that the federal government overspends? I don't see how expressing a federal budget deficit in terms of a percentage to GDP makes any sense at all. isn't the most reasonable.....not to mention most accurate.....method of expressing a deficit done by comparing total expenditures to total receipts (revenue generated vs revenue spent)?

 

I'd really appreciate it if someone could enlighten me here.

Two points. How much debt any entity takes on is related to your income and assets. GDP is the ultimate source of taxes and ability to service that debt. Comparing it to GDP also normalizes for comparisons sake, which is why I brought up the Reagan comparison. A nominal number is pretty meaningless without some type of comparison. The key issue for deficits and debt are the trends. As the deficit ratio has been declining since the worst of the recession, and is now reaching a sustainable level (<4% of GDP), which means the Debt/GDP ratio will start to decline again.

To 3rd, any discussion about usefulness and wastefulness will be based on subjective factors for the most part, so I do try to stick to more concrete issues. You stated several times that the Reps were tired of trillion dollar deficits, so I decided to point out they no longer exist, and in fact have been declining significantly for the past several years.

[Azalin]

In a hand-waving sense, it's a measure of debt to cash flow. A certain amount of leverage is actually healthy, in accounting terms, as it lets you leverage future cash flow into current capital.

 

It seems to be a roughly analogous principle that economists used to judge deficit spending against GDP: you're leveraging future economic productivity into current capital expenditure, so as long as you're not overdoing it it's no big deal. The problems therein lie in 1) are you talking about deficit spending or total debt ($400B in deficit spending against a $15T GDP may not be a big deal...$17T in debt against the same GDP most certainly is), and 2) even if your deficit spending is relatively low, you can't keep it up indefinitely. At some point, the piper has to be paid (as many homeowners learned - and many, unfortunately, were "protected" from learning - after 2008).

thanks.

 

it sounds like comparing annual deficit spending to GDP makes it much easier to wind up with a much higher national debt than if they had been comparing the deficit spending to actual tax revenues.

 

is it just an unfair oversimplification to measure annual deficits to annual revenue? this sounds like a classic smoke & mirrors routine to me.

[keepthefaith]

Two points. How much debt any entity takes on is related to your income and assets. GDP is the ultimate source of taxes and ability to service that debt. Comparing it to GDP also normalizes for comparisons sake, which is why I brought up the Reagan comparison. A nominal number is pretty meaningless without some type of comparison. The key issue for deficits and debt are the trends. As the deficit ratio has been declining since the worst of the recession, and is now reaching a sustainable level (<4% of GDP), which means the Debt/GDP ratio will start to decline again.

To 3rd, any discussion about usefulness and wastefulness will be based on subjective factors for the most part, so I do try to stick to more concrete issues. You stated several times that the Reps were tired of trillion dollar deficits, so I decided to point out they no longer exist, and in fact have been declining significantly for the past several years.

Good step in the right direction reducing deficit to $700b. If we were on our way to zero and there was some determination to get there, all the better but there is little leadership in Washington that will commit to that. The interest on our debt is a giant ball and chain and creates a lot of long term risk with even small moves in interest rates. That's the saddest part of where we are in my book. Your comment that "GDP is the ultimate source of taxes" is spot on. Too bad we can't get any pro growth policies in place other than deficit spending that would positively impact GDP.

[Azalin]

Two points. How much debt any entity takes on is related to your income and assets. GDP is the ultimate source of taxes and ability to service that debt. Comparing it to GDP also normalizes for comparisons sake, which is why I brought up the Reagan comparison. A nominal number is pretty meaningless without some type of comparison. The key issue for deficits and debt are the trends. As the deficit ratio has been declining since the worst of the recession, and is now reaching a sustainable level (<4% of GDP), which means the Debt/GDP ratio will start to decline again.

To 3rd, any discussion about usefulness and wastefulness will be based on subjective factors for the most part, so I do try to stick to more concrete issues. You stated several times that the Reps were tired of trillion dollar deficits, so I decided to point out they no longer exist, and in fact have been declining significantly for the past several years.

I don't believe I stated anywhere that the republicans were tired of trillion dollar deficits. I've seen plenty of republican overspending in my day. I've heard a lot of people lately (mostly college age democrats) using the deficit vs GDP arguement to express their support of the president's economic policies. when you mentioned it in your post above, it was like a 'last straw' to me, and I wanted to understand the logic behind it. my degree is science-based, not economics-based, so I don't get the comparison. to me, living in my simple, straightforward little world, finance is based on how much you earn as an individual, relative to what I spend. if I was to run my finances by the way this deficit-to-GDP method is calculated, then it sounds like I'd be comparing my personal overspending to my employer's annual revenue, not my own. in practical terms, it doesn't make any sense to me at all. when dealing with an issue of such importance as adding to our massive national debt, wouldn't it be easiest to relate overpsnding to annual tax revenues, both in terms of fixing it and in making it easier for the electorate to understand?

[TPS]

 

I don't believe I stated anywhere that the republicans were tired of trillion dollar deficits. I've seen plenty of republican overspending in my day. I've heard a lot of people lately (mostly college age democrats) using the deficit vs GDP arguement to express their support of the president's economic policies. when you mentioned it in your post above, it was like a 'last straw' to me, and I wanted to understand the logic behind it. my degree is science-based, not economics-based, so I don't get the comparison. to me, living in my simple, straightforward little world, finance is based on how much you earn as an individual, relative to what I spend. if I was to run my finances by the way this deficit-to-GDP method is calculated, then it sounds like I'd be comparing my personal overspending to my employer's annual revenue, not my own. in practical terms, it doesn't make any sense to me at all. when dealing with an issue of such importance as adding to our massive national debt, wouldn't it be easiest to relate overpsnding to annual tax revenues, both in terms of fixing it and in making it easier for the electorate to understand?

that last part was directed at 3rdnlong.

How much debt can one handle depends on their level of income.

Edited October 17, 2013 by TPS

[DC Tom]

thanks.

 

it sounds like comparing annual deficit spending to GDP makes it much easier to wind up with a much higher national debt than if they had been comparing the deficit spending to actual tax revenues.

 

is it just an unfair oversimplification to measure annual deficits to annual revenue? this sounds like a classic smoke & mirrors routine to me.

 

It's a simplification, perhaps an oversimplification, but not an unfair one. Like TPS said, it also serves to normalize deficits over time according to economic output. That's a simplification, but a valuable one as it allows for a more meaningful comparison of numbers. The caveat to that being that, as a normalization to a single value, you lose important data - like you allude to, you lose the comparison to actual tax revenues because you've divorced government spending from tax policy.

 

So it's not an end-all and be-all measure (unless you're trying to draw historical correlations..."90% of the time countries running a deficit at X% of GDP end up in default" or something), but it's certainly a valuable tool. Anyone who tries to use it as an absolute measure, though, is a tool in their own right.

[TPS]

 

 

In a hand-waving sense, it's a measure of debt to cash flow. A certain amount of leverage is actually healthy, in accounting terms, as it lets you leverage future cash flow into current capital.

 

It seems to be a roughly analogous principle that economists used to judge deficit spending against GDP: you're leveraging future economic productivity into current capital expenditure, so as long as you're not overdoing it it's no big deal. The problems therein lie in 1) are you talking about deficit spending or total debt ($400B in deficit spending against a $15T GDP may not be a big deal...$17T in debt against the same GDP most certainly is), and 2) even if your deficit spending is relatively low, you can't keep it up indefinitely. At some point, the piper has to be paid (as many homeowners learned - and many, unfortunately, were "protected" from learning - after 2008).

I think I've said this before, the government like a corporation is an ongoing concern, so neither one has to ever pay back their debt until they are dissolved. As long as you can make your interest payments then you will be able to rollover debt in perpetuity.

[DC Tom]

I think I've said this before, the government like a corporation is an ongoing concern, so neither one has to ever pay back their debt until they are dissolved. As long as you can make your interest payments then you will be able to rollover debt in perpetuity.

 

Theorteically, you're right...presuming someone will loan you the money. Ask Greece how long "in perpetuity" lasted.

 

Right now, we're in a position where the Federal Reserve is loaning the US Government money via "quantitative easing". That might be good in theory, but in practice it can be summed up in one word: "Enron."

 

 

 

Edit: AND...if the government were like a corporation, they wouldn't be using cash accounting. If the government switched to accrual accounting practices, they'd probably have to immediately declare bankruptcy and sell California to China in the settlement.

Edited October 17, 2013 by DC Tom