Solutions to government debt

[solletica]

I'd like to comment on the common liberal talking point that the debt "isn't even a problem". So, first off, it is a thing you hear fairly often from the left, about how we could build all these schools and hospitals and parks etc. etc. etc. with the money we throw away on building bombs, jets, tanks etc. Ok then...well have they ever thought about what the U.S. could do with THREE HUNDRED BILLION extra dollars in it's pocket every year not going to paying down the interest on the debt? That isn't chump change, even by today's standards.

The problem with this whole "debt isn't a problem at all" thing, is it is about the same as the "the first step to recovery is admitting you have a problem"...but if they won't even acknowledge we have a problem, HOW ARE we supposed to fix it?

That is not the liberal talking point.

The liberal talking point is "conservatives say the debt is a problem, yet want to spend $100 trillion to bomb the Middle East for the next 10 years. Sounds like a contradiction."

 

[cpwill]

Maybe so but I don't want to play citation poker.

You apparently do not wish to back your outlandish claims at all, but rather rely on a comforting just-so argument.

As I said, it's the heart of the matter. The debt is only a problem if it hurts the economy. Right now, it doesn't and in the near future, it's not likely to hurt the economy. As the economy improves, tax revenues will increase, borrowing will be slowed and the debt can be reduced and eventually eliminated. It's not a problem.

Revenues are.... how to put this..... Okay, the likelihood of revenues improving to the point where just the debt will be eliminated in the next thirty years is approximately similar to the likelihood of the U.S. being successfully invaded by Botswana over the same time period. Simply repeating "it's not a problem" isn't a plan. Instead, it is:

 

[cpwill]

Then you've proven my point; the debt is not a danger to America's economic health.

:lol: that's like saying that one cannot die of old age because one has already lived 102 years.

Notice anything different about the level of U.S. debt in the late 50's v now?

 

[froggigger]

Essentially what you are suggesting is that no one actually pays their own taxes (or bills in general), except when purchasing stuff. Rediculous.

Not what I'm suggesting at all. I'm just pointing out that every time a consumer purchases a good or service, he is paying taxes that are embedded in the price of that good or service. Taxes are overhead to a business and are passed along.

I know, this is an argument that gets old but it is important. Corporations simply do not pay taxes. Ever, not in this flavour of the universe. Oh sure, they hand over the checks for taxes often enough but all taxes are, in hte end, paid by some real human being.

Corporations Do Not Pay Tax - Forbes

 

[Joe Steel]

You apparently do not wish to back your outlandish claims at all, but rather rely on a comforting just-so argument.

I don't want to waste time citing sources you would dismiss just as I would dismiss yours. Above, you cited the Heritage Foundation. Do you honestly think I'd accept anything they publish?

Revenues are.... how to put this..... Okay, the likelihood of revenues improving to the point where just the debt will be eliminated in the next thirty years is approximately similar to the likelihood of the U.S. being successfully invaded by Botswana over the same time period. ...

Maybe the debt won't be eliminated. That's OK. It doesn't have to be eliminated. It just has to be kept at a manageable level and that's entirely possible.

 

[cpwill]

I don't want to waste time citing sources you would dismiss just as I would dismiss yours. Above, you cited the Heritage Foundation. Do you honestly think I'd accept anything they publish?

All you did was the equivalent of putting your fingers in your ears and saying "nuh-uh!". I cited not the Heritage foundation but multiple non-partisan economic organizations and partisan liberals agreeing with my position here. Thus far you seem unable to cite.... anybody.

Maybe the debt won't be eliminated. That's OK. It doesn't have to be eliminated. It just has to be kept at a manageable level and that's entirely possible.

It is. If we are willing to radically restructure our expenses and ensure an above 3% growth rate for the next decade.

 

[Joe Steel]

that's like saying that one cannot die of old age because one has already lived 102 years.

[Image deleted]

Notice anything different about the level of U.S. debt in the late 50's v now?

Sure. It increased but that's not the issue. The issue is the danger debt creates for GDP. Over that same time span, even as the debt was increasing, GDP has done OK. Never has the debt created recessions or depressions.

 

[Joe Steel]

All you did was the equivalent of putting your fingers in your ears and saying "nuh-uh!". I cited not the Heritage foundation but multiple non-partisan economic organizations and partisan liberals agreeing with my position here. Thus far you seem unable to cite.... anybody.

Here's a paper which takes issue with one of the main sources of the debt is dangerous idea, Reinhart and Rogoff. Note, the paper was written before their infamous arithmetic error was discovered.

Conclusion

The larger research effort undertaken by Reinhart and Rogoff to gather data on debt and growth across countries and time has yielded many valuable insights. However, the shakiest inference from this research effort—the claim that there is a well-defined ratio of debt to GDP above which economic growth suffers—has dominated discussion of this work both in the media and in policymaking circles. This paper has shown that there is no compelling reason to believe the most frequently cited claim from GITD that gross debt of about 90% will necessarily lead to slower economic growth. In fact, there is little in economic theory, or in the data presented for the United States, that supports this proposition. While we do believe that projected unsustainable deficits in coming decades should be addressed, there is no solid evidence that we are approaching a tipping point. In fact, the greatest threat to economic growth is policy inaction fueled by deficit fears.

Government Debt and Economic Growth

In short, the idea that high levels of public debt will destroy the economy is unsupportable.

 

[blaxshep]

In short, the idea that high levels of public debt will destroy the economy is unsupportable.

Tell that to the Greek.

 

[Joe Steel]

Tell that to the Greek.

The Greeks have other problems; not the least of which is their inability to collect all the taxes due.

Once again, you've proven my point or, at least, the point I eventually would have made. Our deficit problem comes primarily from lack of revenue not from too much spending.

 

[blaxshep]

The Greeks have other problems; not the least of which is their inability to collect all the taxes due.

Once again, you've proven my point or, at least, the point I eventually would have made. Our deficit problem comes primarily from lack of revenue not from too much spending.

Non-sense our revenue is in line with what it has been for centuries around 18% - 20% of GDP. Spending on the other hand is now 24%.

This can ONLY mean one thing; spending is the problem.

Actually I have proven you wrong, you say the idea that high levels of public debt will destroy the economy is unsupportable then you say that the Greeks problem is revenue. If high levels of debt is inconsequential as your assumption indicates then revenue is irrelevant just take on more debt regardless of your revenue and the economy should be just fine. Funny how it doesn't work that way and the revenue red herring is not helping your argument, it is exposing the fault in your liberal logic. In fact since you think public debt has no effect on the economy why collect taxes at all? Why do we need revenue at all? Just pay for everything with debt.

 

[Oceandan]

Cut every line item in the federal government's budget by one percent for six years.

Pass a constitutional amendment the federal government must operate under a balanced budget, using real world accounting.

Tie federal spending to a percentage of GDP.

Let the politicians fight over the rest. You or your party want to increase spending, you MUST increase GDP first.

 

[Joe Steel]

Non-sense our revenue is in line with what it has been for centuries around 18% - 20% of GDP. ...

Revenue is less than 15% of GDP.

 

[cpwill]

Revenue is less than 15% of GDP.

no, revenue dipped to around 15% of GDP in the Great Recession, as revenue follows growth (not nominal tax rates) most closely. It is now higher, and currently estimated to come in at 16.7%. Never did it fall below 15%.

 

[cpwill]

Sure. It increased but that's not the issue. The issue is the danger debt creates for GDP. Over that same time span, even as the debt was increasing, GDP has done OK. Never has the debt created recessions or depressions.

Debt to GDP?

Got that too:

Then when you start adding up all of the State, Local, and Domestic debt....

It get's really, really, not awesome..





The last time Federal Debt to GDP was higher than 100% was immediately after WWII, and it took us reducing the federal budget by 75% following the war to get us on a path of paying it downward (as a portion of GDP). That's the equivalent of reducing the federal budget by $2.8 Trillion per year today.

 

[Joe Steel]

no, revenue dipped to around 15% of GDP in the Great Recession, as revenue follows growth (not nominal tax rates) most closely. It is now higher, and currently estimated to come in at 16.7%. Never did it fall below 15%.

I saw it reported at about 14.9%. Nevertheless, the point is the same.

 

[Joe Steel]

Debt to GDP?

Got that too:

[image deleted]

Then when you start adding up all of the State, Local, and Domestic debt....

[image deleted]

It get's really, really, not awesome..

What's your point? Where do you show GDP is adversely affected by the public debt?

The last time Federal Debt to GDP was higher than 100% was immediately after WWII, and it took us reducing the federal budget by 75% following the war to get us on a path of paying it downward (as a portion of GDP). That's the equivalent of reducing the federal budget by $2.8 Trillion per year today.

Dare I say the absence of war spending might be the reason the federal budget decreased and that we weren't doing it just to reduce the debt?

 

[head of joaquin]

Tell that to the Greek.

Jimmy?

 

[head of joaquin]

Debt to GDP?

Got that too:

Then when you start adding up all of the State, Local, and Domestic debt....

It get's really, really, not awesome..





The last time Federal Debt to GDP was higher than 100% was immediately after WWII, and it took us reducing the federal budget by 75% following the war to get us on a path of paying it downward (as a portion of GDP). That's the equivalent of reducing the federal budget by $2.8 Trillion per year today.

No, it took about 40 years to pay off the WWII debt, but hardly caused a scratch since the economy was growing . When you have the largest economy in the world, a little growth year by year goes a long way in creating new tax revenues.

The reductions after the War were relatively meaningless in the pay off process, and expenditures exploded only a few years afterwards, as the Cold War set in, the Marshall Plan went into effect, Korea erupted, and Eisenhower (wisely) invested in infrastructure. The spikes were in 1949 and 1953, reaching 1943 levels by that time.

So your apparent argument for the austerity model is not supported by what actually happened.

 

[stonesfever]

Legalize marijuana. Guaranteed tax revenue and tourist boom.

 

[Crossroads]

That is not the liberal talking point.

The liberal talking point is "conservatives say the debt is a problem, yet want to spend $100 trillion to bomb the Middle East for the next 10 years. Sounds like a contradiction."

http://krugman.blogs.nytimes.com/2013/04/09/deficit-derangement-syndrome/

http://www.nytimes.com/2012/01/02/opinion/krugman-nobody-understands-debt.html

 

[cpwill]

I saw it reported at about 14.9%. Nevertheless, the point is the same.

Check to see when the estimate was done - they also just recalibrated how they calculate GDP, with the effect that the size of our GDP jumped up (we included more services and intellectual products); so it may be that it's the same revenue, just measured against a bigger pie.

 

[cpwill]

What's your point? Where do you show GDP is adversely affected by the public debt?

Enjoy Reading.

Since this, some bickering has gone on - with some economists arguing that the tipping point is a bit higher (around 95-100% of GDP), and others arguing that it is lower (~85% of GDP); but what you are seeing there is a range; the point that debt at the higher levels hinders growth in GDP is pretty much set in stone.

Dare I say the absence of war spending might be the reason the federal budget decreased and that we weren't doing it just to reduce the debt?

:shrug: certainly you could - though both were part and parcel. Keynesian economists at the time were universal in insisting that ceasing war spending just because the war had ended would send us straight back into the depths of the Depression, with 20% unemployment and the like.... and turned out (as usual) to be ridiculously, hilariously, wrong :mrgreen: