Annual Interest on Debt Surpasses $1 Trillion

[Econ4every1]

but most of the time I don't see a necessity [of deficit spending] aside from just increased spending without increasing taxes.

I'll give you several reasons why I think deficit spending is necessary.

The US population increases has increased by an average of 293k per month over the last 40 years.

Population

Looking at the census...

The U.S. population in 2020 was 331,449,281.

The 1980 population of 226,545,805.

Here's the breakdown:

• Population increase: 104,903,476 people (68 million more working aged people)
• Percentage increase: 31.64%

Do you think that we need more money in the economy with 31% more people?

Productivity:

Each worker, thanks to advances mostly in computers, but other tech as well, has made the average worker 128% more productive on a per worker basis when compared to 1980.

So in real terms, we'd take the number of workers and multiply by per-person productivity to get a fair comparison with the year 1980. Today there are 208 million working aged people vs 140 in 1980. So if we use 1980 as the year to compare to today we have 474 million peoples worth of productivity (208 million x the increase in per-person output or 2.28) when comparing today to 1980, so in real terms the economy has an output potential 70% greater today than 40 years ago.

Of course, not all people of working age are working, but that's true in both time periods and I don't want to over complicate this, even if the number in 1980 and 2020 were 5%-10% less, the result would stay largely the same as a percentage).

Do you think that an economy with more people and much greater output potential needs more dollars?

Global reserves

Today, the world has over $14 trillion dollars in in foreign reserves, 60% of those are US dollars. That means there is about $8.76 trillion dollars being held in foreign accounts (mostly central banks), that's $8.76 trillion dollars not circulating in the US economy.

Total foreign reserves globally in 1990 was less than $1 trillion (of which US portion of that was a fraction), thus, the net growth in global reserves has increased by about $8 trillion.


There are three of the biggest reasons that I think the US Government needs to net deficit spend.

To say nothing of how deficit spending is an opportunity to rebalance the share of dollars between the top 10% and the bottom 90% of income and wealth holders. Even with government entitlements and spending the top 10 percent's share of wealth has accelerated significantly.



Your thoughts?

 

[Individual]

I'll give you several reasons why I think deficit spending is necessary.

The US population increases has increased by an average of 293k per month over the last 40 years.

Population

Looking at the census...

The U.S. population in 2020 was 331,449,281.

The 1980 population of 226,545,805.

Here's the breakdown:

• Population increase: 104,903,476 people (68 million more working aged people)
• Percentage increase: 31.64%

Do you think that we need more money in the economy with 31% more people?

Productivity:

Each worker, thanks to advances mostly in computers, but other tech as well, has made the average worker 128% more productive on a per worker basis when compared to 1980.

So in real terms, we'd take the number of workers and multiply by per-person productivity to get a fair comparison with the year 1980. Today there are 208 million working aged people vs 140 in 1980. So if we use 1980 as the year to compare to today we have 474 million peoples worth of productivity (208 million x the increase in per-person output or 2.28) when comparing today to 1980, so in real terms the economy has an output potential 70% greater today than 40 years ago.

Of course, not all people of working age are working, but that's true in both time periods and I don't want to over complicate this, even if the number in 1980 and 2020 were 5%-10% less, the result would stay largely the same as a percentage).

Do you think that an economy with more people and much greater output potential needs more dollars?

Global reserves

Today, the world has over $14 trillion dollars in in foreign reserves, 60% of those are US dollars. That means there is about $8.76 trillion dollars being held in foreign accounts (mostly central banks), that's $8.76 trillion dollars not circulating in the US economy.

Total foreign reserves globally in 1990 was less than $1 trillion (of which US portion of that was a fraction), thus, the net growth in global reserves has increased by about $8 trillion.


There are three of the biggest reasons that I think the US Government needs to net deficit spend.

To say nothing of how deficit spending is an opportunity to rebalance the share of dollars between the top 10% and the bottom 90% of income and wealth holders. Even with government entitlements and spending the top 10 percent's share of wealth has accelerated significantly.



Your thoughts?

Government can put more borrowed money into the economy or collect and return more tax revenue into the economy.
When I looked at Romney's tax return some years ago, I found his income much more than 100 times mine, though my tax rate was about 8% higher than his.
$8.76 trillion in actual currency?

331,449,281−226,545,805=104,903,476
104,903,476÷(40×12)=218,549 average per month

 

[Econ4every1]

Government can put more borrowed money into the economy

I'm not being facetious when I ask this, but when you say borrowing, what do you mean? Do you mean if you asked me to borrow $20 where:


So we start like this:
Me
$20

You
$0

So borrowing looks like this:

Me (lender)
-$20 (I hand you $20 bucks)
+$20 IOU (this is just your promise that you will repay)

You (borrower)
+$20 (You accept $20)
-$20 IOU (You promise to repay me in 1 week)

Where we swap money and a promise.

So when the government borrows $100 billion does it look like this?

Private sector (lender)
-$100b (taxes or money spent on gov securities)
+$100b IOU (the IOU in this case would be spending the government promised and already delivered as tax and/or bond sales in the fiscal cycle comes after spending.


Government (borrower)
+$100b (this is money that is commonly referred to as money collected to "pay the bills". When Congress doesn't increase the debt ceiling this is the part we hear about))
-$100b IOU (The IOU in this case is the amount of government securities the government has promised to repay in the future)


Would you say this is an accurate representation (understanding it is over simplified)? Said another way, the government sells bonds or taxes in order to have dollars to spend?

What comes first, government spending or taxes? This is like the chicken and egg question, but this question has only one logical conclusion.

 

[Econ4every1]

$8.76 trillion in actual currency?

When you ask this question, I'm not sure if you know that 95%-ish of all currency balances held in the banking system are electronic, or said another way, there is only between $2.5-$4 trillion in cash, the rest are numbers on spreadsheets. But, to answer your question, the answer is yes, the $8.76 trillion represents real cash balances.

Here is a list of all foreign exchange reserve balances by nation (remember this is all currencies, not just dollars) but, the US portion of the total is understood to be about 60% of the total.

 

[Individual]

When you ask this question, I'm not sure if you know that 95%-ish of all currency balances held in the banking system are electronic, or said another way, there is only between $2.5-$4 trillion in cash, the rest are numbers on spreadsheets. But, to answer your question, the answer is yes, the $8.76 trillion represents real cash balances.

Here is a list of all foreign exchange reserve balances by nation (remember this is all currencies, not just dollars) but, the US portion of the total is understood to be about 60% of the total.

As of 31 Dec. 2023 there was $2,297,400,000,000 of U.S. currency in circulation per the Federal Reserve, $38.1 billion more than the previous year.

 

[Individual]

I'm not being facetious when I ask this, but when you say borrowing, what do you mean? Do you mean if you asked me to borrow $20 where:


So we start like this:
Me
$20

You
$0

So borrowing looks like this:

Me (lender)
-$20 (I hand you $20 bucks)
+$20 IOU (this is just your promise that you will repay)

You (borrower)
+$20 (You accept $20)
-$20 IOU (You promise to repay me in 1 week)

Where we swap money and a promise.

So when the government borrows $100 billion does it look like this?

Private sector (lender)
-$100b (taxes or money spent on gov securities)
+$100b IOU (the IOU in this case would be spending the government promised and already delivered as tax and/or bond sales in the fiscal cycle comes after spending.


Government (borrower)
+$100b (this is money that is commonly referred to as money collected to "pay the bills". When Congress doesn't increase the debt ceiling this is the part we hear about))
-$100b IOU (The IOU in this case is the amount of government securities the government has promised to repay in the future)


Would you say this is an accurate representation (understanding it is over simplified)? Said another way, the government sells bonds or taxes in order to have dollars to spend?

What comes first, government spending or taxes? This is like the chicken and egg question, but this question has only one logical conclusion.

Look at it as the difference between spending money earned and money borrowed, which until repaid has a cost made more or less sustainable by devaluation of the currency and inflation.

 

[Econ4every1]

Look at it as the difference between spending money earned and money borrowed, which until repaid has a cost made more or less sustainable by devaluation of the currency and inflation.

But you really didn't answer the question, do you think the government can only borrow from an existing pool of dollars?


Would you agree with the Fed's definition of inflation?

• Inflation​

  A general sustained upward movement of prices for goods and services in an economy.

And do you think 2% inflation is acceptable or do you think inflation should be kept at 0%

 

[Individual]

But you really didn't answer the question, do you think the government can only borrow from an existing pool of dollars?


Would you agree with the Fed's definition of inflation?

• Inflation​

  A general sustained upward movement of prices for goods and services in an economy.

And do you think 2% inflation is acceptable or do you think inflation should be kept at 0%

Government can create dollars.

Basically yes.

An average inflation rate of 2% would be acceptable to me.

Would a balanced Federal budget during good times and deficit spending only during bad times, which is basically what I've been suggesting, be harmful to the economy?

 

[Kushinator]

Hooray, Fun New Roadmark

Interest is still a smaller share of federal expenditures than it was in the 80's and 90's.

 

[cpwill]

Interest is still a smaller share of federal expenditures than it was in the 80's and 90's.

Ah. So if we tripled our deficit spending next year, that would make interest on the debt less of a problem?

 

[Slartibartfast]

We had this largely solved in the late 90s but then decided to do unnecessary tax cuts and focus on cultural issues like abortion instead of continuing with the fiscal discipline.

 

[hecatmoggie]

liberals say this is a GOOD THING - 35 trillion in debt is good

I disagree

but ultimately, blame both parties for passing massive spending bills and every President over the past 20 years who's done nothing about the national debt

at some point the USA will default on all that debt ... its funny money at this point

 

[CaughtInThe]

Hooray, Fun New Roadmark

Back in 2021, when we were noting that Interest on the debt had risen from $325 Billion in 2018 to half a trillion, I asked:



Current rate on a 10 year Treasury is 4.08%.

The Biden administration rang up a budget deficit topping $1.8 trillion in fiscal 2024, up more than 8% from the previous year and the third highest on record, the Treasury Department said Friday...​

​

One aggravating factor for the debt and deficit picture has been high interest rates from the Federal Reserve's series of hikes to fight inflation.​

​

Interest expense for the year totaled $1.16 trillion, the first time that figure has topped the trillion-dollar level. Net of interest earned on the government's investments, the total was a record $882 billion, the third-largest outlay in the budget, outstripping all other items except Social Security and health care...​

​

As a share of the total U.S. economy, the deficit is running above 6%, unusual historically during an expansion and well above the 3.7% historical average over the past 50 years, according to the Congressional Budget Office....​

You were here all during the Trump Administration and didn't trash the Trump Administration for exploding our national debt.

Why is that?

 

[Econ4every1]

As of 31 Dec. 2023 there was $2,297,400,000,000 of U.S. currency in circulation per the Federal Reserve, $38.1 billion more than the previous year.

I gave you a list of US dollar reserve balances being $8.76 trillion. Is this number, and I'm not certain which is why I'm asking, but is listing the number above a refutation of my claim that foreign nations hold what I claim?

Are you familiar with the different measures of money? M0, M1, M2, M3, M4:
M0 = Currency notes + coins + bank reserves (where "bank reserves" are not the same as "foreign reserves")

M1 = M0 + demand deposits (this is the total of our bank accounts)

M2 = M1 + marketable securities + other less liquid bank deposits

M3 = M2 + money market funds

M4 = M3 + least liquid assets

Apologies if you knew this already, I may have misread your understanding.

 

[Individual]

I gave you a list of US dollar reserve balances being $8.76 trillion. Is this number, and I'm not certain which is why I'm asking, but is listing the number above a refutation of my claim that foreign nations hold what I claim?

Are you familiar with the different measures of money? M0, M1, M2, M3, M4:
M0 = Currency notes + coins + bank reserves (where "bank reserves" are not the same as "foreign reserves")

M1 = M0 + demand deposits (this is the total of our bank accounts)

M2 = M1 + marketable securities + other less liquid bank deposits

M3 = M2 + money market funds

M4 = M3 + least liquid assets

Apologies if you knew this already, I may have misread your understanding.

Changing the Federal income tax code is what I'm interested in discussing.

 

[Econ4every1]

Changing the Federal income tax code is what I'm interested in discussing.

Cool, I agree. What should a change to the tax code accomplish? What should the goal of a change be?

At a high level, what would you like to see changed?

 

[Kushinator]

Ah. So if we tripled our deficit spending next year, that would make interest on the debt less of a problem?

Total expenditures. Try replying to what you've quoted.

 

[Econ4every1]

So if we tripled our deficit spending next year, that would make interest on the debt less of a problem?

What is the problem of interest on the debt that you perceive? I mean, so I can make sure I'm addressing what youthink the problem is.

 

[Individual]

Cool, I agree. What should a change to the tax code accomplish? What should the goal of a change be?

At a high level, what would you like to see changed?

I'd start with what I showed in my post #31.

 

[Helix]

Raise taxes.

 

[Econ4every1]

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

Eliminating all deductions reduces income to the private sector.

If/when necessary, apply a surtax to cover all/most of the deficit.

So reduce income even more?

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.

Are you arguing that spending and taxes should be balanced?

 

[Hamish Howl]

Hooray, Fun New Roadmark

Back in 2021, when we were noting that Interest on the debt had risen from $325 Billion in 2018 to half a trillion, I asked:



Current rate on a 10 year Treasury is 4.08%.

The Biden administration rang up a budget deficit topping $1.8 trillion in fiscal 2024, up more than 8% from the previous year and the third highest on record, the Treasury Department said Friday...​

​

One aggravating factor for the debt and deficit picture has been high interest rates from the Federal Reserve's series of hikes to fight inflation.​

​

Interest expense for the year totaled $1.16 trillion, the first time that figure has topped the trillion-dollar level. Net of interest earned on the government's investments, the total was a record $882 billion, the third-largest outlay in the budget, outstripping all other items except Social Security and health care...​

​

As a share of the total U.S. economy, the deficit is running above 6%, unusual historically during an expansion and well above the 3.7% historical average over the past 50 years, according to the Congressional Budget Office....​

Sounds like we need another tax cut.

 

[Econ4every1]

Raise taxes.

Raise taxes=reduce income.

Do you think the economy should shrink?

 

[rjay]

Donald Trump Built a National Debt So Big (Even Before the Pandemic) That It’ll Weigh Down the Economy for Years

The “King of Debt” promised to reduce the national debt — then his tax cuts made it surge. Add in the pandemic, and he oversaw the third-biggest deficit increase of any president.

www.propublica.org

https://www.newsnationnow.com/politics/which-presidents-added-most-national-debt/

https://www.axios.com/2024/06/24/trump-biden-debt-deficits-election

Trump and Biden: The National Debt | Committee for a Responsible Federal Budget

The national debt is on course to reach a record share of the economy under the next presidential administration, due in part to policies approved by Presidents Trump and Biden during their ti

www.crfb.org

Maybe Trump's was only 3rd biggest, but he did his in one term. I bet it took two terms for those other guys who came in 1st and 2nd.

USA, USA, USA

 

[Helix]

Raise taxes=reduce income.

Do you think the economy should shrink?

Fake news.