5 ms·

What about the US's debt-fueled government? Sustainable?

deleted 9y ago
[deleted]
alexbeloi 9y ago
US debt to GDP ratio is half that of China, not claiming the trend is sustainable but that (at least according to Moody's) China is more at risk of a runaway debt-spend crisis than the US is.
- JumpCrisscross 9y ago
  Consider, too, China's less-favorable demographic profile [1]. [1] http://i1.itc.cn/20140702/2be8_38e3d3f0_51f7_95e6_f762_a70643ae811a_1.jpg http://i1.itc.cn/20140702/2be8_38e3d3f0_51f7_95e6_f762_a7064...
- Analemma_ 9y ago
  Not only is our debt-to-GDP ratio lower than China's, it's lower than most (not all) countries in Western Europe. There is so much uninformed hysteria about the US national debt, it's incredibly frustrating and blocking the implementation of better policy.
  - flukus 9y ago
    > it's lower than most (not all) countries in Western Europe. Portugal, Italy and Ireland aren't "most of western europe": https://en.wikipedia.org/wiki/List_of_countries_by_public_debt https://en.wikipedia.org/wiki/List_of_countries_by_public_de...
  - WillPostForFood 9y ago
    By what measure is the US ratio lower than China's? US is worse in the IMF measure of gross debt to GDP by far. Looking at total debt (government, corporate, and household), the US is worse: 331% to 250%. What numbers are you looking at? https://www.theguardian.com/business/2016/jun/16/chinas-debt-is-250-of-gdp-and-could-be-fatal-says-government-expert https://www.theguardian.com/business/2016/jun/16/chinas-debt...
- Apes 9y ago
  Where did you get this info? Every source I see shows China's Debt/GDP (42.90%) as much lower than the US (104.17%).
  - Analemma_ 9y ago
    The parent is talking about total debt - public, household, and corporate. China's public debt isn't too much but the corporate debt is what has skyrocketed. Many analysts treat Chinese corporate debt as more-or-less equivalent to public debt (and don't do this for the United States), on the assumption that the government will bail out SOEs rather than allow them to fail and create widespread unemployment. That may or may not be true, but that's why they make statements like "China's debt is twice the United States'".
    - cinquemb 9y ago
      >Many analysts treat Chinese corporate debt as more-or-less equivalent to public debt (and don't do this for the United States), on the assumption that the government will bail out SOEs rather than allow them to fail and create widespread unemployment I'd say this certainly gives a lot of political leeway in China, compared to having the opposite in place. I wonder if all the major US companies that were bailed out, that their debt should be considered public debt seeing there is already a precedent in place. But something tells me I doubt moodys will have a word on that.
  - JumpCrisscross 9y ago
    China's total debt is about 250% of GDP, compared to over 300% for the United States [1]. It's more useful to observe total debt since lots of debt the Chinese government will ultimately have to assume, in one form (e.g. financially) or another (e.g. political turmoil), is not held on the government balance sheet, e.g. debt issued by its banks or critical employers or regional governments. Most American debt, on the other hand, is issued by relatively-well regulated banks and by the federal government. [1] https://www.theguardian.com/business/2016/jun/16/chinas-debt-is-250-of-gdp-and-could-be-fatal-says-government-expert https://www.theguardian.com/business/2016/jun/16/chinas-debt...
- thejohnhenry 9y ago
  US debt to GDP is more than double China's. Where are you getting your data?
- alexbeloi 9y ago
  I can't seem to edit my comment anymore. In an attempt to correct the record, I'm very wrong about my claim in at least a couple of ways. 1. I made that statement without checking my facts 2. I recalled from the news today that China had a debt to gdp ratio of about 250% (this is total debt to gdp, including debt held by consumers and corporations) 3. I compared it to a number in my head of US debt to gdp ratio being about 100% (this turns out to be about government debt to gdp). At the very least, the thing I intended to say is wrong or an unequal comparison at best.
ryandamm 9y ago
Sustainability is a function of total annual deficit relative to growth in ability to service the debt. Deficits that lead to productivity-enhancing investments will pay for themselves: education, infrastructure, etc. Deficits that result from cutting taxes will not: the idea that we're on the virtuous part of the Laffer curve has been thoroughly debunked in economic, if not political, circles. Furthermore, debt in the US is a result of exogenous capital flows, not the other way around. If the US government tightened belts and cut heavily, leading to a fiscal surplus (or even just balanced gov't budget), we would see a growth in private sector debt. It's one of my favorite hobby-horses, this idea -- because it's counterintuitive until you dive into the balance sheet analysis, then it makes perfect sense. All credit due to Michael Pettis: http://carnegieendowment.org/chinafinancialmarkets/70042 http://carnegieendowment.org/chinafinancialmarkets/70042
- theprop 9y ago
  Are you seriously suggesting that US government deficits are run to invest in education and infrastructure? Deficits are mostly attributable to military spending. I'm doubtful that killing people in other countries who present absolutely no threat to you is productivity-enhancing.
  - dragonwriter 9y ago
    > Deficits are mostly attributable to military spending. Post-WWII federal deficits are mostly attributable to declining total effective income tax rates.
    - theprop 9y ago
      To some extent. Military spending as a % of GDP isn't that high, ~4%...but may still be a bit higher than usual for relative peacetime.
    - arkis22 9y ago
      Source? The first couple of graphs here: https://en.wikipedia.org/wiki/Income_tax_in_the_United_States https://en.wikipedia.org/wiki/Income_tax_in_the_United_State..., suggest otherwise. We've rarely had income taxes as a higher percentage of GDP than we do now.
theprop 9y ago
Argentina went bankrupt at the US's current debt to GDB ratio I believe (~80%).
- kilroy123 9y ago
  Argentina is NOT the USA. The size, the resources, the people, the culture, and more importantly of all the regulations regarding businesses. Huge difference.
pessimizer 9y ago
Government debt is fine. It's the balance of payments that's unsustainable.

deleted 9y ago

[deleted]

US debt to GDP ratio is half that of China, not claiming the trend is sustainable but that (at least according to Moody's) China is more at risk of a runaway debt-spend crisis than the US is.

JumpCrisscross 9y ago
Consider, too, China's less-favorable demographic profile [1]. [1] http://i1.itc.cn/20140702/2be8_38e3d3f0_51f7_95e6_f762_a70643ae811a_1.jpg http://i1.itc.cn/20140702/2be8_38e3d3f0_51f7_95e6_f762_a7064...
Analemma_ 9y ago
Not only is our debt-to-GDP ratio lower than China's, it's lower than most (not all) countries in Western Europe. There is so much uninformed hysteria about the US national debt, it's incredibly frustrating and blocking the implementation of better policy.
- flukus 9y ago
  > it's lower than most (not all) countries in Western Europe. Portugal, Italy and Ireland aren't "most of western europe": https://en.wikipedia.org/wiki/List_of_countries_by_public_debt https://en.wikipedia.org/wiki/List_of_countries_by_public_de...
- WillPostForFood 9y ago
  By what measure is the US ratio lower than China's? US is worse in the IMF measure of gross debt to GDP by far. Looking at total debt (government, corporate, and household), the US is worse: 331% to 250%. What numbers are you looking at? https://www.theguardian.com/business/2016/jun/16/chinas-debt-is-250-of-gdp-and-could-be-fatal-says-government-expert https://www.theguardian.com/business/2016/jun/16/chinas-debt...
Apes 9y ago
Where did you get this info? Every source I see shows China's Debt/GDP (42.90%) as much lower than the US (104.17%).
- Analemma_ 9y ago
  The parent is talking about total debt - public, household, and corporate. China's public debt isn't too much but the corporate debt is what has skyrocketed. Many analysts treat Chinese corporate debt as more-or-less equivalent to public debt (and don't do this for the United States), on the assumption that the government will bail out SOEs rather than allow them to fail and create widespread unemployment. That may or may not be true, but that's why they make statements like "China's debt is twice the United States'".
  - cinquemb 9y ago
    >Many analysts treat Chinese corporate debt as more-or-less equivalent to public debt (and don't do this for the United States), on the assumption that the government will bail out SOEs rather than allow them to fail and create widespread unemployment I'd say this certainly gives a lot of political leeway in China, compared to having the opposite in place. I wonder if all the major US companies that were bailed out, that their debt should be considered public debt seeing there is already a precedent in place. But something tells me I doubt moodys will have a word on that.
- JumpCrisscross 9y ago
  China's total debt is about 250% of GDP, compared to over 300% for the United States [1]. It's more useful to observe total debt since lots of debt the Chinese government will ultimately have to assume, in one form (e.g. financially) or another (e.g. political turmoil), is not held on the government balance sheet, e.g. debt issued by its banks or critical employers or regional governments. Most American debt, on the other hand, is issued by relatively-well regulated banks and by the federal government. [1] https://www.theguardian.com/business/2016/jun/16/chinas-debt-is-250-of-gdp-and-could-be-fatal-says-government-expert https://www.theguardian.com/business/2016/jun/16/chinas-debt...
thejohnhenry 9y ago
US debt to GDP is more than double China's. Where are you getting your data?
alexbeloi 9y ago
I can't seem to edit my comment anymore. In an attempt to correct the record, I'm very wrong about my claim in at least a couple of ways. 1. I made that statement without checking my facts 2. I recalled from the news today that China had a debt to gdp ratio of about 250% (this is total debt to gdp, including debt held by consumers and corporations) 3. I compared it to a number in my head of US debt to gdp ratio being about 100% (this turns out to be about government debt to gdp). At the very least, the thing I intended to say is wrong or an unequal comparison at best.

ryandamm 9y ago

Sustainability is a function of total annual deficit relative to growth in ability to service the debt. Deficits that lead to productivity-enhancing investments will pay for themselves: education, infrastructure, etc. Deficits that result from cutting taxes will not: the idea that we're on the virtuous part of the Laffer curve has been thoroughly debunked in economic, if not political, circles. Furthermore, debt in the US is a result of exogenous capital flows, not the other way around. If the US government tightened belts and cut heavily, leading to a fiscal surplus (or even just balanced gov't budget), we would see a growth in private sector debt. It's one of my favorite hobby-horses, this idea -- because it's counterintuitive until you dive into the balance sheet analysis, then it makes perfect sense. All credit due to Michael Pettis: http://carnegieendowment.org/chinafinancialmarkets/70042 http://carnegieendowment.org/chinafinancialmarkets/70042

theprop 9y ago
Are you seriously suggesting that US government deficits are run to invest in education and infrastructure? Deficits are mostly attributable to military spending. I'm doubtful that killing people in other countries who present absolutely no threat to you is productivity-enhancing.
- dragonwriter 9y ago
  > Deficits are mostly attributable to military spending. Post-WWII federal deficits are mostly attributable to declining total effective income tax rates.
  - theprop 9y ago
    To some extent. Military spending as a % of GDP isn't that high, ~4%...but may still be a bit higher than usual for relative peacetime.
  - arkis22 9y ago
    Source? The first couple of graphs here: https://en.wikipedia.org/wiki/Income_tax_in_the_United_States https://en.wikipedia.org/wiki/Income_tax_in_the_United_State..., suggest otherwise. We've rarely had income taxes as a higher percentage of GDP than we do now.

theprop 9y ago

Argentina went bankrupt at the US's current debt to GDB ratio I believe (~80%).

kilroy123 9y ago
Argentina is NOT the USA. The size, the resources, the people, the culture, and more importantly of all the regulations regarding businesses. Huge difference.

pessimizer 9y ago

Government debt is fine. It's the balance of payments that's unsustainable.