DEBT SPIRAL: Interest costs on U.S. debt to exceed economic growth by 2045💸💸💸 (1 Viewer)

[Kushinator]

Why should the US put up with countries that heavily tariff US goods?

The U.S. is a consumer economy. We benefit by importing low value inputs and turning them into high value products.

Furthermore, we benefit from access to cheap goods. No matter what... no matter of we have %100 tariffs... low value manufacturing (heavy labor input) is never coming back. People will just pay more for imports, and have less available spending on other goods. That's how you engineer a recession.

Why should the US not push back against these?

By using blunt tariffs? . It would be better to negotiate trade agreements. Perhaps this is the end goal... crush the world economy enough (ours as well) to force other countries to give us favorable trade deals. But that's really ****ing dense, because we are NOT an export driven economy.

Why should the US simply silently take it on the chin with those?

We do not. You're completely out of touch when it comes to international trade. Our country benefits by being able to purchase goods at steep discounts r relative to the opportunity cost.

I can understand and appreciate the objective, even I might not agree with, or be lukewarm about, the methods being used.

You appreciate poor policy because you don't understand trade or economic growth.

What methods would you suggest to incentivize and achieve bi-mutual zero tariffs?

Who gives a **** about barriers to entry? We're not an export driven economy.

 

[Econ4every1]

Many like myself would argue we are already in that debt spiral

People chronically look at this problem the wrong way. The problem isn't debt, or just debt.

Why? Because debt=revenue.

For every dollar in government debt there is at least $1 in revenue earned in the private sector economy.

Think of it like this: if everyone suddenly had a lot more money, but the supply of cars, food, and housing remained the same, the increased demand would simply drive up prices, leading to inflation – demand outstripping supply. That's not a problem of debt, but a combination of spending relative to real output.

So, while the interest paid on the debt becomes income for many and contributes to economic activity, the sustainability of this hinges on the economy's ability to generate corresponding real value. If the growth in income and demand isn't matched by a sufficient increase in the production of goods and services, then we face the risk of inflationary pressures.

Therefore, the focus should arguably be less on simply the absolute size of the debt and more on factors that influence the economy's productive capacity, such as:

• Productivity growth: Technological advancements, innovation, and efficient resource allocation allow the economy to produce more with the same inputs.
• Labor force participation: A larger and more skilled workforce can increase the supply of goods and services.
• Investment in infrastructure and capital goods: These investments enhance the economy's ability to produce in the future.
• Sound fiscal and monetary policies: Policies that promote stable prices and sustainable economic growth are essential for balancing demand and supply.

Of course, this is why tariffs are such a terrible idea. They put extreme pressure on the supply side all while debt/ deficit payments are likely to increase. In other words, foreign goods increase the availability of real goods relative to spending. Tariffs, and uncertainty reduce the availability of real goods, as tariffs decrease imports and uncertainty decreases investment (as investors are uncertain what the future will bring) and this drives up the cost of of investment dollars.

 

[cpwill]

What methods would you suggest to incentivize and achieve bi-mutual zero tariffs?

Just to point out - the Trump Administration is not pursuing mutual zero tariffs. We had those with some countries (and others, such as the EU, offered it to us) and we slapped tariffs on them anyway.

The current governing theory in the Trump Administration is that a trade deficit - somehow - is also the fiscal deficit, and that's why we are in debt, and trade deficits (when we are wealthier than other countries, and, therefore, buy more stuff from them than they can afford to buy from us) are inherently bad.

They are trying to get rid of the trade deficits. With tariffs.

 

[cpwill]

The U.S. is a consumer economy. We benefit by importing low value inputs and turning them into high value products.

Furthermore, we benefit from access to cheap goods. No matter what... no matter of we have %100 tariffs... low value manufacturing (heavy labor input) is never coming back. People will just pay more for imports, and have less available spending on other goods. That's how you engineer a recession.

By using blunt tariffs? . It would be better to negotiate trade agreements. Perhaps this is the end goal... crush the world economy enough (ours as well) to force other countries to give us favorable trade deals. But that's really ****ing dense, because we are NOT an export driven economy.

We do not. You're completely out of touch when it comes to international trade. Our country benefits by being able to purchase goods at steep discounts r relative to the opportunity cost.

You appreciate poor policy because you don't understand trade or economic growth.

Who gives a **** about barriers to entry? We're not an export driven economy.

We are the world's second-largest exporter. If the Trump administration were using wise and careful escalate-to-deescalate strategies to try to get us to mutual zero-tariffs, that would, at least, be a good and worthy intent. He's bombastic enough he probably could have gotten a lot of mileage out of rhetoric and maybe one or two examples (instead of, you know, launching a trade war with the entire world in one go).

They aren't doing that, but, it would be a good intent, which is why some of his fans are trying to pretend like they are.

 

[trumptman]

You've contributed more than most but still falling a bit short on the point of the thread. Let me see if I can get you the rest of the way.

People chronically look at this problem the wrong way. The problem isn't debt, or just debt.

Why? Because debt=revenue.

Debt=revenue=stolen future growth. Stealing from your future growth is fine if you are compounding it in some fashion. Stealing from your future income as a doctor to repay your student loans is great since you'll be earning far more as a doctor than you would would as a barista.

For every dollar in government debt there is at least $1 in revenue earned in the private sector economy.

It's not one to one. That present dollar removes future growth and requires additional debt to repay it.

Think of it like this: if everyone suddenly had a lot more money, but the supply of cars, food, and housing remained the same, the increased demand would simply drive up prices, leading to inflation – demand outstripping supply. That's not a problem of debt, but a combination of spending relative to real output.

This is a partial understanding. There isn't increased demand. There is devalued currency pursuing the same amount of demand. If you had a 1000 people buying 1000 cars and spending $10 million and "suddenly" the money supply doubled to $20 million, those same 1000 people would need those same 1000 cars but the value of what they are using to purchase them in terms of currency was halved so they'd end up paying double aka inflation.

So, while the interest paid on the debt becomes income for many and contributes to economic activity, the sustainability of this hinges on the economy's ability to generate corresponding real value. If the growth in income and demand isn't matched by a sufficient increase in the production of goods and services, then we face the risk of inflationary pressures.

That's a good start. The missing understanding is that there is also an upper limit in reasonable increase and when you can't sufficiently generate it then we hit the debt spiral aka the point of the thread.

The United States Economy is large and mature. Often the rate of growth per year is 2-3% and that is being BOOSTED by debt financing which means real present growth might be lower but borrowed from future growth. If you suddenly turn around and say debt is fine because we can get a sufficient increase of 5-7% growth, that isn't a legitimate target we can expect to make.

Therefore, the focus should arguably be less on simply the absolute size of the debt and more on factors that influence the economy's productive capacity, such as:

I'm going to cut the "and so it follows" since the claims above were only partially understood by you. It is safe to basically limit future debt and try to grow our way out of it. However right now we aren't like a middle aged guy trying to drop 20lbs. We are like a "My 600lb life" patient trying to get to where we can even survive the procedure which would still need to be pretty extreme.

Federal Surplus or Deficit [-] as Percent of Gross Domestic Product

Graph and download economic data for Federal Surplus or Deficit [-] as Percent of Gross Domestic Product (FYFSGDA188S) from 1929 to 2024 about budget, federal, GDP, and USA.

fred.stlouisfed.org

Just using round numbers, if we weren't borrowing 5% of GPD per year, and our GDP growth is 2.5-ish% what do you think our real rate of growth of GPD would be minus that borrowing? If your thinking it like mine you are likely thinking it would be... negative.

So if you take that negative growth and now say, we can't continue to borrow that 5% and on top of that we need 2.5-5% REAL growth, not borrowed growth and that doesn't mean we pay off the debt, just stop adding to it and generating real growth, then you can see the problem.

Most people don't "get" this so shrinking it real small and round if that helps. You started with $100 of income this year but borrowed $5. The return on that $5 generated $2 more dollars of income so you ended the year with $102 but also $5 in debt. If you run this out for years you see the problem. You're taking on more debt and can't seem to generate more growth than that debt. Hence debt spiral.

 

[eohrnberger]

Just to point out - the Trump Administration is not pursuing mutual zero tariffs. We had those with some countries (and others, such as the EU, offered it to us) and we slapped tariffs on them anyway.

The current governing theory in the Trump Administration is that a trade deficit - somehow - is also the fiscal deficit, and that's why we are in debt, and trade deficits (when we are wealthier than other countries, and, therefore, buy more stuff from them than they can afford to buy from us) are inherently bad.

They are trying to get rid of the trade deficits. With tariffs.

I'm not buying into the idea that trade deficits are related fair trade.
I have a trade deficit with my local grocery store, as I most certainly buy more from then than they buy from me.

What I am buying into is that there shouldn't be anything more than a 10% tariff on anything with any of our trading partners, including the EU. This I can support. The other, the methods, not so much.

 

[cpwill]

I'm not buying into the idea that trade deficits are related fair trade.
I have a trade deficit with my local grocery store, as I most certainly buy more from then than they buy from me.

Indeed. Unfortunately, under the model that the Trump administration is running with, that means the Grocery Store is engaging in unfair trading practices, "screwing you"....and you would be wealthier if you were to give up your current job and go back to subsistence farming in order to eliminate your trade deficit with them.

Now, you may: "That can't be it - that's ridiculous - that sounds incredibly stupid."

To which I can only reply: "Yeah, it does, doesn't it." :-/

I had to make a set of appliance purchases this summer - I went out and made them all last week, while we still had pre-tariff supply in the stores. This is going to hurt us directly (though loss of trade, businesses, and jobs) and indirectly (through new growth not being created) for years

What I am buying into is that there shouldn't be anything more than a 10% tariff on anything with any of our trading partners, including the EU. This I can support. The other, the methods, not so much.

The EU offered us zero for zero. Trump rejected it and slapped tariffs on them, just as he slapped tariffs on other countries that had no tariffs against us. He just likes tariffs. He thinks trade is bad - that when someone else makes something that we want to buy, at a price we want to buy it at, and then sells it to us... that they are screwing us.

 

[ataraxia]

Not only, taxing wealth would be such a counter-inducement to working hard, taking risks, and making sound decisions.
I mean why bother with any of all that? You end up not getting ahead in any real or meaningful way, chuck it all.
This'd be the future of the human race:
View attachment 67562967
Exactly what the socialists and Marxists would want.

Not sure where you're getting this from, but it's incorrect.

This was not what "socialists and Marxists" would want, but Adam Smith- the father of modern capitalism:

"It must always be remembered, however, that it is the luxuries, and not the necessary expense of the inferior ranks of people, that ought ever to be taxed. The final payment of any tax upon their necessary expense would fall altogether upon the superior ranks of people; upon the smaller portion of the annual produce, and not upon the greater. Such a tax must in all cases either raise the wages of labour, or lessen the demand for it…

Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole…

It is not very unreasonable then that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion, because a tax on the luxuries and vanities of life [which] occasion the principal expense of the rich... would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable."
-Adam Smith, The Wealth of Nations

 

[eohrnberger]

Indeed. Unfortunately, under the model that the Trump administration is running with, that means the Grocery Store is engaging in unfair trading practices, "screwing you"....and you would be wealthier if you were to give up your current job and go back to subsistence farming in order to eliminate your trade deficit with them.

Now, you may: "That can't be it - that's ridiculous - that sounds incredibly stupid."

To which I can only reply: "Yeah, it does, doesn't it." :-/

I had to make a set of appliance purchases this summer - I went out and made them all last week, while we still had pre-tariff supply in the stores. This is going to hurt us directly (though loss of trade, businesses, and jobs) and indirectly (through new growth not being created) for years

The EU offered us zero for zero. Trump rejected it and slapped tariffs on them, just as he slapped tariffs on other countries that had no tariffs against us.

<SMH>

He just likes tariffs. He thinks trade is bad - that when someone else makes something that we want to buy, at a price we want to buy it at, and then sells it to us... that they are screwing us.

 

[eohrnberger]

Not sure where you're getting this from, but it's incorrect.

This was not what "socialists and Marxists" would want, but Adam Smith- the father of modern capitalism:

"It must always be remembered, however, that it is the luxuries, and not the necessary expense of the inferior ranks of people, that ought ever to be taxed. The final payment of any tax upon their necessary expense would fall altogether upon the superior ranks of people; upon the smaller portion of the annual produce, and not upon the greater. Such a tax must in all cases either raise the wages of labour, or lessen the demand for it…

Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole…

It is not very unreasonable then that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion, because a tax on the luxuries and vanities of life [which] occasion the principal expense of the rich... would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable."
-Adam Smith, The Wealth of Nations

I believe I presented citations to you which support the position that the 'rich' already are paying 'their fair share' and more, on part with about 1/2 the federal tax burden.
I believe that you summarily rejected them.

This 'fair share' slogan. Isn't it really odd how this is never specified beyond being used a propaganda slogan?
What appears to be being promoted is 'Just keep taxing more and more and more until we'll tell you when its enough'.

The US tax code is already more than sufficiently progressive. Taxation will never be sufficient for a government with a spending problem it doesn't recognize as such.

 

[aociswundumho]

People chronically look at this problem the wrong way. The problem isn't debt, or just debt.

Why? Because debt=revenue.

Debt used for productive investment is very different from debt wasted on government boondoggles—like cash for clunkers, the F-35 debacle, ethanol subsidies, bridges to nowhere, and on and on. How much of government debt actually funds something productive? My guess: less than 10%.

The vast majority of federal spending - over two-thirds - is on mandatory programs like social security and medicare, which are transfer payments rather than investments. Interest payments take up another 10–15%. That leaves a small portion for discretionary spending, and only a fraction of that goes toward infrastructure, research, or education. Again, my guess is less than 10% of federal debt is tied to truly productive investment.

For every dollar in government debt there is at least $1 in revenue earned in the private sector economy.

Think of it like this: if everyone suddenly had a lot more money, but the supply of cars, food, and housing remained the same, the increased demand would simply drive up prices, leading to inflation – demand outstripping supply. That's not a problem of debt, but a combination of spending relative to real output.

So, while the interest paid on the debt becomes income for many and contributes to economic activity, the sustainability of this hinges on the economy's ability to generate corresponding real value. If the growth in income and demand isn't matched by a sufficient increase in the production of goods and services, then we face the risk of inflationary pressures.

Not really, because the money is going to wealthy bond holders.

Therefore, the focus should arguably be less on simply the absolute size of the debt and more on factors that influence the economy's productive capacity, such as:

• Productivity growth: Technological advancements, innovation, and efficient resource allocation allow the economy to produce more with the same inputs.
• Labor force participation: A larger and more skilled workforce can increase the supply of goods and services.
• Investment in infrastructure and capital goods: These investments enhance the economy's ability to produce in the future.
• Sound fiscal and monetary policies: Policies that promote stable prices and sustainable economic growth are essential for balancing demand and supply.

Of course, this is why tariffs are such a terrible idea. They put extreme pressure on the supply side all while debt/ deficit payments are likely to increase. In other words, foreign goods increase the availability of real goods relative to spending. Tariffs, and uncertainty reduce the availability of real goods, as tariffs decrease imports and uncertainty decreases investment (as investors are uncertain what the future will bring) and this drives up the cost of of investment dollars.

Both parties are against everything in bold, and again, the whole idea of government "investment" is in reality just gifts to special interest groups. If government investment worked, then central planning would be the success story of the 20th century.

 

[ataraxia]

I believe I presented citations to you which support the position that the 'rich' already are paying 'their fair share' and more, on part with about 1/2 the federal tax burden.
I believe that you summarily rejected them.

This 'fair share' slogan. Isn't it really odd how this is never specified beyond being used a propaganda slogan?
What appears to be being promoted is 'Just keep taxing more and more and more until we'll tell you when its enough'.

The US tax code is already more than sufficiently progressive. Taxation will never be sufficient for a government with a spending problem it doesn't recognize as such.

America's middle class was created when they were more progressive. It is disappearing as it has become less progressive.

So what is your definition of "sufficient"?

 

[aociswundumho]

What appears to be being promoted is 'Just keep taxing more and more and more until we'll tell you when its enough'.

They have no choice, because government is so inefficient. Look at education, where inflation-adjusted per kid spending in U.S. K–12 has more than tripled since 1970, yet half the country reads at a 6th grade level. The only answer they have is to raise taxes to funnel more money into the teacher's unions.

 

[ScrambledEggs]

GOP was so worried about Dems bankrupting the US that they twice elected a guy that's bankrupted multiple businesses including a casino

 

[ataraxia]

They have no choice, because government is so inefficient. Look at education, where inflation-adjusted per kid spending in U.S. K–12 has more than tripled since 1970, yet half the country reads at a 6th grade level. The only answer they have is to raise taxes to funnel more money into the teacher's unions.

Even if you don't like the US system of education, how do you explain the success of public education in so many other countries?

http://www.koreaneducentreinuk.org/wp-content/uploads/downloads/Education_the-driving-force-for-the-development-of-Korea.pdf

China’s heavy investment in education lays foundation for national development - Global Times

www.globaltimes.cn

With 1.4 billion learners, India emerges as an education giant to watch.

India is expected to overtake China as the largest country on earth by 2022 and grow to a population of about 1.5 billion by 2030. Education is set to become a powerful engine of the country’s economic growth and development.

www.holoniq.com

https://www.weforum.org/stories/2018/09/10-reasons-why-finlands-education-system-is-the-best-in-the-world/#:~:text=Finland's%20education%20system%20emphasizes%20equity,by%20sampling%20groups%20of%20schools.

https://openknowledge.worldbank.org/server/api/core/bitstreams/3a25dbec-e59b-5480-8556-24e8dd08fc92/content

Investing in Quality Education for Economic Development, Peace, and Stability

In a time of rapid social, technological, and economic change, investing in education is important for building country resilience, and needs to be embedded in policy discussions and decisions related to peacebuilding, inclusion of women and girls, and state fragility.

www.csis.org

 

[iguanaman]

Interest costs on U.S. debt to exceed economic growth by 2045, increasing risk of fiscal crisis

"Interest costs will reach a record 3.2 percent of GDP this year – exceeding the cost of defense and Medicare," said a budget watchdog group. That may signal a debt spiral.

justthenews.com

Many like myself would argue we are already in that debt spiral and that the 2045 figure is only possibly by keeping on the rose colored glasses and presuming that at some point on the path between now and then, people will actually embrace some pain points rather than jumping off a cliff and continuing down the same path. As an example the 2045 figure probably presumes that when Social Security goes "banktupt" in 2035 the pain is just allowed to happen and the shortfall in benefits won't be borrowed and thrown on to the rising debt.

Yeah that won't happen so in reality we are probably in that spiral now and have been for a while.



The thing that makes me far more pessimistic than most is that the projections pretty much assume things will continue as they when life is seldom that way. Many people earn a good living until suddenly they can't as an example. Many people are in great health until they aren't. That is the great argument about where you draw the lines in a planning discussion. "Just save $500 a month for the next 20 years" presumes you never have bumps in the road. My style of planning presumes the bumps and thus is far more conservative.

So what is a debt spiral and why is it so bad? You can't grow your way out of the debt at the point. Worse still (and this is why I say we are there now) the pain on the return is so large that the shock can't be fully absorbed and even if successful, there are a lot of secondary factors that just show you managed to mitigate the worst outcome while still having serious secondary outcomes be major problems.

So you can't grow your way out of the debt when the amount of debt you need is more than the economy can likely grow. If you need to add 8% of debt a year and an economy as large as the United States can grow reasonably 3-5% a year (which is great grown BTW) then the debt will just keep growing.

We understand this in smaller matters quite easily. You can't earn your way out of a spending problem. You can't exercise your way out of an eating problem.

The secondary matter is that big spending cuts likely SLOW the rate of economic growth. I'd say that is 100% true but you can't just keep adding debt either. It's a tightrope walk for the most part. Right now the Trump administration is talking about trying to get out spending down to ONLY borrowing a trillion dollars a year.

That will indeed bring pain but seriously, the pain is coming in one form or another. You can't go from borrowing $2 trillion a year to a dollar less than that without someone having some pain involved.

There's a lot more pain coming too. The best one could hope for is promoting the most growth possible while trying to absorb just enough pain to try to correct the path going forward. There is no path with zero pain. It doesn't exist.

The future pain points are coming and the less pain we are willing to confront today, the more we will confront in the future.

Trump's insane policies are causing investors to sell their treasuries at alarming rates raising interest rates on our debt substantially.So the man you voted for is collapsing our economy while increasing our interest charges on our debt and weakening our dollar too. Good job.

10-year Treasury yield tops 4.5% after surge this week that’s worrying Wall Street and the White House​

The 10-year Treasury yield climbed higher Friday, adding to its steep weekly rise, as dizzying trade moves by President Donald Trump caused investors to dump U.S. assets in favor of other global safe havens.

The benchmark 10-year Treasury yield advanced 9 basis points to 4.486%. It earlier jumped to its highest level since Feb. 13. The 2-year Treasury yield climbed 12 basis points on the day at 3.97%.

One basis point is equal to 0.01% and yields move inversely to prices.

https://www.cnbc.com/2025/04/11/us-treasury-yields-investors-weigh-state-of-the-us-economy-.html

 

[aociswundumho]

Even if you don't like the US system of education, how do you explain the success of public education in so many other countries?

There are 190 countries. Socialist schools can work in tiny, collectivist countries where everyone looks the same and thinks the same.

China’s heavy investment in education lays foundation for national development - Global Times

www.globaltimes.cn

From that link:

About 70-75 percent of their funding relies upon charities and private donors.

In fact, about 35% of schools in China are private:

In 2022, China had 178,300 privately run schools, accounting for 34.37% of all schools across the country.

They do not funnel endless tax dollars into teacher's unions, like brain dead American progressives.

With 1.4 billion learners, India emerges as an education giant to watch.

India is expected to overtake China as the largest country on earth by 2022 and grow to a population of about 1.5 billion by 2030. Education is set to become a powerful engine of the country’s economic growth and development.

www.holoniq.com

India is not an argument for government-run schools:

https://marginalrevolution.com/marginalrevolution/2022/10/india-the-largest-experiment-in-private-schooling-in-history.html

Forcing kids into government-run schools is exactly the kind of thing Nazis and commies drool over. It’s never been about education - it’s always about shaping obedient little citizens who see the state as their savior, when in fact it’s their master.

 

[Phys251]

There are 190 countries. Socialist schools can work in tiny, collectivist countries where everyone looks the same and thinks the same.

So it's Black and Brown children's fault. Got it.

 

[aociswundumho]

So it's Black and Brown children's fault. Got it.

I think you may have mistaken me with the racist you voted for:

"Poor kids are just as bright and just as talented as white kids."

 

[Phys251]

I think you may have mistaken me with the racist you voted for:

Did you not write the post I quoted? Seems that you are having a Joe Biden moment.

 

[aociswundumho]

Did you not write the post I quoted?

Yes, so why don't quote the text, written by me, that implies racism.

 

[Phys251]

Yes, so why don't quote the text, written by me, that implies racism.

Happy to oblige:

There are 190 countries. Socialist schools can work in tiny, collectivist countries where everyone looks the same and thinks the same.

In AOCIDH's world, public education works best when all the children look the same. His words, not mine.

 

[aociswundumho]

AOCIDH's world, public education works best when all the children look the same. His words, not mine.

The sad irony here is I have to argue about government-run schools with a victim of government-run schools - an adult who's reading comprehension is that of a small child.

"Socialist schools can work in tiny, collectivist countries where everyone looks the same and thinks the same."

This refers to the general population, not just kids. When all of the parents looks the same and think the same, it follows they will all want the same kind of education for their kids, and socialism could work in this instance. It doesn't matter if the country is black, white, or east asian.

 

[Phys251]

The sad irony here is I have to argue about government-run schools with a victim of government-run schools - an adult who's reading comprehension is that of a small child.

"Socialist schools can work in tiny, collectivist countries where everyone looks the same and thinks the same."

This refers to the general population, not just kids. When all of the parents looks the same and think the same, it follows they will all want the same kind of education for their kids, and socialism could work in this instance. It doesn't matter if the country is black, white, or east asian.

That is a long-winded way of defending your racist comment.

 

[aociswundumho]

That is a long-winded way of defending your racist comment.

So now even non-racist comments are considered racist.