US deficit: 1.3 trillion

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US deficit: 1.3 trillion

Postby Diadem » Fri Oct 08, 2010 3:39 am UTC

Article
NEW YORK (TheStreet) -- The Congressional Budget Office estimated Thursday that the federal deficit for the 2010 budget year came in at $1.29 trillion, down $125 billion from last year's epic shortfall of $1.42 trillion.
The $1.29 trillion figure is preliminary, noted the CBO, which expects to report the final number later this month.
The CBO said the estimated 2010 shortfall was, behind 2009 of course, the second biggest deficit for the United States since 1945, relative to the economy's size, as it represents roughly 8.9% of estimated gross domestic product for 2010 vs. 10% in 2009.

1.3 trillion dollars... There are certainly days on which I spend less.

In all seriousness. How does the US ever expect to plug that hole? That's $4,161 per person, just to break even. I don't see a family of 4 paying a 16k tax raise without going bankrupt.
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Re: US deficit: 1.3 trillion

Postby Gellert1984 » Fri Oct 08, 2010 3:50 am UTC

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Re: US deficit: 1.3 trillion

Postby ++$_ » Fri Oct 08, 2010 4:07 am UTC

A big chunk could come from defense spending, and another chunk from the expiration of the Bush tax cuts. That would not eliminate the deficit, but it would get it down to a non-ridiculous level.

There are also ways to increase revenue, such as a carbon tax, that also accomplish a useful purpose.

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Re: US deficit: 1.3 trillion

Postby sardia » Fri Oct 08, 2010 4:14 am UTC

Grow the economy. As the economy grows, it's easier to pay off since everyone has more wealth to pay.
Inflation. Inflation means debts are worth less and our money is worth less.
Taxation. Increasing the tax collected any way you can means we pay it off faster.
Reduce Spending. Cutting medicare/medicaid, social security, and finally defense spending is going to be paramount. These are our top 3 programs we spend our budget on. The 4th is either interest on debt or everything else.

Btw, if nothing else happens we'll pay off the debt at the current rate in 10 years. I believe there was a thread in the SB forum that dealt with this. They pretty much proposed all the above solutions.

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Re: US deficit: 1.3 trillion

Postby frezik » Fri Oct 08, 2010 4:43 am UTC

sardia wrote:Reduce Spending. Cutting medicare/medicaid, social security, and finally defense spending is going to be paramount. These are our top 3 programs we spend our budget on. The 4th is either interest on debt or everything else.


Medicare and Social Security do not contribute to deficts. They are paid for out of specific taxes that are set apart from the normal income taxes that pays general budget items. If you cut Social Security, it would likewise mean cutting that tax, and the defict stays exactly where it is.

In fact, Congress has occasionally raided the Social Security piggybank in order to pretend there was a budget surplus. See this old version of Russ Feingold's senate website:

http://web.archive.org/web/19991114220221/www.senate.gov/~feingold/socsec.html

Medicaid is a little different. Half of it is paid for by the states, not the feds. The fed half does come from general taxes.

Defense spending is the one and only place where cutting 10% of it would make a big, big difference.
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Re: US deficit: 1.3 trillion

Postby Aetius » Fri Oct 08, 2010 4:46 am UTC

frezik wrote:
sardia wrote:Reduce Spending. Cutting medicare/medicaid, social security, and finally defense spending is going to be paramount. These are our top 3 programs we spend our budget on. The 4th is either interest on debt or everything else.


Medicare and Social Security do not contribute to deficts. They are paid for out of specific taxes that are set apart from the normal income taxes that pays general budget items. If you cut Social Security, it would likewise mean cutting that tax, and the defict stays exactly where it is.

In fact, Congress has occasionally raided the Social Security piggybank in order to pretend there was a budget surplus. See this old version of Russ Feingold's senate website:

http://web.archive.org/web/19991114220221/www.senate.gov/~feingold/socsec.html

Medicaid is a little different. Half of it is paid for by the states, not the feds. The fed half does come from general taxes.

Defense spending is the one and only place where cutting 10% of it would make a big, big difference.


That is largely semantics. You can cut social security, cut the social security tax, raise the income tax and achieve deficit reduction with the same tax burden.

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Re: US deficit: 1.3 trillion

Postby cjmcjmcjmcjm » Fri Oct 08, 2010 5:41 am UTC

Raising taxes simply will give Congress more money to waste. We have seen that "starving the beast" with low taxes doesn't work either. We need to cut spending,bad. Perhaps if politicians stopped using the number of jobs they "created" as a dick-measuting contest, we'd be slightly better off.
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Re: US deficit: 1.3 trillion

Postby Minchandre » Fri Oct 08, 2010 5:52 am UTC

Diadem wrote:In all seriousness. How does the US ever expect to plug that hole? That's $4,161 per person, just to break even. I don't see a family of 4 paying a 16k tax raise without going bankrupt.


How about we acknowledge that the US debt isn't particularly meaningful, that the US's debt as a proportion of its annual GDP is actually quite reasonable compared to the rest of the developed world, and then go on to point out that the majority of that debt was accrued under Bush because of irresponsible tax cuts that are now under consideration for extension, and that the entire "HUGE DEBT BAD!" thing is primarily a Republican propaganda campaign to smear the Dems?

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Re: US deficit: 1.3 trillion

Postby big boss » Fri Oct 08, 2010 7:57 am UTC

Diadem wrote:Article

1.3 trillion dollars... There are certainly days on which I spend less.

In all seriousness. How does the US ever expect to plug that hole? That's $4,161 per person, just to break even. I don't see a family of 4 paying a 16k tax raise without going bankrupt.


Many people fail to realize that much of the debt is owed to American citizens themselves and it is not as bad as the media makes it out to be. So yea that may turn out to be $4,161 per person in a tax but much of that money will be returned to U.S. citizens when the debt is actually paid, this may make the rich richer since im assuming that the debt is mostly owed to rich folks and not poor people seeing as they don't have the capital to invest in government, but thats a tale for another day. So yea the national debt is not going to ruin the U.S. any time soon.
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Re: US deficit: 1.3 trillion

Postby Sharlos » Fri Oct 08, 2010 12:12 pm UTC

Minchandre wrote:
Diadem wrote:In all seriousness. How does the US ever expect to plug that hole? That's $4,161 per person, just to break even. I don't see a family of 4 paying a 16k tax raise without going bankrupt.


How about we acknowledge that the US debt isn't particularly meaningful, that the US's debt as a proportion of its annual GDP is actually quite reasonable compared to the rest of the developed world, and then go on to point out that the majority of that debt was accrued under Bush because of irresponsible tax cuts that are now under consideration for extension, and that the entire "HUGE DEBT BAD!" thing is primarily a Republican propaganda campaign to smear the Dems?

How about we read the thread and notice we're talking about the deficit not the debt. That's 1.3 trillion dollars that your in deficit.

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Re: US deficit: 1.3 trillion

Postby nopacman » Fri Oct 08, 2010 1:25 pm UTC

Har, someone needs some akumetsin'

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Re: US deficit: 1.3 trillion

Postby phonon266737 » Fri Oct 08, 2010 1:32 pm UTC

Minchandre wrote:
Diadem wrote:In all seriousness. How does the US ever expect to plug that hole? That's $4,161 per person, just to break even. I don't see a family of 4 paying a 16k tax raise without going bankrupt.


How about we acknowledge that the US debt isn't particularly meaningful, that the US's debt as a proportion of its annual GDP is actually quite reasonable compared to the rest of the developed world, and then go on to point out that the majority of that debt was accrued under Bush because of irresponsible tax cuts that are now under consideration for extension, and that the entire "HUGE DEBT BAD!" thing is primarily a Republican propaganda campaign to smear the Dems?


1.3t / 14.5t = 9%
According to EU rules, any deficit over 3% GDP is unsustainable.
In another news flash, it was about 2.5 % GDP under Bush. The transition from 2.5% to 9% happened over 1 year - the stimulus plan and TARP passed, making FY 2009 extraordinarily high compared to 2008. Spending did not go back down to pre-stimulus levels, and (by the current congress) is not projected to


As for "the majority of that debt was accrued under Bush"
Image
Purple is where Bush ends. Green is where Obama starts. "Extended Baseline" is if no new policy was enacted.

See the vertical part of the purple line in 2008? That's TARP. About 10x more debt was accrued from TARP than the rest of the entire Bush presidency. In Fact, for the majority of 2000-2008, the debt as a % GDP..wait a second..did not actually change that much! Maybe the smear campaign was actually that the Republicans weren't actually that irresponsible in the first place?

I'm just going to reinforce that this is the DEBT. This is the amount of money we paid interest on. It doesn't matter if the Iraq War was in the budget or not, it still shows up in the debt.

big boss wrote:Many people fail to realize that much of the debt is owed to American citizens themselves and it is not as bad as the media makes it out to be. So yea that may turn out to be $4,161 per person in a tax but much of that money will be returned to U.S. citizens when the debt is actually paid, this may make the rich richer since im assuming that the debt is mostly owed to rich folks and not poor people seeing as they don't have the capital to invest in government, but thats a tale for another day. So yea the national debt is not going to ruin the U.S. any time soon.


If you default on the debt owed to "Rich Americans", you damned sure will ruin the US. Remember the top 20% of earners fund ~ 80% of the budget through their taxes, and even more through their buying of bonds. We live in the internet age. I can transfer my bank account to Switzerland with 2 mouse clicks. Sure, there might be taxes to pay on that transfer of funds, but if I currently pay 40k a year in taxes, a one time lump sum of 100k doesn't fix the long term annual shortfall I just created. Also, if the government starts defaulting on its debts to Americans, why would Americans keep paying their taxes?

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Re: US deficit: 1.3 trillion

Postby frezik » Fri Oct 08, 2010 2:07 pm UTC

Aetius wrote:You can cut social security, cut the social security tax, raise the income tax and achieve deficit reduction with the same tax burden.


And immediately be voted out of office by the group that's probably the most reliable likely voter demographic: senior citizens.

Of course, cut defense and conservatives will be up in arms, too. Sometime soon, the Navy will be replacing the older Nimitz-class carriers with the new Gerald R. Ford-class, which is expected to have significant savings due to increased automation and a new catapult system that's less jarring on the aircraft. Think anybody will actually cut the defense budget accordingly?

Once you take Social Security, Medicare, Medicaid, and Defense off the table, what's left? Everything else is puny compared to those. The only other budget item big enough would be interest payments on the debt, and defaulting on those is widely considered to have unthinkable worldwide economic consequences.

phonon266737 wrote:According to EU rules, any deficit over 3% GDP is unsustainable.


It isn't meant to be sustained. Government spending ought to be counter-cyclical (e.g., spending lots during economic contractions, and backing off in good times). The main debate between different economic schools of thought is if it should be done via tax cuts or more direct funding of projects.

big boss wrote:Many people fail to realize that much of the debt is owed to American citizens themselves and it is not as bad as the media makes it out to be.


This is true, though in the last few years a worrying percentage is being grabbed up by China. Or perhaps not so worrying; with China being able dump all that debt at once, and the US being able to default on that debt all at once, the two countries have discovered a form of MAD that doesn't involve nukes.
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Re: US deficit: 1.3 trillion

Postby phonon266737 » Fri Oct 08, 2010 2:27 pm UTC

frezik wrote:
phonon266737 wrote:According to EU rules, any deficit over 3% GDP is unsustainable.


It isn't meant to be sustained. Government spending ought to be counter-cyclical (e.g., spending lots during economic contractions, and backing off in good times). The main debate between different economic schools of thought is if it should be done via tax cuts or more direct funding of projects.


If it isn't meant to be sustained, why don't the budgets reflect this?
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I see a significant Y axis shift (~ 7% GDP) indicating sustained, increased spending.

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Re: US deficit: 1.3 trillion

Postby broken_escalator » Fri Oct 08, 2010 2:32 pm UTC

I don't really know a lot about how a president controls the budget. Does bush's plans effect 2008-2010? I'll probably be googling around to find out, but figured I'd ask anyway.

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Re: US deficit: 1.3 trillion

Postby Diadem » Fri Oct 08, 2010 2:44 pm UTC

Minchandre wrote:
Diadem wrote:In all seriousness. How does the US ever expect to plug that hole? That's $4,161 per person, just to break even. I don't see a family of 4 paying a 16k tax raise without going bankrupt.


How about we acknowledge that the US debt isn't particularly meaningful, that the US's debt as a proportion of its annual GDP is actually quite reasonable compared to the rest of the developed world

Actually we were talking about deficit not debt. An 8.5% deficit (and 10% last year) is not at all reasonable compared to the rest of the developed world. EU countries officially have to stay under 3%, though admittedly during this crisis most go over that a bit. But 8.5% is huge. You need to raise taxes by 4K for every man, woman and child just to break even. And that is a proposal I just do not see congress passing anytime soon.

And if you are talking about debt, you underestimate how fast your debt is rising. The US debt used to be quite low compared to other countries. But it's now already 93% of GDP, which is really high for a developed nation. Sure a few are higher still, but those are generally not the healthiest of countries. Also, this is mere public debt. The US has huge private debts as well.

I don't think its unsolvable. But you need a change of mentality. The US seems to be like the apocryphal crew of the Titanic, that happily kept the party going and completely ignored the iceberg looming on the horizon, thinking they are unsinkable.
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Re: US deficit: 1.3 trillion

Postby Crius » Fri Oct 08, 2010 3:02 pm UTC

big boss wrote:Many people fail to realize that much of the debt is owed to American citizens themselves and it is not as bad as the media makes it out to be.


This may have been true at one point, but isn't really any more. About half of debt is actually intra-governmental, basically the social security surplus lending money to the general fund. The majority of publicly held debt is held by foreign institutions.

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Re: US deficit: 1.3 trillion

Postby Griffin » Fri Oct 08, 2010 3:17 pm UTC

Also, wasn't Bush's "debt level" artificially lowered because he kept things like war costs off the book? While the stimulus plan was certainly bad, Obama also added back all the things that Bush took off the "we are spending this money so it should count as being spent" pile.
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Re: US deficit: 1.3 trillion

Postby Garm » Fri Oct 08, 2010 4:11 pm UTC

Griffin wrote:Also, wasn't Bush's "debt level" artificially lowered because he kept things like war costs off the book? While the stimulus plan was certainly bad, Obama also added back all the things that Bush took off the "we are spending this money so it should count as being spent" pile.


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Re: US deficit: 1.3 trillion

Postby Роберт » Fri Oct 08, 2010 4:25 pm UTC

We can argue about whose fault it is, but I think eventually we'll realize that both parties seem to happily contribute to a ridiculous deficit. What should we do about it? One of my friends refuses to vote for anyone who voted for the bailouts. I guess that's a start.
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Re: US deficit: 1.3 trillion

Postby jesseewiak » Fri Oct 08, 2010 4:35 pm UTC

Роберт wrote:We can argue about whose fault it is, but I think eventually we'll realize that both parties seem to happily contribute to a ridiculous deficit. What should we do about it? One of my friends refuses to vote for anyone who voted for the bailouts. I guess that's a start.


So, your friend would've rather had the utter collapse of the financial system. I mean yes, TARP wasn't perfect, but it has been largely repaid. It my mind, Better TARP + Better Financial Bill > Better TARP + Current Financial Bill > TARP + Better Financial Bill > TARP + Financial Bill > No TARP

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Re: US deficit: 1.3 trillion

Postby bentheimmigrant » Fri Oct 08, 2010 4:42 pm UTC

Also, I seem to remember hearing recently that TARP bailouts may even provide a profit. As for the Auto bailout, it appears to have saved much of the industry (with, I suppose, the exception of Ford, who weren't going bankrupt IIRC), and provided a much more rapid path to recovery than a typical bankruptcy would have.

Largely the solution comes down to your economic beliefs. If you're for a laissez faire system, you generally think the solution is backing off and letting the economy grow. If you're more on the Keynes side, you view government intervention as essential. Good luck finding a consensus in these parts.
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Re: US deficit: 1.3 trillion

Postby CorruptUser » Fri Oct 08, 2010 5:05 pm UTC

The government saying that it reduced the deficit from 1.5 trillion to 1.3 trillion this year and calling it an improvement, is like me saying I only gained 50 instead of 60 pounds this year, so my new diet must be working.
Last edited by CorruptUser on Fri Oct 08, 2010 5:08 pm UTC, edited 1 time in total.

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Re: US deficit: 1.3 trillion

Postby broken_escalator » Fri Oct 08, 2010 5:08 pm UTC

You could support that statement through statistics I'm sure. Just plot out the pattern of lowered weight loss and label it as 'expected' or 'calculated' and have it extend from 'actual'.

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Re: US deficit: 1.3 trillion

Postby Sourire » Fri Oct 08, 2010 5:11 pm UTC

CorruptUser wrote:The government saying that it reduced the deficit from 1.5 trillion to 1.3 trillion this year is like me saying I reduced my weight gain this year from 20 pounds to 15 pounds, and declaring that I was getting thinner.

You seem to be assuming a continuous debt function. If the deficit went from point A to point B, such that it decreased over time (the instance we have here), then the deficit is shrinking. The government is "getting thinner."

Now I'm guessing, and correct me if I'm wrong here, that you still believe they're spending too much. I'll agree to it on a purely mathematical level. Surely, it'd be better for our economy if they closed the deficit this year. However, given that projection is unlikely, I'll settle for "it went down".
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Re: US deficit: 1.3 trillion

Postby frezik » Fri Oct 08, 2010 5:49 pm UTC

phonon266737 wrote:If it isn't meant to be sustained, why don't the budgets reflect this?
. . .
I see a significant Y axis shift (~ 7% GDP) indicating sustained, increased spending.


Because the stimulus wasn't paid for all at once. It's paid for over the course of the next few years as various projects get started. Most of the immediate costs were, in fact, tax cuts, such as the Homebuyer credit and mis-titled Cash for Clunkers.

Notice, too, the dip in the graph in the late '90s. This is exactly what should happen during an economic boom.
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Re: US deficit: 1.3 trillion

Postby phonon266737 » Fri Oct 08, 2010 7:07 pm UTC

Garm wrote:
Griffin wrote:Also, wasn't Bush's "debt level" artificially lowered because he kept things like war costs off the book? While the stimulus plan was certainly bad, Obama also added back all the things that Bush took off the "we are spending this money so it should count as being spent" pile.


Yes. Phonon doesn't understand math.


phonon266737 wrote:Purple is where Bush ends. Green is where Obama starts. "Extended Baseline" is if no new policy was enacted.See the vertical part of the purple line in 2008? That's TARP. About 10x more debt was accrued from TARP than the rest of the entire Bush presidency. In Fact, for the majority of 2000-2008, the debt as a % GDP..wait a second..did not actually change that much!
Maybe the smear campaign was actually that the Republicans weren't actually that irresponsible in the first place?

I'm just going to reinforce that this is the DEBT. This is the amount of money we paid interest on. It doesn't matter if the Iraq War was in the budget or not, it still shows up in the debt.


The CBO doesn't give a damn what was and was not in the budget when they tabulate the debt accumulated in any given year. Fact is, the debt as a % GDP did not increase very much. Sure, the debt increased, but so did GDP. I am quite capable of doing math, but you are quite clearly incapable of understanding the difference between accumulated debt and projected vs. actual deficit. Yes, Bush spent more than he projected to spend in the budget. Yes, that extra money still got added into the national debt when it was spent, regardless of whether or not it was in the budget.

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Re: US deficit: 1.3 trillion

Postby CorruptUser » Fri Oct 08, 2010 7:29 pm UTC

Sourire wrote:You seem to be assuming a continuous debt function. If the deficit went from point A to point B, such that it decreased over time (the instance we have here), then the deficit is shrinking. The government is "getting thinner."


The deficit is the measure of how much the government overspent. While losing 1.3 trillion is not as bad as losing 1.5 trillion, the debt is still increasing. I consider an improvement to be decreasing total debt, not "we are losing less than we were".

Oh, and debt that is eaten up by inflation (that is, the interest rate is lower than the inflation rate) is decreasing debt.

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Re: US deficit: 1.3 trillion

Postby big boss » Fri Oct 08, 2010 7:56 pm UTC

Crius wrote:
big boss wrote:Many people fail to realize that much of the debt is owed to American citizens themselves and it is not as bad as the media makes it out to be.


This may have been true at one point, but isn't really any more. About half of debt is actually intra-governmental, basically the social security surplus lending money to the general fund. The majority of publicly held debt is held by foreign institutions.

Image


Yes but about 50% of it is basically owed to the government itself, you can't really default on a debt to yourself, at least I don't think you can.
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Re: US deficit: 1.3 trillion

Postby sardia » Fri Oct 08, 2010 8:04 pm UTC

Oh, you're right, this is yearly deficit. =|

Anyway, for those of you who are afraid that we won't ever cut our big 3 expenditures in our budgets due to political fears. When a crisis happens, no amount of senior voting or petitioning in the world is going to stop the taxes from going up or the slashed benefits. We will fix the budget, it's just a matter of how fast we can convince each faction that the gravy train is over. If we cut our benefits and raised our taxes because then we save a bunch in future interest. If we wait til later, then we just have to cut even more benefits and raise taxes up to world war II levels. Either way, the problem will get fixed. Btw, if anyone wants to help, you can send money to here:

http://www.treasurydirect.gov/govt/reso ... ebtFinance
The bureau of public debt has a small office which receives checks from people who want to pay off the public debt.
These people are already helping: http://www.nytimes.com/2010/09/24/busin ... 0us&st=cse
Sure it'll take a million years before it gets paid off, but by god, this is America. We don't care about the math.

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Re: US deficit: 1.3 trillion

Postby frezik » Fri Oct 08, 2010 8:57 pm UTC

big boss wrote:Yes but about 50% of it is basically owed to the government itself, you can't really default on a debt to yourself, at least I don't think you can.


Sure you can. It would just ensure that nobody under 40 would ever see a dime of Social Security payouts.
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Re: US deficit: 1.3 trillion

Postby big boss » Fri Oct 08, 2010 11:41 pm UTC

frezik wrote:
big boss wrote:Yes but about 50% of it is basically owed to the government itself, you can't really default on a debt to yourself, at least I don't think you can.


Sure you can. It would just ensure that nobody under 40 would ever see a dime of Social Security payouts.


Yea, but thats not due to the default itself, its more of a secondary effect. I view it as saving one body part at the expense of another.
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Re: US deficit: 1.3 trillion

Postby Vaniver » Sat Oct 09, 2010 1:38 am UTC

big boss wrote:Yes but about 50% of it is basically owed to the government itself, you can't really default on a debt to yourself, at least I don't think you can.
Is the government the beneficiary of social security, or is it the American people?

Because if one part of the government defaults on its promise to pay the other part of the government, that will make a big difference to the people who were expecting to receive money from the part that's now holding worthless debt.

big boss wrote:I view it as saving one body part at the expense of another.
I am more than a body part, thank you very much.
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Re: US deficit: 1.3 trillion

Postby meatyochre » Sat Oct 09, 2010 2:04 am UTC

big boss wrote:
frezik wrote:
big boss wrote:Yes but about 50% of it is basically owed to the government itself, you can't really default on a debt to yourself, at least I don't think you can.


Sure you can. It would just ensure that nobody under 40 would ever see a dime of Social Security payouts.


Yea, but thats not due to the default itself, its more of a secondary effect. I view it as saving one body part at the expense of another.

If social security stops working, that is essentially telling the millions of Americans who have paid into it for years, or even decades, that their money was 100% entirely wasted. The whole reason to pay into it while you work is so you get benefits later. It'd be like when Enron lost every single employee's pensions, but the execs still managed golden parachutes for themselves. The blanket loss of social security benefits is not something a rational person can trivialize unless you either don't work or you get paid under the table.

The only way we can afford to phase out social security (even a little fairly) is to stop collecting SS taxes from everybody. Then either cash it out now (not likely feasible), or when workers hit retirement age, so they at least get back the money they put in. Anything else is frankly government-sponsored theft.

Of course, we still have a large number of people who are on social security (for disabilities or old age) who have either not paid anything into the system, or have not worked long enough and are taking more than they put in. How do we cut them off? They're going to have to be reallocated into SOME kind of welfare program, or they'll simply die.
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Re: US deficit: 1.3 trillion

Postby CorruptUser » Sat Oct 09, 2010 5:56 am UTC

...raise the age of Social Security to 72?
...raise the tax bracket from $106,800 to all incomes without raising the benefit, as unfair as that is?
...change the laws to allow the money to be invested in an annuity with a bank, rather than with the Gov, allowing better management of the money?

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Re: US deficit: 1.3 trillion

Postby EdgarJPublius » Sat Oct 09, 2010 8:06 am UTC

frezik wrote:Of course, cut defense and conservatives will be up in arms, too. Sometime soon, the Navy will be replacing the older Nimitz-class carriers with the new Gerald R. Ford-class, which is expected to have significant savings due to increased automation and a new catapult system that's less jarring on the aircraft. Think anybody will actually cut the defense budget accordingly?


At most, the new carriers will save a few million a year over the older carriers, barely even a drop in the bucket. most of the Defense budget actually goes to administrative costs, maintaining unnecessary domestic bases and propping up the least efficient possible acquisitions system. There was a report several years ago indicating that a cut of the general staff by 50% would save more than 100 billion dollars a year without damaging readiness or any military capabilities. Streamlining the acquisitions process would easily save three or four times that and actually /improve/ capabilities as new systems would be able to enter service faster and cost less to acquire for the same capabilities.

If we then eliminated powerpoint use in the department of defense, we could probably run the whole military on some loose change from between the cushions of the White House couches.


In all seriousness, the national 'deficit'/'debt'/whatever you want to call it is way overblown, the actual amount of the debt is considerably less than the U.S. monetary base, and only about twice the yearly increase in the M2 money supply.

If the Federal Reserve 'created' 1.3 trillion dollars next year to balance the budget, it would register as little more than a blip in terms of inflation, and it's not clear that such a course of action would have much int he way of other negative effects, if it was done slowly over several years, it's doubtful anyone outside of some economists hyped up on their own pseudo-scientific dogma would even notice.

And, as long as it is theoretically possible for the government to simply conjure it's way out of the deficit, there's little reason to actually do it.

Sure, it's a financial tight-rope we're walking, but we're performing over a safety net of fiat currency and an elastic money supply.
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Re: US deficit: 1.3 trillion

Postby phonon266737 » Sat Oct 09, 2010 11:36 am UTC

EdgarJPublius wrote:In all seriousness, the national 'deficit'/'debt'/whatever you want to call it is way overblown, the actual amount of the debt is considerably less than the U.S. monetary base, and only about twice the yearly increase in the M2 money supply.

If the Federal Reserve 'created' 1.3 trillion dollars next year to balance the budget, it would register as little more than a blip in terms of inflation, and it's not clear that such a course of action would have much int he way of other negative effects, if it was done slowly over several years, it's doubtful anyone outside of some economists hyped up on their own pseudo-scientific dogma would even notice.

And, as long as it is theoretically possible for the government to simply conjure it's way out of the deficit, there's little reason to actually do it.

Sure, it's a financial tight-rope we're walking, but we're performing over a safety net of fiat currency and an elastic money supply.


Except here's the problem. You pay interest on your debts, they roll over daily (lots of small loans). If you start printing money at a "fast" rate, that's inflation. Well, when my debt rolls over, I'm going to demand an interest rate higher than the inflation rate and totally negate the effect of your inflation on the money you owe me - otherwise I would just call my loan right then and invest in gold. Now you're just inflating everyone's cash reserves away to nothing and not really making a big chunk in the debt. As the lenders begin the expect continued inflation, they demand even higher interest rates than your current inflation rate! So, in order to actually make a difference, you have to inflate much, much more than one would expect looking at the debt as one static debt. That's called hyper inflation. Guess what? The lenders still get their money, inflation adjusted. Its everyone else who just saw their life savings turn to nothing, that gets screwed.

Secondly, you compare the size of the debt to the size of the GDP. Not the monetary base. Random example- a million dollar revenue/ year business that's 500k in debt, is not that great, but it's not terrible. a 100k a year salary person 500k in debt, that's pretty bad. Remember these aren't assets (when you buy a house, you're in debt, plus you have an asset). This is primarily straight up unsecured debt.

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Re: US deficit: 1.3 trillion

Postby EdgarJPublius » Sat Oct 09, 2010 6:22 pm UTC

Generally, you don't renegotiate the interest rate or the payment period on a given debt, if you make a loan at a certain interest rate, and inflation increase, you're pretty much screwed.

And you can compare the size of the debt to whatever you want, but you don't pay a debt out of GDP.
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Re: US deficit: 1.3 trillion

Postby phonon266737 » Sun Oct 10, 2010 12:27 am UTC

The Us government renegotiates it's debts every day. It's not one big loan for 14 trillion dollars. It's many, many loans with periods ranging from 1 day to 30 years. Those who buy short term debt buy it because they want the ability to adjust for inflation. Long term buyers get a better rate (the treasury offers inflation-adjusted bonds now, too). Also, as the yield on existing bonds go down, people start selling before maturity. As existing bonds become more and more worthless, who's going to invest in new US treasuries when people are selling them in the private market at negative yield just to get out of them?

frezik wrote:
phonon266737 wrote:If it isn't meant to be sustained, why don't the budgets reflect this?
. . .
I see a significant Y axis shift (~ 7% GDP) indicating sustained, increased spending.


Because the stimulus wasn't paid for all at once. It's paid for over the course of the next few years as various projects get started.


Bull. The stimulus was 800 billion. That's ~5% of GDP. over 2 years that would be a 2.5% increase - the stimulus explains the little 3% GDP "peak" from 08 to 2010. It does not explain the seemingly-permanent +7% shift .

And you can compare the size of the debt to whatever you want, but you don't pay a debt out of GDP

That's not true. The debt as a % GDP is essentially the tax rate necessary to pay the debt off in one year. The deficit as a % GDP is essentially the additional tax rate necessary to balance the budget. Right now, the government would need to consume ~ 9% of the economy to balance it's budget. If you wanted to pay the thing down to 2008 levels, you need to raise an additional 50% GDP. So, that's another (on top of the 9% to balance!) 1% of the economy for 50 years, 2% for 25, etc.

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Re: US deficit: 1.3 trillion

Postby Bubbles McCoy » Sun Oct 10, 2010 11:04 pm UTC

EdgarJPublius wrote:In all seriousness, the national 'deficit'/'debt'/whatever you want to call it is way overblown, the actual amount of the debt is considerably less than the U.S. monetary base, and only about twice the yearly increase in the M2 money supply.

If the Federal Reserve 'created' 1.3 trillion dollars next year to balance the budget, it would register as little more than a blip in terms of inflation, and it's not clear that such a course of action would have much int he way of other negative effects, if it was done slowly over several years, it's doubtful anyone outside of some economists hyped up on their own pseudo-scientific dogma would even notice.

And, as long as it is theoretically possible for the government to simply conjure it's way out of the deficit, there's little reason to actually do it.

Sure, it's a financial tight-rope we're walking, but we're performing over a safety net of fiat currency and an elastic money supply.

This just... isn't really true. First off, "only about twice" in the context of money is a rough enough approximation as to be useless. The bigger issue is that the Federal Reserve doesn't have control over M2, only the base - M2 is based off of much more complicated aspects of desired investment. Even if they could they'd still be adding some $800B to the money supply, this isn't a free action - pretending it is is where hyperinflation is born. It's not a matter of dogma, this just is what happens when you attempt to pay off government obligations with printed money.


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