National Debt: Why do Conservatives hate having one?

[joG]

Technically, the Bush deficits were caused by reducing taxes.

But I have to laugh at those that say we should pay off the debt. Just balancing the budget would mean raising taxes or cutting spending by $500-600 billion immediately. The effect on the economy would be devastating. Let's remember that the deficit doesn't have to be zero to be sustainable. This is a good read: Dwindling Deficit Disorder.

It is true that optimal welfare of a society not only allows but requires public borrowing. But the present levels are way above optimal and are, in fact, reducing economic performance. It is unclear that we will even be able to maintain the present level of welfare.
I am afraid the US will have to increase taxes and reduce spending.

 

[jonny5]

Technically the deficits were caused by social spending consuming all of revenue.

View attachment 67166387

But hey, while youre laughing, read the CBO reports.

Harmful Effects of Large and
Growing Debt
How long the nation could sustain such growth in federal
debt is impossible to predict with any confidence. At
some point, investors would begin to doubt the government’s
willingness or ability to pay U.S. debt obligations,
making it more difficult or more expensive for the government
to borrow money. Moreover, even before that
point was reached, the high and rising amount of debt
that CBO projects under the extended baseline would
have significant negative consequences for both the
economy and the federal budget:

 

[jonny5]

It is true that optimal welfare of a society not only allows but requires public borrowing. But the present levels are way above optimal and are, in fact, reducing economic performance. It is unclear that we will even be able to maintain the present level of welfare.
I am afraid the US will have to increase taxes and reduce spending.

True how? That sounds like an opinion, not truth.

 

[joG]

True how? That sounds like an opinion, not truth.

Naw. It is the general result of the solution of an economic model. I will grant you, however, that the exact parameters depend on many things.

 

[American]

Nope, totally agree, even though that's not so much the case anymore. With Bush, we saw a lot of debt being used for the sole purpose of feeding the war in Iraq and fighting the Taliban insurgency. That's irresponsible, and an insult to the citizens who's economy we put at risk. A debt used in the right manner though, is beneficial to the economy as a whole. The theory originated during the market revolution in the 1700 and 1800's, where it worked wonders.

Hint: The national debt got us out of WW2. Undisputed.

I see where we are going.....Bush = bad; Obama = good.

/thread

 

[jonny5]

Naw. It is the general result of the solution of an economic model. I will grant you, however, that the exact parameters depend on many things.

No, you said it was true, as in an absolute fact. If so, show me the facts proving it. If its just an opinion, then make an argument.

 

[Muhammed]

Hint: The national debt got us out of WW2. Undisputed.

Going into massive debt put us into the war in the first place.

BUY WAR BONDS!

 

[MTAtech]

It is true that optimal welfare of a society not only allows but requires public borrowing. But the present levels are way above optimal and are, in fact, reducing economic performance. It is unclear that we will even be able to maintain the present level of welfare.
I am afraid the US will have to increase taxes and reduce spending.

That's your opinion. How is the present borrowing levels reducing economic performance? Interest rates are at record lows and the government is not crowding out private borrowing. So again, how is borrowing reducing economic performance?

On the contrary, the level of austerity necessary to reduce borrowing would be the true drag on the economy. Don't take my word for it. That's what Mark Zandi, Chief Economist at Moody's says.

The fact is, the current level of debt, at 72% of GDP, is sustainable. If you want to make the debt less significant, aim to increase growth.

 

[Fearandloathing]

I don't care what they peg it to, but it would seem to be fiscally responsible to pay it down. My little mind won't wrap itself around a system that just keeps borrowing money to do what it damn well pleases without any intention of paying it off. I can't imagine how that can be a sound monetary policy.

First, the OP is wrong in the generalization, conservatives do not object to a national debt at all. They object to debt for operational line items; borrow to build, not to maintain.

To be comfortable with large debt is to be ignorant of basic economics. Most people can live with paying a small percentage of their income for interest, say five, maybe ten percent. When the interests cost get too high, you face having to borrow to pay interest.

Nations like Germany, Canada etc. who went through massive cutting and debt reduction in the 1990's and early 2000's have had little if any impact from the 2008 melt down, most have recovered while the US languishes with a real unemployment rate in the double digits and a stagnating economy. The difference is the US is borrowing its way out....sort of like digging a hole to hide the dirt of the first one.

 

[Muhammed]

Chief Economist at Moody's says.

Moody's. Aren't they the ones who were giving junk securities a AAA rating back in 2008?

 

[joG]

No, you said it was true, as in an absolute fact. If so, show me the facts proving it. If its just an opinion, then make an argument.

If you optimize an economic model with public spending, you will find an optimum level of borrowing. The theory is quite clear there. The empirical stuff I have looked indicates an optimum somewhere in the area between 40% and 80% of GDP. The amount of work done on this has been accelerating in recent years and would take some effort to honor. Some of the recent work indicates that the efficient level of indebtedness may be lower than was previously though:
"It finds
a non-linear impact of debt on growth with a turning point—beyond which the government
debt-to-GDP ratio has a deleterious impact on long-term growth—at about 90-100% of GDP.
Confidence intervals for the debt turning point suggest that the negative growth effect of high
debt may start already from levels of around 70-80% of GDP, which calls for even more
prudent indebtedness policies." (see link below)

This paper might help you, if you are interested: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1237.pdf

 

[Helix]

National Debt: Why do Conservatives hate having one?

not just conservatives. i dislike it, also. we should be paying our ****ing bills. we need to give up on the trickle down fantasy, spend a whole lot less on war, and stop kicking the damned can down the road. a certain amount of debt is ok, but ours is getting scary. we just basically need to rework our entire strategy.

what's sad is that the only party that seems to care about debt supports a one sided austerity-only strategy that will significantly hit the demand side of economics by balancing the budget on the backs of those who actually really need help. plus, that party also supports a lot of other **** that are just deal killers, so there's no way for me to vote to reduce the debt. honestly, if they aren't willing to look at increased revenue, i don't believe they GAF about the debt at all. it's just a political ****ing chess piece.

 

[joG]

That's your opinion. How is the present borrowing levels reducing economic performance? Interest rates are at record lows and the government is not crowding out private borrowing. So again, how is borrowing reducing economic performance?

On the contrary, the level of austerity necessary to reduce borrowing would be the true drag on the economy. Don't take my word for it. That's what Mark Zandi, Chief Economist at Moody's says.

The fact is, the current level of debt, at 72% of GDP, is sustainable. If you want to make the debt less significant, aim to increase growth.

You are right and thank you for the link, that there is a lot of discussion about the effect of austerity. And it is quite true that reducing the debt or even the deficit is going to be rather painful, unless we are able to find an upswing to do it in. Where you are not right is that the debt level is only 72% of GDP. There are large amounts of debt the government does not report as debt. They are much larger. To get a feel for it, take a look at the U.S. National Debt Clock : Real Time .

"The idea that there is an ideal amount of indebtedness is well established economics. What is less clear is the level beyond which public debt becomes a drag on society. I posted this study in an other response, but I do not know if you saw it: It finds
a non-linear impact of debt on growth with a turning point—beyond which the government
debt-to-GDP ratio has a deleterious impact on long-term growth—at about 90-100% of GDP.
Confidence intervals for the debt turning point suggest that the negative growth effect of high
debt may start already from levels of around 70-80% of GDP, which calls for even more
prudent indebtedness policies."
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1237.pdf

This would indicate that to "aim to increase growth" will be difficult, if we allow the debt to grow.

 

[ludin]

Believe me, I can get behind the national debt being to high, but for the life of me, I can not understand why many of the conservatives I have talked to want to be rid of it for good. I hope people could understand by now, the base importance of maintaining at least a 70% Debt:GDP ratio. The money belongs in the pockets of the American people, and that money is the sole reason our economy reached such heights. We have debt for the purpose of improving infrastructure, flowing money through the economy, and providing economic stimuli to people who need it.

I would guess most of the criticism stems from the poor management of the debt flow, which goes to extremely large subsidies and bailouts, to people who frankly, don't need it. I guess that's the same complaint with the federal reserve, although that is more along the lines of low interest rates. Unrelated to say the least, so lets get back to the point. What is exactly the rights beef with maintaining a national debt, and if not opposed entirely to it, what do you think the ideal ceiling would be?

In general debt is a bad thing. The reason government debt is even worse is that the only way they can pay for that debt is by taking it out of the economy. So money that would be spent for better wages, expansion etc... goes to pay the government unlimited credit card.

the government would be better off with lower debt/ no debt. only borrow when it was needed.
our national debt is soaring out of control.

to the point that people are losing faith that the government can pay it back. i say cut the federal government 1% per year for 10 years and spend all that money on reducing the debt.

the lack of a balance budget amendment has severly hurt not only our economy but the government ability to function.
we simply cannot pay this debt back and by the end of obama's term another 7 trillion dollars or so will be added.

in another 10 years the government interest on the debt will exceed the military budget.

government has gotten to big and needs to be cut in order to reduce costs.

 

[Fearandloathing]

In general debt is a bad thing. The reason government debt is even worse is that the only way they can pay for that debt is by taking it out of the economy. So money that would be spent for better wages, expansion etc... goes to pay the government unlimited credit card.

the government would be better off with lower debt/ no debt. only borrow when it was needed.
our national debt is soaring out of control.

to the point that people are losing faith that the government can pay it back. i say cut the federal government 1% per year for 10 years and spend all that money on reducing the debt.

the lack of a balance budget amendment has severly hurt not only our economy but the government ability to function.
we simply cannot pay this debt back and by the end of obama's term another 7 trillion dollars or so will be added.

in another 10 years the government interest on the debt will exceed the military budget.

government has gotten to big and needs to be cut in order to reduce costs.

I would agree that in general *consumer* debt is a bad thing. I borrowed $100,000 as a line of credit when I left broadcasting and began selling computer network installations with a techno wizz partner. At the time, we were averaging 45% on that line alone [supplier credit later totaled about $1.2 million].

Credit, like all tools mechanical or economic, is excellent when used for what it was designed for. Buying a house you can never afford is not one of them, bailing out the thieves who wrecked the system shouldn't be either.

 

[ludin]

I would agree that in general *consumer* debt is a bad thing. I borrowed $100,000 as a line of credit when I left broadcasting and began selling computer network installations with a techno wizz partner. At the time, we were averaging 45% on that line alone [supplier credit later totaled about $1.2 million].

Credit, like all tools mechanical or economic, is excellent when used for what it was designed for. Buying a house you can never afford is not one of them, bailing out the thieves who wrecked the system shouldn't be either.

it depends on the debt. going into debt to earn 45% is a good idea since you will pay that back in no time.
borrowing because you can't pay the bills that month isn't so good which is what the federal government is doing. they have allowed their expenses to exceed their income. so now they have to borrow the difference to pay for it.

 

[Fearandloathing]

it depends on the debt. going into debt to earn 45% is a good idea since you will pay that back in no time.
borrowing because you can't pay the bills that month isn't so good which is what the federal government is doing. they have allowed their expenses to exceed their income. so now they have to borrow the difference to pay for it.

Ok, thank you then for agreeing that not all debt is bad.

 

[jonny5]

If you optimize an economic model with public spending, you will find an optimum level of borrowing. The theory is quite clear there. The empirical stuff I have looked indicates an optimum somewhere in the area between 40% and 80% of GDP. The amount of work done on this has been accelerating in recent years and would take some effort to honor. Some of the recent work indicates that the efficient level of indebtedness may be lower than was previously though:
"It finds
a non-linear impact of debt on growth with a turning point—beyond which the government
debt-to-GDP ratio has a deleterious impact on long-term growth—at about 90-100% of GDP.
Confidence intervals for the debt turning point suggest that the negative growth effect of high
debt may start already from levels of around 70-80% of GDP, which calls for even more
prudent indebtedness policies." (see link below)

This paper might help you, if you are interested: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1237.pdf

Ah so its a theory then, not truth. Got it.

 

[joG]

Ah so its a theory then, not truth. Got it.

A theory that is well supported empirically. Like so much in science.

But truth like God's Word?

 

[Mithros]

not just conservatives. i dislike it, also. we should be paying our ****ing bills. we need to give up on the trickle down fantasy, spend a whole lot less on war, and stop kicking the damned can down the road. a certain amount of debt is ok, but ours is getting scary. we just basically need to rework our entire strategy.

what's sad is that the only party that seems to care about debt supports a one sided austerity-only strategy that will significantly hit the demand side of economics by balancing the budget on the backs of those who actually really need help. plus, that party also supports a lot of other **** that are just deal killers, so there's no way for me to vote to reduce the debt. honestly, if they aren't willing to look at increased revenue, i don't believe they GAF about the debt at all. it's just a political ****ing chess piece.

I agree with you on deficit, but not debt. If you take away debt you're left with two issues. Without debt there'd be no Treasury Notes/Bills/etc.. That would remove the safest set of investments without providing a suitable replacement. I'd expect that this would add instability to the markets limiting growth. Also, without a debt then you're going to be running a surplus. Where would that money go? Either the government would have to find some means of investing it or else it would sit and do nothing. .

 

[jonny5]

A theory that is well supported empirically. Like so much in science.

But truth like God's Word?

True as it not false, but since this is a theory, its possibly false. In which case, I disagree with the theory. No public borrowing is necessary for optimal welfare of a society because optimal welfare is pretty cheap, free even. It only requires individuals to agree on protection of liberty for each other. Where that doesnt happy society only needs to tax in order to fund that protection, and that tax is far less than our economy produces. For example, Singapore has a balanced budget and is also one of the most economically free and successful countries in the world. They borrow money but not to cover govt spending, only to invest in assets which have real value. So they rely on essentially a reserve acct, not borrowing. And they make interest off those investments, not pay it out.

 

[Helix]

I agree with you on deficit, but not debt. If you take away debt you're left with two issues. Without debt there'd be no Treasury Notes/Bills/etc.. That would remove the safest set of investments without providing a suitable replacement. I'd expect that this would add instability to the markets limiting growth. Also, without a debt then you're going to be running a surplus. Where would that money go? Either the government would have to find some means of investing it or else it would sit and do nothing. .

Like I said, some debt is ok. I just think ours is too much. We need to stop adding to it, and consider paying some of it off.

 

[joG]

True as it not false, but since this is a theory, its possibly false. In which case, I disagree with the theory. No public borrowing is necessary for optimal welfare of a society because optimal welfare is pretty cheap, free even. It only requires individuals to agree on protection of liberty for each other. Where that doesnt happy society only needs to tax in order to fund that protection, and that tax is far less than our economy produces. For example, Singapore has a balanced budget and is also one of the most economically free and successful countries in the world. They borrow money but not to cover govt spending, only to invest in assets which have real value. So they rely on essentially a reserve acct, not borrowing. And they make interest off those investments, not pay it out.

If you do not like the theory, all you must do, is falsify it. That is called scientific method. Until then? Well the theory stands tall.

 

[AJiveMan]

Believe me, I can get behind the national debt being to high, but for the life of me, I can not understand why many of the conservatives I have talked to want to be rid of it for good. I hope people could understand by now, the base importance of maintaining at least a 70% Debt:GDP ratio. The money belongs in the pockets of the American people, and that money is the sole reason our economy reached such heights. We have debt for the purpose of improving infrastructure, flowing money through the economy, and providing economic stimuli to people who need it.

I would guess most of the criticism stems from the poor management of the debt flow, which goes to extremely large subsidies and bailouts, to people who frankly, don't need it. I guess that's the same complaint with the federal reserve, although that is more along the lines of low interest rates. Unrelated to say the least, so lets get back to the point. What is exactly the rights beef with maintaining a national debt, and if not opposed entirely to it, what do you think the ideal ceiling would be?

Why do conservatives hate having debt? They don't. Ask the Bush 43 leg humpers.

 

[jamesrage]

What is exactly the rights beef with maintaining a national debt, and if not opposed entirely to it, what do you think the ideal ceiling would be?

Being in debt does the following-
1.Lowers the value of the dollar.
2.Makes you at the mercy of people you owe money to.Basically the country we owe the most money to can make us their bitch in exchange for them not collecting on their debt or them to continue loaning us money.
3.Consonantly borrowing encourages the government to spend money it doesn't have.
4.Eventually the people we owe money to will stop loaning us money and will eventually want their money back and we will have no money or we will have to print extra money which lowers the value of our dollar.
5.It is not right to put future generations in debt for something our government is doing today.