What's wrong with US national debt?

[Farm Boy]

I'm not talking about inflation. I'm talking about how there are only a few types of assets we can use to pay for things and all of them are subject to the market except treasuries. You can fight for more government pensions and scholarships (which, btw, are a hard sell for covering private school tuition) and that's cool but in the absence of that, accumulated private wealth is what we've got.

Guh. I've been thinking about this and trying to come back around to your line of thinking since you do make a sympathetic case. But tossing an turning last night I decided that I can't. You've got the have-littles and have-less's out there tromping for their wages and investing the lion's share of their total equity in the market. Be it a business, be it their house, be it their car, be it their engagement ring, be it their living expenses, and these people are a lot of the people. They might have some token 401k funds, grossly inadequate for retirement. Their equity is already almost entirely in the market, and it's already unsafe. Then you have the wealthy that have not-insignificant investments in safe treasury tools, or the ability to move their assets to safe treasury tools if desired. Some of these entities are sympathetic, like scholarship endowments, or churches. But it really comes down to the same cyclical BS. The markets are hot and doing well, those without much are invested in it with about everything, like usual, they're "getting ahead." Those with much are also invested in it heavily and since capital gravitates to capital, they're probably "getting ahead harder." But this is ok, since big players adding liquidity to the system for the little guys, the engines of capitalism is the justification for allowing them to exist. Then things cool off. Or they tank, as you say, and like they did in 2008. The savvier and larger the player already is, the more ability they have/had to shift their assets quickly into safe treasuries. The little guys, the engines of capitalism, can't, and they burn. Either their business investments become worth crap, or the foundation for their labor dries up, and they pay. Either way, their ability to weather this storm is crap compared to the bigger player who can better shift to safety. And then, eventually, things start to get better. And the bigger players then still have their cushion they're sitting on to snap up those resources which are limited when the markets start to recover. Letting capital be safe from being destroyed by the markets guarantees that the cycles of boom and bust make the big bigger and the small stay small. The best thing that happened in the Great Recession was Lehman. It might be the only good thing that happened at all on any scale. The wealthy need to be able to burn as easily as the small, anything else is cronyism. I'm angry. Let those 401k holders and trust fund babies and successful capitalists feel the burn too. Let them look askance at door frames and slip knots too. Safe investment instruments. The more I think about it the more I think fury is a better reaction than sympathy.

 

[MacAttack]

You say that we don't need these things. Lots of people disagree with that.

My kids disagree with me on taking showers every day. Just because they disagree, does not mean it is right.

The government is the servant of the population. If the population wants something, why shouldn't the government provide it?

Because government does a lousy job at it. Creates crony capitalism as an unintended consequence and private enterprise can do better and is more innovative. Case in point, see the history of East Germany and cars. I, as the majority of the population want cars. The government would not do a better job making quality cars on their own. We need Ford, Dodge, Toyota, Nissan and Volkswagen all competing for our business. They will find ways to make their cars better and more attractive for us to buy. This is also called progress.
There are a few things that the government should be responsible for that the population wants, such as defense to protect our shores, providing police services in our cities and rural areas, a judicial system, and paving and maintaining roads among others.

That's not even to mention the vast number of things that the market fails to provide. Markets are not magic. They do not serve all needs.

I agree markets are not perfect. In the words of a man I greatly admire: “But they (markets) allow for a world where prudence is rewarded and recklessness is punished - a world in which people are more likely to take risks and innovate – one where more people prosper. That includes the poor. It’s said ‘the poor will always be with us’ but if free markets were unleashed, that would be much less true. The future could be so rich – so filled with technology and wonders – that my grandchildren would need to read about poverty to know what it was.” My brother who is an entrepreneur once told me, “if there is a need, there is someone out there who will figure out how to satisfy that need well and make good money doing it. Heck! Someone will figure out a need we don’t even know about and once it is out there, we will wonder how did we ever live without it? Think back to gradeschool when we had no cellphones.“
Things that the market fails to provide is usually being impeded by government regulations. Seatbelt technology is a prime example of it. How is it that we have GPS in our cars, yet seatbelts look identical (and are as uncomfortable) to the ones I used in the 1980’s?

The problem being, without unions, there is no prosperity for the majority of the population.

I vehemently disagree. Unions accomplished some good things in the past, but like the quill pen, it belongs in the past. We are way past the need for unions. The world has changed. They are an impediment now, the opposite of prosperity. Look at the mass transit union and the cab drivers union in New York City. They are colluding with government to prevent others to break into the public transportation market because they fear they will compete and charge cheaper prices, and potentially drive them out of business. That is an atrocity.
If you think without unions employers would treat employees bad, it’s the employees responsibility to change jobs. Take their skills elsewhere. LeBron James was unhappy with his bosses, so he took his talents to South Beach. I had a horrible boss in the past, guess what, I left that job for another job that is far more enriching and professionally satisfying. They lost my talent and had to find new talent. I sure hope she realized how wrong she was and corrected her ways so the does not lose my replacement.

There's no guarantee that you'll get what you want with term limits. Term limits increase the power of the bureaucracy at the expense of the legislature. Expertise matters.

On the contrary, creating the bureaucracy in the first place is the first mistake as it will always try to increase its power and become a loud lobbying group so that it is not eliminated and those people who have jobs in that bureaucracy don’t have to go find work elsewhere. Has nothing to do with term limits.

Nevertheless, that's the basic GOP strategy. And, as a whole, it has been a successful one for them.

Agreed, and that is the fault of the electorate. We should demand more from them. This statement includes Democrats. Both parties are focusing on the wrong things.

The biggest obstacle to that is the huge money in politics. Congress has moved far to the right over the past 30 years because more and more it is big money interests who decide who can stand for elections. Not the general public. Special interests were not always as dominant as they are now.

Agreed. It’s a shame isn’t it? Wish there was a silver bullet to solve that.

I have some sympathy for the term limits idea. But it doesn't necessary solve the problems we are talking about.

Oh I know that it wouldn’t solve all our woes overnight. But it is a step in the right direction. I wish it did though.

To a large extent, it's the big money interests that are at fault. Candidates are increasingly segregated from the voters. And from each other. They talk to lobbyists and donors, not voters and colleagues.

You hit the nail on the head. I think this is one of the fundamental problems with America today. Big government has created this. I mentioned earlier about Microsoft not having a lobbying division, and after they were sued they created one, a powerful well-funded one. Well, they don’t just lobby for Microsoft’s interests, but they even use their Washington connections to attack rivials.

I see that. That puts you one up on most of Congress.

Yeah, we need to use the right platforms to attempt to create positive change. I refuse to go political on Facebook. I choose my platforms carefully. I figured this was a good one since it is searchable on the internet.

You're out of cinc with most of the people talking about the deficit then. They aren't willing to dirty their hands with the hard part.

It’s not that I am out of sync, it is that they are cowards.

 

[Hygro]

The economy is not a zero sum game for two reasons.

The first is distribution, and below Mac Attack's example is one example of that: I want your thing and not my thing, you want my thing and not your thing, presto chango we're both happier.

The second is economic growth, which the US has historically averaged around 3% for the past few centuries, higher and lower at times. In the days of strong unions (mid 30s to mid 60s, with a savings-spending lagtime so more like '48-'73) that growth was almost equally shared among all five quintiles of income. Since then, it's gone to the top 20% but skewed more and more and more the higher you go.

That 3% growth is measured in real GDP and as such fails to appreciate some technology so the real wealth growth potential is at times higher. Social expectations make the technology from opportunities into needs.

Beyond that, the economy is a zero sum game.

Here we go.

I hear (read) all y'all's concern and I understand what you mean regarding money spent by the government going to the private sector and how that influences the economy.

But my arguments are ways to cut the budget, and use the savings to pay off the national debt, which was what I was getting at. Then we can resume business as usual. There is no good reason for us to have debt, considering we are one of the wealthiest societies in human history. Some of the government bonds, are held by the private sector. So paying off the debt will get the money back to the private sector. There should be no bonds and the government should be able to operate off tax revenues. If that is not possible, the government must do two things, cut the budget and reform the tax code. Besides, the government having a debt is practically the same as printing more money.

On the money spent going to the private sector, you HAVE to think of the ECON 101 class basic concepts of opportunity cost. For example, instead of the government spending all those tens of millions of dollars on a failed antitrust lawsuit against Microsoft, how about use that money to buy Gate's office products to make their bureaucracies's computer systems more effective. This lawsuit did not help me choose Apple products. I chose Apple because I was sick and tired of Windows and wanted something new and different that met my needs better. Before the lawsuit, Microsoft had no lobbyists in DC. Since this lawsuit, they learned their lesson and now have a large lobbying budget, and the DOJ has not even looked their way since. Microsoft could be using those dollars on R&D (maybe the Xbox One would have been even better with extra funding?) rather than a whole Legal and Lobbying department.

Additionally, the economy is not a zero sum game. If two parties are satisfied with a trade then they both win. I want to fly to Tahiti, but I do not have anything the airline wants except for dollars. So I trade my dollars for their service. My employer values my time and skills, but they are not a grocer, far from it as a matter of fact, so they cannot trade me food for my labor. But they do have dollars. I also value dollars, so we agreed that they would pay me X dollars annually for my skills. Now that I have dollars, I can exchange them for food at the grocer and transportation services form the airline. All of us are happy with our trades. It's like trading in Fantasy Football. You want to make a trade where both owners come out ahead. If one owner gets screwed, he will probably never trade with the guy who screwed him over again. That just negatively affected that fantasy league's trading market as other owners will be less inclined to trade with that owner now as well. Debt on the other hand is the promise that you will have something to trade in the future for the goods and/or services provided to you now. That is not good. Because when you default (Fail to make good on our promise), you screw over everybody. Whether you are John Doe or a Country. This is why credit agencies exist and issue scores, to determine who is honest and who is dishonest. The lower the score the more dishonest and irresponsible they think you are. So credit card companies are less willing to engage with you.

Thus, I have no problem with tax money going to the private sector to accomplish public needs. It is what PART of the private sector and in what capacity that concerns me. Thinking that any government spending is good for the economy is incredibly irresponsible. I do not want the government exchanging tax dollars for bullsh**. That is where the cuts come in. Just because the government is spending less money, does not mean it is bad for the economy. Once the debt is paid off, the government is fully operating at a considerable small scale, the global economy will adjust accordingly. It will get rough at first, but the upside and recovery will be so great, nothing we have ever witnessed in the past will match it.

Now I want to ask you to think in terms of opportunity cost. Forget money for a second, because money is only as real as our government and society chooses it to be.

What is real is our labor, our capital, and our resources. Our actual economy. If someone came along and said "you know the best thing to do is to have all of these inputs match up to maximize their potential" I know I'd be like, that's a good idea. You would too, right? That's what markets are meant to do, after all.

Now a second person comes along and says "no wait, but I have this grand way of organizing them that involves 10% of them not ever being used. But the numbers I made up in my notebook are symmetrical! And we're only going to pay the people who work" You'd tell that guy to get lost. His system, for the sake of artistic symmetry is leaving an economy the size of South Korea's labor force completely dormant. That labor force will fight for the artificial scarcity of employment due to this guy's symmetrical bookkeeping.

That's crazy talk. Imagine if South Korea every year produced nothing. Guess you like paying 20% more for all your electronics, right? That's 30 million folk's worth of labor every year gone forever.

A lost opportunity.

That's the opportunity cost I ask you to think about. Asking for a balanced budget is being the guy who says "wait, it looks really pretty on paper" and then basing the system off that. It's not based on the real economy, but the real economy suffers.

Now let's talk about why.

***
This is going to be a bit dense, but it's important. I think you can roll.
You said:

"But my arguments are ways to cut the budget, and use the savings to pay off the national debt"​

But there are no savings when you do that, I will explain soon.

"Some of the government bonds, are held by the private sector. So paying off the debt will get the money back to the private sector.
[.....]
Besides, the government having a debt is practically the same as printing more money."
​

Wait which is it? Are the bonds money, or will turning the bonds into cash make the private sector have more money? It can't be both, that's impossible. (it's the latter, btw, bonds are money and cash is money, both worth their face value in USD, we'll get back to that.)

"There should be no bonds and the government should be able to operate off tax revenues." ​

Now I ask, where does the legal tender to pay these taxes originally come from?

Ready?

All non-bank money, all non-loan money is created by the government. It doesn't matter if it's cash or bonds, it's all new money. The government has infinite money. That's because money is made up and the government is the only with the legal power to make it up. When you pay the IRS, the IRS does not take that money and pay the treasury. That money is gone. Forever. Shredded if payed in cash, deleted if payed electronically. Taxed money is destroyed money.

So money comes from the government spending it into existence. Whether it's cash money or bond money, it's all typed into some program somewhere, maybe Excel.

All money, (save bank loans), is government debt. This is why "the national debt" is an arbitrary term. All the cash in your wallet is government debt. All the treasuries on Wall St are government debt. What we call and don't call debt in the public discourse is irrelevant, all money is government debt. So you can want to "pay off all the debt" but that just means destroying all the money. Who owns that money? We do.

But why just eliminate all the bonds? Okay, let's say you want to do this. I don't understand why, but let's pretend.

First, we could just do this by converting them all to cash, because that's what they're going to do in time anyway. They are savings accounts (bonds) that time out into checking accounts (cash).

But what if you wanted to "pay them" with tax money? What you're saying is that you want to destroy cash money so that when bond money, already money, becomes cash money, still money,

What you're saying is that you want to take ~$16 trillion out of the private sector while simultaneously declaring that all bonds are now cash. Since bonds are already money, you aren't turning the bonds into money. You are only taxing it away.

You know that the financial crisis resultant recession has, over 7 years, only cost the economy ~$5 trillion? (This number I think is low, but you can see a good visualization here. http://www.lostoutputclock.com/ )

But unlike a gigantic economic depression like the one we had in the 30s, which is akin to the size of output loss you are suggesting, in your system we can't use the tool that returns us to economic growth which is, in a money economy, adding more money to meet the savings desires and economic growth of that economy, aka deficit spending.

In case it's not clear, money is not created at the point of taxation, it's created at the point of spending. Money is destroyed at the point of taxation.

 

[Cutlass]

My kids disagree with me on taking showers every day. Just because they disagree, does not mean it is right.

In a democracy, most people have a vote. You may be able to compel your will on your children. And maybe there's even a good reason for you to do so. But on the scale of nations, the most certain way to make a nation fail is for an elite minority to impose their will on the majority.
What works is distributing power as widely as possible. What does not work is concentrating power only in the elite.

Because government does a lousy job at it. Creates crony capitalism as an unintended consequence and private enterprise can do better and is more innovative. Case in point, see the history of East Germany and cars. I, as the majority of the population want cars. The government would not do a better job making quality cars on their own. We need Ford, Dodge, Toyota, Nissan and Volkswagen all competing for our business. They will find ways to make their cars better and more attractive for us to buy. This is also called progress.
There are a few things that the government should be responsible for that the population wants, such as defense to protect our shores, providing police services in our cities and rural areas, a judicial system, and paving and maintaining roads among others.

See, this just isn't true. It can be made to be true. And a primary goal of conservative politics in the US today is to make it true. But it was not true in the US before the election of Reagan. And even then it has only become dominantly true since the election of GW Bush. Now there are many things that the government should be leaving to the market. But there is an even larger number of things that only the government can do well. You only have Ford, Dodge, Toyota, Nissan and Volkswagen competing for your business because government made that happen. Government prevented those companies from all merging into one company. Competitive markets are an absolutely wonderful thing. But markets do not inherently compete. They have to be made to compete. They will not do so, left to their own devices. Not competing is always more profitable than competing. And because of that, private market actors will always seek a means of not competing.

Now, again, we have a political problem here: The problem is that exact same politicians who are most forceful in saying that the government is the problem, and we need to get the government out of the way, are the exact same politicians who's bread and butter is crony capitalism. That is, the most corrupt politicians in Washington are the ones who are the most voracious in their attacks on the government.

Why is that true? Because deregulation is the Holy Grail of crony capitalism. Nothing government does benefits crony capitalism more than deregulation and cutting taxes.

I agree markets are not perfect. In the words of a man I greatly admire: “But they (markets) allow for a world where prudence is rewarded and recklessness is punished - a world in which people are more likely to take risks and innovate – one where more people prosper. That includes the poor. It’s said ‘the poor will always be with us’ but if free markets were unleashed, that would be much less true. The future could be so rich – so filled with technology and wonders – that my grandchildren would need to read about poverty to know what it was.” My brother who is an entrepreneur once told me, “if there is a need, there is someone out there who will figure out how to satisfy that need well and make good money doing it. Heck! Someone will figure out a need we don’t even know about and once it is out there, we will wonder how did we ever live without it? Think back to gradeschool when we had no cellphones.“
Things that the market fails to provide is usually being impeded by government regulations. Seatbelt technology is a prime example of it. How is it that we have GPS in our cars, yet seatbelts look identical (and are as uncomfortable) to the ones I used in the 1980’s?

It is a fundamental failure to understand markets that if you think an outcome is good, that the market will provide it. Markets do not work that way. And it is a fundamental failure to understand both markets, and the interactions of markets and government, to think that when market's fail to have the outcome you desire, that it was government that caused it.

Market failure is a real thing, and it has nothing to do with government being in the way of the market.

What you have to understand is the profit motive. You see, your view of the economy only works if the profit motive does not exist. If there is a profit motive, then the markets will not do these things. And that can be seen everywhere that you look at any segment of the economy.

The US economy, always, from day one, has been a public-private partnership. And that is true in every nation that is not dirt poor. And that has been true throughout history.
The government built the roads and canals, the markets flourished taking advantage of them.

I vehemently disagree. Unions accomplished some good things in the past, but like the quill pen, it belongs in the past. We are way past the need for unions. The world has changed. They are an impediment now, the opposite of prosperity. Look at the mass transit union and the cab drivers union in New York City. They are colluding with government to prevent others to break into the public transportation market because they fear they will compete and charge cheaper prices, and potentially drive them out of business. That is an atrocity.

The need for unions has never been greater. Unions lost their bargaining power in the 70s and 80s. Labor hasn't had a raise since. If labor's wage gains had remained constant over the past 35 years as it was the previous 35 years, labor would be making 70% higher real wages today. And the economy would have grown faster as well, so the entire nation would be wealthier.

What a person earns has very little to do with the value of what they produce. What a person earns is related only to their ability to bargain for higher pay. Yet the bargaining power of labor is trivial compared to the bargaining power of employers. The extremely uneven power relationship is what makes unions irreplaceable. If government is not backing labor to increase it's bargaining power, labor will be constantly worse off over time. That is, until you hit a floor of bare subsistence. And even then, markets kill labor in job lots, just to keep the price of it down.

You see, that is the difference: Labor is coerced into taking a bad bargain, because the alternative is death. Management is not coerced into taking a bad bargain, because the alternative is, at worst, a slightly lower rate of profit.

If you think without unions employers would treat employees bad, it’s the employees responsibility to change jobs. Take their skills elsewhere. LeBron James was unhappy with his bosses, so he took his talents to South Beach. I had a horrible boss in the past, guess what, I left that job for another job that is far more enriching and professionally satisfying. They lost my talent and had to find new talent. I sure hope she realized how wrong she was and corrected her ways so the does not lose my replacement.

Markets simply do not work like this. There has never been, there never will be, as many jobs as there are people looking for those jobs. Supply always exceeds demand. Basic economics tells you that when supply exceeds demand, prices will be bid down.

On the contrary, creating the bureaucracy in the first place is the first mistake as it will always try to increase its power and become a loud lobbying group so that it is not eliminated and those people who have jobs in that bureaucracy don’t have to go find work elsewhere. Has nothing to do with term limits.

You hire someone to do a job, then you have to organize the work. So bureaucracy. If you don't do that at all, then crony capitalism wins, and the economy becomes poorer and poorer and poorer.

Agreed, and that is the fault of the electorate. We should demand more from them. This statement includes Democrats. Both parties are focusing on the wrong things.

The GOP electoral success has gotten the Democrats to move far to the right on a great many issues. The greater importance of big money in elections has also moved Democrats far to the right on economic issues. So, no, they are not innocent. But their movement is a reaction to other factors. They are the followers here, not the leaders, in going in the wrong direction.

Agreed. It’s a shame isn’t it? Wish there was a silver bullet to solve that.

The Supreme Court struck that down with Citizen's United. It may take a constitutional amendment. Republicans have succeeded in stacking the courts with crony capitalism apparatchiks.

Oh I know that it wouldn’t solve all our woes overnight. But it is a step in the right direction. I wish it did though.


You hit the nail on the head. I think this is one of the fundamental problems with America today. Big government has created this. I mentioned earlier about Microsoft not having a lobbying division, and after they were sued they created one, a powerful well-funded one. Well, they don’t just lobby for Microsoft’s interests, but they even use their Washington connections to attack rivials.

It isn't big government which has created this. It is big money which has created this. It's taken a long time for big money to corrupt the government to the point that it has.

Yeah, we need to use the right platforms to attempt to create positive change. I refuse to go political on Facebook. I choose my platforms carefully. I figured this was a good one since it is searchable on the internet.

You make a case for your ideas. I don't think you're right on most of it. But I give you credit for taking the time to making the case. Most people don't do that.

It’s not that I am out of sync, it is that they are cowards.

I'm not sure that it's true that they are all cowards. Certainly many of them are. But don't discount the extent to which many of them are acting in a politically rational manner. They are pursuing, not just the goal of cutting the budget, but also the goal of hurting their political opponents to the greatest extent possible while they are doing so.

After all, they have to get elected to pursue their agenda. Getting elected means doing all you can so that the other guy is not elected.

 

[Hygro]

Guh. I've been thinking about this and trying to come back around to your line of thinking since you do make a sympathetic case. But tossing an turning last night I decided that I can't. You've got the have-littles and have-less's out there tromping for their wages and investing the lion's share of their total equity in the market. Be it a business, be it their house, be it their car, be it their engagement ring, be it their living expenses, and these people are a lot of the people. They might have some token 401k funds, grossly inadequate for retirement. Their equity is already almost entirely in the market, and it's already unsafe. Then you have the wealthy that have not-insignificant investments in safe treasury tools, or the ability to move their assets to safe treasury tools if desired. Some of these entities are sympathetic, like scholarship endowments, or churches. But it really comes down to the same cyclical BS. The markets are hot and doing well, those without much are invested in it with about everything, like usual, they're "getting ahead." Those with much are also invested in it heavily and since capital gravitates to capital, they're probably "getting ahead harder." But this is ok, since big players adding liquidity to the system for the little guys, the engines of capitalism is the justification for allowing them to exist. Then things cool off. Or they tank, as you say, and like they did in 2008. The savvier and larger the player already is, the more ability they have/had to shift their assets quickly into safe treasuries. The little guys, the engines of capitalism, can't, and they burn. Either their business investments become worth crap, or the foundation for their labor dries up, and they pay. Either way, their ability to weather this storm is crap compared to the bigger player who can better shift to safety. And then, eventually, things start to get better. And the bigger players then still have their cushion they're sitting on to snap up those resources which are limited when the markets start to recover. Letting capital be safe from being destroyed by the markets guarantees that the cycles of boom and bust make the big bigger and the small stay small. The best thing that happened in the Great Recession was Lehman. It might be the only good thing that happened at all on any scale. The wealthy need to be able to burn as easily as the small, anything else is cronyism. I'm angry. Let those 401k holders and trust fund babies and successful capitalists feel the burn too. Let them look askance at door frames and slip knots too. Safe investment instruments. The more I think about it the more I think fury is a better reaction than sympathy.

If more people understood this our country would function a lot better.

The problem is not the existence of safe assets, but I agree the existence of safe assets does add a layer of complexity that has been abused. Remember that the government created safer assets (insuring bank deposits, not dissimilar to what bonds are in the first place) in response to the bank failures between 1930 and 1933, so as to protect the little guy as much as anyone.

We could address the power inequity caused by wealth inequity not by giving the market more power over everyone's lives, which is your implication, but by giving the public a more divvied-up share of its own commonwealth.





And more market-logic dominance trying to lead to more equality never historically worked--wealth inequality was the same back in the late 20s and the rich got there the same way they did now, without the help of ... wait... time out... I need to check WW1 debt levels and stock volatility pre-1929. But assuming that the WW1 debt wasn't the enabling factor because we were after all on the gold standard before and after running tiny deficits with almost no debt, the rich got rich without safe assets. Do note the bigger debts after WW2 coincided with greater equality. So without doing additional research, we see that post WW1 we had one regime and post WW2 we had another.

The differences between both big debt run-ups was that after WW1 our legal system favored industry rentiers over industry workers, and after WW2 our legal system briefly favored labor over rentiers.

Either way, it seems the debt-structure wasn't the cause of inequality. So when we address inequality, we should tackle it from the primary sources (labor rights, tax codes, spending, that stuff). Added bonus: we can run smaller deficits to keep things going when we have a more efficient, equal economy.

 

[MacAttack]

Okay, based on my responses, Hygro's, and the rest, and I think we are getting away from the intent of the original question: "What's wrong with US national debt?" Perhaps we should re-word the question, "What is wrong with the Federal Budget's deficit?"

I am pumping the breaks in our discussion just because I feel like we are on the verge of going down Tangent Blvd.

 

[Hygro]

Okay, based on my responses, Hygro's, and the rest, and I think we are getting away from the intent of the original question: "What's wrong with US national debt?" Perhaps we should re-word the question, "What is wrong with the Federal Budget's deficit?"

I am pumping the breaks in our discussion just because I feel like we are on the verge of going down Tangent Blvd.

We can change topics if you'd enjoy, but I think you might find we'll end up back at the start if you assert deficits are bad because they cause debt.



A point of clarification on my last post: I mentioned the output gap (~$5 trillion+) adjacent to a private sector asset drain of ~$16 trillion. To be clear, these are two different types of things--one represents economic activity of final goods and services measured in dollars, the other represents who has the dollars themselves. They are related, in that a $16 trillion tax surplus would tank GDP, primarily by the spending cuts that got there. But there's not a 1:1 conversion of taxes to economic activity even measured in the same denominator as taxes. This is because A) GDP doesn't reflect all economic activity and more important B) GDP is a measure of flows that have no corresponding stock value, whereas assets are stocks (of which we can measure flow periods of asset net changes).

 

[Farm Boy]

Either way, it seems the debt-structure wasn't the cause of inequality. So when we address inequality, we should tackle it from the primary sources (labor rights, tax codes, spending, that stuff). Added bonus: we can run smaller deficits to keep things going when we have a more efficient, equal economy.

To buy this you would have to assume my principal objection is to inequality. I think there should be inequality. Hard and clever work deserves to be rewarded. Innovation and valuable services deserve to be rewarded.

But to draw a terribad metaphor: having wealth should function like surfing. The higher and harder you ride the more skill and savvy it takes to maintain. And eventually, that wave is going to break. Society can put some water wings on ya and some lifeguards on the beach to make sure you don't die when it breaks and let you get back on the board. If you're skilled, you go back up again. If you have a good teacher, that's an advantage, you get decent coaching and help using your gear, that helps. Instead, what we have is more like competitive bungee jumping. Having somebody lift you up the platform, hook you into the harness, and giving you a decent chord is almost everything. You'll bounce back up and be fine. Meanwhile you have all the other a-holes trying to construct chords out of barbed wire and twine. And when society can be bothered it drags an inflatable cushion under the platform but doesn't stress much to make sure it's in exactly the right spot and it certainly isn't paying more than lip service to installing a ladder back up to the platform instead of a sheer rock cliff.

 

[Hygro]

To buy this you would have to assume my principal objection is to inequality. I think there should be inequality. Hard and clever work deserves to be rewarded. Innovation and valuable services deserve to be rewarded.

But to draw a terribad metaphor: having wealth should function like surfing. The higher and harder you ride the more skill and savvy it takes to maintain. And eventually, that wave is going to break. Society can put some water wings on ya and some lifeguards on the beach to make sure you don't die when it breaks and let you get back on the board. If you're skilled, you go back up again. If you have a good teacher, that's an advantage, you get decent coaching and help using your gear, that helps. Instead, what we have is more like competitive bungee jumping. Having somebody lift you up the platform, hook you into the harness, and giving you a decent chord is almost everything. You'll bounce back up and be fine. Meanwhile you have all the other a-holes trying to construct chords out of barbed wire and twine. And when society can be bothered it drags an inflatable cushion under the platform but doesn't stress much to make sure it's in exactly the right spot and it certainly isn't paying more than lip service to installing a ladder back up to the platform instead of a sheer rock cliff.

Your terribad metaphor was fun to read but it doesn't tell me what the goals are.

You don't want equality. You want fairness. But fairness has to be governed by something, and I invite you to share with us how you define fair and how our society might achieve it.

 

[Flying Pig]

Equality of opportunity is a good starter - a person should be able to reach the same station in life regardless of who his parents were. I'd also add that the State should ensure that nobody should ever fall below a particularly low standard of living.

 

[Farm Boy]

And I've already stated I'm not expert enough to tell you how to make it work, merely that I don't like how I see it working now.

I want the journey from being part of the 1% to the 99th% percent to be equally as easy as the journey from the 99th% to the 1%. The ease and likelihood of which needs to be way higher. And I think that is going to require knocking out a lot of supports from pedestals. Maybe different tax rates on investment income. Maybe insured deposit limits significantly smaller than they are. Maybe no tax incentives on retirement account contributions/earnings, maybe no cap on income vulnerable to social security taxation. Maybe a lot of things.

 

[Hygro]

Equality of opportunity is a good starter - a person should be able to reach the same station in life regardless of who his parents were. I'd also add that the State should ensure that nobody should ever fall below a particularly low standard of living.

That's the American ideal. I find it appealing. When someone is born in a poor neighborhood and has 60% the physical can-do energy because of particulates in the air, and they have to spend that deficient amount of energy catching up in worse schools what the wealthier kids got from growing up in their homes before going to better schools, I just don't see how we can actually do it without a lot of intervention.

I'm all eyes if you have any ideas.

And I've already stated I'm not expert enough to tell you how to make it work, merely that I don't like how I see it working now.

I want the journey from being part of the 1% to the 99th% percent to be equally as easy as the journey from the 99th% to the 1%. And I think that is going to require knocking out a lot of supports from pedestals. Maybe different tax rates on investment income. Maybe insured deposit limits significantly smaller than they are. Maybe no tax incentives on retirement account contributions/earnings, maybe no cap on income vulnerable to social security taxation. Maybe a lot of things.

A reasonable claim--you shouldn't have to be expected to. But I am noticing you've set your sights on general top 20% stuff instead of top 1% stuff, and haven't mentioned much bottom-up stuff.

 

[Farm Boy]

A reasonable claim--you shouldn't have to be expected to. But I am noticing you've set your sights on general top 20% stuff instead of top 1% stuff, and haven't mentioned much bottom-up stuff.

I'm getting older. The late 90s sci-fi idealism is wearing thin. It's still there, but with the amount of zero-sum this world has, I'm recognizing that making somebody win in important ways often makes somebody else lose. And you simply aren't going to to get those on top to agree to pull all those below up them up to an equal level. Generosity only goes so far in our tribal selfish-gened little species. The generous and well-off will pull those below up them up, but never all the way to their own level. They'll want to maintain the power. It's also perilous to try and pull up the 80% directly, they'll always want to be pulled up over more people. What I can see happening, as slightly more realistic, is that you build in a floor and you design the system to constantly knock down the upper 50% by default. If you're winning, that's awesome, ride the wave while you can.

 

[Cutlass]

Okay, based on my responses, Hygro's, and the rest, and I think we are getting away from the intent of the original question: "What's wrong with US national debt?" Perhaps we should re-word the question, "What is wrong with the Federal Budget's deficit?"

I am pumping the breaks in our discussion just because I feel like we are on the verge of going down Tangent Blvd.

The thing about this is, all debt is not created equal. Most businesses carry a load of debt. Including nearly every large and successful business. Why? Because what they buy with that debt is worth more than the cost of that debt. Most households carry a mortgage. Why? Because the value of what people get for that mortgage exceeds the cost of paying that mortgage. And most governments carry debt. Why? Because the value of what is bought with that debt exceeds the cost of carrying that debt.

That doesn't mean all debt is good. Just that it is necessary to understand that not all debt is bad.

 

[Integral]

The thing about this is, all debt is not created equal. Most businesses carry a load of debt. Including nearly every large and successful business. Why? Because what they buy with that debt is worth more than the cost of that debt. Most households carry a mortgage. Why? Because the value of what people get for that mortgage exceeds the cost of paying that mortgage. And most governments carry debt. Why? Because the value of what is bought with that debt exceeds the cost of carrying that debt.

That doesn't mean all debt is good. Just that it is necessary to understand that not all debt is bad.

Lots of good claims here.

--

Back to the original question, which I'll broaden a bit to "What is wrong with US fiscal policy:" I'm not convinced that we're allocating that particular 20% of GDP efficiently.

 

[Cutlass]

Lots of good claims here.

--

Back to the original question, which I'll broaden a bit to "What is wrong with US fiscal policy:" I'm not convinced that we're allocating that particular 20% of GDP efficiently.

That's certainly true. But it's a better way to frame the discussion. Rather than say "too much", we need break it down and talk about the value of each piece of it. My discussion with MacAttack touched on parts of that. Which is better than a lot of people manage.

 

[Hygro]

I'm getting older. The late 90s sci-fi idealism is wearing thin. It's still there, but with the amount of zero-sum this world has, I'm recognizing that making somebody win in important ways often makes somebody else lose. And you simply aren't going to to get those on top to agree to pull all those below up them up to an equal level. Generosity only goes so far in our tribal selfish-gened little species. The generous and well-off will pull those below up them up, but never all the way to their own level. They'll want to maintain the power. It's also perilous to try and pull up the 80% directly, they'll always want to be pulled up over more people. What I can see happening, as slightly more realistic, is that you build in a floor and you design the system to constantly knock down the upper 50% by default. If you're winning, that's awesome, ride the wave while you can.

Coolio, but "knocked down" better be to a pretty well supported place. Otherwise you have people who worked hard and smart and provided something useful, to be deemed worthy of living a lifetime of affluence in return for solving a need, only to have that affluence taken away because some other folks made the wrong money choices. That doesn't seem fair to me.

The thing about this is, all debt is not created equal. Most businesses carry a load of debt. Including nearly every large and successful business. Why? Because what they buy with that debt is worth more than the cost of that debt. Most households carry a mortgage. Why? Because the value of what people get for that mortgage exceeds the cost of paying that mortgage. And most governments carry debt. Why? Because the value of what is bought with that debt exceeds the cost of carrying that debt.

That doesn't mean all debt is good. Just that it is necessary to understand that not all debt is bad.

That's a good point, but that's still rendering the intellectual concept of public debt under private debt logic, which is not even the same logic. Maybe baby steps is key but the fact is, to make the case for public debt we don't need to argue ROR we can just point out that what we are calling public debt is literally just the minus sign to the private sector's plus sign on the macroeconomic balance sheet.

Lots of good claims here.

--

Back to the original question, which I'll broaden a bit to "What is wrong with US fiscal policy:" I'm not convinced that we're allocating that particular 20% of GDP efficiently.

Nawp. Different topic

I've been waiting for you to ride into this thread like I'm the prince-pretender with your smote-stick. I will smite back, though

 

[Cutlass]

That's a good point, but that's still rendering the intellectual concept of public debt under private debt logic, which is not even the same logic. Maybe baby steps is key but the fact is, to make the case for public debt we don't need to argue ROR we can just point out that what we are calling public debt is literally just the minus sign to the private sector's plus sign on the macroeconomic balance sheet.

What's different in the logic?

 

[Farm Boy]

Coolio, but "knocked down" better be to a pretty well supported place. Otherwise you have people who worked hard and smart and provided something useful, to be deemed worthy of living a lifetime of affluence in return for solving a need, only to have that affluence taken away because some other folks made the wrong money choices. That doesn't seem fair to me.

Given our past discussions I'm pretty sure you would react with hostility to my concept of a pretty well supported place.

I don't know that I really consider anything deemable worthy of "living a lifetime of affluence." Ensuring people can't be comfortable in that security kinda would by the point of my idea. Perhaps sustaining injury in service is worth of living a lifetime of relative comforts. Perhaps you can take comfort in the knowledge that I'm pretty sure every side of the political spectrum would tell me to screw off as they all simultaneously consider themselves worthy of a greater than average slice of the pie.

 

[Integral]

Nawp. Different topic

I've been waiting for you to ride into this thread like I'm the prince-pretender with your smote-stick. I will smite back, though

So do you want me to specifically comment on the optimal size of the US public debt load (and perhaps its expected future path, say)?

I wanna know the rules before I start busting out claims that I'll eventually have to defend.

(And I know I'm a bit late, so feel free to chastise me if I tread over old ground!)

What's different in the logic?

Public debt differs from private debt in three crucial respects.

1) The US government has the ability to print US currency, and US debt is denominated in US currency. By contrast, Greek debt is denominated in Euros, and the Greeks can't print Euros. The game changes a bit when the government has, in principle, unlimited ability to fulfill its debt obligations.

2) When a private citizen takes on some debt, it probably won't affect aggregate GDP too much. When the government takes on debt, it does affect macro aggregates. Government debt is more sensitive to the macro situation than private debt is.

3) US government debt is special on a lot of peoples' (and firms') balance sheets, for whatever reason: it's safe, people pathologically assign higher weight to Treasury debt, whatever. But that gets into banking and finance, which is a dark place that I don't want to go.

So there is reason to treat public debt slightly differently than the debt of a small household.