The National Debt

[Moderate Right]

You have never demonstrated that the debt is even harmful! Now you want to curb deficit spending and live with the resulting increase in unemployment and general misery because, what, you feel "ooky" about big numbers?

Why don't you educate me more, since that is what you like to do. Please educate me as to when debt would be harmful. So far all I have heard is that debt is NEVER harmful, ever.

 

[Moderate Right]

Why do you expect me to defend your position on debt and what makes it excessive/what is excessive?

I need an education because I clearly don't know as much as you do. At what point is debt excessive?

 

[Ntharotep]

I need an education because I clearly don't know as much as you do. At what point is debt excessive?

From my understanding debt on a national level is a lot like climate change.
Nobody can put a finger on the exact timeline or money value of "excessive to a dangerous level".
There are other factors as well as I read more about the National Debt. The USD value is not always simply determined by good market sense on the world stage. Sometimes it is political. If we got to a point where the USD reached a low enough value then we could more seriously find ourselves in the hands of our economic allies who also use the USD or we could find it really hard to fight an economic war against those with a higher value (ergo more sought after) currency.
The political side being that it can be a balancing act on keeping our economic allies happy while trying to stretch the USD to its fullest potential.

Some of this ties into how important you think US sovereignty is. If you don't mind selling the country at some point to those with more economic power then there you go. No problem.
The good thing is nobody probably wants to own this ball of insanity just now.

 

[Moderate Right]

OK. Maybe if this gets turned around you'll understand.

If less debt is good, what debt number so we shoot for? One trillion? Zero?

And how do we do it, and how do you see the damages from reducing spending being balanced by the (as yet not described by ANYONE) benefits of being debt free?

Just what are the benefits of no debt, anyway?

I have never advocated being totally debt free for the government. However, I do advocate getting to a balanced budget in a reasonable fashion that won't trigger an economic collapse and I do advocate not continually adding to the national debt year after year after year. Just because I advocate getting our fiscal house more in order doesn't mean I'm an extremist. I do realize that excessive austerity will actually worsen the problem rather than helping it. Liberals see no problem at all. We can spend our way out of everything and print money whenever we want.

 

[Kushinator]

This is all a weird argument. I think people are trying to draw lines in a sand that is very abstract.

The basic issues with debt:
• The US Dollar (USD) is tied closely to the US's credibility as a lender/borrower.
• If Creditors decide that the US is not credible for paying its debt, they could undermine the USD by moving away from anything backed by the USD.
• If creditors distance themselves from the USD then people paid in USD start to lose wealth, resulting in the value of the USD decreasing.
• The affects of the decrease of USD value can be minor to disastrous. Especially considering if reach a point of debt that this happens we will not be able to suddenly dig ourselves out which creates an economic sinkhole.
• Every time we print more money it threatens to set us on this path with creditors and lowers the USD value and the US credibility over all.

Yes it really is that bad. Now here's the rub. Nobody, even the best economic gurus in the world, can take a guess at what that target number of "debt beyond recovery" would be or how much printed money would plummet the value of USD.
So it is a high wire act without any real net but it is one that has never caused the acrobat to fall to their death so they become more and more confident in walking that wire. Is it overconfidence? I guess we'll find out.

Disclaimer: This is a very simplistic explanation and I am not an economist though I do have some hobby interest in economics.

Your concern is the relative value of the dollar? The dollar is valued because it can buy goods and services made and sold in the U.S., not because the federal government has some arbitrary level of debt.

 

[Moderate Right]

Oil supply shocks in the early 1970's combined with the Fed's experimentation with monetarism in the late 1970's aside, i don't think we are anywhere near that type of scenario.



Having 12% interest rates would require inflation to be somewhere in that range, which would simultaneously reduce the debt burden, in a more than equivalent fashion, until existing debt matures and is rolled over at higher rates. At this point, it becomes equivalent in terms of expenditures equaling real debt changes. However... this is a strange type of scenario to be worrying about, considering just how fast oil has plunged, and how the rest of the world is barely treading water. At this point, the worst case scenario is full on deflation, which necessarily increases the debt burden as fixed payments will carry stronger purchasing power, and makes those indebted that much more poor.

I didn't say anything was happening tomorrow but liberals have this younger person attitude that it can never happen to me. Deflation can bring on both recession and depression. Oil has collapsed but you don't know what tomorrow will bring. World War III could be right around the corner and it could drive oil prices and inflation up exponentially. It's like a fire. Once it gets started it may just take off and we may be unable to put it out until our economy burns all the way to the ground. We will be better equipped to deal with this if we didn't owe 19 trillion dollars.

 

[Kushinator]

I have never advocated being totally debt free for the government. However, I do advocate getting to a balanced budget in a reasonable fashion that won't trigger an economic collapse and I do advocate not continually adding to the national debt year after year after year. Just because I advocate getting our fiscal house more in order doesn't mean I'm an extremist. I do realize that excessive austerity will actually worsen the problem rather than helping it. Liberals see no problem at all. We can spend our way out of everything and print money whenever we want.

There is no risk in deficit spending at the moment. Inflation is low, and there is still considerable structural slack in labor markets. It could be that peak labor force participation occurred 15 years ago, and the modern economy requires some level of deficit spending.

Did you notice how the deficit, all by itself, miraculously was reduced by $800+ billion between 2009 and 2013? The question remains; would the overall economy been better off putting that money into the economy, by means of a deficit?

 

[Kushinator]

World War III could be right around the corner

If your argument is premised on WWIII... we don't have much to discuss.

 

[JohnfrmClevelan]

Why don't you educate me more, since that is what you like to do. Please educate me as to when debt would be harmful. So far all I have heard is that debt is NEVER harmful, ever.

I not going to bother trying to educate you, because it's an impossible task. I'm sure you left a trail of frustrated teachers and professors in your wake when you were in school, too.

You are asking your opponents to do your homework for you. Good luck with that strategy.

 

[Moderate Right]

Of course there are. You either don't know or refuse to point them out. Forty pages in, and we are still dealing with a phantom argument; you cannot define/describe what you claim to oppose.

Happy googling!

I'm confused. If you admit that there are consequences to unlimited debt and deficit spending, then why is it necessary for anyone to tell you what they are, since you must already know?

 

[Kushinator]

I need an education because I clearly don't know as much as you do. At what point is debt excessive?

The point at which private domestic investment is crowded out in favor of funding government deficits, and inflation expectations move dramatically upwards. Given the level of interest rates and inflation, i'm not sure we will face such a scenario for at least another decade (IMO). At that time, it would be beneficial to reduce both taxes and spending.

 

[Threegoofs]

Oh no.. I have no problem pointing them out.

The problem with high debt and deficits is that they erode confidence in the economy and in the dollar. When people see high debt, and high deficits, and especially if they don't see a good reason for them (like war), people begin to change their behavior. People look to social security and think? Will it be there for me with all this debt? and so instead of spending money.. they may put more away into savings. A business person may say.. gee, I don;t like the stability of the country and the economy.. its built on government spending and that will have to end sometime.. so they hedge their bets and decide NOT to expand their business or don;t expand as much. Other countries see the debt and high deficits and it erodes their confidence in the American economy and so they don;t buy our debt, or don't expand their businesses into America.. because it seems more risky. And the end result is that the economy begins to decline.

Many here on this board don;t understand what the study of economics is. They think its accounting. (which is ironic because if ever a time in history the accounting did not matter its now.. now that dollars can be created out of thin air and debt can be "poof" disappeared). Economics is about human behavior and their responses to needs for resources and how they acquire those resources.

the real answer of "when is the debt and deficit too high"... its when people think they are too high.

So with the debt being 18 TRILLION, the economy must be terrible, and the dollar must be falling relative to all the other currencies. That explains why interest rates are so high.

 

[Moderate Right]

This is all a weird argument. I think people are trying to draw lines in a sand that is very abstract.

The basic issues with debt:
• The US Dollar (USD) is tied closely to the US's credibility as a lender/borrower.
• If Creditors decide that the US is not credible for paying its debt, they could undermine the USD by moving away from anything backed by the USD.
• If creditors distance themselves from the USD then people paid in USD start to lose wealth, resulting in the value of the USD decreasing.
• The affects of the decrease of USD value can be minor to disastrous. Especially considering if reach a point of debt that this happens we will not be able to suddenly dig ourselves out which creates an economic sinkhole.
• Every time we print more money it threatens to set us on this path with creditors and lowers the USD value and the US credibility over all.

Yes it really is that bad. Now here's the rub. Nobody, even the best economic gurus in the world, can take a guess at what that target number of "debt beyond recovery" would be or how much printed money would plummet the value of USD.
So it is a high wire act without any real net but it is one that has never caused the acrobat to fall to their death so they become more and more confident in walking that wire. Is it overconfidence? I guess we'll find out.

Disclaimer: This is a very simplistic explanation and I am not an economist though I do have some hobby interest in economics.

For being a "hobby" you seem to have a better grasp on the subject than those here who claim to be experts and want to educate the us.

 

[Kushinator]

I'm confused. If you admit that there are consequences to unlimited debt and deficit spending, then why is it necessary for anyone to tell you what they are, since you must already know?

Why should i have to do your work for you? It's certainly not my argument!

 

[Ntharotep]

Your concern is the relative value of the dollar? The dollar is valued because it can buy goods and services made and sold in the U.S., not because the federal government has some arbitrary level of debt.

Actually the USD is not restricted to goods and services in the US.
Use of the USD outside of the United States - Wikipedia

I would rather find a better economic site than wiki, but I'm getting tired of linking things

I can find no instance of a time where we printed more money (in modern times not literally printing money) where the USD did not decrease.
It is also not just supply and demand of goods, money lending comes into play as well:
I don't agree with everything (or sometimes even a lot) of this article writer but they don't paint a bad picture of how it all works:
why-not-to-worry-about-a-us-dollar-collapse

The problem here is the attitude of "Well, yeah, the USD is going to collapse some day but that isn't our problem today...it works for now...print more..."
A sketchy approach at best.

 

[Kushinator]

Actually the USD is not restricted to goods and services in the US.

Sure it has other uses, but they do not influence the trade weighted U.S. dollar value. Consider supply and demand at the most basic level; what happens to the value of a currency where goods and services are becoming more and more scare? Simultaneously, what happens to the price of goods when they become more scare?

I can find no instance of a time where we printed more money (in modern times not literally printing money) where the USD did not decrease.

You can set index dates and observe other periods of time if you'd like.

The problem here is the attitude of "Well, yeah, the USD is going to collapse some day but that isn't our problem today...it works for now...print more..."
A sketchy approach at best.

That isn't been the approach of those you've addressed.

 

[JohnfrmClevelan]

This is all a weird argument. I think people are trying to draw lines in a sand that is very abstract.

The basic issues with debt:
• The US Dollar (USD) is tied closely to the US's credibility as a lender/borrower.
• If Creditors decide that the US is not credible for paying its debt, they could undermine the USD by moving away from anything backed by the USD.

Who are our creditors? Are you talking about people that hold U.S. bonds? If so, they can hardly be considered "creditors." They held dollars, now they hold bonds. It's all the same to a fiat currency-issuing government.

Ask any bond trader if the U.S. pays its bills. There is a reason U.S. bonds are considered 99.9% safe - because the operational ability of the government to create dollars to pay their bills is absolute. The only risk is political - the debt ceiling.

If investors thought there was any risk, they would demand higher interest rates.

• If creditors distance themselves from the USD then people paid in USD start to lose wealth, resulting in the value of the USD decreasing.
• The affects of the decrease of USD value can be minor to disastrous. Especially considering if reach a point of debt that this happens we will not be able to suddenly dig ourselves out which creates an economic sinkhole.
• Every time we print more money it threatens to set us on this path with creditors and lowers the USD value and the US credibility over all.

But we don't just "print" money. The dollars the government creates are spent into the economy, which elicits production. That is why govt. spending counts in GDP.

If there was ever a time when investors would have "lost confidence" in the dollar, it was in 2008. But the Fed stepped in, and the dollar was fine. Did prices even change?

I think people vastly overestimate this "confidence" thing. If you can take your dollars to the grocery store, and there are groceries on the shelf to buy, what else matters?

 

[Moderate Right]

There is no risk in deficit spending at the moment. Inflation is low, and there is still considerable structural slack in labor markets. It could be that peak labor force participation occurred 15 years ago, and the modern economy requires some level of deficit spending.

Did you notice how the deficit, all by itself, miraculously was reduced by $800+ billion between 2009 and 2013? The question remains; would the overall economy been better off putting that money into the economy, by means of a deficit?

There is no risk in deficit spending AT THE MOMENT, except that we will be better equipped to deal with problems on down the road if we get the deficit under control NOW. The deficit didn't shrink over the last few years totally "all by itself". We had a mix of hard fought tax increases and spending cuts. Yes, the economy turning the corner after the Great Recession didn't hurt. I really disagree with your last sentence. It is short sighted only and doesn't look into the future. Sure, continually adding to the deficit and debt helps the economy year after year after year after year - until the fuse reaches the end and the nuclear bomb goes off. That's what liberals don't understand. The fuse is burning by continually adding onto the debt. How long is that fuse? Nobody really knows but it is common sense to know that the more the fuse burns the closer it gets to the end. Liberals only care about the now and the fact that the fuse hasn't reached it's end yet.

 

[Moderate Right]

If your argument is premised on WWIII... we don't have much to discuss.

I'm thinking in boyscout terms. My argument is not premised on WWIII, it is premised on all sorts of bad and unexpectable things can and do happen in the future and we need to get our financial house in order so that when these things do happen we will be in a much better position to deal with them from a financial standpoint. Having your head in the sand and pretending that nothing bad will ever happen is fantasyland and unrealistic.

 

[JohnfrmClevelan]

There is no risk in deficit spending AT THE MOMENT, except that we will be better equipped to deal with problems on down the road if we get the deficit under control NOW. The deficit didn't shrink over the last few years totally "all by itself". We had a mix of hard fought tax increases and spending cuts. Yes, the economy turning the corner after the Great Recession didn't hurt. I really disagree with your last sentence. It is short sighted only and doesn't look into the future. Sure, continually adding to the deficit and debt helps the economy year after year after year after year - until the fuse reaches the end and the nuclear bomb goes off. That's what liberals don't understand. The fuse is burning by continually adding onto the debt. How long is that fuse? Nobody really knows but it is common sense to know that the more the fuse burns the closer it gets to the end. Liberals only care about the now and the fact that the fuse hasn't reached it's end yet.

Do you ever look at your own posts and wonder where the substance is? Because that's what the rest of us are wondering.

Why don't you explain exactly what you mean by your fuse/bomb analogy? Or maybe you would rather ask one of us to do it for you?

 

[Kushinator]

There is no risk in deficit spending AT THE MOMENT, except that we will be better equipped to deal with problems on down the road if we get the deficit under control NOW.

What does down the road entail? An above average growing economy, not one stuck at 2%.

We had a mix of hard fought tax increases and spending cuts.

Sorry, the data disagrees with your position:

until the fuse reaches the end and the nuclear bomb goes off.

You haven't described the fuse or the bomb; only that they exist and we should be afraid.

Sorry, but your argument is less than convincing.

 

[Moderate Right]

The point at which private domestic investment is crowded out in favor of funding government deficits, and inflation expectations move dramatically upwards. Given the level of interest rates and inflation, i'm not sure we will face such a scenario for at least another decade (IMO). At that time, it would be beneficial to reduce both taxes and spending.

Oh my gosh. I see a light at the end of the tunnel. So, there is a point at which it would be beneficial to reduce both taxes and spending. It's just a debate as to when. My opinion is that it is better to cut it off at the pass before it is already upon us, at which time it may be too late. Some would rather wait until it is already upon us and then try getting out of our 40 trillion dollar hole.

 

[Kushinator]

I'm thinking in boyscout terms. My argument is not premised on WWIII, it is premised on all sorts of bad and unexpectable things can and do happen in the future and we need to get our financial house in order so that when these things do happen we will be in a much better position to deal with them from a financial standpoint. Having your head in the sand and pretending that nothing bad will ever happen is fantasyland and unrealistic.

Having an economy stuck at 2% is probably the no.1 priority to get our financial house in order.

Do you take those silly ads on TV about the debt seriously?

 

[Moderate Right]

Why should i have to do your work for you? It's certainly not my argument!

Why should we have to answer a question when you already know the answer? That makes no sense.

 

[Kushinator]

at which time it may be too late.

Doesn't work like that....