What's wrong with US national debt?

[MacAttack]

1) How big is too big?

Hey Hygro, I'll try to break down your questions in sections.
1. How big is too big? Let me put it this way. Federal spending is triple the amount of federal spending at the height of World War II. And then we were conducting a global war campaign. We had troops in Africa, the Pacific, and Europe, all fighting. We had the Lend Lease program with the Soviet Union. The nation was fully mobilized for war. We are no longer in a global conflict. Yet we have still have nearly 200 troops in places like Greenland? Even if it was half the size it may still be too big. There is more government waste than I can even express on here. Particularly with all the interest group pandering. I would like to see term limits on Senators and Congressmembers. That would be a good start.

2) What things would you cut from the federal government?

2. What I would cut? Holy cow! My list is long. I will hit on the first two dozen (in no particular order) and be brief so this post doesn't overwhelm:
1. the TSA (privatize it)

2. Federal Flood Insurance (privatize it also)

3. Eliminate the Small Business Administration (they do nothing fruitful)

4. Repeal the Davis-Bacon Rules. (for those who don't know, these rules are where the government must pay fat union-set wages to workers on federal construction projects.

5. Reduce significantly foreign aid (eliminating it is my preference, it really does us more harm than good)

6. the Department of Education (this at worst is a state and local thing, I prefer to privatize all education, give me my tax money back so use that money so I can decide where I want to send my little girl. We are spending $32,000 per student per annum on a national scale, while good private schools in Texas are no more than $35,000. I am willing to pony up the extra $3k. Reality has taught me that government "public" schools are one of the worst parts of America).

7. End Social Security. (Putting money into Social Security is currently my worst investment in my portfolio. The rate of return won't beat inflation by the time I start collecting. Shoot, there may be no money left in the trust by the time I hit collecting age)

8. Industry and niche subsidies. (It promotes crony capitalism rather than free market capitalism)

9. Health Care Insurance regulations, such as Obamacare. (Health Care insurance should be more like car insurance. Only cover catastrophic losses. I mean, companies purchase Stop-Loss Insurance for their regular insurance plans. Insurance for insurance? That's absurd. I bet you don't know how much doctor visits, surgical procedures, or CAT scans really cost. Can you imagine if we have Food Insurance? Where we purchase food and an insurance plan covers 85% of the cost? Milk would be as expensive as jewelry.)

10. Nation building endeavors. (Exhibit A: Latin America. Exhibit B: In more detail, in June 2004 the US Military loaded $12Billion in shrinkwrapped $100 bills, weighing almost 400 tons, onto planes headed to Iraq. That money is now missing, and nobody knows. Military officials do this when then they are asked -> )

11. Food Stamps. (This is where charities come in, folks won't go hungry in this country. If you make at least $30k a year that puts you in the top 2% of wage earners in the WORLD. We do not need government to help our neighbors, we as private citizens will do so, through charity, because it is in our nature)

12. Useless programs like Head Start, (which has been an expensive faliure)

13. US postal service. (Privatize it)

14. End the War on Drugs. (Because Prohibition worked so well. I don't do drugs, I think drugs are destructive to society, but the black market it creates is worse. Legalize all drugs, and treat them like cigarettes and make some serious money off the potential TAXES!)

15. the A1 Abrams retrofitting programs (its cheaper to buy new tanks than to retro fit these antiquated tanks, and sell/recycle the scrap metal. They haven't done that because it would close an Army base and the district's congressman and lobbying group puts the breaks on it. I wish I could remember their names, sorry.)

16. Worthless grants like the $150k comedy tour in India a few years ago (we got no tangible or intangible gain from that)

17. Gun control programs (all they are doing is disarming law abiding citizens, as criminals will use them regardless, the Nazi's were the first to institute full gun control. Once they disarmed the citizenry, it became easier to oppress.)

18. Narrow the US Military's mission. It will better serve our troops and save billions in tax money.

19. Cut Medicare and Medicaid. (It will save us $441 billion. If we gave every man woman and child $1M to cover a lifetime of medical expenses, it would still be less money. It will also give consumers incentive to price compare amongst doctors and pharmaceutical companies. This will invariable nurture innovation which often leads to price drops)

20. Get rid of OSHA. (workplace injuries and deaths were already declining and the rate did not decline at a faster rate after the inception of OSHA)

21. Bank bailouts (there is no such thing as too big to fail, that is a scam).

22. Deregulation of industries ("Congress should be judged on how many laws they repeal not how many they pass" - John Boehner (one of his too few sensible quotes))

23. Public transportation (Privatize it. The private sector does a better job.)

24. Tariffs. (All they do is hurt economies at home and abroad, and other governments impose their own to "punish" us.)

3) If you cut government to your preferred size, and the debt remains, is it still a problem?
3b) If so, why?

See, the thing is, every dollar the government spends goes straight to the private sector. This is an accounting fact. It's also figuratively true. Running surpluses therefore is the opposite. Tax surpluses come from the private sector. Running surpluses shrinks the private sector.

That is not possible. The only way that would happen is if there was extreme corruption and waste.

the debt will not magically disappear over night after cutting government, but I can assure you the US Government will be able to pay it off at an incredible rate, it will make Congress's head spin.

Every dollar does not go to the private sector, to think it does, is an absurd conclusion. Here are a couple of examples where it goes other than our private sector. It lines foreign leader's personal coffers, it ends up in our enemies's hands, and it is not used to further our economy and society. Government Payrolls: I guarantee you that some of the money some government workers get from their wages, goes to illicit drug use, oversees to relatives, personal savings in places not at banks or investment firms (think underneath mattresses, jars, etc where they lose value based on inflation).

The money that does go to the private sector may also not be benefiting the economy and society. Think opportunity cost and efficiency.
Sorry this is a long post. I will stop now. <<steps off soap box>>

 

[sophie]

I'm not sure I understand that. Are you arguing that the crises of Zimbabwe and Weimar Germany were intentional?

I don't know about Zimbabwe, but Weimar's was absolutely.

 

[Farm Boy]

I appreciate the opinion sharing Mac! Long posts take a while to put together, I appreciate it, at least, and I agree with some of them - but disagreeing is more fun, so here goes! =D

2. Federal Flood Insurance (privatize it also)

Private insurance industries have shown multiple times that when they're given money for things like widespread flood protection they do not adequately fund. They take the premiums and use them for profit, then when a catastrophic flooding event happens, instead of limited local events, they simply default. All the decision-makers in that process win at the expense of everyone else. Pure scam. Pure theft. I recommend jail time for anyone who makes this actually happen.

7. End Social Security. (Putting money into Social Security is currently my worst investment in my portfolio. The rate of return won't beat inflation by the time I start collecting. Shoot, there may be no money left in the trust by the time I hit collecting age)

If you have the luxury of consiering Social Security to be the worst investment in your portfolio, if you have a "portfolio," then amazingly enough Social Security isn't really designed with you principally in mind. But it still benefits you, since living in a country where the rates of elder poverty aren't even higher does benefit the populace at large. If we were wise, we'd eliminate the cap on salary that's forced to contribute towards it.

9. Only cover catastrophic losses. I mean, companies purchase Stop-Loss Insurance for their regular insurance plans. Insurance for insurance? That's absurd. I bet you don't know how much doctor visits, surgical procedures, or CAT scans really cost.

19. Cut Medicare and Medicaid. (It will save us $441 billion. If we gave every man woman and child $1M to cover a lifetime of medical expenses, it would still be less money. It will also give consumers incentive to price compare amongst doctors and pharmaceutical companies. This will invariable nurture innovation which often leads to price drops)

The fact that you think $1M is an adequate safety net to cover one catastrophic event, much less a lifetime of expenses on top of catastrophic protection means it's a pretty safe assumption that you yourself have no idea how much medical care really costs.

11. Food Stamps. (This is where charities come in, folks won't go hungry in this country. If you make at least $30k a year that puts you in the top 2% of wage earners in the WORLD. We do not need government to help our neighbors, we as private citizens will do so, through charity, because it is in our nature)

There is hunger now, people do go hungry in this country. You eliminate food stamps and nutritional assistance and more will go hungry. Charity is wonderful. We need more of it. But no, our fellow citizens are not that generous. They are not that tuned in, they are not that consistent. Ending food stamps is either a sign of dangerous and harmfully naive idealism or callous indifference and greed masquerading as such. Which it is doesn't matter, as the end result would be the same.

 

[Tahuti]

Bank bailouts (there is no such thing as too big to fail, that is a scam).

Actually, too big to fail does exist, though bank bailouts make it worse. Banks need to broken up first.

 

[Cutlass]

I'm not sure I understand that. Are you arguing that the crises of Zimbabwe and Weimar Germany were intentional?

The German one, certainly. Zimbabwe might be a case of it being a side effect of another policy. But you don't get hyperinflation without deliberate, and sustained, policies to cause it. Hyperinflation is not a case of the central bank being too loose with the money supply. Hyperinflation only really takes place when the government is paying it's bills with the printing press rather than taxing or borrowing. And even then it takes paying very nearly all of it's bills that way.

Either way, it's not something you can fall into by accident. You have to work for it.

The people in political circles today who are throwing around the term hyperinflation either haven't got a fraking clue what they are talking about, or are deliberately misusing the phrase for political fear-mongering. The definition of hyperinflation is 50% inflation per month! I think the closest the US has ever seen to that was the Confederacy in 1863-5. And even then they didn't reach the real thing.

 

[potatokiosk]

Begger thy neighbor, eh? That's a zero sum game. You said monetary expansion, not trading our stuff for their currencies (or I suppose buy back our own currency until all the foreign debt is repurchased, which is a limited prospect). How about actual dollar expansion policies. Got any in mind? I know some really radical ways the Fed can boost AD but most of those involve just giving out money to people.

I haven't forgotten the longer post, but the last one took me over an hour so I need a minute yadadamean.

Their are more dollar expansion policies than there are things that can be bought with dollars. The Fed just happens to buy assets that are either issued by the government or backed by government guarantees. Regardless of who serves as the middle man, a monetary expansion is a monetary expansion. Fundamentally, it's not through interest rates or exchange rates or anything of that sort that monetary expansion increases aggregate demand. What we have is the "hot potato" effect, where everyone who has money must decide whether to hold the money or spend it. Nominal GDP must reach a level where the demand for money equals the supply. This is the most important principle for how monetary policy influences aggregate demand, and it's entirely possible for monetary expansion to lead to higher, not lower, long term interest rates.

Now people will argue against this by proposing other variables in the demand for money aside from income. The higher interest rate are, the higher the opportunity cost of holding money, and the lower demand for money will be. Then if we have rates near zero, it's conceivable that no amount of adding to the money supply will increase aggregate demand to any significant degree, because it's possible that as interest rates approach some lower limit the demand for money approaches infinity. I don't accept this because the central bank can influence expectations of inflation and gdp growth through forward guidance. The central bank can engage in level targeting, promising to make up for falling short of its objectives in the past by intentionally overshooting in the future.

 

[Cutlass]

Hey Hygro, I'll try to break down your questions in sections.
1. How big is too big? Let me put it this way. Federal spending is triple the amount of federal spending at the height of World War II. And then we were conducting a global war campaign. We had troops in Africa, the Pacific, and Europe, all fighting. We had the Lend Lease program with the Soviet Union. The nation was fully mobilized for war. We are no longer in a global conflict. Yet we have still have nearly 200 troops in places like Greenland? Even if it was half the size it may still be too big. There is more government waste than I can even express on here. Particularly with all the interest group pandering. I would like to see term limits on Senators and Congressmembers. That would be a good start.

Nope.

What else you got?

 

[El_Machinae]

Why does the graph stop at 2010?

 

[Cutlass]

That's just the first graph I found that covers the relevant time period. All the graphs have various start and stop cutoffs for one reason or another.

But whichever graph you pick, no way is the US government spending as a percent of GDP as high now as it was in WWII. Much less "triple". So the argument begins from a false premise.

 

[MacAttack]

I appreciate the opinion sharing Mac! Long posts take a while to put together, I appreciate it, at least, and I agree with some of them - but disagreeing is more fun, so here goes! =D

Disagreeing is fun! I also like attempting to sway people to what I think is correct. Emphasis on "think", since I could be wrong and I am open to changing my opinion if it warrants it. Freedom of speech (and opinion) is priceless. I actually look forward to your response to my replies coming up!

Private insurance industries have shown multiple times that when they're given money for things like widespread flood protection they do not adequately fund. They take the premiums and use them for profit, then when a catastrophic flooding event happens, instead of limited local events, they simply default. All the decision-makers in that process win at the expense of everyone else. Pure scam. Pure theft. I recommend jail time for anyone who makes this actually happen.

Private insurances can&#8217;t provide adequate coverage because the federal government undercuts them with unsustainable premiums, because Congress is not held accountable for the $19 billion they are in the hole. $19 BILLION! WTH! If an insurance company&#8217;s CEO ran a $19 Billion deficit, can you imagine how stakeholders would react? Memo to all employees of that company, find other employment STAT!
All the government is doing is incentivizing people to build on the beach and flood plains. A friend of mine had a weekend beach house that was destroyed by a hurricane. He&#8217;s well off enough to take that loss, but the government flood insurance covered it all. When I asked him about rebuilding it, he said plans were underway. I told him he was dumb to build there. He set me straight. The government will take care of his beach house with that flood insurance. No risk. Just delayed weekend relaxing trips.
Why not allow people to take chances with their own money? Be more careful where they build/buy homes. Tax payers should not be on the hook on such risky properties.
Think like an economist. If none builds next to shores or flood plains, then those property prices will fall. To the point where investors and would be owners would be able to justify to pay the extra money for higher flood insurance premiums.

If you have the luxury of consiering Social Security to be the worst investment in your portfolio, if you have a "portfolio," then amazingly enough Social Security isn't really designed with you principally in mind. But it still benefits you, since living in a country where the rates of elder poverty aren't even higher does benefit the populace at large. If we were wise, we'd eliminate the cap on salary that's forced to contribute towards it.

There are better options than social security. Individuals could do a better job investing that money than the government can. I would be in favor of mandatory 401k contributions and forbidding 401k loans on the mandatory plans, but give the power back to employees to manage their own money. It is insulting for the government to think that they can do a better job planning our financial future than we can. Social Security&#8217;s benefit to us is not significant enough to warrant its existence. On your cap suggestion, I'm would be in favor of that change, I just think it's not enough.

The fact that you think $1M is an adequate safety net to cover one catastrophic event, much less a lifetime of expenses on top of catastrophic protection means it's a pretty safe assumption that you yourself have no idea how much medical care really costs.

I would actually be against the $1M giveaway. It was a bit of a hyperbole on my part. But if that giveaway was placed, of course Stop-Loss type insurance would exist, the market would demand it. We do not need government to mandate it or even (gasp!) manage it.
You are right, I have no clue what health care (pre and post profit margins) really costs. Which I find very troubling and it&#8217;s a disgrace.

There is hunger now, people do go hungry in this country. You eliminate food stamps and nutritional assistance and more will go hungry. Charity is wonderful. We need more of it. But no, our fellow citizens are not that generous. They are not that tuned in, they are not that consistent. Ending food stamps is either a sign of dangerous and harmfully naive idealism or callous indifference and greed masquerading as such. Which it is doesn't matter, as the end result would be the same.

This is the land of opportunity. If your current job does not put enough bread on your table, it behooves you to find employment elsewhere that does. (Shoot, job hunting and relocation expenses are tax deductible!!) If you are unemployed for whatever reason, finding employment is your full time job. If you do not have any skills, create them. You can develop skills. Churches, Charities, even job firms will help you. There is money to be made to help people find jobs! How else does careerbuilder.com and monster.com exist? They will do a better job than government can. Turn that money spent on food stamps on job placement programs. If people are not incentiveized (is that even a word?) to look for employment, they will not seek help from churches, charities and/or firms. To keep this short, I won&#8217;t go into more details so support my argument.
On getting rid of the Food Stamp program, I wouldn&#8217;t just pull the plug like you would on a lamp to shut it off. We would need to roll it back. Like most programs. But not as slowly as pulling troops from Iraq. Because it would never go away.
I am willing to bet you a beer (a coke if you don't drink alcoholic beverages), that once you wean the American public off food stamps, you will see behavioral changes, like people having less children. Some just get pregnant just to that they can qualify for these types of programs. That unintended consequence is criminal.

 

[sophie]

But whichever graph you pick, no way is the US government spending as a percent of GDP as high now as it was in WWII. Much less "triple". So the argument begins from a false premise.

It also kind of ignores just how dramatically the US's population has skyrocketed since the 1940s, and how the demographics have shifted over the years (more people, and in particular more old people require higher allocations of government money than would have been required 60 years ago [ignoring the war])

 

[MacAttack]

Actually, too big to fail does exist, though bank bailouts make it worse. Banks need to broken up first.

Divestitures are the way to go, and that is what usually happens. But government should not throw money at them. It would also open the door for new competitors. Those were just executives who did not want to lose their jobs and have the stigma of "running a major corporation into the ground" on their resume.

 

[MacAttack]

Nope.


What else you got?

Hey Cutlass, thanks for your feedback.

In my opinion, it is criminal to compare spending to GDP. It's like saying winning football teams should be determined by stats rather than final scores.

The amount of money spent on defense has nothing to do with how robust our economy is.

Here is the graph I found. Sorry it only goes to 2007 and its only adjusted to inflation and 2007 Dollars. It's what I could come up with on short notice. But based on trends, you can easily tell where we are at now. The Bush II and Obama eras increased spending from its 2007 levels.

But you can easily determine WW II expenses and 2007 expenses. It is criminal.

It also kind of ignores just how dramatically the US's population has skyrocketed since the 1940s, and how the demographics have shifted over the years (more people, and in particular more old people require higher allocations of government money than would have been required 60 years ago [ignoring the war])

Owen,

Dead. On.

 

[dutchfire]

Jesus Christ, what is that drop in revenue in 2001? The Bush tax cuts?

 

[MacAttack]

By the way, Nancy Pelosi once said last September on CNN's "State of the Union" about the federal buget [/QUOTE] &#8220;The cupboard is bare. There&#8217;s no more cuts to make. It&#8217;s really important that people understand that,&#8221;[/QUOTE]

There are only two things that we can assess from that. Either she is liar or very dumb/naive.

If she is any of those, she needs to be removed from office immediately.

 

[MacAttack]

Jesus Christ, what is that drop in revenue in 2001? The Bush tax cuts?

Yet they went ahead and spent more money anyways

 

[Antilogic]

I love how charity is trotted out as the solution to all these social ills when we have quite clear and unambiguous records that charity failed to address these problems for centuries. It's why programs like food stamps were wanted in the first place.

 

[MacAttack]

I love how charity is trotted out as the solution to all these social ills when we have quite clear and unambiguous records that charity failed to address these problems for centuries. It's why programs like food stamps were wanted in the first place.

Charity is easier to sell than private firms. Besides, charities are greatly handcuffed on what they can do by government. Mainly because some programs would suffer. Private firms would do the best job, imho.

 

[Antilogic]

Wha? Charities were not handcuffed by the government back in the 18th and 19th centuries because programs would suffer, whatever that means.

I don't subscribe to the fetishism that private is always best/most efficient/what have you.

 

[Cutlass]

Hey Cutlass, thanks for your feedback.

In my opinion, it is criminal to compare spending to GDP. It's like saying winning football teams should be determined by stats rather than final scores.

The amount of money spent on defense has nothing to do with how robust our economy is.

Here is the graph I found. Sorry it only goes to 2007 and its only adjusted to inflation and 2007 Dollars. It's what I could come up with on short notice. But based on trends, you can easily tell where we are at now. The Bush II and Obama eras increased spending from its 2007 levels.

But you can easily determine WW II expenses and 2007 expenses. It is criminal.

Spoiler :

Owen,

Dead. On.

So you throw out a worthwhile metric to substitute a worthless one? Total dollars spent means nothing. It is not a metric which has actual information that could be used in a comparison. The number which matters is percentage of GDP. What are you ignoring? The fact that the population of the nation has tripled. The fact that the size of the economy has more than tripled. The fact that what we want the government to do is entirely different.