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Of more concern to me is the bursting of valuation bubble for the United States. Currently, people are undervaluing the risk of lending money to it. What happ

Of more concern to me is the bursting of valuation bubble for the United States. Currently, people are undervaluing the risk of lending money to it. What happens when they realize its future revenues won't cover all of its commitments?

comicjk 15y ago
If the US had European tax rates, it could support its current commitments and more. The risk is political: that the US will default on debts which it has the ability to pay.
- _delirium 15y ago
  In fact it doesn't even have to go to European tax rates to pay off its debt. All levels of government in the U.S. currently take in a combined 27% of GDP in taxes. In Germany, it's 41% (not to mention Denmark at 49%), which leaves quite a lot of fiscal headroom for the U.S. to raise additional revenue while still remaining a relatively low-tax country.
ericd 15y ago
US Gross debt is currently around 16.4 trillion, its GDP in a given year is around 14.6 trillion, and its operating budget is around 2.5 trillion with a 1 trillion deficit. It seems within its capabilities to repay its debts, though it has opened up the throttle a good amount in the past couple years, and there seems to be no political will to raise taxes right now.
- fennecfoxen 15y ago
  By "operating budget" I assume you mean revenues. For reference, the US spent $2.73 trillion in 2007 and $2.9 trillion in 2008. It plans on spending $3.8 trillion in 2012 and about the same in 2013. When you say "opened up the throttle a good amount" that amount is in the vicinity of ~35%. (These numbers are not adjusted for inflation. Sorry.)
  - ericd 15y ago
    Right, that's the revenue they have to play with, and yep, that's what I meant by opening up the throttle :-)
    - deleted 15y ago
      [deleted]
    - stretchwithme 15y ago
      ‎"The political expression of altruism is collectivism or statism, which holds that man’s life and work belong to the state—to society, to the group, the gang, the race, the nation—and that the state may dispose of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good." Ayn Rand
      - ericd 15y ago
        I don't see how that applies here? That communism doesn't work well or is inherently unfair doesn't generalize into the idea that the less communistic a society is, the better. In general, I think Rand is overly reductionistic and shouldn't constitute a significant portion of anyone's worldview.
stretchwithme 15y ago
And by commitments, I don't just mean its budget and its 16 trillion in debt. I include all the debt we took over from the banks and the bottomless pit of AIG. I include all the private pension funds that are insured by the government. The President of the Dallas Federal Reserve, Richard W. Fisher, painted a rather bleak picture of what our liabilities actually are when he spoke to the Commonwealth Club. Fisher said back in 2008, before the collapse of AIG, that our liabilities exceed $99 trillion. His speech is here: http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm Of course, we can walk away from these things or inflate our way out, but those are just different endings to the same bubble. Confidence that the bubble will not collapse is the only thing keeping this bubble from collapsing.

comicjk 15y ago

If the US had European tax rates, it could support its current commitments and more. The risk is political: that the US will default on debts which it has the ability to pay.

_delirium 15y ago
In fact it doesn't even have to go to European tax rates to pay off its debt. All levels of government in the U.S. currently take in a combined 27% of GDP in taxes. In Germany, it's 41% (not to mention Denmark at 49%), which leaves quite a lot of fiscal headroom for the U.S. to raise additional revenue while still remaining a relatively low-tax country.

ericd 15y ago

US Gross debt is currently around 16.4 trillion, its GDP in a given year is around 14.6 trillion, and its operating budget is around 2.5 trillion with a 1 trillion deficit. It seems within its capabilities to repay its debts, though it has opened up the throttle a good amount in the past couple years, and there seems to be no political will to raise taxes right now.

fennecfoxen 15y ago
By "operating budget" I assume you mean revenues. For reference, the US spent $2.73 trillion in 2007 and $2.9 trillion in 2008. It plans on spending $3.8 trillion in 2012 and about the same in 2013. When you say "opened up the throttle a good amount" that amount is in the vicinity of ~35%. (These numbers are not adjusted for inflation. Sorry.)
- ericd 15y ago
  Right, that's the revenue they have to play with, and yep, that's what I meant by opening up the throttle :-)
  - deleted 15y ago
    [deleted]
  - stretchwithme 15y ago
    ‎"The political expression of altruism is collectivism or statism, which holds that man’s life and work belong to the state—to society, to the group, the gang, the race, the nation—and that the state may dispose of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good." Ayn Rand
    - ericd 15y ago
      I don't see how that applies here? That communism doesn't work well or is inherently unfair doesn't generalize into the idea that the less communistic a society is, the better. In general, I think Rand is overly reductionistic and shouldn't constitute a significant portion of anyone's worldview.

stretchwithme 15y ago

And by commitments, I don't just mean its budget and its 16 trillion in debt. I include all the debt we took over from the banks and the bottomless pit of AIG. I include all the private pension funds that are insured by the government. The President of the Dallas Federal Reserve, Richard W. Fisher, painted a rather bleak picture of what our liabilities actually are when he spoke to the Commonwealth Club. Fisher said back in 2008, before the collapse of AIG, that our liabilities exceed $99 trillion. His speech is here: http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm Of course, we can walk away from these things or inflate our way out, but those are just different endings to the same bubble. Confidence that the bubble will not collapse is the only thing keeping this bubble from collapsing.