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National Debt And Stuff

bilby

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humans have not changed much in the last 10000 years let alone the last 100 years.
But money (and the economic activity it enables) has changed out of all recognition in the last hundred years. It used to be based on commodities - usually metals such as gold or silver. Now it's based on concepts - a dollar is a dollar because the taxation authorities say that it's a dollar, and the public go along with that claim.
Human behavior is very complex and hard to understand which is probably why economics is so poorly understood even by people who have studied the subject.
Money is apparently also very hard to understand, which is why most people's understanding of economics is mired in the distant past, when money was synonymous with gold (or silver).

Commodity money is only workable when the size of your economy roughly matches the supply of the commodity you're using for money. Gold worked fairly well in pre-industrial economies, because the amount of new gold is typically very small, and the amount of economic growth is also typically very small.

But commodity money is simply unworkable in an economy with a wide range of rapidly growing and novel activities - that is, its unworkable when the greater mass of humanity suddenly stops living in squalor and poverty, and starts participating in the economy, without generating a commensurate supply of extra gold to use for money.

Your dollar has very little in common with your great grandfather's dollar, other than the name.

Which is necessary, because the world has little in common with your great grandfather's world.

If you got a time machine and brought a person from the eighteenth century two hundred years forward in time, almost every aspect of daily life in the twentieth century would be confusing, mysterious, new, and astonishing.

If you instead got your time machine to bring a person from the first century eighteen hundred years forward in time, to the eighteenth century, almost every aspect of daily life would be familiar. The fashions and language have changed dramatically, but the peasants still grow crops and raise animals, the lords still ride horses, the roads are still awful (in fact, the roads and communications systems have deteriorated a lot). Almost everyone lives on the land, in tiny villages whose major economic activity is farming and the trading of goods and tools used in farming. City life is uncommon, and city dwellers are mostly involved in trade and government functions; Cities aren't producing much, they're just coordinating the trade in food and clothing products from the countryside.

Today, most people live in cities, and most economic production comes from factories, and increasingly from offices, in those cities. People and goods are transported by road, rail, air and sea in vast quantities, at high speed and very low cost. A person living in Australia eats breakfast cereal made in the UK, using wheat grown in the USA, and that's cheaper than making it from Australian wheat in Australian factories, because the transportation costs are tiny, and the cost savings from having a single mega-factory making that breakfast food for half the population of the world are significant.

Until the nineteenth century, almost every wealthy person in history was the owner of productive farmland, or was able to take stuff from farmers either as taxes or plunder. Today, almost none of the wealthiest individuals in the world made their wealth from agriculture; And most of them made their wealth from activities that didn't even exist three hundred years ago. Those non-agricultural sources of wealth that did exist - such as shipping, or mining, for example - have themselves changed out of all recognition. Even farming is practically unrecognisable as the massively labour intensive activity it was from the founding of modern civilisation around five thousand years ago, up until the middle of the eighteenth century.

Humans haven't changed, but economies have. Massively. And so, unavoidably, money has had to change too.
 
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Canard DuJour

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Swammerdami said:
it is ILLEGAL for Treasury to print banknotes (or create electronic money) and use that to pay interest or principal on its debt.
[Note that this is a specific statement about banknotes.]

Where do you get that idea?

The St. Louis Fed said:
maturing debt can be replaced with newly issued debt.

So, no.

Oh my. It's bad enough that many of us prattle without any real understanding of economics, banking or money creation -- and trot out grade-school trivia to show off -- but is it too much to ask that we agree on a dictionary?
Wikipedia said:
A banknote is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand.
Now use Google to discover whether newly issued Treasury debt meets the definition of "banknote." If you're able to do that, ask a Mod for help deleting your mistaken post.

You, however, claimed that "it is ILLEGAL for Treasury to print banknotes (or create electronic money) and use that to pay interest or principal on its debt."

It is not only legal but routine to pay both by creation of electronic money which payees can withdraw as banknotes at whim.

Money, whether electronic or as circulating banknotes, is created by banks (including the Federal Reserve Banks) and not by the Treasury.

Because banks including central banks are authorised to do so by government. In the case of govt spending (including debt servicing), Treasury instructs the Fed to mark up the payee's bank's reserve account along with instruction for that bank to mark up the payee's current account:

"There is nothing to prevent the government from creating as much money as it wants and paying it to someone." - Alan Greenspan, Fed Chair

If nothing else happened, reserves would continuously increase, driving the Federal Funds Rate (which is driven by supply and demand for reserves in the banking system) to zero. Bond sales drain the reserves. The Fed can then buy the bonds if it wants the FFR to fall.

That's why govt matches its deficit with bond sales. Not because the Fed/banks would otherwise decline to make the payments. As the central bankers themselves evidently understand, unlike a lot of ppl and politicians:

"Ultimately, the federal government has control over the supply of the nation’s legal tender." - StLouis Fed VP

Taking quotes out of context does not change this. IIRC this has been explained to you before.
As the Fed article avers, "Ultimately, the federal government has control over the supply of the nation’s legal tender."

Are you "moving the goalposts"? The debate was whether Treasury created money. I guess you've just learned that, No, "newly issued Treasury debt" is NOT money. (Though banks, whether central or private, DO create money when they buy that debt.)

Since the FedRes Banks are effectively part of the federal government, the "Fed" allegation you quote isn't wrong. But the claim you sought to refute was about U.S. Treasury specifically, and NOT about FedRes.

No, my point was about the fiscal capacity of govt. The distinctions you're trying to draw, or impute, suggest the common confusion re the monetary plumbing.

The Fed Res (for which a large portion of the officers are elected by private banks) is an autonomous entity. It is subject to various regulations. UIAM it still buys Treasury debt only on the open market, where the prices are set by competitive bidding.

What about it? Who's saying otherwise?
 

Canard DuJour

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..none of which is to say the govt should run arbitrarily big deficits, or could so without consequence. But the constraints are in the broad economy, not the whims of bankers (central or otherwise).
 

bilby

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..none of which is to say the govt should run arbitrarily big deficits, or could so without consequence. But the constraints are in the broad economy, not the whims of bankers (central or otherwise).
Indeed.

The major constraints are finding something useful (ie something that will stimulate a counterbalancing growth) to spend money on.

The magnitude of the deficit, or of the resulting pile of debt, is completely unimportant.

The problem with deficit spending is that it's sometimes very difficult to predict which specific infrastructural investments will lead to long-term economic growth, and which will add little or nothing to long term productivity.

The solution is to spend money on anything and everything that seems like a plausibly wise investment, and to raise taxes to recover the cost of the fraction of that investment that doesn't get converted into growth. This approach allows government to spend without causing inflation, even if they don't know which specific investments were great, which were merely OK, and which were a total waste.

When spending on infrastructure has been very low for a long time, there's typically no shortage of good infrastructure investments that could be made. Both the repair of damaged and worn out stuff, and the provision of new stuff to un-block constraints, are typically obvious places where it's better to spend than not.

Penny-pinching on infrastructure projects is almost always a poor idea. If you're building a bridge, build it two or three times as large as it needs to be today, because it's going to cost a lot more to increase capacity later on, than it costs to incorporate spare capacity into the original design.
 

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I remember when that was real money!

Trillion Dollar Coin

The trillion-dollar coin is a concept that emerged during the United States debt-ceiling crisis of 2011 as a proposed way to bypass any necessity for the United States Congress to raise the country's borrowing limit, through the minting of very high-value platinum coins. The concept gained more mainstream attention by late 2012 during the debates over the United States fiscal cliff negotiations and renewed debt-ceiling discussions. After reaching the headlines during the week of January 7, 2013, use of the trillion-dollar coin concept was ultimately rejected by the Federal Reserve and the Treasury.

Seriously, I heard some chatter today on NPR about people trying to revive this now.
 

Copernicus

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..none of which is to say the govt should run arbitrarily big deficits, or could so without consequence. But the constraints are in the broad economy, not the whims of bankers (central or otherwise).
Indeed.

The major constraints are finding something useful (ie something that will stimulate a counterbalancing growth) to spend money on.

The magnitude of the deficit, or of the resulting pile of debt, is completely unimportant.

The problem with deficit spending is that it's sometimes very difficult to predict which specific infrastructural investments will lead to long-term economic growth, and which will add little or nothing to long term productivity.

The solution is to spend money on anything and everything that seems like a plausibly wise investment, and to raise taxes to recover the cost of the fraction of that investment that doesn't get converted into growth. This approach allows government to spend without causing inflation, even if they don't know which specific investments were great, which were merely OK, and which were a total waste.

When spending on infrastructure has been very low for a long time, there's typically no shortage of good infrastructure investments that could be made. Both the repair of damaged and worn out stuff, and the provision of new stuff to un-block constraints, are typically obvious places where it's better to spend than not.

Penny-pinching on infrastructure projects is almost always a poor idea. If you're building a bridge, build it two or three times as large as it needs to be today, because it's going to cost a lot more to increase capacity later on, than it costs to incorporate spare capacity into the original design.

Regarding deficit spending, Keynes once joked during the Great Depression that it would be better for the government to pay people to dig holes in the ground and then fill them up rather than to do nothing. He didn't mean this seriously, because deficit spending should always be to produce something of value, but the idea is that doing nothing to stimulate a depressed economy is worse than spending money to do something stupid. The important thing is to get cash into the hands of people who will circulate it. One person's spending is another person's income. When the economy is slow, you don't want people to hold onto money, waiting until things get better to spend it. When everybody (including the government) holds onto their cash, then nobody earns an income. Infrastructure spending is the best kind of spending, because building roads and railroads makes is easier for businesses to reach more buyers and sellers. Digging holes doesn't necessarily produce anything to create new wealth. Austerity is worse than spending money on stupid things.
 
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bilby

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..none of which is to say the govt should run arbitrarily big deficits, or could so without consequence. But the constraints are in the broad economy, not the whims of bankers (central or otherwise).
Indeed.

The major constraints are finding something useful (ie something that will stimulate a counterbalancing growth) to spend money on.

The magnitude of the deficit, or of the resulting pile of debt, is completely unimportant.

The problem with deficit spending is that it's sometimes very difficult to predict which specific infrastructural investments will lead to long-term economic growth, and which will add little or nothing to long term productivity.

The solution is to spend money on anything and everything that seems like a plausibly wise investment, and to raise taxes to recover the cost of the fraction of that investment that doesn't get converted into growth. This approach allows government to spend without causing inflation, even if they don't know which specific investments were great, which were merely OK, and which were a total waste.

When spending on infrastructure has been very low for a long time, there's typically no shortage of good infrastructure investments that could be made. Both the repair of damaged and worn out stuff, and the provision of new stuff to un-block constraints, are typically obvious places where it's better to spend than not.

Penny-pinching on infrastructure projects is almost always a poor idea. If you're building a bridge, build it two or three times as large as it needs to be today, because it's going to cost a lot more to increase capacity later on, than it costs to incorporate spare capacity into the original design.

Regarding deficit spending, Keynes once joked during the Great Depression that it would be better for the government to pay people to dig holes in the ground and then fill them up rather than to do nothing. He didn't mean this seriously, because deficit spending should always be to produce something of value, but the idea is that doing nothing to stimulate a depressed economy is worse than spending money to do something stupid. The important thing is to get cash into the hands of people who will circulate it. One person's spending is another person's income. When the economy is slow, you don't want people to hold onto money, waiting until things get better to spend it. When everybody (including the government) holds onto their cash, then nobody earns an income. Infrastructure spending is the best kind of spending, because building roads and railroads makes is easier for businesses to reach more buyers and sellers. Digging holes doesn't necessarily produce anything to create new wealth. Austerity is worse than spending money on stupid things.
We should build a Death Star.

Or at least, start working towards it. The Apollo program was a massive boost to the US economy, as were both World Wars. Bombing Germany, or bringing a few kg of rocks from the Moon, aren't in themselves money making ventures. Certainly I would recommend against the former. But a national (or even international) objective to land a human on Mars and return them safely to Earth would be a massive boost to all kinds of technologies, and would be almost certain to have long-term benefits that far outweigh the costs - and any national project with such long term benefits is definitely worth borrowing money to achieve.

And we might get a few kg of Mars rocks out of it, too.
 

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Going to Mars is not gonna happen. A better idea would be a long term, multination program to deal with dangerous asteroids.
 

bilby

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Going to Mars is not gonna happen.
Not with that attitude, it isn't.

The point isn't to succeed, it's to inspire and motivate, and to try.

And if that happens, I would be very surprised if we were to fail.
A better idea would be a long term, multination program to deal with dangerous asteroids.
Another good idea. But it lacks the inspirational qualities of a defined goal. There's no obvious point at which you can pop the champagne corks and say "we did it!".
 

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If there isn't enough money for Social Security, Medicare, Medicaid, ACA, or Veteran's programs, according to the GOP, how well do you think spending 10's of billions of dollars to send men to Mars is going to go over with American voters? Politically, it is a dead parrot.
 

bilby

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If there isn't enough money for Social Security, Medicare, Medicaid, ACA, or Veteran's programs, according to the GOP, how well do you think spending 10's of billions of dollars to send men to Mars is going to go over with American voters? Politically, it is a dead parrot.
Have you read any of the rest of the thread?

That's the entire topic.

The GOP are wrong, money is unlimited, and as long as spending results in growth, it's worth doing even if it looks like wastefulness.

In the past, wasting vast sums of money has often been a massive economic stimulus; But with a handful of exceptions (such as the Moon landings) that waste has manifested as the killing of foreigners.

The idea that wasteful spending is worse than not spending at all, or even just not spending without equal taxation (aka "austerity" or "a balanced budget") is simply incorrect for a modern fiat money issuing nation that isn't a significant net exporter of goods, such as the USA.

That the voters don't understand this is the problem that needs to be addressed, not the reason why it shouldn't be considered.
 

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It is politics. Pass big tax cuts. Deficits soar. GOP: We have to slash SS etc, because deficits! No, no big projects like sending a man to Mars. Politically, that is dead. Let Elon pay for it if he wants it. The only way a manned trip to Mars would be popular is if Ron DeSantis was sent to Mars.
 

Copernicus

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It is politics. Pass big tax cuts. Deficits soar. GOP: We have to slash SS etc, because deficits! No, no big projects like sending a man to Mars. Politically, that is dead. Let Elon pay for it if he wants it. The only way a manned trip to Mars would be popular is if Ron DeSantis was sent to Mars.

I agree with you that the trip to Mars isn't going to happen, at least not in the lifetimes of most of us. Maybe never. And there is no question that people like to hear the message that we are balancing the budget, lowering the national debt, and cutting taxes. However, I agree with bilby that doing those things willy nilly won't necessarily make any real economic sense when it comes to helping a national economy stay solvent and grow. The government needs to have flexibility in managing the economy, and the Republican goals seem designed to manage the economy like a family manages its budget. That makes sense to individuals who raise families, but not to governments that need to keep a large percentage of the population working, earning, and producing goods and services. So we should resist giving into the false equivalence of a national budget with a family budget. Family economic strategies for controlling wealth don't scale up into viable national economic strategies for controlling the economy.

I also agree with bilby that creating the biggest killing machine on the planet and manufacturing the tools they need to kill lots of people efficiently is a worthy strategy for maintaining an economy. It's not that it doesn't work. The US economy owes a lot to the military-industrial complex. If we tried to kill it and not replace it with , we would be cutting our own throats economically, not to mention the fact that we really do need a military for defensive purposes. However, conquering space is an inspiring goal, and the practical consequences lie not so much in actually colonizing other planets as in the spinoff technology that we gain from injecting lifeforms and machines into the hostile environments that exist outside of Earth's environment. Defending against meteor and comet strikes are a practical side benefit, but we need something sexier to motivate people to create all of those new economic opportunities.
 

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There would be no need for expensive armies, navies, and airforces if there were no asshole nations in the world. Like Russia, and now, China, Organizations like ISIS. Boko Haram etc. But they exist and as in Ukraine, demonstrate a danger to all without big militaries. A sad fact of life. It is like real life. Real life could be good except for the fact a few assholes spoil it for everyone. But the assholes won't simply go away.
 

Copernicus

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There would be no need for expensive armies, navies, and airforces if there were no asshole nations in the world. Like Russia, and now, China, Organizations like ISIS. Boko Haram etc. But they exist and as in Ukraine, demonstrate a danger to all without big militaries. A sad fact of life. It is like real life. Real life could be good except for the fact a few assholes spoil it for everyone. But the assholes won't simply go away.

They won't go away, because they are a part of the human nature that exists in all of us. Everyone has the capacity to make mistakes, behave selfishly, and do stupid self-destructive things. It is too simplistic to describe entire nations as "asshole nations" or just blame individuals as just being "assholes". Russia is not the only nation in which people believe that the best leader is a strong leader who will sometimes take drastic action in order to get good results. Barbos once called Putin a "benevolent tsar", and I have seen other pro-Putin Russians use that term. A lot of Americans also see Donald Trump as that kind of leader. I like the fact that I was born into a society with a strong tradition of representative democracy, but we still elect a lot of what you and I think of as assholes.

Religious and political ideologies produce a fanatical belief in ends that justify immoral, sometimes downright evil, behavior. The sad fact of life is not that assholes exist, but that fanaticism and dogmatism can infect and corrupt even democratic systems of governance. It is a much more serious problem in countries with a history of authoritarianism. Putin may be a "tsar" now, but he is as far from as benevolent a one as Russia could get. He isn't just an asshole, but he managed to make himself a popular one, despite the rather questionable way in which he managed to rise to power. He won't go away soon, and his replacement won't be a huge improvement. The system of governance in Russia favors the rise of yet another authoritarian. Hopefully, the next one will actually be more benevolent than the current one. Americans should beware of the assholes in their own country, because Americans aren't so different from Russians.
 
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..none of which is to say the govt should run arbitrarily big deficits, or could so without consequence. But the constraints are in the broad economy, not the whims of bankers (central or otherwise).


Penny-pinching on infrastructure projects is almost always a poor idea. If you're building a bridge, build it two or three times as large as it needs to be today, because it's going to cost a lot more to increase capacity later on, than it costs to incorporate spare capacity into the original design.
State governments in Australia are notorious for penny pinching. So foolish. They will spend 12 years over a 15 year peiod widening a freeway whereas if they had widened it at the start it would have been cheaper in the long term. It not just the money, it is the waiting in tarffic jams, congestion, stress. anger etc. that is not considered.
 

Lumpenproletariat

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Let's hear it for higher and higher public debt!
100% guaranteed effective -- nothing can go wrong!

Also, any falsehood is OK if it promotes raising the debt higher.

For example, from an overall perspective (macroeconomic if you like jargon), interest and debt repayment poses little burden on a country when those payments are made to people and institutions in the country because the payments are simply redistribution of income from taxpayers to domestic creditors.
This is econobabble nonsense. A debt is just as problematic regardless whether the creditor is foreign or domestic. Each dollar has to be repaid and is still exactly $1.00 dollar (acquired either from future taxpayers or from new lenders who will have to be repaid still later etc.) and thus a cost to be extracted from the economy at the due date, regardless whether it's repaid to a domestic or foreign creditor. It's delusionary to pretend that somehow debt is any less a burden on the future simply because it's owed to a citizen rather than a foreigner. The obligation to repay it, and the burden on those who repay it, is exactly the same.

You could also hallucinate that if that creditor is residing within the country, somehow it's better for the U.S. economy than if s/he is residing abroad. You can hallucinate that it's better for the U.S. if everyone keeps their money "within the country" rather than spending it in another country. Likewise the delusion that it's better for the local economy if you spend your money locally rather than traveling to another town, and also that the foreigners working within the country do some kind of damage to our economy when they send their earnings to their family back home.

You could imagine that you promote your race if you try to buy only products which were produced by members of your race, or that you promote your religion if you limit your spending to patronize only producers who are members of your religion.

A good term for this kind of thinking is Snake-Oil Economics: any propaganda which preaches that it makes a difference where the money you spend goes, and so you should "keep it within the family," support "your own" when you buy anything, and beware of the outsiders who are not "our kind" and having an economic agenda in conflict with ours -- maybe they're even plotting against us and so we should regard them with suspicion. Usually those who preach such populism and nativism and economic nationalism have their own (maybe subconscious) personal agenda which they cloak inside the rhetoric of patriotism, like "Made in America" and "Make America Great Again" and "Buy American" and the "bring back the factories" chanting of the China-bashers.

Anyone preaching that something negative is going on when some of the country's income is sent abroad is appealing to your Neanderthal instincts in the hope that this nativistic anti-foreign dog whistle will trigger something in you to rally you to their cause.


Interest payments and debt retirement repayment to those [domestic] creditors remains in the country. It does not represent much of an economic burden in terms of its effects on real economic activity.
Wrong -- the economic burden is exactly the same either way, because exactly the same has to be repaid -- it's a delusion to make an issue out of the nationality of the creditor or to pretend that we're better off if the payment "remains in the country."

Financially, when one analyzes the credit-worthiness of a borrower, one usually looks at their income and their wealth. In most discussions about the US national debt, the wealth of the US gov't is completely ignored. The US gov't has trillions of dollars in assets. The US gov't owns thousands of acres of land, and multitudes of physical assets such as dams, bridges, buildings, planes etc... that conceptually could be sold to pay off debt.
What this really means, in the practical reality, is that much of the U.S. debt has been bad debt or waste -- pork programs, fraud, corporate welfare, bloated bureaucracy -- BUT hey, not to worry, we've got lots of wealth we can liquidate in order to pay the costs. Except as a rationale to excuse such waste, however great, the above quote has no meaning in any practical sense.

The argument that we can easily pay for it (not the argument that the borrowed money is well spent) is the tipoff that much of this debt is waste and has made the U.S. poorer than it would have been otherwise. That we have the resources to repay the creditor is a legitimate argument only to convince the potential lender who suspects this investment is a bad risk for the borrower because it won't pay for itself; and so the above argument gives assurance to the lender that it's OK, because the borrower has plenty of resources to liquidate -- so don't worry, because only the borrower can get shafted, not the lender who is guaranteed payment in full.


Moreover, the GDP is usually taken as the total available income in the US. Right now, it is around an estimated $23 trillion dollars and federal tax receipts are about $5 trillion which means that the effective federal tax burden on all income is less than 20% of GDP. While people do not like paying more in taxes, I think it is clear from a purely arithmetic view, there is room for increasing the overall tax burden.
translation: don't fuss over whether the spending programs are worth the cost. Waste and fraud don't matter, because we can find ways to pay for it by depleting however much wealth is required to pay for it, no matter how great the waste is.

Of course the propagandist giving the higher-debt argument will quickly retreat from it and insist, as an afterthought, that the spending has to be efficient etc. But such concern for efficiency is tokenism only, never a real demand or requirement to justify the spending -- rather, the token concern for efficiency is absent except as a defense to promote more debt, to persuade those who are reluctant -- all that really matters is to make the debt go higher and say whatever it takes to reach this goal. Never is there any back-off from a proposed increase in debt -- such higher debt is the bottom line to all questions raised, and no argument is made except one which would lead to that result, whatever it takes, even to pretend to care about the efficiency and the risk of waste, if such words are necessary in order to convert debt skeptics.

The tipoff that this is really what motivates the debt promoters is the fact that they NEVER have misgivings about any govt program other than ideological opposition to an entire program, plus also partisan opposition to the particular faction currently in power. They never say the amount being spent is beyond the appropriate level, but express ideological opposition only to the whole program in some cases. The concept of how much is too much is never addressed by them. They never express what limit there should be on their favorite program.


Arithmetically, if the economy grows at a rate that exceeds the rate of interest on the debt, then interest payments on debt should be no problem because tax revenues will grow faster than interest payments.
Whenever a crusader says "no problem" -- watch out! the roof is about to cave in.

The assurance that "tax revenues will grow faster" is an empty promise. Whatever promises are made, the reality is that the debt has increased percentagewise relative to the tax revenues to pay for the budget and debt.

It's not only the interest payments that are a "problem" -- paying back the basic principle is just as problematic. Even zero-interest debt is not worth it beyond a certain level of debt. The same amount has to be repaid years later, which is an ANTISTIMULUS cancelling the original "stimulus" when the money was borrowed, because it subtracts income from whoever is paying for it. If more income (when it's borrowed at point A) is a "stimulus" which is beneficial, then the less income (at point B when it's repaid) is an ANTISTIMULUS which is harmful,, even if there's no interest at all.

And "the economy grows" doesn't mean much, because much of that growth is itself waste, which increases with each extra dollar of govt waste, because all that wasteful spending, including every bridge to nowhere, "grows the economy" (= higher GDP) by however many more dollars were wasted on that bridge (or high-speed rail boondoggle, etc.). It requires more than just "growth" (higher GDP) to prove that the spending and borrowing was worth it when it has to be repaid later.

The constant refrain of those who insist that the debt or debt ceiling must be increased is that there's plenty of existing wealth which we can liquidate, wealth from which to pay it and absorb the losses. And even if there are losses/waste, it's worth it because there is some great Purpose served by the debt per se, even when those resources are wasted. This is basically a religious, or cult-like dogma contained within the Higher-Debt per se crusade:


the religion of
doing nothing at all vs doing something stupid

Here is one statement of this Invisible Hand Cosmic Higher-Debt per se Doctrine, regardless whether the public spending is wasted:
Copernicus:. . . doing nothing to stimulate a depressed economy is worse than spending money to do something stupid.
So it's better to waste money than do nothing at all, because the spending waste per se will "stimulate" the economy even if it all goes to waste, e.g. on a bridge to nowhere. This is an argument that it's good to build a bridge to nowhere, regardless of anything else because this spending per se is an economic benefit even if all that production and labor and resources go totally to waste.

This affirmation is a deep religious mystical impulse, not economics. It's similar to the Doctrine that

"The present and future ability of the USA to pay any debt of any magnitude, denominated in US Dollars, is unlimited."

I.e., the Fantasy and Miracle nature of unlimited debt as a magic formula which cannot go wrong, no matter what. This impulse may be expressed in various twists in order to make sense of it, but the reality is that there has to be a limit to the debt spending at some point, and beyond that limit there is waste which makes the society worse off, not better. And so you can't ever demand more debt without a rule stating what the limit is, and beyond that limit the wasted spending does more harm than good, and it would have been better if that "something stupid" had not been done -- doing nothing would have been better, i.e., would have led to a better outcome.

And there is no case ever where doing something stupid is better than doing nothing. Rather, you have to prove the benefit of the "stupid" something, which might be less than ideal, but which still is the best choice, or better than the alternatives.

Copernicus: The important thing is to get cash into the hands of people who will circulate it.
No, because that "cash" has to come from someone else who pays for it one way or another, and that repayment itself is "cash" taken out of the hands of people somewhere and thus out of circulation in the economy. With "economic stimulus" deficit, that repayment happens later, at point B when it's repaid,

Copernicus: One person's spending is another person's income.
Yes, but not all "income" is good for society. If it means wasting resources, then it really reduces the total "income" of the whole population, and that "spending" is still bad for the nation even though it gave "income" to someone. If the artificial income to some is then cancelled by causing someone else's income to decrease, then its net effect is negative for the economy, even though it provided "income" to this or that special interest receiving "income" from a govt program.

Copernicus: When the economy is slow, you don't want people to hold onto money, waiting until things get better to spend it.
Yes we do want them to hold onto the money until there is something worth it to them personally to spend it on. It's never a social benefit to get them to spend money on something they don't benefit from personally.

When you spend your money, it has to be that you personally benefit from it, so that the seller or producer of whatever you're buying gets rewarded only for producing something that had real value to someone (buyer), which means enough value so the buyer was willing to make that sacrifice (the price) in order to get that item. That's the test to verify that the production of that item was worth it -- and if the product does not pass this test, then it was not worth it for that item to be produced, or for that production to take place, regardless if it provided "employment" to the producer. The employment per se, or the job per se, has no value unless it provides something the buyer desires so much that they're willing to pay the full unsubsidized price for it. The mere fact that the "job" or the employment per se was made possible has no value. The function of the economy, or of the production, is not to provide "jobs" for someone to keep them out of mischief. The only function is to create whatever the consumers demand, using resources up to the point where the satisfaction gained from it is high enough to surpass the cost of the production -- not including the babysitting benefit of having that worker employed to keep him/her off the streets.


(this Wall of Text to be continued)
 
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bilby

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this Wall of Text to be continued
It's really not necessary. You've already established beyond any doubt that not only do you have no idea what you're talking about, you also have no idea what anyone else in this thread is talking about either.

Your "responses" are either flat-out wrong; Or are responding to your misunderstanding of what someone said (rather than to what they actually said); Or (perhaps most worryingly) are responding to shit you completely made up, apparently solely to have something to rail against.

We get it. You don't understand economics, you don't want to understand it, and you very much want to be hopping mad about the actions, policies, and recommendations of people who do understand it.

Your opinions are noted, and will be given the respect and consideration that they deserve.
 

Lumpenproletariat

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---- "Just the facts, ma'am, just the facts."
Let's hear it for higher and higher public debt!
100% guaranteed effective -- nothing can go wrong!

Also, any falsehood is OK if it promotes raising the debt higher.

(continued from previous Wall of Text)

Arithmetically, if tax revenues grow at the rate that the economy (inflation plus "real" growth) does while gov't spending grows only at the rate of inflation, any deficit has to decline.
Promises! promises! But what's the reality since this debt culture began?

Whatever the arithmetic and convoluted rationale, the debt has consistently increased percentagewise (beginning mainly in the 1930s) and will continue to do so, by all indications, so that the debt percent will become twice as high as it is now, as a consistent long-term pattern with ups-and-downs along the way. The Debt/GDP today is at the all-time record high. To not change anything and to continue the raise-the-debt-ceiling crusade means it will increase even higher.

All the arguments here from virtually everyone posting on this topic are based on the premise that

the annual federal deficits should continue to increase

or that

the current federal deficit should increase to $2 or $3 trillion or higher

because the "economic stimulus" from the deficits are good for the economy no matter how high they go and no matter what the money is spent on. Plus there's so much we want which we could spend those trillions on -- you can't deny it -- many good causes we can find for spending so much more. Why not take the dive, since we're told that only good outcomes are possible with higher public debt?

Everyone posting here has expressed the above sentiment, and no sentiment that the deficits are too high. There is a basic instinct that higher public debt is beneficial as an "economic stimulus" even if the money borrowed is wasted, because even then the nation benefits from the "economic stimulus" (providing the "jobs! jobs! jobs!) to get the riff-raff off the streets.

Even 1 or 2 who say this is not their sentiment never express a sentiment to stop the increasing debt. In other words, the only sentiment they express is that the debt has to increase, but there is also an Apology which takes offense at being accused of harboring the higher-debt sentiment. I.e., the only argument against higher debt is the offense at being accused of wanting higher debt. When your only argument against higher debt is that you object to being accused of harboring a sentiment for higher debt (while at the same time you keep expressing the same sentiment for higher debt) --- guess what? You're a higher-debt fanatic right along with all the other more naked crusaders for the higher-debt religion.

We/you have to ask: Why is it that there's no word suggesting that maybe this is too much? Is it possible we've crossed the line? Why is it taboo to raise that question? except in cases to pretend you care about it in order to appease the debt doubters and win them over?

No, all the sentiment is to raise the debt higher still -- as a higher % of the economy -- with never a suggested rule about how much is too much. It's clear that there is some kind of belief in a Magical Power, or Mystical Formula, which flows into the economy, inspiring or triggering some Cosmic Force which will save us from any bad consequences later -- We can just feel the magic Vibes radiating out from a special Something which has to work if we just have faith. Never think about the price paid later when the debt comes due -- there's an Infinite Source of future lenders from which the current debt can be paid, with no need to ever worry about it -- "In the long run, we're all dead!!!" (famous quote from a major founder of this religious cult).

This quote (or paraphrase of it) is repeated again and again by the members of this cult.


But economically and financially literate people understand that debt use can be beneficial.
translation: the current deficit (about 1.2 - 1.6 trillion) is not enough.

Notice that nothing negative is ever said about the higher and higher debt -- never any doubt that it might be more harm than good. Only think positive, be optimistic, never skeptical of the promise of a magical "growing economy" to pay for it and shower abundant blessings upon our nation.

(In 100 years from now it's possible that such optimism will become scientific, based on fact, if the development of fusion power succeeds, and a New Industrial Revolution will be made possible to save us from climate change, and it will be easy to pay for it either with more debt or higher taxes (because of a better economy), due to the much greater abundance of clean energy.)

Today we have no such hope based on science, but only on ideological mystical fanaticism, and blind dedication to the Magic of higher and higher Debt: The deficit should go up another half trillion or so every year, and there should be no means to stop the increase, such as the requirement to vote on raising the debt ceiling.

No one is giving any reason why the deficit should not go up another half trillion or so.

The only question is whether there are sufficient resources we can tap into in order to pay the cost later (i.e., "cost" due to the waste and poor decisions by the elected demagogues). Even then the net economic loss is worth it because of the "economic stimulus" from the spending which will generate more "jobs! jobs! jobs!" (especially factory jobs) if we just trust our higher-debt gurus Bernie Sanders and Donald Trump. Take your pick, whether you feel more inspired by the corporate-bashing and employer-bashing Progressive Demagoguery, or the nativistic nationalistic China-bashing Right-wing Demagoguery. Those are your 2 debt-raising choices: Vote for the Populist Demagogue of your choice, but vote.

Of course everyone denies that this is what they're saying, especially those on the Left. But notice: no one ever says the debt might be too high or that the "jobs" are not worth it when the money is wasted. No, even when the money spent is wasted, still that "economic stimulus" must magically goose the economy and make us better off than if we try to cut the "fat" or distinguish efficient spending from waste. No one is saying that a higher deficit might be more harm than good. Without exception, all the arguments are for INcreasing the debt, never for reducing it.

Why do those demanding the debt increase never express concern about waste? or always dismiss this? or never define what limit is appropriate? It's because their faith is in the basic magic of the debt per se. So this debt automatically has to make our economy better regardless if the money is wasted. And why are they so sure that it makes the economy better no matter what?

From a purely financial point of view, when the financial returns from the use of debt exceed the financial expense of borrowing, the borrower adds to its income and net wealth.
But there's no evidence that this is the overall result of our use of debt for the last 90 years, since we adopted the policy of permanent ongoing peacetime deficits which have generally increased as a percent of the economy.

The belief that the economy is better off because of this increased debt is based on blind faith only. When it began, in 1931-33, the result in the years following was much worse than in earlier depressions when "economic stimulus" deficits were not used. All the evidence is that the "economic stimulus" deficits of Hoover/FDR made the economy worse, not better.

Since then we've not had a test of the "economic stimulus" theory, to be able to do the comparisons, as we've consistently followed this theory in all recessions. But there's no evidence that it has ever made the economy better. The only benefit is the instant gratification gained at the point where the borrowed money is spent, which of course always happens initially, with no way to calculate and compare the damage inflicted later when the debts have to be repaid.

The instant gratification of some new "jobs! jobs! jobs!" is the only practical observable benefit which can ever be cited as the outcome following any new "economic stimulus" deficits. No long-term benefit can be demonstrated by facts, to prove a better outcome than if there had been no such "economic stimulus."

From an economic point of view, when the benefits (financial and non-cash) from debt use exceed the cost of obtaining the funds, the borrower is better off.
But there's no evidence that this has happened, other than unusual emergency crisis spending -- WW2, crash of 2008, 2020-21 pandemic. Though there is evidence that the opposite happened in the years following the extra debt beginning in 1931-33. In that case all indications are that the country's economy was made worse, not better. But in cases since WW2 there is no way to make the comparisons for measuring the outcomes. Each side, pro & con, can ideologically distort the facts to prove that the "stimulus" really succeeded or did not.

(For clarity, the "cost of obtaining the funds" cannot just be the interest payment. It doesn't matter what the interest is if the debt is too high. Even if it's ZERO interest, it's too high and makes the economy worse, not better. Don't pretend that a low interest rate automatically makes the debt worth it -- it does not.)


In my view, much of the debate revolves around the value of the non-cash flow benefits from our current use of debt.
There is no reliable calculation of any such benefits, when the cost of repayment is factored in. The only benefit is the instant gratification at point A which has to be repaid at point B. No one has given any evidence of any long-term net gain from these "economic stimulus" deficits.

You can insist ideologically that after WW2 we had provable benefits from the "economic stimulus" deficits. But exactly the opposite can also be argued ideologically, with neither side really having the necessary facts to make the comparison. It's only ideology, not fact.

But for the 1931-33 deficits we have objective evidence or facts which cannot be denied. I.e., the bad results of 1932-1940, which are undeniable and can be compared to the much better results in earlier cases after an economic crash. In this case, the facts of history are known by everyone, Left and Right.


The economic talking heads always say the government is different than a household but both have to pay interest on the debt that they borrowed.
True, but gov'ts have tools to pay interest that households don't: taxes and money creation.
translation: Govt can more easily repay debt, so there's no need to worry about the riskiness of the investment -- the repayment is automatic because it doesn't rely on the need for the money to be spent efficiently without waste, and actually the investment can be a total waste and yet it will still be repaid out of already-existing wealth which can be depleted -- so, not to worry -- the higher debt is worth it, to pay for any wasteful spending no matter how inefficient or costly to someone later.

In addition, the US gov't has an advantage over most households in that creditors worldwide seem willing to lend it funds whenever it wants.
Same logic again -- this is the only argument offered for why we should keep increasing the deficits: there's plenty of potential lenders who know they'll be repaid, and plenty of already-existing resources from which to repay the debt, regardless if all the money spent is wasted. And so there's no need to make sure the debt generates any new wealth from which to pay for it later. So, we have the power to run up higher debt, and therefore we should always do so, regardless how wasteful that spending might be.

Such a disregard for whether the spending is worth it cannot make any sense unless there is a fundamental premise that

All public debt is good for the economy, no matter how much of it goes to waste -- as long as we have a rich economy we can deplete for the repayment, so --

Go for it!!


This is the basic logic for why the debt ceiling has to always be raised. Many of those making the argument say frankly that it's beneficial regardless if there is waste, because of the "economic stimulus" -- I.e., in the end it's all about


"jobs! jobs! jobs! jobs! jobs! jobs! jobs!"

This probably is the instant-gratification type of jobs. However, the Jobs Fanatics might believe that the "jobs" created will be permanent, not just temporary. Maybe the uncompetitive jobs created by the "stimulus" deficits can be reinforced by still more such deficits into the future. This can't be proved one way or the other. It's possible that uncompetitive jobs and other waste can be perpetuated again and again into the future, ad infinitum. All we know for sure is that the deficits to "create jobs" are always successful immediately to cause instant jobs, however wasteful, and there's no evidence that these are worth it to those who have to pay the cost several years later.

E.g., if a plane flies over a town and drops 100 billion dollars down to flutter randomly to various locations, it is an Absolute Certainty that the unemployment rate in that town will soon decrease measurably, and some economists or ideologues of one kind or another will jump for joy and cheer on the amazing "economic recovery" which takes place in that lucky town -- like winning the lottery. And the econ pundits will even produce mathematical formulas and graphs and charts to prove that their brilliant theories explain how this remarkable "recovery" took place.
 
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laughing dog

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Whatever the arithmetic and convoluted rationale, the debt has consistently increased percentagewise ....
The debt/GDP ratio has not consistently increased since the 1930s. And as my previous response pointed out, the focus on the debt/GDP ignores other salient measures that private sector creditors and the financially literate use (I.e. the value of assets for example). Your entire response is simply a rather boring ignorant wall of text.

I will point out that the idea that the inability to put a dollar value on a non-cash flow benefit somehow makes that borrowing an example of "instant gratification" is simply moronic. WWII is the perfect example. I strongly suspect that given what Nazi Germany and Japan were doing, that most people agree that the borrowing incurred to fight and defeat them was worthwhile even if we cannot prove that it had a positive net present value. And that they would disagree that borrowing to finance the fight in WWII was an example of satisfying instant gratification.

Finally, I point out to your implicit argument that counter factual arguments can be made to fight an ideological position is monumentally ironic.
 
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