AS DEFICIT EXPLODES, GOP DEMANDS EMERGENCY TAX CUT FOR THE RICH

[laughing dog]

If someone offed a credit card with no limit and all you had to do was make a monthly payment would that sound too good to be true.

Personal finance is not the same as government finance. People cannot issue currency to pay debts: governments can. People cannot tax others to pay debts: governments can.

Unfortunately, some politicians think this way too. It has been tried several times in several different countries and has had disastrous consequences for the citizenry. The latest example is Venezuela... their currency, the Bolivar, is now worthless.

The currencies of Germany, France, Italy, Japan, and the USA are doing fine.

 

[skepticalbip]

Unfortunately, some politicians think this way too. It has been tried several times in several different countries and has had disastrous consequences for the citizenry. The latest example is Venezuela... their currency, the Bolivar, is now worthless.

The currencies of Germany, France, Italy, Japan, and the USA are doing fine.

That is because they don't print as much money as they want to cover any debt they want to accrue. Their increase in currency in circulation is tied to their GDP growth. Germany after WWI, Zimbabwe, etc. printed money to cover debt and the citizenry suffered because of it as the currency became worthless. Venezuela didn't learn from their example and, apparently, you didn't either.

 

[laughing dog]

Unfortunately, some politicians think this way too. It has been tried several times in several different countries and has had disastrous consequences for the citizenry. The latest example is Venezuela... their currency, the Bolivar, is now worthless.

The currencies of Germany, France, Italy, Japan, and the USA are doing fine.

That is because they don't print as much money as they want to cover any debt they want to accrue.
Their increase in currency in circulation is tied to their GDP growth.

Right, and it can be used to pay off debt as well without causing inflation or economic harm.

[
Germany after WWI, Zimbabwe, etc. printed money to cover debt and the citizenry suffered because of it as the currency became worthless. Venezuela didn't learn from their example and, apparently, you didn't either.

I pointed out that governments, unlike people, can print currency and tax which makes their financial situation different than that of people. Are you disputing that characterization?

I made no claim about the appropriate or desired policy to pay off gov't debt, so why are you babbling about Germany after WWI (you forgot Hungary and Austria), Zimbabwe and Venezuela?

 

[Elixir]

48 percent of all US employees work for small businesses, down from 52 percent in the early 2000s. 18 percent of all US employees work for businesses with fewer than 20 employees. Small businesses accounted for over half of net job creation in 2014. Anyone who calls 48 percent of people "outliers" should be mindful that their Orange Avatar got only 48% in 2016.

 

[Half-Life]

48 percent of all US employees work for small businesses, down from 52 percent in the early 2000s. 18 percent of all US employees work for businesses with fewer than 20 employees. Small businesses accounted for over half of net job creation in 2014. Anyone who calls 48 percent of people "outliers" should be mindful that their Orange Avatar got only 48% in 2016.

So you're saying that small busineses run the country, not billionaires and the 1%?

Are you finally a Republican now?

 

[Keith&Co.]

48 percent of all US employees work for small businesses, down from 52 percent in the early 2000s. 18 percent of all US employees work for businesses with fewer than 20 employees. Small businesses accounted for over half of net job creation in 2014. Anyone who calls 48 percent of people "outliers" should be mindful that their Orange Avatar got only 48% in 2016.

So you're saying that small busineses run the country, not billionaires and the 1%?

Are you finally a Republican now?

And again, there's nothing like that in whst you quoted. Please justify this interpretation of that post.

 

[ZiprHead]

The deficit is a red herring.

But we should be using our capacity to deficit spend, i.e. within the limits of acceptable inflation, for something other than making the obscenely rich more obscenely rich and trying to satisfy the insatiable Military-Industrial Complex.

Oh, you don't know the facts.

3% of our budget is military. 10-15% of our budget is government handouts to the poor.

But military spending is the problem?

Might want to rethink what the facts say instead of listening to Democrats lie to you.

WTF???

 

[Elixir]

48 percent of all US employees work for small businesses, down from 52 percent in the early 2000s. 18 percent of all US employees work for businesses with fewer than 20 employees. Small businesses accounted for over half of net job creation in 2014. Anyone who calls 48 percent of people "outliers" should be mindful that their Orange Avatar got only 48% in 2016.

So you're saying that small busineses run the country, not billionaires and the 1%?

Are you finally a Republican now?

And again, there's nothing like that in whst you quoted. Please justify this interpretation of that post.

Perhaps I should clarify that those facts were presented solely to shed light on the mendacity and lack of forthrightness in HL's contrary assertion. It is not true that the 48% of all working Americans who work for small businesses are "outliers". To assert that they are, is to LIE or to express an ignorance-based belief.

 

[steve_bank]

If someone offed a credit card with no limit and all you had to do was make a monthly payment would that sound too good to be true.

Personal finance is not the same as government finance. People cannot issue currency to pay debts: governments can. People cannot tax others to pay debts: governments can.

But it is. The federal government as the business that it is BORROWS MONEY. You can look up how much we owe China. There has been occasions in modern times when the federal international credit rating dropped. That means the cost to borrow goes up. It is the same with the individual states.

Federal financing is a balancing act. With the Trump tax cuts revenue has dropped and debt accelerating. The key word is DEBT. The borrowed debt at any tine has a principal amount plus interest owed. Just like your auto loan.

What do you think happens if we default to China or China sells the debt?

The U.S. debt to China is $1.07 trillion as of December 2019.    That's 16% of the $6.7 trillion in Treasurybills, notes, and bonds held by foreign countries The rest of the $23 trillion national debt is owned by either the American people or by the U.S. government itself.

If you buy T bills you are loaning money to the government. When it comes time to pay you back with interest where does the money come from?

Of wait I forgot, if the government runs short of money it can just print more, right?

 

[steve_bank]

https://en.wikipedia.org/wiki/National_debt_of_the_United_States

The national debt of the United States is the total debt, or unpaid borrowed funds, carried by the federal government of the United States, which is measured as the face value of the currently outstanding Treasury securities that have been issued by the Treasury and other federal government agencies. The terms "national deficit" and "national surplus" usually refer to the federal government budget balance from year to year, not the cumulative amount of debt. A deficit year increases the debt, while a surplus year decreases the debt as more money is received than spent.

There are two components of gross national debt:[1]
"Debt held by the public" – such as Treasury securities held by investors outside the federal government, including those held by individuals, corporations, the Federal Reserve System, and foreign, state and local governments.
"Debt held by government accounts or intragovernmental debt" – are non-marketable Treasury securities held in accounts of programs administered by the federal government, such as the Social Security Trust Fund. Debt held by government accounts represents the cumulative surpluses, including interest earnings, of various government programs that have been invested in Treasury securities.

In general, government debt increases as a result of government spending, and decreases from tax or other receipts, both of which fluctuate during the course of a fiscal year. In practice, Treasury securities are not issued or redeemed on a day-by-day basis,[2] and may also be issued or redeemed as part of the federal government's macroeconomic management operations.

Historically, the US public debt as a share of gross domestic product (GDP) has increased during wars and recessions, and subsequently declined. The ratio of debt to GDP may decrease as a result of a government surplus or due to growth of GDP and inflation. For example, debt held by the public as a share of GDP peaked just after World War II (113% of GDP in 1945), but then fell over the following 35 years. In recent decades, aging demographics and rising healthcare costs have led to concern about the long-term sustainability of the federal government's fiscal policies.[3] The aggregate, gross amount that Treasury can borrow is limited by the United States debt ceiling.[4]

As of February 2020, federal debt held by the public is 17.23 trillion and intragovernmental holdings were $6.02 trillion, for a total national debt of $23.3 trillion.[5] At the end of 2018, debt held by the public was approximately 76.4% of GDP,[6][7] and approximately 29% of the debt held by the public was owned by foreigners.[8] The United States has the largest external debt in the world. In 2017, the US debt-to-GDP ratio was ranked 43rd highest out of 207 countries.[9] The Congressional Budget Office forecast in April 2018 that debt held by the public will rise to nearly 100% of GDP by 2028, perhaps higher if current policies are extended beyond their scheduled expiration date.[10]

 

[laughing dog]

But it is. The federal government as the business that it is BORROWS MONEY. You can look up how much we owe China. There has been occasions in modern times when the federal international credit rating dropped. That means the cost to borrow goes up. It is the same with the individual states.

Try to focus. Households, businesses and governments can choose to incur debt. Ehen the debt comes due, all three can choose to either repay the debt or try to refinance it, The difference is that households and businesses sources for repayment are saving, or selling assets. Governments have these options plus the options of taxation and printing money (at the national level). So gov’t finance is not the same as household finance.

 

[DBT]

Why go into debt if you can just print as much money as you like, ha, ha....

 

[ZiprHead]

 

[Horatio Parker]

Why go into debt if you can just print as much money as you like, ha, ha....

Sure. Issuing debt is a legacy from the gold standard. Now it functions as a tool to maintain the interbank interest rate.

Or we could issue only three month treasuries.

 

[bigfield]

I think laughing dog has already explained, several times, that there's a difference between government debt and business/personal debt, but there's a couple more differences that bear emphasis.

Firstly, the government is immortal. People retire, businesses mature, but the government can be treated as if it's going to be around forever. it doesn't need to pay down its debt before it's made old or redundant.

Secondly, the economy is (almost) always growing, which means the government is constantly increasing its revenues, which in turn means that it can service increasing amounts of debt over time. No person or business can count on that kind of growth--not even Amazon. The money supply is also increasing constantly, maintaining inflation. As inflation reduces the real value of the US dollar, it also reduces the effective size of the debt over time. If the interest rate on the debt is close to the rate of inflation then the real value of the debt stays fairly constant, and shrinks as a percentage of the government's income.

Basically, the government is constantly increasing its income forever. As long as the country maintains economic growth, the government can go into increasing amounts of debt.

There are limits on how much the government can borrow: If the economy stops growing, the government won't have enough money to pay its debts, and creditors will stop buying government debt at low interest rates. If the government borrows too much it might not be able to service the debt. There's a sensible amount of debt someone between "no debt" and "infinite debt", and that number is constantly changing based on the state of the economy.

---

What do you think happens if we default to China or China sells the debt?

Why would either of those things happen? In order for the US to get to a point where it can't pay its debts to China, the US economy would have to be royally fucked, like total-economic-collapse fucked and China's reaction would be the least of your concerns. And China won't sell the bloody debt; doing so would fuck China just as badly as it would fuck the US.

 

[funinspace]

Oh, you don't know the facts.

3% of our budget is military. 10-15% of our budget is government handouts to the poor.

But military spending is the problem?

Might want to rethink what the facts say instead of listening to Democrats lie to you.

WTF???

It's Orange Imaginary Math, its not supposed to have any basis in reality.

 

[Horatio Parker]

But it is. The federal government as the business that it is BORROWS MONEY. You can look up how much we owe China. There has been occasions in modern times when the federal international credit rating dropped. That means the cost to borrow goes up. It is the same with the individual states.

Federal financing is a balancing act. With the Trump tax cuts revenue has dropped and debt accelerating. The key word is DEBT. The borrowed debt at any tine has a principal amount plus interest owed. Just like your auto loan.

What do you think happens if we default to China or China sells the debt?

China will be the loser. They are assuming the risk. We get stuff, they get numbers in the Fed computer.

Issuing debt and borrowing are not the same. The govt spends first, then issues debt. Not like a business.

The U.S. debt to China is $1.07 trillion as of December 2019.    That's 16% of the $6.7 trillion in Treasurybills, notes, and bonds held by foreign countries The rest of the $23 trillion national debt is owned by either the American people or by the U.S. government itself.

If you buy T bills you are loaning money to the government. When it comes time to pay you back with interest where does the money come from?

Of wait I forgot, if the government runs short of money it can just print more, right?

Yes. Deficits are a feature, not a bug. If the govt taxed back all of the money it spent every year, no one else would have any. So the debt reflects the money spent into existence and held by either private citizens or trading partners.

Nations running surpluses do so because they ship their resources overseas in exchange for financial promises.

 

[SimpleDon]

It makes absolutely no sense to believe that giving the wealthy another tax break will help the economy.

But Halfie isn't even suggesting that.
ALL he wants is to keep The Rich happy.
It's in our interest as workers that The Rich keep providing all these jobs...

Except.
Most non-chain stores suffer from the big box stores. If we RAISE taxes on the Rich, and Halfie thinks they would, what, shut down the money-making business that made them rich (?!), that might be better. If McD's and Burger King and Wendy's closed, business would increase at Big Bad Wolf's BBQ, and Josh-B-Gosh, and Martelli Pizza around town.
And there would be at least seven empty buildings for some new business to open in, already set up with a freezer and a drive-through.

Halfie might be on to something. We should tax the living shit out of the rich, get them to defensively and punitively close the big-box stores and chains. And watch locals take over the vacuum thus created.

Keith, think of the mall. Most people who are on the left see the mall as everything wrong with capitalism. Now, just imagine the whole mall shut down. That's thousands of employees out of work. Is that a good thing, Keith? No way. People need these businesses in order for them to make a living and put food on the table. Calling the mall "a cesspool of capitalism" is spitting on all the workers who make a living there. Why would you rather have people out of work? Makes no sense.

Your understanding of economics is breathtaking in its simplicity.

Of course, people have to have jobs to live. Likewise, capitalism depends on people having jobs to provide the money to buy the products produced by the economy. You wouldn't be wrong to say that in order for people to become rich other people have to have jobs to provide the money that the other people need to buy the products produced by the rich people's businesses.

Rather than an absolute, your understanding that the rich provide the jobs, it is more of a needed balance to maintain the health of the economy. The question then becomes where is it best for the economy to set the balance?

There is a way to determine this too if you care to listen. I suspect that your view of the economy is based on who you hear something from based on your dependence on the right/left, good/bad arguments that seem to be the sum of your reasoning on the economy.

I think that I can explain it to you. It is really quite simple but it does require effort on your part.

Also, tax the rich to high Heaven and they will take their companies to another country with lower tax rates and all the jobs will really be gone. Nobody would be laughing then, Keith.

This is pretty much what has happened over the last forty years or so. Apparently our politicians decided that we should undertake the largest foreign aid project in the history of the world to benefit Communist China, our ideological and geopolitical opponent. Why this was done certainly is pertinent to our discussions here.

The rich aren't as motivated by taxes as they are by profits. Profits go almost exclusively to the rich and after all, they have to earn profits before they have to worry about taxes.

Profits are a necessary part of capitalism. They provide the needed incentives and the needed funds to invest. As noted above they are also what makes the already rich even richer.

The absolute genius of capitalism is that it channels what otherwise is an undesirable human characteristic, greed, into a socially desirable purpose, providing sustenance for a nation's population. But unchanneled greed is still undesirable even in a capitalistic economy. And it is unchanneled greed on the part of the rich combined with their complete control of one of the two political parties and partial control of the other that produced these threats to our capitalistic economy.

Profits are what a business has left after they have paid all of the bills. For most businesses, one of the largest bills that they have is their employees' wages. The fastest route to higher profits is to suppress their employees' wages. There is no more effective way to do this than to put your employees in competition with the workers in a low wage country like communist China. Even the threat of moving to the PRC has the effect of lowering wage demands from their current employees.

However, suppressing wages provides less money in the hands of the workers, money to purchase the products of the rich peoples' businesses. And no,

• The economy is not put back in balance by the lower cost of the Chinese products allowing US workers to buy more with their suppressed wages.
• The businesses are not interested in reducing the cost of the products to the consumers, they are after the increased profits guaranteeing that the consumers' price will not reflect the savings in the wages.
• The other results of the already rich's control of the government, the increases in the real estate valuations increasing housing costs and the increases in college tuition bought about by the rich's aversion to taxes and the fidelity to which state governments bend to it, completely wipe out any benefit from the lower cost.

 

[Elixir]

It makes absolutely no sense to believe that giving the wealthy another tax break will help the economy.

But Halfie isn't even suggesting that.
ALL he wants is to keep The Rich happy.
It's in our interest as workers that The Rich keep providing all these jobs...

Except.
Most non-chain stores suffer from the big box stores. If we RAISE taxes on the Rich, and Halfie thinks they would, what, shut down the money-making business that made them rich (?!), that might be better. If McD's and Burger King and Wendy's closed, business would increase at Big Bad Wolf's BBQ, and Josh-B-Gosh, and Martelli Pizza around town.
And there would be at least seven empty buildings for some new business to open in, already set up with a freezer and a drive-through.

Halfie might be on to something. We should tax the living shit out of the rich, get them to defensively and punitively close the big-box stores and chains. And watch locals take over the vacuum thus created.

Interesting...
When we moved here from Boulder in 1996 there was McDonalds, Wendy's, Sonic, Burger King, KFC ... and not a decent restaurant in town. Then every one of them except McDonalds went out of business. Now there are small upscale dining places and a good number of decent mid-priced options. Much better IMHO, though I do occasionally miss KFC.

 

[Canard DuJour]

In a monetarily sovereign country such as the United States of America, the United Kingdom and most other countries, government debt held in the home currency are merely savings accounts held at the central bank. In this way this "debt" has a very different meaning to the debt acquired by households who are restricted by their income. Monetarily sovereign governments issue their own currencies and do not need this income to finance spending.

A central government with its own currency can pay for its nominal spending by creating money ex novo,[3] although typical arrangements leave money creation to central banks. In this instance, a government issues securities to the public not to raise funds, but instead to remove excess bank reserves (caused by government spending that is higher than tax receipts) and '...create a shortage of reserves in the market so that the system as a whole must come to the [central] Bank for liquidity.'

https://en.wikipedia.org/wiki/Government_debt

Govt "borrowing" is not like a borrower taking out a bank loan; more like a bank receiving a saver's deposit and paying a bit of interest on it.

Isn’t it Time to Stop Calling it “The National Debt”?

Fourteen. Trillion. Dollars. That’s how much the U.S. government “owes.” You hear that massive number all the time, right? And people are forever telling you that you and your family are on the hook to pay off that scary huge number. There are 125 million U.S. households. You do the arithmetic. The horror.

What those scare-mongers don’t tell you, and generally don’t even understand: it actually makes almost no sense to call that figure “the national debt.” And no, you’re not on the hook to pay it back.

..article continues