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==Assuming we only pay 2% interest on that debt== Where does this come from? the 10-year bond rate was closer to 3% for most of 2018 [1]. ==So that's a 4x ROI

==Assuming we only pay 2% interest on that debt== Where does this come from? the 10-year bond rate was closer to 3% for most of 2018 [1]. ==So that's a 4x ROI correct== You can't calculate ROI with an I. In this case, that is the 3.9% of GDP mentioned. Going forward, we may gain more tax revenue than we would pay in debt servicing each year, but that ignores the initial investment we made. In reality, you would need to show that the present value of your annual tax revenues (0.29% of GDP - 0.076% of GDP) is larger than the 3.9% of GDP invested initially. [1] https://www.thebalance.com/interest-on-the-national-debt-4119024 https://www.thebalance.com/interest-on-the-national-debt-411...

opportune 8y ago
It doesn't matter, 2% or 3% is just splitting hairs. I also apparently underestimated the percent of US GDP going to federal taxes; it's around 19%, not 10%. So there is still more a lot more new tax money coming in than is necessary to service the new debt. "3.9% of GDP invested initially" How is this investing 3.9% of GDP? It costs 0$ in investment for the government to issue new bonds. The only way federal debt costs the country is in the interest spent on servicing it. As long as the tax base increases faster than the interest spent on servicing debt (and also accounting for population growth) there is no economic problem with increasing the federal debt. And again, I am not arguing that the things we are spending the government money on are rational. I think we could do a lot better by cutting military spending and increasing funding for non-military research and infrastructure without deficit spending (which is certainly possible). But technically the current deficit spending is not unsustainable
- moorhosj 8y ago
  Nobody said it was unsustainable. The point is that if you have to borrow almost 4% of your GDP to generate growth of only 3% of GDP, your underlying economy is not performing strongly enough to support itself. That we can’t escape deficit-fueled growth in a supposedly “booming economy” is a scary sign for future economic hiccups.

opportune 8y ago

It doesn't matter, 2% or 3% is just splitting hairs. I also apparently underestimated the percent of US GDP going to federal taxes; it's around 19%, not 10%. So there is still more a lot more new tax money coming in than is necessary to service the new debt. "3.9% of GDP invested initially" How is this investing 3.9% of GDP? It costs 0$ in investment for the government to issue new bonds. The only way federal debt costs the country is in the interest spent on servicing it. As long as the tax base increases faster than the interest spent on servicing debt (and also accounting for population growth) there is no economic problem with increasing the federal debt. And again, I am not arguing that the things we are spending the government money on are rational. I think we could do a lot better by cutting military spending and increasing funding for non-military research and infrastructure without deficit spending (which is certainly possible). But technically the current deficit spending is not unsustainable

moorhosj 8y ago
Nobody said it was unsustainable. The point is that if you have to borrow almost 4% of your GDP to generate growth of only 3% of GDP, your underlying economy is not performing strongly enough to support itself. That we can’t escape deficit-fueled growth in a supposedly “booming economy” is a scary sign for future economic hiccups.