Does POTUS Really Think We Are This Stupid?

[TPS]

 

 

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.

Greece is constrained by being in the eu and adopting the euro; it's analogous to a us state that must balance its budget.

We've always been in a position where the fed loans the us money, just not to the current degree. If there was an issue with selling tbills, one easy solution would be stop paying interest on bank reserves, which currently exceeds 1 trillion. The banks would then buy treasuries with their excess reserves. Once again, the key for fed govt deficits and debt is the direction of change. We are currently moving in the right direction with a falling ratio, and now that it's dropping below 4%, then the debt/GDP ratio will also decline.

[Azalin]

We are currently moving in the right direction with a falling ratio, and now that it's dropping below 4%, then the debt/GDP ratio will also decline.

but if our economy remains stagnant, or slows down even more, won't that bring GDP down? in fact, won't that bring total tax revenues down as well?

[TPS]

 

but if our economy remains stagnant, or slows down even more, won't that bring GDP down? in fact, won't that bring total tax revenues down as well?

absolutely. That's how deficits are supposed to work, countercyclical: shrink when the economy expands, and rise when it's contracting.

[Chef Jim]

 

 

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.

 

China is buying California but not from the government but from individuals one house at a time.

[IDBillzFan]

China is buying California but not from the government but from individuals one house at a time.

 

We have a relatively new development about two miles from us. Neighbors across the street moved into their second, smaller 'retirement' home in Big Bear and let their daughter, son-in-law and three kids live in their house after they lost their house. They went to the development to see the houses (~ $700K range for 4/2/2700sqft) driving through the neighborhood, it's nothing but Asians on the streets, yards, etc . Asian woman at the welcome center told her straight up: "Full price. Cash only. It's what we're getting for all the houses."

[Dante]

China is buying California but not from the government but from individuals one house at a time.

Your so right. We spent the last few months house hunting and with no exaggeration I would say 80% of the shoppers were Asian. My wife's aunt sold her duplex in Burlingame and the agent said exactly what you are saying. Chinese are buying up everything including duplex's. Thanks B.Clinton, Hud and various community organizers for strong arming banks. Using the tried and true racism card and redlining. Now no one out here can afford houses except foreigners. Edited October 17, 2013 by Dante

[keepthefaith]

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.

 

But at what interest rate? Let's say 10 years from now the debt rises to $23T and interest rates move toward more recent norms of say 10 years ago. Quick math says we could be spending $800B per year to service the debt, double what it is today. Add to that the growth in entitlement spending and sluggish growth in GDP and the hole (expense) just continues to increase faster than any hope of revenue increase.

[TPS]

 

 

But at what interest rate? Let's say 10 years from now the debt rises to $23T and interest rates move toward more recent norms of say 10 years ago. Quick math says we could be spending $800B per year to service the debt, double what it is today. Add to that the growth in entitlement spending and sluggish growth in GDP and the hole (expense) just continues to increase faster than any hope of revenue increase.

what's the underlying cause of the interest rate increase? If it's higher inflation, then that means nominal gdp will be growing faster too, which, again, is the source of paying the debt. Any scenario is possible in the future, and some changes will be necessary, but not to the extent fear mongers lead you to believe.

[GG]

Greece is constrained by being in the eu and adopting the euro; it's analogous to a us state that must balance its budget.

We've always been in a position where the fed loans the us money, just not to the current degree. If there was an issue with selling tbills, one easy solution would be stop paying interest on bank reserves, which currently exceeds 1 trillion. The banks would then buy treasuries with their excess reserves. Once again, the key for fed govt deficits and debt is the direction of change. We are currently moving in the right direction with a falling ratio, and now that it's dropping below 4%, then the debt/GDP ratio will also decline.

 

Paying interest on bank reserves vs forcing banks to buy treasuries with their capital is an accounting entry. It doesn't change the fact that the borrowing has been increasing at a rate significantly above the rate of GDP growth.

 

Since a picture is always worth a thousand words, this one speaks fairly loudly While the defIcit has declined as a percent of GDP over the last year, it was done with gimmickry which cannot be sustained and you haven't come close to getting the economy back to the 3% long term average growth. Never mind that you should be hitting north of 5% for a few quarters considering the deep hole that you needed to climb out of.

 

So while there's no reason to fear the inflation monster any time soon, you shouldn't be doing cartwheels over an economy which can only boast that it's better than antiquated Eurozone.

[DC Tom]

Since a picture is always worth a thousand words, this one speaks fairly loudly .

 

In climatology, they call that pattern a "hockey stick," and it's a sign of the apocalypse.

[/dev/null]

But at what interest rate? Let's say 10 years from now the debt rises to $23T and interest rates move toward more recent norms of say 10 years ago. Quick math says we could be spending $800B per year to service the debt, double what it is today.

 

Which IMO is the real reason for the Fed's policy of QE2-Infinity.

[Alaska Darin]

In climatology, they call that pattern a "hockey stick," and it's a sign of the apocalypse.

Nice.

[TPS]

 

 

Paying interest on bank reserves vs forcing banks to buy treasuries with their capital is an accounting entry. It doesn't change the fact that the borrowing has been increasing at a rate significantly above the rate of GDP growth.

 

Since a picture is always worth a thousand words, this one speaks fairly loudly While the defIcit has declined as a percent of GDP over the last year, it was done with gimmickry which cannot be sustained and you haven't come close to getting the economy back to the 3% long term average growth. Never mind that you should be hitting north of 5% for a few quarters considering the deep hole that you needed to climb out of.

 

So while there's no reason to fear the inflation monster any time soon, you shouldn't be doing cartwheels over an economy which can only boast that it's better than antiquated Eurozone.

doesn't change gdp, but it creates a source of funds to sop up treasuries.

 

The tax increases from January and spending cuts from sequester are gimmicks? I haven't said anything about whether this economy has been good or not, I was simply pointing out 3rdnlong's right wing talking point that reps are tired of trillion dollar deficits no longer holds.

[3rdnlng]

doesn't change gdp, but it creates a source of funds to sop up treasuries.

 

The tax increases from January and spending cuts from sequester are gimmicks? I haven't said anything about whether this economy has been good or not, I was simply pointing out 3rdnlong's right wing talking point that reps are tired of trillion dollar deficits no longer holds.

 

What, with na, na, na, it's only 700 billion? It's a right wing talking point that conservatives are tired of large deficits? This is what i know: when the economy starts working again, those 8 years that will average out as trillion dollar deficits will have to be paid for. Yes, interest on that debt will be much higher than it is now and it will be a new drag on the economy. So all that new revenue from an expanded economy will be short lived. I tried to point out to you when you compared Reagan's deficits to Obama's that how that money was spent made a difference, but you didn't dare go there and chose to remain in your world of "theory".

 

It is f'n amazing that you can talk in circles and attempt to refute everyone else's opinion and then end up with such a lame claim that "I was just pointing out 3rd's claim that this year it's not a trillion but a mere 700 billion". After all the bs that's all you got.

[TPS]

What, with na, na, na, it's only 700 billion? It's a right wing talking point that conservatives are tired of large deficits? This is what i know: when the economy starts working again, those 8 years that will average out as trillion dollar deficits will have to be paid for. Yes, interest on that debt will be much higher than it is now and it will be a new drag on the economy. So all that new revenue from an expanded economy will be short lived. I tried to point out to you when you compared Reagan's deficits to Obama's that how that money was spent made a difference, but you didn't dare go there and chose to remain in your world of "theory".

 

It is f'n amazing that you can talk in circles and attempt to refute everyone else's opinion and then end up with such a lame claim that "I was just pointing out 3rd's claim that this year it's not a trillion but a mere 700 billion". After all the bs that's all you got.

Yes, that's all I got because I'm not defending Obama as most of you infer. As for comparing it to Reagan, the purpose was to show you that you can't focus on the nominal number alone. Again, if you want to claim Reagan's deficits were somehow better, I think that gets you into very subjective arguments that will be based on yours and my biases, plus I'm not comparing them for any other reason than to point out why your talking point was wrong.

 

As for deficits in general, of course we're not out of the woods yet, but it's headed in the right direction, which was my other point. Really, there are two main points about deficits that I'll defend:

1. They should be countercyclical--falling when the economy is growing, and rising when the economy is contracting.

2. The government does not EVER have to pay off its debt, but long term stability requires that the deficit as a % of gdp remains below the nominal growth rate. As long as this condition is met, the debt/gdp ratio will decline over time, and that's the ratio that investors tend to worry about.

 

Current projections by the CBO indicate the deficit ratio will be < NGDP growth for the next few years, so the debt ratio will decline. However, in another 4-5 years, the healthcare costs begin to push it back up again. That still needs to be resolved. Yes, I set myself up for the ACA-attack...

[GG]

doesn't change gdp, but it creates a source of funds to sop up treasuries.

 

The tax increases from January and spending cuts from sequester are gimmicks? I haven't said anything about whether this economy has been good or not, I was simply pointing out 3rdnlong's right wing talking point that reps are tired of trillion dollar deficits no longer holds.

 

It's a gimmick because the tax increase is likely a bump because people didn't have time to reorder their incomes and there's the probability that people front loaded some discretionary income at prior lower rates, which caused revenues to jump. With GDP growing at less than 2%, employment in a standstill, and continuing demonization of the rich, I don't expect revenues to keep up the same pace.

[TPS]

It's a gimmick because the tax increase is likely a bump because people didn't have time to reorder their incomes and there's the probability that people front loaded some discretionary income at prior lower rates, which caused revenues to jump. With GDP growing at less than 2%, employment in a standstill, and continuing demonization of the rich, I don't expect revenues to keep up the same pace.

A big part of the improvement has come from the end to the SS tax cut, which is not subject to manipulation. Those tax increases and spending cuts helped slowed economic growth in the first half of the year. The economy was gaining a little more momentum starting the second half, then the idiots in DC took over...

[3rdnlng]

Yes, that's all I got because I'm not defending Obama as most of you infer. As for comparing it to Reagan, the purpose was to show you that you can't focus on the nominal number alone. Again, if you want to claim Reagan's deficits were somehow better, I think that gets you into very subjective arguments that will be based on yours and my biases, plus I'm not comparing them for any other reason than to point out why your talking point was wrong.

 

As for deficits in general, of course we're not out of the woods yet, but it's headed in the right direction, which was my other point. Really, there are two main points about deficits that I'll defend:

1. They should be countercyclical--falling when the economy is growing, and rising when the economy is contracting.

2. The government does not EVER have to pay off its debt, but long term stability requires that the deficit as a % of gdp remains below the nominal growth rate. As long as this condition is met, the debt/gdp ratio will decline over time, and that's the ratio that investors tend to worry about.

 

Current projections by the CBO indicate the deficit ratio will be < NGDP growth for the next few years, so the debt ratio will decline. However, in another 4-5 years, the healthcare costs begin to push it back up again. That still needs to be resolved. Yes, I set myself up for the ACA-attack...

 

Gotcha, you can compare the deficits of the two presidents but don't want to discuss the differences because while my opinions are subjective, yours are fact.

[Alaska Darin]

A big part of the improvement has come from the end to the SS tax cut, which is not subject to manipulation. Those tax increases and spending cuts helped slowed economic growth in the first half of the year. The economy was gaining a little more momentum starting the second half, then the idiots in DC took over...

Bull. This "economy" is nothing more than a shell game that's getting ready to implode. Any "momentum" is a false promise.

[TPS]

Gotcha, you can compare the deficits of the two presidents but don't want to discuss the differences because while my opinions are subjective, yours are fact.

You're an idiot. (note: I'm using copyrighted material without the author's consent).

The point of my original response was to point out, one, we are past the trillion dollar deficits; and two, throwing out big numbers without some type of normalizing is a way to make a blow-hard point--which you are good at. I used Reagan to give you an example from someone you probably idolize. The deficit in 1983 was 6% of gdp, which would generate a trillion dollar deficit based on 2013 gdp. You want to change the subject and play "mines better (bigger?) than yours," which has nothing to do with the point I made. If you'd like to move to that subject, fine; though the majority of the current large deficits (and Reagan's) have more to do with revenues than spending.