TPS Posted December 4, 2014 Posted December 4, 2014 It's interesting how people rant and rave about $18 trillion debt but can't explain why it's a problem. It's one thing to rant against big government or Obama and his bad policies, and you are right about both. Those are different issues. The OP says we're all getting !@#$ed. I'd like him or anyone to explain why and how that debt will !@#$ us? Meanwhile, since the end of 2007 the debt has increased by $6 trillion, and the Fed has purchased about $1.8 trillion of of that additional debt, so it now holds about $2.8 trillion. Many here have stated all that money printing by the Fed will cause inflation, yet the US and EU are now moving toward deflation. And speaking of Europe, serious people are now calling for radical ways to stimulate demand. Willem Buiter, the chief economist at Citigroup suggests the following as a remedy: The second measure is a temporary fiscal stimulus (say 1 per cent of eurozone GDP per year for two years, concentrated in the countries with the largest output gaps, that is, in the periphery), which is permanently funded and monetised by the ECB. To make the mechanics of this helicopter money drop more transparent, the ECB could cancel the sovereign debt it purchases. This third measure would be economically equivalent to buying and holding the debt forever (rolling it over as it matures), but rather more dramatic. Full article So he's effectively arguing that the central bank should buy the bonds that "finance" the stimulus, then declare a debt jubilee. "Print the money" to fund the spending. I'd love to hear any arguments for why this is a problem. Back to our $18 trillion !@#$ing... Based on that same idea, what if the Fed cancelled the entire $2.8 trillion in treasury debt it holds? Know what would happen? The debt clock would "fall backwards" and that's about it. If anyone thinks it would cause a problem, I'd love to hear about it....
GG Posted December 4, 2014 Posted December 4, 2014 If you read what I wrote, you'll see that I said "some ends up in savings accounts of public workers". I'll try to express it in terms of ACC101 so AD can follow along...and I'll exclude the international sector to make it even easier for him. S-I = G-T Private sector surplus is the combined surplus of Households and Firms, and G-T is the combined balances of all levels of government. These are annual flow variables. What the identity states is if G-T (a deficit) =$1 trillion, then by accounting identity there is a $1 trillion surplus accumulated by HHs and Firms. This means that HH savings + business profits = $1 trillion for the year. For the year, the government spent in excess of its revenues by $1 trillion which generated greater profits for firms and savings for HHs of an equal amount. It's the net difference, after your tax issue. So that net government spending will increase revenues 1) directly by its purchases from firms; and 2) indirectly by the consumption spending by public employees, who will also save some of their income. You, as usual, want to change what I've said. I never said tax cuts increase revenues. I said the deficit, the excess in SPENDING over taxes increases business revenues except for the savings of public sector workers. And that deficit is = the savings of HHs + profits of firms. Now, to address your obvious tax issue. If the government cuts business taxes during the year, then 1) the deficit increases from the lost revenue and 2) after-tax profits increase--revenues don't. Of course. But, the increased "surplus" or profit in the business sector is = the government's tax revenue loss or change in its deficit. That's the accounting. No, you said government deficits increase firms revenues, while also using profits and revenues interchangeably.
IDBillzFan Posted December 4, 2014 Posted December 4, 2014 It's interesting how people rant and rave about $18 trillion debt but can't explain why it's a problem. Perhaps it's even more curious how countless progressives have literally no understanding how ANY long-term debt in ANY capacity can be a problem for whomever is carrying that debt. Maybe progressives love debt because when you have someone in debt like, say, oh, a low-income minority household, you can stay in power by giving them a couple of schneckles to get them along, but never give them a hand up so they forever stay indebted to you and keep voting you back into office. Yeah, I guess it really is difficult to explain why debt is a problem
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