[HN Gopher] The US fiscal mess: Some unpleasant fiscal simulations
___________________________________________________________________
The US fiscal mess: Some unpleasant fiscal simulations
Author : cen4
Score : 96 points
Date : 2024-07-27 17:08 UTC (1 days ago)
(HTM) web link (cepr.org)
(TXT) w3m dump (cepr.org)
| avidiax wrote:
| It's an interesting article, but the number of typos makes me
| wonder how rigorous it is.
|
| It also takes as an unstated given that we need or want to
| stabilize deficit/GDP or debt/GDP ratios.
|
| The US dollar is still a global reserve currency. The US
| situation might therefore be "special" or "privileged" compared
| to other countries that have non-reserve "local" currencies.
|
| The other question I have, is "does debt/GDP & deficit/GDP matter
| in absolute terms, or only in relative terms?". One could imagine
| a world where most governments have similar debt problems, and
| their currencies have similar inflation problems. For someone
| holding currency, there would be little reason to pick another
| currency in this scenario. One would instead predict a rush to
| place money in assets, causing asset inflation. That sounds like
| our present calamity, perhaps from different or more varied
| causes.
| neilwilson wrote:
| Why do you think it matters at all?
|
| The choice to pay interest on what is in fact a balancing item
| in the accounts is a political choice. Just don't do that and
| then those ratios are irrelevant.
|
| We have a floating rate exchange system. Quite why people think
| ratios from a fixed exchange rate era remain relevant is
| difficult to understand.
|
| Other than that is what they really want to go back to - one
| world currency with no variation and governments completely
| unable to direct resources for the benefit of their own people,
| rather than global capital.
|
| The world has excess production. Where is the untapped source
| of demand that will replace the current net import nations?
| There isn't any. That's why those with excess production swap
| that excess production for promises, rather than physical
| output.
| Aeolun wrote:
| The ratio does not matter beyond giving some indication of
| when you'll be printing as much money as your entire economy
| contains every year.
|
| It's not that you need to do anything about it at all, but
| eventually your economy will completely collapse.
| imtringued wrote:
| >It's not that you need to do anything about it at all, but
| eventually your economy will completely collapse.
|
| The vast majority of money systems were designed to be
| disposable and to only last a few hundred years though.
| _heimdall wrote:
| That's interesting, where do you get that from? I have a
| hard time seeing people creating a new money system
| purposely building one that they expect from the
| beginning to fail.
| fragmede wrote:
| no they're not. what ridiculous crypto manifesto did you
| pull that out from?
| neilwilson wrote:
| Why and how will it "collapse"?
|
| If you want to use the "printing money" analogy because you
| can't grok the correct credit and debit process then you
| have to accept that taxation "shreds money" and saving
| money (which is what a deficit is) "puts it in a drawer".
|
| How does people putting money in a drawer cause a problem?
| imtringued wrote:
| >That's why those with excess production swap that excess
| production for promises, rather than physical output.
|
| That's the thing. Mercantilism never really went away. It is
| just more subtle nowadays.
|
| The greek crisis can be boiled down to this: "Germany is
| exporting to Greece, because the absence of exchange rates
| makes German products unreasonably cheap in comparison to
| Greek products. Greece therefore buys from Germany, but
| Germany doesn't buy from Greece."
| Paradigma11 wrote:
| So if Greece still would have had the Drachme, Germany
| would have bought more olive oil, Greece would have bought
| less machines and everything would have been honky dory?
| lazide wrote:
| And Greece could go insolvent periodically to reset.
|
| Can't do a reset on a currency that isn't yours.
| Paradigma11 wrote:
| Nobody would have lent Greece any money in Drachma.
| lazide wrote:
| Huh? They did all the time, albeit at higher rates.
|
| Do you think Greece never had any national debt before
| joining the EU? They've had multiple defaults, and then
| built up more debt, etc. long before joining.
|
| [https://www.toptal.com/finance/financial-
| consultants/greek-d...]
|
| Same with Argentina, Brazil, etc.
|
| Someone is _always_ willing to lend money, just rarely at
| the rate the country is willing to pay.
| neilwilson wrote:
| Lending in Drachma to Greece is very different to lending
| dollars to Argentina.
|
| It's a category mistake to conflate the two
| lazide wrote:
| Care to explain?
|
| Bonus if you can compare lending to Russia too.
| neilwilson wrote:
| Greece would lend money to itself given Greece is the
| currency issuer of the Drachma.
|
| That happens automatically when government makes a
| payment
| neilwilson wrote:
| It would all be hunky dory because for Germany to export
| as much as it has done to Greece it would have to hoard
| Drachma, the drain of which the Greeks could then simply
| accommodate via a fixed wage Job Guarantee - ending
| unemployment permanently.
|
| As it stands the ECB refuses to do the necessary
| reflection of the German Target2 hoard into the Greek
| economy and the result is excessive unemployment and
| reduced production in Greece due to lack of monetary
| circulation.
|
| All to service a belief about the medium of exchange that
| isn't actually the case - that people won't hold it
| without monetary incentive (aka an interest payment).
|
| We need to chuck out this damaging interest-obsessed
| monetary religion. The price anchor and stabilisation
| policy needs to be in the market for labour, not the
| market for money.
| Paradigma11 wrote:
| "...the Greeks could then simply accommodate via a fixed
| wage Job Guarantee - ending unemployment permanently."
|
| So this was the case before Greece joined the Euro?
| paulmd wrote:
| Was Germany following a policy of stockpiling Greek
| drachmas to an internationally-significant extent before
| Greece joined the euro?
|
| You left off the prior in your rush to attack the
| conclusion, but no, if you separate the necessary
| condition then the event will no longer occur.
| panick21_ wrote:
| That totally ignores they systematic mismanagment and
| greece. Having 300% debt to gdp doesnt just happen.
|
| Despite EU bonds not existing the EU unified bond yields,
| and the had a greek government that did take full advantage
| of this.
|
| There was a reason the EU had rules, and then those rules
| were ignored in favor of an idiological political project.
| verzali wrote:
| It's written in British English. Other than that, I didn't see
| any typos?
| jameslk wrote:
| There's no political will to raise taxes and cut government
| spending. One or the other may happen but not both. Both are
| required to get us out of this mess. We don't have politicians
| that think long term.
|
| As a consequence, the Fed will be forced to lower interest rates
| as low as possible again so the government can escape crushing
| interest payments and let inflation inflate away government debt.
|
| Expect long term inflation, asset prices, and commodity prices
| that keeps rising as a consequence.
| toomuchtodo wrote:
| One would think a rating agency might call time on debt growing
| beyond what a declining population pyramid can support (through
| ratings downgrades). Even if the Fed lowers rates, investors
| might not have appetite for declining quality sovereign debt
| that will never be paid back. But maybe Japan and the BOJ show
| this is immaterial.
| DANmode wrote:
| https://www.cnbc.com/2023/08/08/moodys-cuts-ratings-
| of-10-us...
| toomuchtodo wrote:
| These are banks, I'm referring to sovereign debt. As a
| nation state, when you issue sovereign debt, that is a
| promise to repay that debt in the future. Who will be
| paying that debt back? Workers generating output that will
| be taxed in some way, with taxes servicing and retiring
| future debt obligations. What will there be less of in the
| future? Workers (structural demographics, total fertility
| rate rapidly declining globally, etc). The collateral
| (future worker aggregate productivity) doesn't exist at the
| forward curve with the promises to repay in the future,
| therefore the debt should be rated as higher risk and less
| likely to be paid back. This would force interest rates
| higher on issued debt (more risk demands higher yields),
| but whether the market has an appetite for debt issued with
| more realistic fundamental expectations remains to be seen.
| linotype wrote:
| Why would they think long term? They're all about to die
| according to actuary tables.
| JKCalhoun wrote:
| Come on, they have kids, grandkids like everyone else. The
| answer is that long term doesn't sell. We all know that.
| JumpCrisscross wrote:
| > _no political will to raise taxes and cut government
| spending. One or the other may happen but not both. Both are
| required to get us out of this mess_
|
| Did we read the same article?
| jameslk wrote:
| My point is that there is no political will that leads to the
| long term fiscal adjustments proposed in TFA
| OscarCunningham wrote:
| Why do people suggest inflating away debt rather than just
| defaulting on it? I'd guess that the debt markets would punish
| the two options equally, because bonds would lose the same
| amount of real value either way. But inflation also screws up
| your economy as a side effect.
| heisenbit wrote:
| Default impact is spread more unevenly compared with
| inflation.
| dragontamer wrote:
| Because defaulting means that Social Security Trust Fund
| fails to get paid.
|
| A huge amount of debt is to Americans, American institutions
| and the states.
| randerson wrote:
| Defaulting on debt is the fastest way to turn the US into a
| third world country. Banks would fail, since they invest our
| deposits in long-term assets including treasuries. Companies
| typically store their cash in treasuries and money markets,
| so companies would go under (or have to issue more shares
| under duress), crashing the stock market. Retirees would stop
| receiving Social Security payments, and retirees' nest eggs
| are normally mostly bonds.
|
| The US would piss off other countries who lent us money,
| who'd come knocking with a country-scale baseball bat
| demanding their money. But two thirds of that $35T is owed to
| Americans. There'd be a good chance of either a civil war or
| global war. We'd likely lose our status as the world's
| reserve currency, devaluing the dollar and leading to
| inflation.
|
| Nobody would trust the government enough to lend them money,
| so they'd have no choice but to print money to pay expenses
| at this point. So, we'd have inflation either way.
| quickthrowman wrote:
| > Why do people suggest inflating away debt rather than just
| defaulting on it? I'd guess that the debt markets would
| punish the two options equally, because bonds would lose the
| same amount of real value either way. But inflation also
| screws up your economy as a side effect.
|
| Defaulting would impact the value of Treasurys far more than
| inflation, a bond's price is merely the sum of its future
| cash flows, pricing in a default would push yields waaay
| higher than they would from inflation alone. There would also
| be _massive_ liquidity problems since banks and companies
| hold a ton of Treasurys along with pensions and retirees.
|
| There's far more negative impacts from a debt default that
| sibling comments already elaborated on.
|
| There are very few black swan scenarios that would cause me
| to liquidate the assets in my retirement accounts for cash,
| but a US sovereign default would be one of them.
| DataDive wrote:
| There is plenty of political will of every kind.
|
| We, the population, vote for the persons with specific
| political wills. We choose what to enact.
| JKCalhoun wrote:
| Then OP is essentially saying that we appear not to choose
| politicians that are prescribing bitter medicine.
| tastyfreeze wrote:
| That is true. We have mostly elected politicians that
| promise to bring as much federal tax dollars home as
| possible. When you have promised the moon, telling your
| constituents that the rocket needs to be dismantled and
| sold off is political suicide.
| cjbillington wrote:
| The Fed is expected to cut soon regardless, not to bail out the
| government but because inflation is falling. I imagine that
| will be the resolution to this. Perhaps rates won't go as low
| as you're suggesting, but they are expected to be decently
| lower than they are now.
| MuffinFlavored wrote:
| > We don't have politicians that think long term.
|
| They wouldn't get voted in. You said it yourself. What kind of
| platform is "let me cut your benefits/raise your taxes for
| temporary pain now so that hopefully in 10 years some good
| thing (that you might not even notice) will happen if
| everything goes according to plan"?
| anonym29 wrote:
| >Both are required to get us out of this mess.
|
| Disagree on multiple counts.
|
| First - you don't need _both_ - if you cut Social Security and
| Medicaid altogether, and use the surplus to start paying down
| debt, that solves 100% of the deficit and starts chipping away
| at the debt, while this would actually _reduce_ taxes rather
| than raising them. I 'm not asserting that the political will
| exists to do this (it doesn't), but the idea that you can't
| balance the budget without raising taxes is obviously false -
| taxes are nonzero, but you could reduce spending to zero.
|
| Second - you don't actually need either - if you hyperinflate
| the currency, the value of the existing debt becomes
| negligible. To wit, I fundamentally agree with the message of
| the remainder of your post.
| AnimalMuppet wrote:
| The whole point of "getting out of this mess" is so that you
| _don 't_ hyperinflate the currency, with all the economic and
| political damage that causes. "Don't bother doing either,
| just hyperinflate" is therefore not doing anything at all,
| just resigning yourself (and the country) to your fate.
| anonym29 wrote:
| Hyperinflation is a different mess from unsustainable debt.
| I took "getting out of this mess" literally, rather than
| meaning "getting out of this mess while avoiding getting
| into any other messes in the process".
| ilaksh wrote:
| How does this compare to the fiscal situation at the time of WWI
| or WWII? And how does it compare relative to other factors like
| other countries' finances?
| panick21_ wrote:
| Basically the US now is approching WW2 level debt. Just outside
| of a war. Without all the growth. Without all the other
| destroyed countries in desprate need of rebuilding. Without the
| young population. With massive unfunded liabilities in its
| social programs. With massive amounts of crumbling
| infrastructure.
|
| Basically after WW2, as soon as the war was over debt started
| dropping. Before the great societ stuff, the US didnt have so
| many future liabilities. Debt was dropping during Korean War.
| rwmj wrote:
| (Genuine questions here!) Is paying less interest an option?
| Either "refinancing" the debt at lower interest rates, or simply
| declaring that existing bonds will be paid out at a lower rate?
| People will presumably still want to hold US Treasuries because
| of their other properties.
|
| Also Japan has a debt to GDP much, much greater than the US, and
| still seems to function fine as a country, so how do they do
| things differently?
| ifwinterco wrote:
| The federal reserve can just buy the debt from the government
| using newly created central bank reserves, but this increases
| the money supply so in the long run it will cause inflation
| (eventually you end up with Weimar/Zimbabwe style
| hyperinflation, although that's a long way from where we are
| now).
|
| Japan has essentially been doing this (the mechanics are a bit
| more complicated, but the effect is essentially the same), and
| they've been able to get away with it because inflation has
| been low for the last three decades due to external factors
| such as globalisation.
|
| Now inflation is starting to rise even in Japan, so they may
| have some issues in the not too distant future.
| phartenfeller wrote:
| Money growth and inflation has no direct connection. It can
| impact it but doesn't have to. In europe the inflation was
| caused by the supply chain crisis: https://www.ecb.europa.eu/
| press/key/date/2023/html/ecb.sp230...
|
| Additionally some experts say that the inflation was bigger
| in Europe because the governments didn't do investments with
| new debt.
| georgeplusplus wrote:
| that's the governments in the EU deflecting blame and not
| admitting they messed up telling people to stay home, in
| some countries up to a year, and then paying those people
| to stay home (literally money printing) that it had no
| direct influence on inflation or wasa primary driver of it.
|
| I mean you'd have to be completely stupid to believe that
| what they did had no impact on inflation.
| ifwinterco wrote:
| It's definitely controversial and in the short term it's
| probably dwarfed by other factors (velocity of money and
| external factors), but it stands to reason that if M1
| increases by 300% while population remains roughly static
| and GDP increases by 50%, in the long run there will be
| inflation.
|
| If tripling the amount of base money has no effect then
| logically destroying 70% of the base money would also
| have no effect, but I never see people advocating that
| _heimdall wrote:
| The original definition of inflation was literally an
| increase in the money supply. Economists only changed the
| term to mean an increase in prices when they also latched
| onto the idea that they can print new money and inject it
| into the system without consequence.
| okasaki wrote:
| Why would it matter what the original definition was?
| _heimdall wrote:
| It seems relevant when the GP claim is that money growth
| and inflation have no connection.
|
| The definition was changed _only_ because economists
| decided inflating the money supply was a brilliant
| economic policy and the old definition became
| inconvenient.
|
| When you realize they changed the definition only for
| better optics it's easier to question the underlying
| principles.
| roenxi wrote:
| > The definition was changed only because economists
| decided inflating the money supply was a brilliant
| economic policy and the old definition became
| inconvenient.
|
| That probably isn't true, both because it isn't that
| obvious that the economists thought it was a good idea or
| that they were the ones who changed the definition.
| "Economists" don't have any power over anything and the
| consensus position seems to tend towards disagreement
| with government policy.
|
| Inflation is one of those topics where there seems to be
| a dearth of actual economic evidence bought to the
| conversation. The policy justification in the public
| discourse tends towards just-so stories.
| _heimdall wrote:
| https://www.clevelandfed.org/publications/economic-
| commentar...
|
| This is a good overview of the history of the term
| "inflation."
|
| Ideally people would specify which inflation they're
| referring to, like monetary Inflation or price inflation.
| Short of that though, until we started moving to full
| fiat currencies inflation without any qualifier was
| inflation of the money supply. After the move to fiat
| they repurposed the braod term to mean price inflation,
| presumably because monetary inflation isn't meaningful
| when your system is based entirely on manipulating the
| money supply.
| hartator wrote:
| Because it's still true that inflation = money creation =
| making everyone poorer.
| lazide wrote:
| It doesn't necessarily mean making everyone poorer, when
| population is increasing and there are significant
| increases in actual economic output.
|
| In fact, in those situations it's necessary to increase
| the money supply to avoid deflation and other issues, as
| the existing folks with money/resources otherwise just
| have to sit on their hands and squeeze everyone else to
| get rich.
|
| In an actual growth environment, Printing more money
| keeps everyone roughly the same level of poor/rich
| overall.
|
| The issue is when population is decreasing or actual
| economic output is decreasing, but rather than
| withdrawing money to compensate, more money is printed to
| try to keep the graph going up and to the right.
|
| IMO that has been an ever increasing trend since around
| the 90's in the US.
| _heimdall wrote:
| That still depends on which inflation your talking about.
|
| Monetary inflation = money creation by definition.
| Whether that makes everyone poorer depends on other
| factors though, like how the money enters the money
| supply and what current market dynamics are.
|
| Price inflation doesn't equal money creation though.
| Printing money can cause price inflation, but other
| things can as well. Printing money too slowly relative to
| the economy could actually not keep up, prices can fall
| even though the money supply increase. There may be a
| corner case or two, but I do pretty much agree though
| that price inflation makes everyone poorer.
| roenxi wrote:
| > In europe the inflation was caused by the supply chain
| crisis
|
| Then we'd expect to see deflation when the supply chain
| crisis is resolved - which seems unlikely but I suppose it
| cannot yet be ruled out. I doubt anyone will be held
| accountable if that deflation doesn't materialise though.
|
| It is an interesting question where CPI inflation is
| supposed to be coming from if not inflation in the money
| supply.
| mindvirus wrote:
| Funny enough, the US government is in a large part in debt
| to... the US government. So for that part at least, it feels
| more like an accounting mechanism than anything.
| _heimdall wrote:
| Its only an accounting mechanism rather than fraud because
| there's no one to enforce it. I've never understood how a
| government being so massively in debt to itself isn't seen as
| a joke proving that the whole thing is a sham.
|
| Its one thing when outside parties offer debt to a
| government, its effectively a show of faith in the government
| to pay its liabilitirs and still exist long enough to do so.
| Buy what does it even mean for a government to extend debt to
| itself?
| david-gpu wrote:
| _> But what does it even mean for a government to extend
| debt to itself?_
|
| You may be interested in reading about Modern Monetary
| Theory (MMT).
|
| I'm not an economist, but had a mild interest in
| macroeconomy some years ago and found MMT eye opening.
| _heimdall wrote:
| Oh I have read about it, I just fundamentally disagree
| with both MMT and Keynes.
|
| What I was trying to ask there is what does it mean for
| debt to exist when there is no relative risk?
|
| When a third party extends debt in good faith, it says
| something about their estimation of risk.
|
| When a government extends debt to itself it literally
| means nothing, if one party fails they both do. More
| importantly, there's no recourse if the debtor defaults.
| The debt there exists purely as smoke and mirrors, it is
| created only so they can claim money wasn't made out of
| thin air.
| david-gpu wrote:
| _> When a government extends debt to itself it literally
| means nothing_
|
| I get where you are coming from. If I'm not mistaken, and
| according to MMT, a government buying its own debt
| induces future inflation and a decrease to interest
| rates.
|
| All money nowadays is fiat (i.e. created out of thin air
| by a few actors), so it's not like any form of money
| creation and destruction means much more than changes to
| the inflation rate, interest rate and the derived swings
| to the economic cycle.
| _heimdall wrote:
| Yeah that's my understanding how MMT would explain the
| system as well. I just take issue with that approach.
|
| When you peak behind the curtain and see how an MMT
| system actually works, it's pretty clear that the whole
| thing is just for a game and, at best, a benign one.
|
| As long as it isn't hurting anyone, I can see it being
| plenty useful given what we can do with it even if the
| system is just a game. As soon as the system starts
| harming people though, say because they can't access
| basic goods or live a happy life, simply because of how
| the game works then it skips right past being an
| entertaining game and into the realm of being a
| dangerous, arguably evil, weapon.
| cen4 wrote:
| Covers it quite well - https://michael-
| hudson.com/2023/07/global-economic-history-i...
| silverquiet wrote:
| I always think about it like how you're never supposed to
| use a self-signed TLS cert, but all the root certs are
| self-signed (because who else would sign them?). I always
| think of the fed as the root authority in our
| implementation of fiat currency.
| worstspotgain wrote:
| I'm not going to comment on the article because most electively-
| undertaken fiscal projections are colored with the theories
| harbored by the authors.
|
| However, I'd like to point out that the budget hawks of
| yesteryear (Reagan, Simpson, McCain) were at least logically
| consistent in that they were pro-immigration.
|
| Immigration's positive impact on US fiscal policy is so large
| that not even right-wing think-tanks can refute it. [1] It raises
| the fraction of the population currently in the labor force. As a
| separate, compounded effect, the average immigrant contributes
| more to the social services pot than they draw out. The bonus to
| Social Security is even larger because of the undocumented
| population, which pays payroll taxes but is ineligible for
| retirement benefits. This effectively foots the bill for 2-3
| million American retirees. [2]
|
| So when today's populists peddle nativism while posing as budget
| hawks, it really fits in nicely with the rest of their bill of
| goods.
|
| [1] https://www.cato.org/blog/fiscal-impact-immigration-
| united-s...
|
| [2] https://www.americanprogress.org/article/improving-lives-
| str...
| koolba wrote:
| > However, I'd like to point out that the budget hawks of
| yesteryear (Reagan, Simpson, McCain) were at least logically
| consistent in that they were pro-immigration.
|
| Being pro immigration does not mean you're pro _illegal_
| immigration.
|
| > The bonus to Social Security is even larger because of the
| undocumented population, which pays payroll taxes but is
| ineligible for retirement benefits. This effectively foots the
| bill for 2-3 million American retirees.
|
| If they don't have social security numbers, they're not paying
| payroll taxes.
| worstspotgain wrote:
| > Being pro immigration does not mean you're pro illegal
| immigration.
|
| This distinction is mostly out the window with today's
| populists, see e.g. repealing jus soli and all the other
| racist dogwhistles.
|
| > If they don't have social security numbers, they're not
| paying payroll taxes.
|
| They're using SSNs, often false or not their own. Read about
| the Earnings Suspense File at the SSA in the second link I
| posted.
| ineedaj0b wrote:
| >This distinction is mostly out the window with today's
| populists, see e.g. repealing jus soli and all the other
| racist dogwhistles.
|
| your enemies aren't all dumb. the smart ones aren't likely
| to talk to you based on your attitudes towards them.
| koolba wrote:
| > This distinction is mostly out the window with today's
| populists, see e.g. repealing jus soli and all the other
| racist dogwhistles.
|
| There are already some limitations on birthright
| citizenship, for example we do not grant it to children
| born to diplomats visiting the USA. It's not an
| unreasonable position to limit it to _legal_ immigrants.
|
| Foreign embassies are considered US soil for jurisdictional
| purposes. If an army forced their way in to an embassy so
| that their pregnant battalion could deliver their babies
| within the embassy, should they get citizenship? If it
| doesn't apply to the embassy, how about if they do the same
| thing to a small island controlled by the USA or even the
| southern USA border?
| worstspotgain wrote:
| You're right, I can picture this. A pregnant battalion of
| the Mexican army breaches the border and invades the US
| to give birth, 18 years later the kids are employed
| cleaning American bathrooms. Mexico wins and America is
| not great once again.
| pkaye wrote:
| > There are already some limitations on birthright
| citizenship, for example we do not grant it to children
| born to diplomats visiting the USA.
|
| That's largely because the US is a signatory of the
| Vienna convention on diplomatic relations. Children of
| foreign diplomats born in the United States are not
| automatically granted citizenship because they are not
| considered subject to the jurisdiction of the United
| States.
| pkaye wrote:
| > ...repealing jus soli and all the other racist
| dogwhistles.
|
| Australia did the exact thing. Switch from Jus Soli to
| Jus Sanguinis. Some Jus Sanguinis countries have switched
| to some hybrid system that allows legal immigrants to get
| citizenship at birth.
| panick21_ wrote:
| Legal immigration has already been reduced to almost
| nothing anyway.
|
| > If an army forced their way in to an embassy so that
| their pregnant battalion
|
| Most people prefer to live in the real world rather then
| in absurdist fantasy land.
| silverquiet wrote:
| > Being pro immigration does not mean you're pro illegal
| immigration.
|
| I can't really know what anyone believes in their heart, but
| I doubt that the oligarchs who extol the free market
| (including the market for labor) really care about any of the
| demographic details of those they would employee as long as
| they produce as expected.
| mcculley wrote:
| Fake and reused social security numbers work just fine for
| withholding. Most companies are not doing E-Verify. The
| companies profiting from illegal labor are working with the
| system as designed.
| _heimdall wrote:
| There's a very simple fix to both issues you raise, change
| the immigration system to allow more legal immigration.
|
| We write the rules on what is and isn't legal. Writing the
| rules and then using them to say immigration is great
| _unless_ it 's illegal is very circular logic.
| ineedaj0b wrote:
| aren't you sorta talking besides the point? I don't see how
| immigration less or more reduces government debt meaningfully.
| I understand paying for social security (SS) is a decent
| fraction of the debt load for the US but solving SS does not
| plug the holes.
|
| if I'm generous with your proposal; wouldn't you still find
| immigrants applying for citizenship and eventually pulling from
| SS? most immigrants are younger and we should both be able to
| agree, they'd likely want to stay if they could.
|
| I feel like your biases are coming through with a lot of this,
| the answer to our debt problems will not factor heavily with
| immigration.
| saintkaye wrote:
| Outsized productive outcomes have been heavily immigrant
| created historically.
| mensetmanusman wrote:
| If immigrants are unskilled the productivity per capita
| decreases which lowers effective wealth, this is a minor effect
| compared to a housing policy that assumes no immigration and
| ends up screwing the young and increasing the wealth of the
| elderly.
| worstspotgain wrote:
| That's not how productivity works. In fact it's the other way
| around for the native born: to make X widgets it takes 1 CEO,
| 1000 middle managers, 10000 white-collar workers and 30000
| blue-collar workers. If you bring in 30000 new immigrant
| blue-collar workers, you allow 11001 native workers to move
| up the ladder.
|
| As for housing, it's screwed because of land-use policies
| that intentionally strangle supply to artificially inflate
| property values, such as suppressive zoning. If there was
| less demand the cartel would just restrict supply further.
| mensetmanusman wrote:
| I should have mentioned the productivity accounting for
| entitlements. Assuming little to no entitlements, your
| analysis makes sense.
| worstspotgain wrote:
| The Cato paper linked above measured the net per-capita
| fiscal impact on the government. The receipts/outlays
| ratio for 2018 is 1.427 for immigrants and 0.757 for 3rd-
| generation natives.
| jacoblambda wrote:
| If immigrants are unskilled and there isn't work for them to
| do (which is not the case), then the solution is to train
| them into skilled labor we need.
|
| Ignoring xenophobia based justifications against immigration,
| the only reason why the right wing has a major push against
| immigration is because unskilled illegal immigrant labor is
| better for businesses than unskilled legal immigrant labor.
|
| Illegal immigrants can be paid below minimum wage and without
| proper tax or benefits contributions (forcing the immigrant
| to bare the company's tax cost if they want to actually be
| squared away with the IRS). Illegal immigrants also don't
| know their rights and/or are afraid of reporting issues to
| the DOL or OSHA out of fear of deportation (despite
| deportation protections for whistleblower immigrants).
| Illegal immigrants are also less likely to unionize because
| if they "make trouble" the company can just threaten to
| report them to ICE.
|
| All in all illegal immigration is an exploitative
| relationship that overwhelmingly benefits the people and
| companies that most aggressively rally against it.
|
| If you eliminate this exploitative arrangement and provide an
| easy safe path for immigrants to engage with the labor
| market, most of this lowering of effective wealth that occurs
| for workers goes away.
|
| > this is a minor effect compared to a housing policy that
| assumes no immigration
|
| Given that unskilled immigrant labor is predominantly
| seasonal migrant labor, this really isn't as much of an issue
| as you'd assume. And the solution to this is again opening up
| the legal immigration path and adjusting policy decisions to
| reflect that.
|
| Overwhelmingly the costs associated with immigration are
| costs associated with illegal immigration and they are
| predominantly self-inflicted in an attempt to optimize
| profits for the capital owning class.
| mensetmanusman wrote:
| Thanks for the response, I would add that Canada has found
| that not planning for housing for mass migration has
| affected their housing market (which increases wealth of
| the elderly and decreases wealth of the youth):
|
| https://www.cbc.ca/amp/1.7080376
| panick21_ wrote:
| > The US interest bill is rising. In 2024, it is projected to
| exceed the entire military budget.
|
| This is the one that is mind blowing. The military is fucking
| gigantically huge. And every single years a militray budget worth
| of stuff simple gets burned for 'nothing'.
|
| The problem in the US is that most of the money is already
| commited. The future money is already promissed. And the rest is
| mostly military and debt service. And what is left over isnt
| enough to cut to be effective.
|
| I really dont see a solution.
|
| I'm happy that in my country we have strict limits in place and
| debt/gpd is only 40%. Not have the huge debt servicing ever year
| seems usuful to stabilze your budget long term.
| DataDive wrote:
| As the joke goes.
|
| If I owe you 100 grand and I can't pay, I am in trouble.
|
| If I owe you 100 trillion and I can't pay, you are in trouble.
| roenxi wrote:
| The sign in the article is out of date, it claims the US debt is
| ~$31 trillion. That is off by about $4 trillion; which I think
| dates the photo to sometime last year or the year before.
| ta1243 wrote:
| Who is this debt owed to and what will they do with it should it
| be repaid?
| jmclnx wrote:
| Most is owed to Social Security. The money paid into that is
| invested in US Bonds. That is based upon an article I say a
| while ago.
|
| As for taxes, the past few GOP admins lowed taxes for the ultra
| wealthy and corporations. If they had stayed at the same level,
| the debt would be much lower. Plus Bush's invasion of Iraq, for
| no reason, added quite a bit also.
| tryptophan wrote:
| Nope social security money is not invested, it's just put
| into general revenue and spent.
| tim333 wrote:
| The article is a bit doom and gloom. The debt to GDP levels are
| fairly middling against other developing countries. Also
| historically what usually happens to government debt is that it
| isn't really paid back but sits there and is reduced in value
| over time by inflation. That will probably happen here.
| MuffinFlavored wrote:
| > by inflation
|
| By average 2-3% a year inflation or by above-average heightened
| inflation (which hurts people)?
|
| https://www.google.com/search?q=inflation+tax
| enceladus06 wrote:
| Based on the amount of debt, inflation may exceed 2-3%, and
| there will be complaints. To fix the debt load, a combination
| of inflation, taxes, and spending cuts will be needed.
|
| Additionally, the intergenerational transfer of wealth from
| Boomers to Millennials and Zoomers will occur over the next
| 20ish years as Boomers die off. This wealth transfer could be
| used to increase tax revenues.
|
| One tax that could be raised would be the estate tax, which
| would be unpopular among the wealthy, but if lowered to
| 1MM-1.5MM (maybe 10% rate) and over 50MM (50% rate) would
| help to fill the deficit. The more likely scnario is the
| government allows higher inflation rates and we have a bag of
| cheetos costing $10 in <10 years.
| tim333 wrote:
| Who knows but back 30 years the US consumer price index is up
| 2.13x. My guess is that in another 30 years the debt will be
| there but reduced in value by something like that. And the
| CPI tends to understate inflation a bit.
| alephnerd wrote:
| > The article is a bit doom and gloom
|
| The CEPR is an EU think tank supported by the French Government
| [0]
|
| France and Germany have been lobbying against US stimulus
| packages like the IRA and IIJA, and economic protectionism that
| has become mainstream politically [1]. It is becoming a trade
| war [2]
|
| Western European allies can tell the US what to do when they
| start carrying their weight like Poland, Romania, Czechia, etc.
|
| [0] - https://cepr.org/about
|
| [1] - https://www.politico.eu/article/macron-heads-to-
| washington-o...
|
| [2] - https://www.institutmontaigne.org/en/expressions/real-
| reason...
| panick21_ wrote:
| Pointing out the reality isnt 'telling what to do'. And
| France isnt in a position anyway to do that, since they have
| the exact same problem as the US.
| alephnerd wrote:
| It isn't a reality though.
|
| It's absolutely a biased piece of advice because it has
| subsidized American industrial players at the expense of
| players across Europe - which is why the EU has been in the
| process of lobbying against American deficit spending that
| is primarily being used for subsidizing industrial policy.
|
| Western European austerity has clearly hobbled France and
| Germany while the US was able to weather the GFC and COVID
| recsssion by using it's deficit.
|
| > And France isnt in a position anyway to do that, since
| they have the exact same problem as the US.
|
| Yet they are as Macron's lobbying blitz in 2022-23, the
| French Govt's Institue Montagaine has pointed out, and the
| French govt supported CEAP has been lobbying against.
| gjsman-1000 wrote:
| "a bit doom and gloom"
|
| I don't think there's a scenario where you can look at any
| country with this much debt, break the news, and then have it
| not sound like gloom and doom.
|
| This just reminds me of the Mel Brooks Robin Hood Movie: "
| _Maybe, if you break the bad news to me, but in a good way,
| then it won't sound so bad!_ "
|
| https://m.youtube.com/watch?v=Mi-YLIwkfJs
|
| "That will probably happen here."
|
| Can you even conceive of how much inflation this would require,
| especially at the pace of the debt's growth? People would be
| rioting.
| tim333 wrote:
| In the UK where I live it went to over 250% of GDP after the
| world wars but life went on and it reduced to about 50% over
| the following decades, and then bounced back a bit.
| https://articles.obr.uk/300-years-of-uk-public-finance-
| data/...
|
| I mean not ideal but the 50s and 60s were quite good in the
| UK.
| gjsman-1000 wrote:
| True; but the UK had at least three advantages: Huge post-
| war economic growth, a high export market (rebuilding
| Europe takes material) boosted by US aid to those
| countries, and the Bretton-Woods system made negotiating
| the debt easier by ironically relying on the stability of
| the US dollar.
|
| The US would not have any of those advantages. There's not
| a more stable dollar alternative to look to, there's not an
| obvious ludicrous economic boom on the horizon, the export
| market's probably not growing that much, and US taxes don't
| have much headway to go up before being counterproductive
| and stalling growth (if they haven't already been doing
| so). Stalled growth results in less tax revenue, defeating
| the point of the tax increase.
|
| In a nutshell, the UK was partially saved by the US and
| countries rebuilding themselves. The US has no savior.
| tim333 wrote:
| The US has the world reserve currency thing making it
| easier to borrow although I think that is a bit
| overrated. It is also the world leader in a lot of the
| most important industries especially tech and AI which
| should help things.
| LUmBULtERA wrote:
| An optimist might see the combination of plentiful non-
| fossil fuel energy, AI, and advanced robotics as a
| potential pathway to a ludicrous economic boom. Although
| it is certainly not a given.
| phkahler wrote:
| Comparing to other countries is irrelevant. Their economies are
| smaller and maybe their ratio is stable?
|
| Also, the US budget was balanced in 2000. It is possible.
|
| I have no idea why so many people refuse to accept that there
| is a growing problem.
| amphibian87 wrote:
| because it's not? revenue was reduced a ton by the 2017 tax
| scam. The number one sign of a weak nation state is the
| inability to collect taxes from their elites.
| Bostonian wrote:
| Your opposing a tax cut does not make it a "scam".
| CryptoBanker wrote:
| >Your opposing a tax cut does not make it a "scam".
|
| The scam part comes from how the tax cut was marketed to
| Americans
| tdb7893 wrote:
| I love how when people talk about making America Great
| Again they are generally talking about a time where the
| highest marginal tax rate was like 70% (of course no one
| paid that but people don't pay the top rate now either). I
| would love to bring _that_ piece of history back. I love
| America and have benefitted a lot from it, I 'm happy to
| pay more for my fellow Americans (which I do now via some
| donations but I need to do more)
| rayiner wrote:
| People pay much more of the theoretical top rate today
| than they did of the higher top rate back then. Federal
| tax revenues as a percentage of GDP has been basically
| flat since 1950:
| https://fred.stlouisfed.org/series/FYFRGDA188S.
| tdb7893 wrote:
| Interesting, thanks for the info. Though I wish it could
| be broken down based on income brackets but I can't find
| that.
| rayiner wrote:
| https://taxfoundation.org/data/all/federal/us-income-
| growth-...
|
| "Contrary to common perceptions, the CBO data indicate
| that: (1) income earned after taxes and transfers has
| increased over the past several decades for all income
| groups, (2) the federal tax system is progressive and has
| become more progressive over the past three decades, and
| (3) the federal system relies heavily on higher earners
| to raise revenue for government services and means-tested
| transfers."
|
| https://www.forbes.com/sites/timworstall/2015/01/08/the-
| us-t...
|
| I can't find data before 1980.
| woooooo wrote:
| "Three decades" is doing a lot of work there. Reagan?
| rayiner wrote:
| The data starts at 1979, before Reagan's major tax reform
| in 1986: "In contrast, the effective federal tax rate for
| the top 1 percent has remained relatively high over this
| period, ranging between 25 and 35 percent since 1979."
|
| Reagan's tax reform wasn't a gimmick: it broadened the
| tax base (to encompass more kinds of income) and lowered
| rate to keep the effective tax rate basically the same.
|
| The biggest problem is we simply doesn't tax enough. We
| want to grow the scope of our government to be more like
| Europe, but we aren't willing to tax the middle and upper
| middle class the way they do in Europe. We had an au pair
| from Germany. Our effective tax rate in a blue state as a
| dual income professional couple was the same as she paid
| at her entry level office job.
| lotsofpulp wrote:
| I contend that taxing higher earned incomes at higher and
| higher rates is not progressive. Real wealth is made via
| appreciation in property prices, and those mostly
| detractive and rent seeking members of society are the
| least taxed.
| anonym29 wrote:
| Since WW2, US tax revenue as a percentage of GDP has never
| left the range of of 13-20%, and spent a lot of time in a
| much tighter cluster of 16-17%. [1]
|
| This time span covers top marginal tax rates from as high
| as 90% to as low as 35%. The truth here is that we cannot
| significantly increase tax revenues by raising tax rates,
| as when taxes get too high, people are simply incentivized
| to earn less, or to spend more on finding, developing, or
| exploiting loopholes in the tax code to reduce their taxes.
| Accordingly, actual economists have understood for the last
| 50 years that simply raising taxes blindly can
| counterintuitively _decrease_ overall tax revenue. This
| effect is part of what 's referred to as the Laffer Curve.
| [2]
|
| But to your first point, that there is no problem, I'd like
| to point out that interest spending has exceeded defense
| spending. [3]
|
| But hey, don't take my word for that constituting a
| problem, take it from Jerome Powell, chair of the U.S.
| Federal Reserve:
|
| "The U.S. federal government's on an unsustainable fiscal
| path. And that just means that the debt is growing faster
| than the economy. So, it is unsustainable. I don't think
| that's at all controversial." [4]
|
| In summary:
|
| * No, everything is not perfectly fine. The United States
| is on a fiscally unsustainable path.
|
| * No, the TCJA is not the big proximal contributor to the
| problem, routine deficit spending resulting in
| unsustainable debt is.
|
| * No, we can't easily fix the problem by raising taxes on
| everyone, let alone by only raising them on the rich.
|
| Citations:
|
| [1] https://fred.stlouisfed.org/series/FYFRGDA188S
|
| [2] https://www.investopedia.com/terms/l/laffercurve.asp
|
| [3a] https://fred.stlouisfed.org/series/A091RC1Q027SBEA
|
| [3b] https://fred.stlouisfed.org/series/FDEFX
|
| [4] https://thehill.com/homenews/4447860-powell-the-us-is-
| on-an-...
| nrr wrote:
| I find the appeals to authority unconvincing, especially
| in light of there being other models concerning taxation
| like modern monetary theory. It leaves yet more
| confounding variables uncontrolled for and makes policy
| decisions based on only one perspective feel myopic at
| best.
|
| None of this stuff is a priori true.
| adam_arthur wrote:
| That's incorrect.
|
| Gross federal tax revenue never declined, even in the year
| after the 2017 tax cuts took effect.
|
| https://www.statista.com/statistics/200405/receipts-of-
| the-u...
| lazide wrote:
| Much of US government debt is US social security debt, which is
| going to be drawn down over the next decade and a half.
| anonym29 wrote:
| Social Security's _current_ obligations are the largest
| single spending category of the entire U.S. Federal
| Government, and are continuing to grow rapidly.
|
| The SS trust fund is projected to be depleted by 2033, at
| which point benefits will be automatically reduced to just
| 79% of their current level, by laws that are already on the
| books. This information is freely available from the Social
| Security Administration themselves. [1]
|
| Keep in mind, Social Security's and Medicare's unfunded
| _future_ liabilities grossly exceed the current liabilities
| of these programs.
|
| These defined benefit programs are mathematically reliant on
| a growing, rather than shrinking population, yet a shrinking
| population is what the entire industrialized world is
| currently on track for with our sub-2.1 TFRs.
|
| [1] https://www.ssa.gov/oact/trsum/
| ryandrake wrote:
| Social Security is going to end up being yet another one of
| those ladders that the Boomers pull up once they're done
| benefiting from it. Just like low home prices and cheap
| college tuition.
| anonym29 wrote:
| How do you figure that boomers, as a collective cohort,
| are uniquely responsible for the increases in college
| tuition and housing prices?
|
| I'm not stating your assertion is false, but I don't see
| the connection.
| lazide wrote:
| Not the poster, but IMO it's a bit like saying Gen Z is
| responsible for TikTok.
|
| If they weren't there, or this was 100 years earlier, or
| Gen Z was fundamentally different than they had been
| raised to be, then yeah TikTok likely would not exist, or
| at least not be a notable problem.
|
| Post WW2 was an economic and population boom time. The
| boomers resulted from that boom, and the programs for
| them helped them, and that boom continued.
|
| Booms continue to grow until the fundamentals fall apart
| and the leverage can't keep it going anymore - and then
| you get a bust.
|
| The longer and unhinged the boom, usually the longer and
| unhinged the bust.
|
| And here we are.
| lazide wrote:
| Correct, I realize my comment may have been ambiguous.
|
| Money is now, and will continue to do more so in the
| immediate future, flow _out_ from the gov't /taxes/money
| printer, and into retirees pockets through SS and other
| means. Up until recently, it had gone from major inflows to
| mostly neutral on that front.
|
| For the reasons you're mentioning.
|
| So yeah, either we need to start producing more economic
| activity - or more likely - just print more money and hope
| it all works out.
|
| We're not in as bad a crisis as Japan, but it's the same
| kind of problem.
|
| Interestingly, with the US as the worlds reserve currency
| this is going to have a global effect.
| anonym29 wrote:
| Another factor to keep in mind is that life expectancy
| has changed dramatically since the introduction of these
| programs, which is ultimately good if you're pro-humans-
| living.
|
| When SS was formed in 1935, average life expectancy at
| birth was just 60, whereas the full retirement age was
| 65. In effect, this resulted in close to 150 people
| paying in for every 1 recipient.
|
| These days, full retirement age is almost done being
| hiked to 67, while life expectancy at birth was up to 78
| the last time I checked. This results in fewer than 3
| people paying into the program for every 1 recipient.
|
| If the full retirement age was simply indexed to (life
| expectancy at birth + 5), that would also solve the
| fiscal problems with Social Security, though it's a
| political impossibility.
|
| I think people forget that the actual name of the "Social
| Security" program that people think of as "retirement" is
| OASI - Old Age Survivorship Insurance. I use Social
| Security in quotes because there are other components
| too, like DI - disability insurance, though that's
| negligible compared to OASI.
|
| It was never meant be a retirement program, it was meant
| to be insurance in case you accidentally lived for a lot
| longer than you were expected to.
| rayiner wrote:
| It's not middling. At 122%, we are just behind basket cases
| Italy and Greece. We are above France or Spain, and more than
| double well-run countries such as Germany or the Netherlands.
| The EU target is 60% debt to GDP. Moreover, our debt is growing
| faster. Our deficit as a percentage of GDP, at 6.3%, is more
| than double the EU target.
| pohuing wrote:
| I'd be hesitant about calling us Germans well run. We're
| lacking money for everything and the past 16 years's greatest
| accomplishment was pushing maintenance further back to purse
| a balanced budget. Not spending money has its own costs as we
| now have to suffer through.
| brnt wrote:
| Germany doesn't lack money, it just reveres the lack of
| debt a bit too much. It's cheap for Germany to borrow and
| invest, and in all likelihood be able to debts down and
| benefit from the investments, but they don't, because debt
| scary.
|
| A mountain of unrealized goodwill. It's such a pity,
| because indeed much of infrastructure is barely maintained.
| panick21_ wrote:
| Inflation isnt magic. As you roll over debt, its afjusted for
| inflation expectation. And if you do it faster then ecpected
| its basically extra taxes.
| dataflow wrote:
| > The debt to GDP levels are fairly middling against other
| developing countries
|
| Doom is about the future, not the present. Why are you looking
| at present levels instead of where the trend is taking us in
| the future?
| omgwtfbyobbq wrote:
| It can also be about the past.
|
| That's one problem with looking at charts that aren't
| indexed/real (inflation adjusted) and/or ratios.
|
| On it's face, our debt looks scary.
|
| https://fred.stlouisfed.org/series/GFDEBTN
|
| Looking at it as a ratio, it's still not great, but we've
| been in similar places in the past.
|
| Debt as a percentage of GDP.
|
| https://fred.stlouisfed.org/series/GFDGDPA188S
|
| Interest as a percentage of GDP.
|
| https://fred.stlouisfed.org/series/FYOIGDA188S
| TeaBrain wrote:
| The US can't just withhold payments and wait for inflation to
| run its course. The debt is largely in government bonds and
| other debt securities. Payments have to be made on the debt
| securities when they are obligated to be due.
| zamadatix wrote:
| It is and isn't how it works, depending how nuanced a look
| you give the initial comment. On one hand you're absolutely
| right, i.e. 30 year treasury bonds have to be paid back in 30
| years - right from the name even. That said it's not quite
| right the government expects to withhold payment as the way
| to avoid having to actually "pay back the debt" long term.
| Instead the fed expects to continue selling new 30 year bonds
| to pay off the old 30 year bonds as they have for many loops
| now. Usually people accept buying new bonds in this kind of
| scenario because it's an extremely low risk and easy to
| manage method of holding your e.g. retirement money without
| just having it sit there completely.
|
| Of course another level of nuance to that conversation is
| then asking "and what could happen to break that cycle and
| what would result"?
| alephnerd wrote:
| The CEPR is an EU think tank supported by the French Government
| [0]
|
| France and Germany have been lobbying against US stimulus
| packages like the IRA and IIJA, and economic protectionism that
| has become mainstream politically [1]. It is becoming a trade war
| [2]
|
| Western European allies can tell the US what to do when they
| start carrying their weight like Poland, Romania, Czechia, etc.
|
| [0] - https://cepr.org/about
|
| [1] - https://www.politico.eu/article/macron-heads-to-
| washington-o...
|
| [2] - https://www.institutmontaigne.org/en/expressions/real-
| reason...
| mamonster wrote:
| All of the countries you named as "carrying their own weight"
| have the curious commonality of being net recipients of massive
| amounts of money from the EU cohesion budgets (i.e Western
| Europe) over the last 10 years. Very easy to spend money on big
| guns and other projects when you are Poland and get something
| like 10 billion euro net on average for the last decade.
|
| EU scary hours will begin in something like 10-15 years when
| Poland will be asked to become a net contributor (after they
| converge and some W. Europe country will inevitable come up
| with the idea of plugging fiscal deficits by cutting EU
| contributions).
| alephnerd wrote:
| EU's problems are the EU's to solve.
|
| Doesn't mean Americans should undermine our Industrial Policy
| because French and German players are nowhere near as
| competitive.
|
| At least Eastern European allies help cover and support
| American defense spending in Europe, while Western European
| players like France and Germany are opposed to Atlanticism
| unless SHTF
| hartator wrote:
| I think this is missing out the most-obvious corrective scenario:
| super-high inflation.
| treebeard901 wrote:
| Important to consider that all the debt was created during a time
| of relative peace. Now, the U.S. is potentially facing three
| simultaneous wars having already increased the debt to these
| levels.
|
| There are changes in international settlement that bypass the
| dollar. China and Russia and others have been advancing ways
| around needing to use the U.S. which is already having
| consequences as some of this would have found its way to funding
| the rising U.S. deficit.
|
| Most likely through buying Government debt and there is a chance
| we will know when the debt party is over if there is ever a
| Treasury issuance that cant find a buyer.
|
| Given that part of the problem is the system where there is
| always a buyer of last resort and so much of the debt is money we
| owe ourselves. Which reduces but does not eliminate the impact of
| the move away from the dollar.
|
| It is clearly unsustainable and certain measures like the reverse
| repo market show a sort of short term liquidity and it is
| interesting to compare it to future issuance of debt.
|
| The resulting effect then would have to be increased inflation
| until spending reaches and equilibrium again. Though with all of
| the potential threats around the world, anything can happen.
|
| It just isn't sustainable and there seems to be a collective
| delusion that it is.
| lumost wrote:
| One could take a cynical view that the collective delusion is
| necessary to sustain increasing wealth inequality. Americans
| are highly unlikely to accept such inequality if it is
| accompanied by large reductions in the standard of living. On
| paper, the debt isn't a big deal if the government could close
| out the balance with private assets.
| crote wrote:
| It isn't just wars. Infrastructure is crumbling because it's
| well past replacement age, climate change avoidance and
| mitigation is going to require massive investments over the
| next few decades, and the aging population is going to result
| in a big spending increase while tax income from the working is
| going to shrink.
|
| Even if the US manages to not get involved in yet another
| expensive overseas war, it's still going to have significant
| budget issues. Decades of prosperity have been squandered with
| zero long-term vision, let's hope the backlash from it in the
| near future won't be _too_ bad.
| Nifty3929 wrote:
| People forget that the economy is not about money, it's about
| stuff - the goods and services that add (economic) value to our
| lives: food, shelter, video games, medical treatments, shoes,
| etc.
|
| The problem isn't the deficit - it's the spending. When the
| government spends money, it takes people away from whatever other
| economic activity that person would be doing, and consumes their
| labor in service of the government instead. This reduces economic
| productivity, and we all end up with less stuff as a result.
|
| The key is to focus on productivity in terms of stuff (not money)
| - everything else takes care of itself.
|
| This is important because focusing on money and the deficit often
| inspire solutions that attempt to solve those problems, but at
| the cost of hurting productivity. Higher taxes, for example.
| Raising taxes may (arguably) raise revenue and reduce the deficit
| - but may well also reduce productivity. That would be bad.
| c22 wrote:
| Why is government spending a black hole of productivity? Does
| it not result in "stuff"?
| tdb7893 wrote:
| Theoretically the government is spending productivity for
| services so the argument that government spending is not
| creating stuff is a little weird (though obviously they are
| often less efficient). There are even lots of situations where
| government spending _increases_ productivity in significant way
| (e.g. public education)
| chung8123 wrote:
| It is weird to me to have so many people complain about inflation
| and have so many people say that our deficits won't cause
| inflation. We have been hiding inflation for so long and it
| finally hit us. Unfortunately I haven't met a politician yet that
| will actually try to balance the budget. It is a bunch of spend
| more and cut taxes that win elections.
| listless wrote:
| Austerity is miserable. It does not win elections. Even if a
| party bit the bullet, locked in and fixed this mess, they would
| be handing both the credit for any success and at least the
| best few future elections to the other party. Our system seems
| designed to fail from some angles.
| chung8123 wrote:
| It is a similar thing with climate change to be honest. We
| have been spending at a pace we cannot keep up with. In my
| mind, of course we won't have the same luxuries as our
| parents, they bought that life with CO2 debt.
| xyzzy4747 wrote:
| The debt doesn't matter too much... what matters the most for any
| country is if they have a lot of educated and talented people
| living there or not, the companies they work for, and a stable
| society and political environment. This is not going to change
| due to federal accounting tricks.
|
| It would be better to live in the U.S. with a 100x debt/gdp than
| live in Haiti, Niger, or South Sudan with a 0.1x debt/gdp.
| panick21_ wrote:
| Better then a 3rd world country in a civial war isnt the goal
| most people aspire too.
|
| Servicing the exisiting debt already cost the US a whole
| militaries worth of budget. And that is after decades of low
| interest rates. If interest rates go up even slightly, you have
| to refinance all the debt with a higher rate. And if the
| private market ever decide to lower the rating on US debt, or
| starts to expect higher inflation. The debt servicing alone
| could consume pretty much the whole discretionary budget.
|
| And remember the are massive budget issue on town and state
| level in the US too. And they expect the federal government to
| fund all the massive infrastructure spending they need. Plus
| all the federal infrastructure.All that infrastructure from the
| 60-70 is falling apart.
|
| The backlog is already huge and getting bigger, that from the
| discretionary budget.
|
| So debt absolutly matters, it has mattered to every government
| for at least 5000 years.
|
| A societ that is stable can be made unstable, and debt is
| usually involved. France just had massive demostrations because
| they wanted to increase retierment age. And that was a drop in
| the bucket compared to what France needs. That has lead to
| massive victory for outright nazi party in France, and the far
| left who want to ignore this problem has also won.
|
| And this is in normal peacful times. What if another finacial
| crisis happen?
|
| Lets see how stable everything is once taxes double or social
| services get cut massively. That how you get people elected
| with programs that are the opposite of a stable political
| envoirment.
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