5 ms·

I think a good place to start would be to not have the average American be 6 figures in debt.

by tengbretson 6y ago

mandelbrotwurst 6y ago
Yes, that would be nice. What policy would you suggest to get there?
- tengbretson 6y ago
  State-enforced debt jubilees.
  - wfhpw 6y ago
    Does this not discourage lending? Who would issue a loan the year before a debt jubilee?
    - tengbretson 6y ago
      > Does this not discourage lending Yes. The goal is to reduce debt.
      - gumby 6y ago
        Why? Buying a house or car through debt is not a bad way to match your payment stream to the usable lifetime of the asset. Even if you can pay cash, unless you have a huge cushion this could make a lot of sense (taking your savings to 0 is worse than taking your savings to n months of cost of living, including the loan payments). I am lucky enough to be a cash buyer but I can still see the logic of using debt in this way.
        clairity 6y ago
        from an economic perspective, it doesn't make sense to buy a depreciating asset, like a car, with debt. a house, on the other hand, is generally considered a stable asset, so debt is appropriate there.
        gumby 6y ago
        Sure it does, for the cash flow reason I mentioned. Consider the debt payments as an insurance premium against financial problems. A municipality can take on debt for a capital expenditure on a bridge or something that might reasonably be dismantled or replaced around the time the bond is paid off, for the same reason. I would not consider either case to be irresponsible or economically irrational in principle. Especially as humans have finite life spans.
        clairity 6y ago
        sure, a bridge provides net economic benefit, so is not simply a depreciating asset. it's paying for broad benefits that accrue widely across society, rather than strictly to the government (externalized benefits). that doesn't happen with cars. in fact, cars produce large negative externalities. there's also fewer viable, affordable substitutes for bridges, whereas cars have multiple viable such alternatives, which makes debt often a bad choice for cars but not bridges. but to the point of bonds, a lot of bond measures are not for net economic benefit, but rather political gain (school funding bonds, for example, tend to fail to improve educational outcomes despite the political rhetoric).
        leetcrew 6y ago
        it can absolutely make sense to finance a depreciating asset. example one: I have just been offered a good job that requires a car for commuting. I have no car and negligible other assets. it is rational to take out a loan for a reasonably priced car as long as I can comfortably make the payments on my new wages. if I later lose my job but am not upside-down on the loan, I am still better off than I started. example two: I make $200k and have $500k in assets and I want to buy a $20k car. I could easily afford to buy the car outright by selling some assets, but then I would have to pay capital gains and forgo future appreciation. if the expected appreciation + capital gains tax on those assets is significantly higher than the loan interest over the full term, it is rational to finance the vehicle.
        clairity 6y ago
        no, you're not considering opportunity costs or lower cost alternatives.
  - nemanja 6y ago
    Hoping you are being ironic here rather than moronic
  - mandelbrotwurst 6y ago
    This would have tons of negative consequences even if you believe that we'd be better off with debt and loans generally, e.g. essentially acting as a huge windfall (i.e. a free house) toward people who currently have mortgages while doing nothing for renters.
  - AnimalMuppet 6y ago
    But, see, who holds the debt? It's not just evil people who deserve to lose their ill-gotten gains. It's things like pension funds, too. So a debt jubilee sounds great. A "lose your pension fund jubilee" sounds a lot less nice.
- eeZah7Ux 6y ago
  Stop encouraging a debt-based economy?
leetcrew 6y ago
this is true, but kinda misleading. a very large portion of that 6 figure debt is going to be a mortgage on a home. as long as you're not upside-down and you can afford the monthly payments, it's not bad to have a mortgage. you have to go down to the tenth percentile of american households to find negative net worths. of course, net worth doesn't tell the whole story either, but it's a lot better than presenting debt loads without balancing it against assets held.
- tengbretson 6y ago
  I don't think its really all that misleading. The article is talking about basic income being needed as a safety-net for events like losing your job so that you can continue to feed your family. I suspect that absent a car, mortgage and credit card payment coming due every month most people would actually be able to weather this sort of event. The reality of these monthly liabilities doesn't change all that much regardless of your equity situation.
  - leetcrew 6y ago
    I'm disagreeing that "the average american has a six figure debt load" is a problem to begin with. if you take the total outstanding consumer debt in the US and divide by the number of households, you get about $110k for the mean, which is pretty close to the median household net worth. unless the distributions of debt and net worth look quite different, this implies that a typical household has a debt-to-assets ratio of <0.5. this doesn't strike me as a problem. this is independent of whether I think UBI is a good idea in general (I do, actually).

I think a good place to start would be to not have the average American be 6 figures in debt.

mandelbrotwurst 6y ago

Yes, that would be nice. What policy would you suggest to get there?

tengbretson 6y ago
State-enforced debt jubilees.
- wfhpw 6y ago
  Does this not discourage lending? Who would issue a loan the year before a debt jubilee?
  - tengbretson 6y ago
    > Does this not discourage lending Yes. The goal is to reduce debt.
    - gumby 6y ago
      Why? Buying a house or car through debt is not a bad way to match your payment stream to the usable lifetime of the asset. Even if you can pay cash, unless you have a huge cushion this could make a lot of sense (taking your savings to 0 is worse than taking your savings to n months of cost of living, including the loan payments). I am lucky enough to be a cash buyer but I can still see the logic of using debt in this way.
      - clairity 6y ago
        from an economic perspective, it doesn't make sense to buy a depreciating asset, like a car, with debt. a house, on the other hand, is generally considered a stable asset, so debt is appropriate there.
        gumby 6y ago
        Sure it does, for the cash flow reason I mentioned. Consider the debt payments as an insurance premium against financial problems. A municipality can take on debt for a capital expenditure on a bridge or something that might reasonably be dismantled or replaced around the time the bond is paid off, for the same reason. I would not consider either case to be irresponsible or economically irrational in principle. Especially as humans have finite life spans.
        clairity 6y ago
        sure, a bridge provides net economic benefit, so is not simply a depreciating asset. it's paying for broad benefits that accrue widely across society, rather than strictly to the government (externalized benefits). that doesn't happen with cars. in fact, cars produce large negative externalities. there's also fewer viable, affordable substitutes for bridges, whereas cars have multiple viable such alternatives, which makes debt often a bad choice for cars but not bridges. but to the point of bonds, a lot of bond measures are not for net economic benefit, but rather political gain (school funding bonds, for example, tend to fail to improve educational outcomes despite the political rhetoric).
        leetcrew 6y ago
        it can absolutely make sense to finance a depreciating asset. example one: I have just been offered a good job that requires a car for commuting. I have no car and negligible other assets. it is rational to take out a loan for a reasonably priced car as long as I can comfortably make the payments on my new wages. if I later lose my job but am not upside-down on the loan, I am still better off than I started. example two: I make $200k and have $500k in assets and I want to buy a $20k car. I could easily afford to buy the car outright by selling some assets, but then I would have to pay capital gains and forgo future appreciation. if the expected appreciation + capital gains tax on those assets is significantly higher than the loan interest over the full term, it is rational to finance the vehicle.
        clairity 6y ago
        no, you're not considering opportunity costs or lower cost alternatives.
- nemanja 6y ago
  Hoping you are being ironic here rather than moronic
- mandelbrotwurst 6y ago
  This would have tons of negative consequences even if you believe that we'd be better off with debt and loans generally, e.g. essentially acting as a huge windfall (i.e. a free house) toward people who currently have mortgages while doing nothing for renters.
- AnimalMuppet 6y ago
  But, see, who holds the debt? It's not just evil people who deserve to lose their ill-gotten gains. It's things like pension funds, too. So a debt jubilee sounds great. A "lose your pension fund jubilee" sounds a lot less nice.
eeZah7Ux 6y ago
Stop encouraging a debt-based economy?

leetcrew 6y ago

this is true, but kinda misleading. a very large portion of that 6 figure debt is going to be a mortgage on a home. as long as you're not upside-down and you can afford the monthly payments, it's not bad to have a mortgage. you have to go down to the tenth percentile of american households to find negative net worths. of course, net worth doesn't tell the whole story either, but it's a lot better than presenting debt loads without balancing it against assets held.

tengbretson 6y ago
I don't think its really all that misleading. The article is talking about basic income being needed as a safety-net for events like losing your job so that you can continue to feed your family. I suspect that absent a car, mortgage and credit card payment coming due every month most people would actually be able to weather this sort of event. The reality of these monthly liabilities doesn't change all that much regardless of your equity situation.
- leetcrew 6y ago
  I'm disagreeing that "the average american has a six figure debt load" is a problem to begin with. if you take the total outstanding consumer debt in the US and divide by the number of households, you get about $110k for the mean, which is pretty close to the median household net worth. unless the distributions of debt and net worth look quite different, this implies that a typical household has a debt-to-assets ratio of <0.5. this doesn't strike me as a problem. this is independent of whether I think UBI is a good idea in general (I do, actually).