4 ms·

US: Record Trade deficit + record fiscal deficit + record govt debt + record corp debt (all during a period when economy is supposedly doing well) = time bomb

by ghouse 7y ago

lazyjones 7y ago
Why are you looking only at alleged (nominal -> inflation...) negative records? Record low unemployment, highest stock indices, highest household incomes, low hispanic and african american poverty rates etc. etc. Also, some of your negative indicators are the result of lower taxes = more wealth for tax payers.
- jazzyk 7y ago
  >Record low unemployment The actual, real rate of unemployment is called "Civilian Labor Force Participation Rate" and covers all adults (16 or older) who are not working. As you can see from the diagram on the BLS website, the participation rate is ~ 63% which is close to the lowest level in 40+ years. Booming economy, for FAANG and Wall Street, perhaps. Just barely off the lows for most people, though. https://data.bls.gov/pdq/SurveyOutputServlet https://data.bls.gov/pdq/SurveyOutputServlet
- seanmcdirmid 7y ago
  > Record low unemployment, highest stock indices, highest household incomes, low hispanic and african american poverty rates etc. etc All of those points are true before any bust. Juicing an already hot economy with tax cuts and low interest rates is just stupid, leading to excessive inflation, bubbles, and ultimately a bust. If adults were running things, they would use taxation and interest rate as a lever, cut when the economy is bad, but raised when the economy is good: this would provide relief during bad times and prevent good times from overheating.
  - Itsdijital 7y ago
    I never really thought about that, or put 2 and 2 together on taxes. Why don't we have annual dynamic taxes? I'm sure there is a lot of nuance that would have to be worked out, but it seems like an excellent method for smoothing volatility.
    - seanmcdirmid 7y ago
      Property taxes sort of are dynamic (they can go up or down depending on property values), interest rates are definitely supposed to be dynamic. It would probably be a good thing to apply to income taxes, but they are already progressive and if you lose your job, well...you don’t have to pay them. Obama’s temporary payroll tax cut was a bit clever in this regard, as lower income people pay mostly payroll taxes anyways (directly or indirectly).
      - rdtwo 7y ago
        Incorrect, property taxes don’t go down because government spending always goes up. If property values go down the city government finds a way to not adjust down or increase rates. You could sue and get them to readjust down but next year they will just reset you back and you have to do it again guaranteed that it will cost you more to fight than to pay.
        seanmcdirmid 7y ago
        Property taxes have actually gone down before, but in order for the government to remain solvent, they often raise the rate for the next year if they can do it automatically. Or they can play shenanigans with appraisal values, but then fairness comes into play (e.g. if my $100k house is taxed as much as the $200k house nearby, but the $200k house is taxed exactly as it should be). For property taxes to play their secondary role of forcing people to put their property to productive use (as opposed to using them for speculative investing), the tax is perfectly able to go up and down depending on the assessed value of the property. Of course, local governments also depend on the revenue, which becomes their primary purpose these days. However, societies that lack a property tax (e.g. China) suffer from a lot more speculative bubbles, making the tax useful in itself even if its revenue wasn’t significant.
    - dodobirdlord 7y ago
      Taxes are such an important and partisan issue that they are instituted in ways that are deliberately difficult for future legislative bodies to interfere with. Any sort of dynamic system would give some institutional body the ability to control tax rates without having to succeed in passing legislation, which is not something legislators want. Consider the Federal Reserve, which dynamically sets interest rates. Congress has very little input on this process (which is good!) and the tenure of the Chair is long enough that entire sessions of Congress can go by without Congress having any input at all. It’s hard to convince legislators that they should hand over power like this on issues that effect their chances of re-election, even when it’s correct.
  - lazyjones 7y ago
    > Juicing an already hot economy with tax cuts and low interest rates is just stupid, The economy isn't "hot" (obvious attempt to negate positive facts), it's healthy. "Juicing" it is improving it further and making the population wealthier. There's nothing negative about that.
    - seanmcdirmid 7y ago
      If tax cuts and low interest rates led to more real investment and value creation, you would be right. Unfortunately, they are primarily going into real estate and the stock market ATM either directly or indirectly via speculative investments. There isn’t much real growth out there, and everyone is waiting for the inevitable downturn in the cycle anyways so they are playing to safe.
- jayd16 7y ago
  Isn't record low unemployment in the face of "record Trade deficit + record fiscal deficit + record govt debt + record corp debt" a massive problem? Where do we go from here?
  - lazyjones 7y ago
    No, it's not a problem. And the trade deficit is also a result from people being able to afford to buy goods. Government debt is no problem at all for a healthy economy. Corporate debt is a sign of trust in those corporations.
- ajross 7y ago
  You could have written those same words in 1999 and 2007. Which is the point. All absolute metics look great at the peak of an expansion, by definition. But the "negative records" you complain about are proxies for measuring the derivative, which is what you care about when discussion recession risk.
taiwanboy 7y ago
Trade deficit - going way down wrt China. Also, dollar is strong, and we turn commodities from other countries into more valuable goods that we export. Record fiscal deficit/gov debt - hard to judge without also looking at gdp + asset growth, which US is doing great in (stock, real estate). Also. US is safe haven for investors right now Corp debt - record low interest rate.
- tzs 7y ago
  > Trade deficit - going way down wrt China But going up overall [1]. [1] https://www.census.gov/foreign-trade/balance/c0004.html https://www.census.gov/foreign-trade/balance/c0004.html

US: Record Trade deficit + record fiscal deficit + record govt debt + record corp debt (all during a period when economy is supposedly doing well) = time bomb

by ghouse 7y ago

US: Record Trade deficit + record fiscal deficit + record govt debt + record corp debt (all during a period when economy is supposedly doing well) = time bomb

lazyjones 7y ago

Why are you looking only at alleged (nominal -> inflation...) negative records? Record low unemployment, highest stock indices, highest household incomes, low hispanic and african american poverty rates etc. etc. Also, some of your negative indicators are the result of lower taxes = more wealth for tax payers.

jazzyk 7y ago
>Record low unemployment The actual, real rate of unemployment is called "Civilian Labor Force Participation Rate" and covers all adults (16 or older) who are not working. As you can see from the diagram on the BLS website, the participation rate is ~ 63% which is close to the lowest level in 40+ years. Booming economy, for FAANG and Wall Street, perhaps. Just barely off the lows for most people, though. https://data.bls.gov/pdq/SurveyOutputServlet https://data.bls.gov/pdq/SurveyOutputServlet
seanmcdirmid 7y ago
> Record low unemployment, highest stock indices, highest household incomes, low hispanic and african american poverty rates etc. etc All of those points are true before any bust. Juicing an already hot economy with tax cuts and low interest rates is just stupid, leading to excessive inflation, bubbles, and ultimately a bust. If adults were running things, they would use taxation and interest rate as a lever, cut when the economy is bad, but raised when the economy is good: this would provide relief during bad times and prevent good times from overheating.
- Itsdijital 7y ago
  I never really thought about that, or put 2 and 2 together on taxes. Why don't we have annual dynamic taxes? I'm sure there is a lot of nuance that would have to be worked out, but it seems like an excellent method for smoothing volatility.
  - seanmcdirmid 7y ago
    Property taxes sort of are dynamic (they can go up or down depending on property values), interest rates are definitely supposed to be dynamic. It would probably be a good thing to apply to income taxes, but they are already progressive and if you lose your job, well...you don’t have to pay them. Obama’s temporary payroll tax cut was a bit clever in this regard, as lower income people pay mostly payroll taxes anyways (directly or indirectly).
    - rdtwo 7y ago
      Incorrect, property taxes don’t go down because government spending always goes up. If property values go down the city government finds a way to not adjust down or increase rates. You could sue and get them to readjust down but next year they will just reset you back and you have to do it again guaranteed that it will cost you more to fight than to pay.
      - seanmcdirmid 7y ago
        Property taxes have actually gone down before, but in order for the government to remain solvent, they often raise the rate for the next year if they can do it automatically. Or they can play shenanigans with appraisal values, but then fairness comes into play (e.g. if my $100k house is taxed as much as the $200k house nearby, but the $200k house is taxed exactly as it should be). For property taxes to play their secondary role of forcing people to put their property to productive use (as opposed to using them for speculative investing), the tax is perfectly able to go up and down depending on the assessed value of the property. Of course, local governments also depend on the revenue, which becomes their primary purpose these days. However, societies that lack a property tax (e.g. China) suffer from a lot more speculative bubbles, making the tax useful in itself even if its revenue wasn’t significant.
  - dodobirdlord 7y ago
    Taxes are such an important and partisan issue that they are instituted in ways that are deliberately difficult for future legislative bodies to interfere with. Any sort of dynamic system would give some institutional body the ability to control tax rates without having to succeed in passing legislation, which is not something legislators want. Consider the Federal Reserve, which dynamically sets interest rates. Congress has very little input on this process (which is good!) and the tenure of the Chair is long enough that entire sessions of Congress can go by without Congress having any input at all. It’s hard to convince legislators that they should hand over power like this on issues that effect their chances of re-election, even when it’s correct.
- lazyjones 7y ago
  > Juicing an already hot economy with tax cuts and low interest rates is just stupid, The economy isn't "hot" (obvious attempt to negate positive facts), it's healthy. "Juicing" it is improving it further and making the population wealthier. There's nothing negative about that.
  - seanmcdirmid 7y ago
    If tax cuts and low interest rates led to more real investment and value creation, you would be right. Unfortunately, they are primarily going into real estate and the stock market ATM either directly or indirectly via speculative investments. There isn’t much real growth out there, and everyone is waiting for the inevitable downturn in the cycle anyways so they are playing to safe.
jayd16 7y ago
Isn't record low unemployment in the face of "record Trade deficit + record fiscal deficit + record govt debt + record corp debt" a massive problem? Where do we go from here?
- lazyjones 7y ago
  No, it's not a problem. And the trade deficit is also a result from people being able to afford to buy goods. Government debt is no problem at all for a healthy economy. Corporate debt is a sign of trust in those corporations.
ajross 7y ago
You could have written those same words in 1999 and 2007. Which is the point. All absolute metics look great at the peak of an expansion, by definition. But the "negative records" you complain about are proxies for measuring the derivative, which is what you care about when discussion recession risk.

taiwanboy 7y ago

Trade deficit - going way down wrt China. Also, dollar is strong, and we turn commodities from other countries into more valuable goods that we export. Record fiscal deficit/gov debt - hard to judge without also looking at gdp + asset growth, which US is doing great in (stock, real estate). Also. US is safe haven for investors right now Corp debt - record low interest rate.

tzs 7y ago
> Trade deficit - going way down wrt China But going up overall [1]. [1] https://www.census.gov/foreign-trade/balance/c0004.html https://www.census.gov/foreign-trade/balance/c0004.html