Annual Interest on Debt Surpasses $1 Trillion

[cpwill]

Tell us if you will, why are Republicans only concerned about the debt when democrats control the white house?

Because they are partisans, and are currently controlled by a big-spending, big-government, would-be-autocrat.

 

[bongsaway]

Because they are partisans, and are currently controlled by a big-spending, big-government, would-be-autocrat.

I'm impressed, that is what I consider a shockingly accurate assessment of the current GOP voter many of who vote against their own best interests.

 

[brianpatrick]

Why would anyone need to be paid, if the labor has no cost?

yes I suppose they wouldn’t. Everything would just be free.

 

[cpwill]

So it's not a lie. Who didn't hold them to account? Voters. Put the blame where it's due.

True. Voters do not seem interested in hard fiscsl reality.

Higher taxes on the wealthy are needed for a wide range of reasons. Tax revenue is certainly one of them.

To generate needed revenue in the least destructive manner possible is the right purpose of a tax structure, however, this runs into a hard problem: higher income taxes on top income earners don't produce higher revenue:



IIfwe want European-style revenues, we are young to need European-style taxes, meaning: broad tax increases on the lower and middle class.

Which party will take the lump of harming our economic growth to pay down debt?

Neither, because attempting to do so will (as you point out) result in immediate electoral loss.

 

[Mach]

To generate needed revenue in the least destructive manner possible is the right purpose of a tax structure, however, this runs into a hard problem: higher income taxes on top income earners don't produce higher revenue:

I'm sure the loopholes the rich work into the system, offshoring, legal recourse, etc., are a completely mystery to us. Maybe defend the IRS like Republicans want, surely that's just coincidence.

Ifwe want European-style revenues, we are young to need European-style taxes, meaning: broad tax increases on the lower and middle class.

Europe has debt too though.
If we want European style revenues, we'd get European style benefits, sounds OK to some, not to others. They have less class warfare, presumably in large part due to this too.
For the average person, it's certainly better. Could better endure a slower economy to pay off debt if we had healthcare/retirement and better wages/benefits, as a population?

Neither, because attempting to do so will (as you point out) result in immediate electoral loss.

Yeah, and I bet some economist/strategist types look at this from a world perspective. We're competing against China, if we slow, and they pass us, we're screwed. So it's the pedal to the metal, and we'll see whose car blows up first.
Like a game of chicken. Beats war though I suppose. Maybe MMT will swoop in, in the end, and just waive a magic wand and that debt goes poof. We make a deal that all nations will do this by X percent, one time deal (wink wink).

Realistically though, we'll crash the economy and then blame each other.

 

[Individual]

They don't want to talk about it. Both Trump and Harris are going to spend huge. They will both be out of politics by the time the shit hits the fan.

We're pass the point where this can be fixed. You'd have to raise taxes about 40% just to cover the deficit, never mind the debt. As far as huge spending cuts, forget it, it's not happening.

The only politically possible way out is the printing press, and when they start printing trillion after trillion, remember that it's the fed's job to "fight inflation".

Simplify the tax code, by eliminating ALL deductions and tax gross income.
If/when necessary, apply a surtax to cover all/most of the deficit.
It CAN be fixed, IF only we begin discussing HOW. And I see no need to cut spending as long as voters across the income spectrum accept the tax liability they are brought to bear to cover what government is spending.
If we're going to call our government a Democracy, we ALL need to become more involved than simply electing politicians.

 

[cpwill]

I'm sure the loopholes the rich work into the system, offshoring, legal recourse, etc., are a completely mystery to us.

Eh. People will make lots of changes to how they take compensation in order to - rationally - avoid having it taken. The higher income folks have the greatest ability to be flexible, and incomes are a more flexible base than (say, for example) food sales.

Europe has debt too though.
If we want European style revenues, we'd get European style benefits, sounds OK to some, not to others.

Well, we need European taxation just to keep our current benefits (such as they are) going.

They have less class warfare, presumably in large part due to this too.

I'm not certain this is the case. Class conflict has never really caught on, historically, in the United States, the way it did in Europe; we had no history of Fuedalism to fuel it.

For the average person, it's certainly better. Could better endure a slower economy to pay off debt if we had healthcare/retirement and better wages/benefits, as a population?

Hm. I think I might challenge this as well, though, it would have to be a strictly material judgment of "better" for apples to apples comparison (how do you put value on freer speech?).

I think a common error is to assume that Europeans have basically our standard of income / living, but better benefits because they tax the rich. This is, I think, not mathematically borne out, though I'd be willing to do some side by side comparisons.

Yeah, and I bet some economist/strategist types look at this from a world perspective. We're competing against China, if we slow, and they pass us, we're screwed. So it's the pedal to the metal, and we'll see whose car blows up first.
Like a game of chicken. Beats war though I suppose. Maybe MMT will swoop in, in the end, and just waive a magic wand and that debt goes poof. We make a deal that all nations will do this by X percent, one time deal (wink wink).

History is littered with the stories of governments who attempted to print their way out of crises. They are not happy stories.

Realistically though, we'll crash the economy and then blame each other.

On that, I fear, we are in complete agreement

 

[Econ4every1]

As a share of the total U.S. economy, the deficit is running above 6%,

Source?

FRED says 2.3%

 

[Econ4every1]

• Reform the entitlements to decrease expenditures (sucks, and, necessary).
• Reduce Defense spending (sucks, and, necessary).
• Increase taxes broadly (sucks, and, necessary).

Cutting spending reduces income.

So all of these decreases in spending and increases in taxes you propose would result in increases in unemployment and would result in greater entitlement spending or increases in the homeless population, people dying from healthcare they cannot obtain, children lacking education because funding is cut and real wealth destroyed as the money to upkeep is cut. Not to mention increased defaults on personal debt, of which the household sector alone has $20 trillion dollars in outstanding debt. Throw in everything and the private sector is $75 trillion in debt. Now you want to cut spending and increase taxes? All for what? What benefit?

None of these proposals are solutions, they make the problem worse. The only people that benefit from austerity are the wealthy who buy defaulted properties and businesses for pennies on the dollar.

 

[Econ4every1]

And we continue to have deficit budgets rather than fix the tax code to result in a balanced budget.

Why would you want to balance the budget?

The best way to to think about this is to go back in time and imagine a balanced budget.

If we look at the last 40 years:

The population has increases over 30% or over 100 million people
Productivity per person has increased by 128%
The amount of money moved to the foreign sector (money not circulating in the US economy) has grown by $8 trillion dollars.

Now you don't have to go back 40 years, do 10, 20, 30 years, but the effect is the same. If spending and taxes equal zero, the amount of money in the economy either stays the same, or is created though increasing amount of leverage on private sector debt, of which there is currently $75 trillion dollars of debt outstanding ($2o trillion in the private sector alone).

You can't grow an economy without increasing the amount of money flowing in it. If you want the government's debt to stay the same, all you're saying is that you want the debt and the risk entirely within the private sector and we saw in 2008 how that went.

You need to balance the economy, not the budget.

 

[Econ4every1]

They claim they will reduce the debt by increasing taxes on the wealthy. That is, IMO, a lie. They have absolutely no intention of using the money in that way.

Both sides lie because they know they have to. Americans don't understand the debt, what it is, what it represents, and what would happen if you paid it down or off....

Let's look at ALL significant past attempts to pay down on the debt...

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.


Yet both parties are voted into office by people who think that the government's debt operates like a household. For the few on Capitol hill, who after getting access to the resources needed to understand the reality of our debt system, they realize they could never try to explain how the system works, because the myth of the US federal debt is so pervasive they'd get laughed out of Congress.

So the American people get the representees they deserve and despite both parties disagreeing on almost everything, the one thing they do agree on is flat wrong.

 

[Econ4every1]

Simplify the tax code, by eliminating ALL deductions and tax gross income.

So the poor pay more as a percentage of their income and rely even more on assistance.

The middle class who generally live check to check or close to it lose whatever deductions they currently get making the middle class poorer.

How does this help?

 

[Individual]

So the poor pay more as a percentage of their income and rely even more on assistance.

No, they would pay the lowest percentage of their income, and assistance would be provided based on need.

The middle class who generally live check to check or close to it lose whatever deductions they currently get making the middle class poorer.

The middle class would need no deductions as the tax rates would increment based on multiples of the GNI per person.

How does this help?

The tax rate would only grow incrementally as income increased. Only those with income up to the GNI per person would, in good times or bad times, pay an equal percentage of their income.

 

[Individual]

Why would you want to balance the budget?

The best way to to think about this is to go back in time and imagine a balanced budget.

If we look at the last 40 years:

The population has increases over 30% or over 100 million people
Productivity per person has increased by 128%
The amount of money moved to the foreign sector (money not circulating in the US economy) has grown by $8 trillion dollars.

Now you don't have to go back 40 years, do 10, 20, 30 years, but the effect is the same. If spending and taxes equal zero, the amount of money in the economy either stays the same, or is created though increasing amount of leverage on private sector debt, of which there is currently $75 trillion dollars of debt outstanding ($2o trillion in the private sector alone).

You can't grow an economy without increasing the amount of money flowing in it. If you want the government's debt to stay the same, all you're saying is that you want the debt and the risk entirely within the private sector and we saw in 2008 how that went.

You need to balance the economy, not the budget.

I'm all ears, how would you balance the economy?

 

[Econ4every1]

I'm all ears, how would you balance the economy?

Balancing the looks at things like capacity utilization, which is the percentage of US total production capacity being used (available resources include manufacturing, mining, and electric and gas utilities). In other words, capacity utilization measures the amount of slack in the economy by looking at how much industries in the U.S. are presently producing and comparing that output to what they could potentially produce if the industrial sector was running at maximum capacity.



So why is there slack in capacity?

Honestly, there are at least 5-6 major categories that could explain it, but the fact remains that unused capacity could be put to some use without increases in inflation as the infrastructure already exists.


One of the issues is skilled labor, so perhaps a way to balance the economy is to spend additional money subsidizing education, especially in the fields that require it.

Overall, the government moves money into and out of the economy, sometimes the economy needs more spending, sometimes less, but looking at the prevailing economic data and, for instance, counter-cyclical spending is a way to use the government's power to balance the economy.

I've explained several times that increasing populations and per-person productivity over time increases the demand for money when compared to the past. Balanced budgets keep inflows and outflows of the government's money the same, while labor potential increases significantly over time. So the government can balance the economy by increasing spending/ decreasing taxes. Increasing debt on the government's side is increased surplus on the private sectors side. These two things are equal and offset.
Since 1990 $8.1 trillion dollars have been captured by the foreign sector. That money no longer circulates in the domestic US economy. To balance the economy, the US government has to deficit spend $8.1 trillion dollars just to keep money circulating at the same level, all other things being equal.

 

[Individual]

Balancing the looks at things like capacity utilization, which is the percentage of US total production capacity being used (available resources include manufacturing, mining, and electric and gas utilities). In other words, capacity utilization measures the amount of slack in the economy by looking at how much industries in the U.S. are presently producing and comparing that output to what they could potentially produce if the industrial sector was running at maximum capacity.

View attachment 67538686

So why is there slack in capacity?

Honestly, there are at least 5-6 major categories that could explain it, but the fact remains that unused capacity could be put to some use without increases in inflation as the infrastructure already exists.


One of the issues is skilled labor, so perhaps a way to balance the economy is to spend additional money subsidizing education, especially in the fields that require it.

Overall, the government moves money into and out of the economy, sometimes the economy needs more spending, sometimes less, but looking at the prevailing economic data and, for instance, counter-cyclical spending is a way to use the government's power to balance the economy.

I've explained several times that increasing populations and per-person productivity over time increases the demand for money when compared to the past. Balanced budgets keep inflows and outflows of the government's money the same, while labor potential increases significantly over time. So the government can balance the economy by increasing spending/ decreasing taxes. Increasing debt on the government's side is increased surplus on the private sectors side. These two things are equal and offset.
Since 1990 $8.1 trillion dollars have been captured by the foreign sector. That money no longer circulates in the domestic US economy. To balance the economy, the US government has to deficit spend $8.1 trillion dollars just to keep money circulating at the same level, all other things being equal.

Sounds like your solution is for government to spend more money. Is that correct?

 

[Econ4every1]

Sounds like your solution is for government to spend more money. Is that correct?

If we're talking about net spending, generally speaking, yes, but it really depends on the prevailing economic conditions.

 

[cpwill]

Source?

FRED says 2.3%

View attachment 67538614

Ah you accidentally confused interest payments with the deficit.

The Federal Deficit was $1.8 Trillion in FY 2024. The US Economy is $28.87 Trillion.

1.8 is 6.25% of 28.87.

 

[Econ4every1]

Ah you accidentally confused interest payments with the deficit.

Doh! Quite right.

 

[Jason Warfield]

I agree that taxes alone won't pay down. But add that in with other fiscal policies and you will find that it will help a lot.

I also agree that reducing spending won't bring down the debt because the voters don't want. Oh, they say they do...until its the programs they want/need that comes to the chopping block and suddenly it becomes "cut THEIR spending, not OURS". Politicians want to get re-elected...so the spending continues.

In addition, I also agree that freezing spending won't work either for two reasons: the same reason why reducing spending won't work and...because of things that we can't plan on, like emergencies, as in...war or natural disasters. A lot of folks got made at FEMA and accused the Democrats of not fully funding FEMA (it was actually mainly Reps that did one, though). So, if you freeze spending...then you can't bitch about things like FEMA. Now...let's say you decide that some things won't get frozen. I then ask...who decides. And then we get back to the voters who will make their demands....and we go right back to square one.

So, the first thing that needs to get fixed...are the voters and their expectations for government and learning how to sacrifice and do without. Until that happens...no amount of bitching about the economy and stating who should do what means a goddamn thing.

 

[Gatsby]

We should have a federal spending freeze for a year (with a few exceptions), and allow most of the Trump tax cuts to expire as scheduled. The deficit is too large, relative to the state of our economy. Ideally, deficits should be large during recessions, and nonexistent during booms.

 

[Gatsby]

To generate needed revenue in the least destructive manner possible is the right purpose of a tax structure, however, this runs into a hard problem: higher income taxes on top income earners don't produce higher revenue:

View attachment 67538465

Most economic studies have indicated that higher taxes do indeed produce higher revenues, except in the most extreme cases. This looks like a chart crime, for multiple reasons:

• The y-axis ranges from 0 to 90, obscuring meaningful 1% increases and decreases in tax revenue as a percentage of GDP. A 1% change would be $290 billion!
• The x-axis dates all the way back to 1950 and ends at 2005. Let's grant that a top income tax rate of 91%, as it was in the 1950s, is too high and most likely on the bad side of the Laffer Curve, and could indeed lead to increased revenue by cutting taxes. Not really relevant to the modern situation though.
• The blue line and red line are not measuring the same thing. The blue line is looking solely at the top income tax rate, whereas the red line is measuring ALL federal tax revenue.

 

[Individual]

If we're talking about net spending, generally speaking, yes, but it really depends on the prevailing economic conditions.

And borrowing rather than taxing is the preferred method of funding such increased spending?

 

[Econ4every1]

And borrowing rather than taxing is the preferred method of funding such increased spending?

Again, it depends. You are obviously leading me though a line of questioning in an attempt to show the flaws in my answer/ reasoning, so in the interest I'll be a good sport I'll answer your questions.

However, Instead of looking at the future where the variables can't be known, let's look at the past so that I can answer your question and we can evaluate the real world effects.

And let's evaluate your question in a reasonable long period of time as shorter periods may not be representative of the larger whole.

You can pick any 10 year period you want and I will commit to the idea that the government needs to (needed to) deficit spend into the economy, which has the effect of adding new dollars to the economy. Which means that spending exceeded taxes (with the exception of the 1998-2001 period). I think this answers your question.

That said, I think the concept of government "borrowing" is largely misunderstood in what it is and what its affects are, but instead of getting to far into it, I'll set that aside and address it if I need to.

-Cheers

 

[Individual]

Again, it depends. You are obviously leading me though a line of questioning in an attempt to show the flaws in my answer/ reasoning, so in the interest I'll be a good sport I'll answer your questions.

However, Instead of looking at the future where the variables can't be known, let's look at the past so that I can answer your question and we can evaluate the real world effects.

And let's evaluate your question in a reasonable long period of time as shorter periods may not be representative of the larger whole.

You can pick any 10 year period you want and I will commit to the idea that the government needs to (needed to) deficit spend into the economy, which has the effect of adding new dollars to the economy. Which means that spending exceeded taxes (with the exception of the 1998-2001 period). I think this answers your question.

That said, I think the concept of government "borrowing" is largely misunderstood in what it is and what its affects are, but instead of getting to far into it, I'll set that aside and address it if I need to.

-Cheers

If you truly recognize some flaws in your answer/reasoning, I'm satisfied.
There can be times when government needs to borrow and run a deficit, but most of the time I don't see a necessity aside from just increased spending without increasing taxes. And what I've been suggesting would not increase the taxes on the bottom about 70% of taxpayers., unless a surtax was applied.