5 ms·

There's nothing that makes that debt load scary, unserviceable, etc. the US can raise taxes anytime. It's simply doesn't have to. It can play the annual debt ce

by pas 5y ago

There's nothing that makes that debt load scary, unserviceable, etc. the US can raise taxes anytime. It's simply doesn't have to. It can play the annual debt ceiling chicken game without any real impact on its ability to issue new debt.

ptero 5y ago
Raising taxes beyond a certain point tends to decrease the total tax haul as those with lots of money move income to other jurisdictions and some of others work less, leaning harder on social system (further increasing the public debt).
- pas 5y ago
  The US is very far from that.
  - ptero 5y ago
    How do you know?
    - pas 5y ago
      The US economy is huge, people and companies are not likely to leave if the US increases taxes. https://www.taxpolicycenter.org/briefing-book/how-do-us-taxes-compare-internationally https://www.taxpolicycenter.org/briefing-book/how-do-us-taxe... https://files.taxfoundation.org/20210517160849/The-tax-burden-on-labor-in-Belgium-is-seven-times-that-of-Child-OECD-tax-burden-tax-wedge-with-single-worker-with-no-children-earning-a-nations-average-wage.png https://files.taxfoundation.org/20210517160849/The-tax-burde...
roenxi 5y ago
> There's nothing that makes that debt load scary, unserviceable, etc. There absolutely is - there are a series of steps that will need to be taken to reduce that debt load. If anyone was seriously planning to see them through they wouldn't have let the numbers get that high. This is emporor-no-clothes levels of debt; the plan is not to pay it back. If the plan was to pay it back then the plan would need to have started more than a decade ago. Who is trying to do that? Nobody. The plan is inflation.
- ethbr0 5y ago
  There are two things that make debt unserviceable: debt payments and cost/rate to take on new debt. Debt crises only happen when debt payments exceed ability to repay and the cost/rate to take on new debt spikes. Everyone fails to appreciate the second factor when looking at large economy, stable country debt levels. High debt:GDP ratios are dangerous, but not intrinsically a crisis... until the market also loses faith. Given that in the current international economic climate, the US can issue new debt, and find buyers, at <2%, that's a cheap way to buy time for even normal inflation levels to nibble away at debt. Ironically, now is the perfect time to deficit spend, in the same way it's a perfect time for an IPO. Why would you not take money, invest it in something productive, if people are screaming to give it to you at negative real rates?
  - roenxi 5y ago
    The US has been taking on new debt faster than inflation has chipped it away for around 40 years at this point. There is no evidence it is going to stop. If anyone who cared was anywhere near the levers of power it wouldn't have crossed 100% debt:GDP. Sure it isn't a crisis right now. But the debt will continue to grow and at some point there will be a crisis because either rates will spike, or government manipulation of rates will turn out to have killed off real investment and critical parts of the economy will give out. And in neither of those scenarios are the people lending the US money going to see all of it come back. Hopefully it is all lent by foreigners and not pension funds, that is all I can say.
    - pas 5y ago
      There's nothing magical about 100% debt:GDP ratio. Why is "we need to work for a year to pay back all we have borrowed" qualitatively different from "we need to work 2 years" or 3. Or half a year. First of all there's no need to pay it back in one year (or 2, or whatever fixed timeframe), it's very-very-very likely that if paying the debt service ever becomes a serious problem it's possible to switch it out with longer maturity bonds, and/or restructure it. “The Treasury is already extending the WAM of the debt gradually over time under the current issuance profile.” "The weighted average maturity (WAM) dropped from around 70 months just before the pandemic to less that 65 months - or just over five years - at the end of 2020 ..." https://www.reuters.com/article/us-usa-economy-yellen-bonds-idUSKBN2BF2LP https://www.reuters.com/article/us-usa-economy-yellen-bonds-... It's entirely logical to take on debt as long as it leads to positive revenue/growth. (Meaning as long as it has a positive return on investment.)

by pas 5y ago

ptero 5y ago

Raising taxes beyond a certain point tends to decrease the total tax haul as those with lots of money move income to other jurisdictions and some of others work less, leaning harder on social system (further increasing the public debt).

pas 5y ago
The US is very far from that.
- ptero 5y ago
  How do you know?
  - pas 5y ago
    The US economy is huge, people and companies are not likely to leave if the US increases taxes. https://www.taxpolicycenter.org/briefing-book/how-do-us-taxes-compare-internationally https://www.taxpolicycenter.org/briefing-book/how-do-us-taxe... https://files.taxfoundation.org/20210517160849/The-tax-burden-on-labor-in-Belgium-is-seven-times-that-of-Child-OECD-tax-burden-tax-wedge-with-single-worker-with-no-children-earning-a-nations-average-wage.png https://files.taxfoundation.org/20210517160849/The-tax-burde...

roenxi 5y ago

> There's nothing that makes that debt load scary, unserviceable, etc. There absolutely is - there are a series of steps that will need to be taken to reduce that debt load. If anyone was seriously planning to see them through they wouldn't have let the numbers get that high. This is emporor-no-clothes levels of debt; the plan is not to pay it back. If the plan was to pay it back then the plan would need to have started more than a decade ago. Who is trying to do that? Nobody. The plan is inflation.

ethbr0 5y ago
There are two things that make debt unserviceable: debt payments and cost/rate to take on new debt. Debt crises only happen when debt payments exceed ability to repay and the cost/rate to take on new debt spikes. Everyone fails to appreciate the second factor when looking at large economy, stable country debt levels. High debt:GDP ratios are dangerous, but not intrinsically a crisis... until the market also loses faith. Given that in the current international economic climate, the US can issue new debt, and find buyers, at <2%, that's a cheap way to buy time for even normal inflation levels to nibble away at debt. Ironically, now is the perfect time to deficit spend, in the same way it's a perfect time for an IPO. Why would you not take money, invest it in something productive, if people are screaming to give it to you at negative real rates?
- roenxi 5y ago
  The US has been taking on new debt faster than inflation has chipped it away for around 40 years at this point. There is no evidence it is going to stop. If anyone who cared was anywhere near the levers of power it wouldn't have crossed 100% debt:GDP. Sure it isn't a crisis right now. But the debt will continue to grow and at some point there will be a crisis because either rates will spike, or government manipulation of rates will turn out to have killed off real investment and critical parts of the economy will give out. And in neither of those scenarios are the people lending the US money going to see all of it come back. Hopefully it is all lent by foreigners and not pension funds, that is all I can say.
  - pas 5y ago
    There's nothing magical about 100% debt:GDP ratio. Why is "we need to work for a year to pay back all we have borrowed" qualitatively different from "we need to work 2 years" or 3. Or half a year. First of all there's no need to pay it back in one year (or 2, or whatever fixed timeframe), it's very-very-very likely that if paying the debt service ever becomes a serious problem it's possible to switch it out with longer maturity bonds, and/or restructure it. “The Treasury is already extending the WAM of the debt gradually over time under the current issuance profile.” "The weighted average maturity (WAM) dropped from around 70 months just before the pandemic to less that 65 months - or just over five years - at the end of 2020 ..." https://www.reuters.com/article/us-usa-economy-yellen-bonds-idUSKBN2BF2LP https://www.reuters.com/article/us-usa-economy-yellen-bonds-... It's entirely logical to take on debt as long as it leads to positive revenue/growth. (Meaning as long as it has a positive return on investment.)