What drives US debt?

[dismal]

Yes, again. Until people realize, sooner or later these special interest treasury bonds need to be paid off or rolled over, creating even bigger future debts. As massive numbers of baby boomer retire, eventually SS no longer gets surpluses. These treasury special interest notes are IOUs, needing to be paid off by the public, sooner or later. It's basic math.

The longer we put off getting a correct understanding of all of this and start dealing with it realistically, the worse future problems will be when the inevitable hits us.

Lock box now!

They are promises one branch of the US govt has made to another. One branch has an asset, another has a liability. In the consolidated view of what the US govt owes they are meaningless.

 

[Cheerful Charlie]

These things are mere IOUs, nothing more. Someday the taxpayers gets to pay these IOUs off.

I can hear the GOP politicians now: "Tax Increases! Tax increases! We will save you! We will save you from these big bad tax increases to pay off these takers' debts!" Yeah baby!

 

[whichphilosophy]

I've read and heard that a common complaint about social security, medicare and medicaid is that they are the reason the US is so far in debt.

But . . .

According to the Summary of the 2015 Annual Reports the four trusts that make up those programs bring in more revenue than they expend by $10.9 billion a year on a consolidated basis. So contrary to the common view that those programs drive the debt the reality is that those programs don't add to the debt at all.

The question then remains: What is the actual driver of US indebtedness?

Anyone that points to Social Security, Medicare and Medicaid either hasn't bothered to actually look at the financial status of those programs or knows and has a different agenda than really addressing the deficit and debt.

2 trillion for the Iraq war
http://www.reuters.com/article/us-iraq-war-anniversary-idUSBRE92D0PG20130314

Then we can add
Afghanistan 1 trillion

http://www.cnbc.com/2014/12/15/

Syria 275 billion (coul reach 1.3 trillion by 2020

SOCIAL SECURITY us£39 BILLION DEFICIT IN 2014 INSOLVENT BY 2035 BUT PEANUTS VS MILITARY EXPENDITURE

http://www.heritage.org/research/re...-39-billion-deficit-in-2014-insolvent-by-2035

 

[Loren Pechtel]

We have both a revenue problem and a spending problem.

The spending problem is a matter of how inefficiently the government runs. Vast sums are spent on things because they're in the district of some powerful congresscritter rather than due to need. Other things are underfunded so they make a total mess that often ends up costing more in the long run.

 

[SimpleDon]

If Republicans want to cut Social Security benefits they should state it clearly and not hide behind arguments that the Social Security Trust Fund is bankrupt. Social Security is a government program funded by the government out of government revenues.

Either it is a worthwhile program or it isn't.

The government can't save money, there is no lockbox possible. The extra payroll taxes collected supposedly for the future of Social Security were spent on other government services in the year that they were collected. They were used to offset the losses in revenue from the supply side income tax cuts.

The existence of the bonds in the Social Security Trust Fund is nothing but a promise to fund Social Security from the general fund when payroll tax receipts dropped below the total benefits being paid out. If the Republicans want to renege on this promise then they should state why they want to and leave it to the voters to decide if the benefits are to be cut.

 

[SimpleDon]

We have both a revenue problem and a spending problem.

The spending problem is a matter of how inefficiently the government runs. Vast sums are spent on things because they're in the district of some powerful congresscritter rather than due to need. Other things are underfunded so they make a total mess that often ends up costing more in the long run.

So you are proposing that the government should fund its programs based solely on need and its revenues solely on ability to pay? There is something familiar about that idea. I just can't put my finger on it.

 

[dismal]

If Republicans want to cut Social Security benefits they should state it clearly and not hide behind arguments that the Social Security Trust Fund is bankrupt. Social Security is a government program funded by the government out of government revenues.

I am not saying the social security trust fund is bankrupt, I am saying its existence is essentially meaningless.

This is a basic accounting truth whatever views you may have on social security.

If you can't follow the basic argument being made it seems unlikely you will be successful rebutting it.

 

[Horatio Parker]

These things are mere IOUs, nothing more. Someday the taxpayers gets to pay these IOUs off.

I can hear the GOP politicians now: "Tax Increases! Tax increases! We will save you! We will save you from these big bad tax increases to pay off these takers' debts!" Yeah baby!

No. This is a myth. The debts can be rolled over forever simply by issuing more. Not like Greece, whose debt is in a foreign currency. Our debt is in the currency that the govt has the monopoly to create.

The seven deadly innocent frauds:

1. The government must raise funds through taxation or borrowing in order to spend. In other words, government spending is limited by its ability to tax or borrow.

2. With government deficits, we are leaving our debt burden to our children.

3. Government budget deficits take away savings.

4. Social Security is broken.

5. The trade deficit is an unsustainable imbalance that takes away jobs and output.

6. We need savings to provide the funds for investment.

7. It’s a bad thing that higher deficits today mean higher taxes tomorrow.

http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

 

[dismal]

No. This is a myth. The debts can be rolled over forever simply by issuing more.

A reasonable level of debt can be rolled over. This doesn't mean any level of debt can be rolled over.

As a rule if debt is growing faster than GDP, it won't be sustainable.

 

[Horatio Parker]

No. This is a myth. The debts can be rolled over forever simply by issuing more.

A reasonable level of debt can be rolled over. This doesn't mean any level of debt can be rolled over.

As a rule if debt is growing faster than GDP, it won't be sustainable.

So Japan is unsustainable? What's going to happen to it?

Anyway, granting potential problems with the bond markets, why does govt have to issue debt at all?

 

[dismal]

A reasonable level of debt can be rolled over. This doesn't mean any level of debt can be rolled over.

As a rule if debt is growing faster than GDP, it won't be sustainable.

So Japan is unsustainable? What's going to happen to it?

Anyway, granting potential problems with the bond markets, why does govt have to issue debt at all?

I don't recall having said "Japan is unsustainable".

I recall saying that borrowing faster than GDP growth is unsustainable. What happens when you borrow faster than GDP growth is eventually people will stop lending you money because they will be able to observe you will likely not be able to pay it back, or will be forced to inflate your currency to do so.

Government does not have to issue debt at all. I would expect absolutely 0.0% problems in the bond market if they did not.

Politicians, however, find spending money very tempting and raising money somewhat painful.

 

[Horatio Parker]

So Japan is unsustainable? What's going to happen to it?

Anyway, granting potential problems with the bond markets, why does govt have to issue debt at all?

I don't recall having said "Japan is unsustainable".

I recall saying that borrowing faster than GDP growth is unsustainable. What happens when you borrow faster than GDP growth is eventually people will stop lending you money because they will be able to observe you will likely not be able to pay it back, or will be forced to inflate your currency to do so.

Government does not have to issue debt at all. I would expect absolutely 0.0% problems in the bond market if they did not.

Politicians, however, find spending money very tempting and raising money somewhat painful.

According to your argument, Japan should be unsustainable. So I asked you a direct question, which you appear to be avoiding.

Japan is borrowing at 2xGDP. They have no problem selling their issues. Is Japan going to sink into the sea, or what? Otherwise, I have to consider that you're spouting nonsense.

Can you cite examples of countries defaulting due to excessive national debt (in their sovereign currency)?

 

[dismal]

I don't recall having said "Japan is unsustainable".

I recall saying that borrowing faster than GDP growth is unsustainable. What happens when you borrow faster than GDP growth is eventually people will stop lending you money because they will be able to observe you will likely not be able to pay it back, or will be forced to inflate your currency to do so.

Government does not have to issue debt at all. I would expect absolutely 0.0% problems in the bond market if they did not.

Politicians, however, find spending money very tempting and raising money somewhat painful.

According to your argument, Japan should be unsustainable. So I asked you a direct question, which you appear to be avoiding.

No, I never said anything like any country is not sustainable. You are creating distortions and fabrications.

I will say again that any country, including Japan, can not sustain borrowing to the point where its debt grows faster than its GDP. Japan may have been doing it, but this does not mean it is sustainable. Do yuoui know what the word "sustainable" means?

Do you actually believe there is no limit on what a country can borrow? I seriously question whether you have considered this issue in any meaningful way if you do.

Why not repeal all taxes and borrow enough to let us all live like Rockefellers?

Countries borrow themselves into financial trouble all the time. It's practically the national sport in South America.

 

[Horatio Parker]

According to your argument, Japan should be unsustainable. So I asked you a direct question, which you appear to be avoiding.

No, I never said anything like any country is not sustainable. You are creating distortions and fabrications.

I will say again that any country, including Japan, can not sustain borrowing to the point where its debt grows faster than its GDP. Japan may have been doing it, but this does not mean it is sustainable. Do yuoui know what the word "sustainable" means?

Do you actually believe there is no limit on what a country can borrow? I seriously question whether you have considered this issue in any meaningful way if you do.

Why not repeal all taxes and borrow enough to let us all live like Rockefellers?

Countries borrow themselves into financial trouble all the time. It's practically the national sport in South America.

You're one to talk about fabrications and distortions.

South American debt was not sovereign debt. Conflating foreign debt with sovereign debt is distortion and fabrication of the first order.

But back to Japan, to be clear, you are saying that Japan's borrowing is unsustainable, but you don't know when this (supposed) disaster is going to happen, but it must. Is that fair?

And I'll ask you another direct question, again: can you cite any examples of national default on sovereign debt?

Govts are not budget constrained in their own currency. It may not be wise to cut everyone a check for a billion dollars, but theoretically, there's nothing to prevent it.

 

[dismal]

No, I never said anything like any country is not sustainable. You are creating distortions and fabrications.

I will say again that any country, including Japan, can not sustain borrowing to the point where its debt grows faster than its GDP. Japan may have been doing it, but this does not mean it is sustainable. Do yuoui know what the word "sustainable" means?

Do you actually believe there is no limit on what a country can borrow? I seriously question whether you have considered this issue in any meaningful way if you do.

Why not repeal all taxes and borrow enough to let us all live like Rockefellers?

Countries borrow themselves into financial trouble all the time. It's practically the national sport in South America.

You're one to talk about fabrications and distortions.

South American debt was not sovereign debt. Conflating foreign debt with sovereign debt is distortion and fabrication of the first order.

WTF? Venezuelan debt is sovereign debt if you're Venezuela. Argentinian debt is sovereign debt if you're Argentina. It's foreign debt to us, but not to them.

But back to Japan, to be clear, you are saying that Japan's borrowing is unsustainable, but you don't know when this (supposed) disaster is going to happen, but it must. Is that fair?

I am not currently tracking Japan. I have repeated my point like 3 or 4 times now so I will decline to do it again. You can go back and read the first 3 times. At some point, you can't borrow any more. I can think of no special exception that makes Japan immune from this and capable of borrowing infinite amounts of money.

Govts are not budget constrained in their own currency. It may not be wise to cut everyone a check for a billion dollars, but theoretically, there's nothing to prevent it.

Why wouldn't it be wise if you believe there is no limit on the national debt? Let's take advantage of that and enrich the people.

 

[RVonse]

Yes, again. Until people realize, sooner or later these special interest treasury bonds need to be paid off or rolled over, creating even bigger future debts. As massive numbers of baby boomer retire, eventually SS no longer gets surpluses. These treasury special interest notes are IOUs, needing to be paid off by the public, sooner or later. It's basic math.

The longer we put off getting a correct understanding of all of this and start dealing with it realistically, the worse future problems will be when the inevitable hits us.

Lock box now!

They are promises one branch of the US govt has made to another. One branch has an asset, another has a liability. In the consolidated view of what the US govt owes they are meaningless.

Then why does the government bother to keep track of any budgets or accounting about any of its branches? Not saying what you believe is wrong but just asking.

 

[dismal]

They are promises one branch of the US govt has made to another. One branch has an asset, another has a liability. In the consolidated view of what the US govt owes they are meaningless.

Then why does the government bother to keep track of any budgets or accounting about any of its branches? Not saying what you believe is wrong but just asking.

I dunno. I think in this case it probably has something to do with the fact people didn't like the idea that the government took the social security surpluses into the general fund and spent them, so they created this trust fund full o' magickal bonds to make it seem as if they didn't. However, based on discussions here, I have come to understand that aversion to reality on this issue is strong. It would not surprise me if some congresspeople were sufficiently ignorant of accounting and finance to actually believe they were achieving something meaningful. What's the saying? Never attribute to malice that which can be adequately explained by incompetence...

 

[Alcoholic Actuary]

I've read and heard that a common complaint about social security, medicare and medicaid is that they are the reason the US is so far in debt.

But . . .

According to the Summary of the 2015 Annual Reports the four trusts that make up those programs bring in more revenue than they expend by $10.9 billion a year on a consolidated basis. So contrary to the common view that those programs drive the debt the reality is that those programs don't add to the debt at all.

The question then remains: What is the actual driver of US indebtedness?

Anyone that points to Social Security, Medicare and Medicaid either hasn't bothered to actually look at the financial status of those programs or knows and has a different agenda than really addressing the deficit and debt.

Great I get to do this today...

Couple of Points:

1) Technically it only brought in $11b in 2014 - which is actually kind of low historically. The 5 year average surplus to all programs in aggregate is closer to $35b, but the program is in decline.
2) The actual "operational" revenue less the benefit payments is negative (Payroll Taxes + Taxes on Benefits + Reimbursements) - (Total Benefit Payments - Admin Expenses). The only reason we can consider the program in the black is because we can take the interest income into the revenue calculation - which is a non-trivial amount. That is interest earned on the trust fund.

I bring up the second point only because there are some people around here who purport to know things that insist that the trust fund is fictitious and/or meaningless.

As far as our overall US Debt, I think the only debt worth worrying about is what is owed outside of the umbrella of the Federal Government. Even then I think there are degrees of worry, so money we owe to US corporations in US dollars is less concerning than money we owe to China who is constantly manipulating its currency.

aa

 

[Horatio Parker]

WTF? Venezuelan debt is sovereign debt if you're Venezuela. Argentinian debt is sovereign debt if you're Argentina. It's foreign debt to us, but not to them.

If the currency is pegged, it's sovereign in name only. Not at all like the situation with the US.

Are you unaware of the difference?

I am not currently tracking Japan. I have repeated my point like 3 or 4 times now so I will decline to do it again. You can go back and read the first 3 times. At some point, you can't borrow any more. I can think of no special exception that makes Japan immune from this and capable of borrowing infinite amounts of money.

A simple "I don't know" would suffice.

Why wouldn't it be wise if you believe there is no limit on the national debt? Let's take advantage of that and enrich the people.

Because there are limits on real resources.

 

[dismal]

Why wouldn't it be wise if you believe there is no limit on the national debt? Let's take advantage of that and enrich the people.

Because there are limits on real resources.

Ok, why not just fund the maximum resource acquisition that is possible by floating debt?

And, obviously there's no need for taxes to fund our current level of resource acquisition, so let's start by eliminating them and floating debt to cover all spending we currently do.