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We owe a bit more than 1 year's GDP. Most families that own a house owe substantially more than 1 year's income. Last time we reduced the annual deficit to ze

We owe a bit more than 1 year's GDP. Most families that own a house owe substantially more than 1 year's income. Last time we reduced the annual deficit to zero, the usual debt hawks all reversed their position and said "this is terrible". We've demonstrated in my lifetime that we can do this. The fact that "we" don't want to right now has more to do with Republican attitudes towards taxation than anything else. MMT says we don't need to think about this the way we think about personal and corporate debt. It's not that there's nothing to see here, but the sky is not falling. Now, the stock market overvaluation ... that could be a real problem, but not the same problem.

rajnathani 3y ago
(Couldn’t edit my previous sibling comment as it is out of the edit period) > We owe a bit more than 1 year's GDP. > Most families that own a house owe substantially more than 1 year's income. Minor nitpick: A country’s income is not the GDP but rather the tax revenue collection. The US federal tax revenue is around $4.5T as of last year, which is just about 20% of the US’s GDP.
nickff 3y ago
Comparing a government's debt to its GDP is like comparing a couple's debt to their employers' total revenues. The country's government doesn't own all its residents' property, and is usually unable take their income streams. MMT says a lot of things, but people only seem to follow it when convenient.
- ot 3y ago
  Comparing debt to GDP is very much mainstream economics, not MMT. https://en.wikipedia.org/wiki/Debt-to-GDP_ratio https://en.wikipedia.org/wiki/Debt-to-GDP_ratio > is usually unable take their income streams It takes a percentage of that, through taxes. https://en.wikipedia.org/wiki/List_of_sovereign_states_by_tax_revenue_to_GDP_ratio#/media/File:Total-tax-revenues-gdp.png https://en.wikipedia.org/wiki/List_of_sovereign_states_by_ta...
  - coffeemug 3y ago
    Comparing debt to GDP is mainstream economics, but it's very much different from the analogy of homeowners debts and their salaries. The proper analogy there would be government revenues, not GDP.
    - PaulDavisThe1st 3y ago
      The government doesn't owe the debt, we the people do. We authorized & enabled the government to incur that debt on our behalf.
      - hamilyon2 3y ago
        This is pretty non-mainstream macroeconomic point of view. It did not correspond to reality when latest sovereign debt default occurred in Greece. Then it was government, foreign banks who bought the debt and European Central Bank who was on the hook for restructuring, not citizens or general public.
        PaulDavisThe1st 3y ago
        Who was on the hook for the effects of the debt restructuring deal?
- cbsmith 3y ago
  > Comparing a government's debt to its GDP is like comparing a couple's debt to their employers' total revenues. No. It's more like comparing a merchant's debts to the value of the turnover of their inventory. Sure, their revenue isn't the same as their income, but their income tends to be proportional to their revenue. Similarly, while GDP isn't representative of federal income, because most federal income is derived from taxation of activities that contribute to GDP, they tend to be closely correlated. Per Hauser's Law (https://en.wikipedia.org/wiki/Hauser%27s_law https://en.wikipedia.org/wiki/Hauser%27s_law), federal tax revenues have been roughly consistent with 20% of the GDP. Since increasing the share the government extracts from the economy produces net drag on the economy, you don't want to get in to a situation where you have to increase that ratio significantly without a dramatic change in what the federal government puts back in to the economy (which also generally doesn't happen). So yeah, the experts who look at debt to GDP ratios aren't crazy.
- deleted 3y ago
  [deleted]
- PaulDavisThe1st 3y ago
  The debt is owed by us, the American people. Thus we compare to the total (economic) resources available to us, the American people.
  - dkjaudyeqooe 3y ago
    That's not true, it's not like if the US defaults you become personally liable. We're more like shareholders, and they are never debtors.
    - PaulDavisThe1st 3y ago
      "We the American people" is the corporation.
    - coldtea 3y ago
      >That's not true, it's not like if the US defaults you become personally liable. Citizens might not become "personally liable" in a legal sense, but they get similar consequences, reduction in wealth, poverty increase, etc, that somebody "personally liable" for their personal debt would get. A country wide failure of economy can be even more devastating to individuals than some personal debt they default on.
- casercaramel144 3y ago
  Except it can. The way it does that is by printing and taxing. Both can be used to pay debt and are "taking income streams" / "seizing property" in disguise.
- coldtea 3y ago
  >Comparing a government's debt to its GDP is like comparing a couple's debt to their employers' total revenues. The country's government doesn't own all its residents' property, and is usually unable take their income streams. Doesn't matter, since it's a relative comparison, not an absolute one. And as a proxy of the severity of the issue it's good. The government might not take "all its residents' property, and is usually unable take their income streams", but getting part of those is exactly where it gets the money to pay the debt (plus printing money, with its own side-effects).
berserk1010 3y ago
Take a look at Zeihan's video where he shows in a graph how US debt level compares to other major economies. https://youtu.be/mcZPOuI-vcU?t=939 https://youtu.be/mcZPOuI-vcU?t=939. US is in the middle of the pack. US is going to be ok. Also, watch until 20:38. You will see how screwed up some countries are when it comes to debt.
- matthewaveryusa 3y ago
  I started watching and couldn't stop until the end. Now the only question I have is how much should I believe Zeihan? He makes a lot of bold assertions, what's his track record?
  - berserk1010 3y ago
    That's a valid question. He does have videos where he just speaks off top of his head, and I prefer the ones where he has charts and numbers that he speaks to. If you don't believe his charts and numbers, find ones online that you believe. I do think someone who can hold that much minute, dry details in his brain and can cross reference them is going to be smarter than most of us. He does after all consult for major corporations and the U.S government.
    - matthewaveryusa 3y ago
      Yeah, he sounds very smart and pieces a lot of things together, but in a very assertive way. For example he goes on to talk about how gas is used only in the butadien petrochemical vertical but could displace oil verticals and have competitive advantage over other countries. That's cool as a theory, but really isn't a commoditized market a more likely scenario in a capitalist global economy? If I'm Mr. Gas I'm going to sell my LNG at a higher price abroad instead of selling it for the same in the US for others to make a profit instead
      - toomuchtodo 3y ago
        https://www.whitehouse.gov/briefing-room/statements-releases/2024/01/26/fact-sheet-biden-harris-administration-announces-temporary-pause-on-pending-approvals-of-liquefied-natural-gas-exports/ https://www.whitehouse.gov/briefing-room/statements-releases...
bigstrat2003 3y ago
> The fact that "we" don't want to right now has more to do with Republican attitudes towards taxation than anything else. No, it has just as much to do with Democrat attitudes towards spending. You're right that the Republicans are partly to blame. But to balance a budget requires cutting spending as much as, if not more than, increasing revenues. The problem is that ~everyone thinks using their preferred approach ("just raise taxes"/"just cut spending") is more important than getting the budget balanced, so they are unwilling to compromise. And the American people get the shaft, as ever.
- deleted 3y ago
  [deleted]
- PaulDavisThe1st 3y ago
  A lot of Democrats (not all, for sure) would be very happy to massively cut defense expenditure, which is a vast slice of federal expenditure. Alas, that has two problems: (1) US military spending is our own national version of socialism, in which we prop up communities by providing massive state subsidies, along with housing, healthcare, education and more to a large group of people (2) because of (1), it is hard to convince elected representatives to cut these expenditures because of the very real and direct impact they will have on their communities. Although both D & R representatives experience the above somewhat equally, there is some imbalance in the relationship between D & R representatives and the military-industrial complex, and that leads to us to a situation where cutting these expenditures is even more difficult than it would be if the only factors were 1+2 above.
  - thebradbain 3y ago
    The active duty military vote is not actually a solid republican voting block, contrary to popular belief: in 2020, they swung +8 for Biden [1]. It’s the veterans who are solidly (2/3) conservative, currently, but even that’s lessening [2]. Unfortunately I don’t think a majority of either party wants to reign in military spending, considering every admin including Obama and Biden has increased it since Carter, even though likely granting such a blank check is financially irresponsible (i.e. trillions unaccounted for in budget audits [3]). Both parties just want to please that bloc of votes, because it also has ripple effects on the rest of the nation’s votes to be seen as “good on military”. I personally think our military could be just as effective if we tightened the wallet, but I don’t think either party actually wants to. [1] https://www.economist.com/united-states/2021/10/14/military-bases-swung-hard-away-from-republicans-in-2020 https://www.economist.com/united-states/2021/10/14/military-... and https://www.nbcnews.com/think/amp/ncna1245542 https://www.nbcnews.com/think/amp/ncna1245542 [2] https://news.gallup.com/poll/118684/military-veterans-ages-tend-republican.aspx https://news.gallup.com/poll/118684/military-veterans-ages-t... (2009, but the trend has only gotten deeper) [3] https://www.reuters.com/world/us/pentagon-fails-audit-sixth-year-row-2023-11-16/ https://www.reuters.com/world/us/pentagon-fails-audit-sixth-...
slowhand09 3y ago
MMT basically says "its ok, we can just print more money". How did that work for Venuzuela? Lets see... 1.00 US Dollar = 3,615,588.83 Venezuelan Bolívares. The 6 inch thick stack of currency required to buy a roll of toilet paper would be more efficient than the toilet paper. Printing more money just devalues the work product of everyone before that. Republican attitudes about tax? Surely you jest.
- PaulDavisThe1st 3y ago
  [flagged]
- sajisiajqha 3y ago
  [flagged]
- raincom 3y ago
  MMT works well, if exporters want to swap their real assets (commodities, food, chips, metals, labor) with US dollars (nominal). No one wants to export their real stuff to Venezuela unless the latter pays in US dollars.
  - KoolKat23 3y ago
    Don't know why you're being down voted, it's widely accepted that it only really works for currencies that are reserve currency status. It could also work if you were entirely self-sufficient with no exports/imports. All on the proviso that humans are quick to react to inflation, using perfect information, which we're not and which we don't have.
    - neilwilson 3y ago
      It works for all currencies. Some currencies have higher savings rates than other currencies. The problem is calling that saving 'debt' and then catastrophising about it.
      - KoolKat23 3y ago
throw0101d 3y ago
> We owe a bit more than 1 year's GDP. And who is this money owed to? $24T is owed to US domestic entities, while $7T is foreign owned: * https://usafacts.org/articles/which-countries-own-the-most-us-debt/ https://usafacts.org/articles/which-countries-own-the-most-u... Americans are mostly paying money to themselves.
- _lvbh 3y ago
  I might be completely off but wouldn’t having more foreign owned debt be better since America can just say “we won’t pay that” and nobody has the power to collect? The military can always just crush whomever disagrees.
csomar 3y ago
> MMT says we don't need to think about this the way we think about personal and corporate debt. I thought the recent inflation surge has debunked MMT (something which I almost bought, myself). Or is that not enough inflation?
- lxgr 3y ago
  Where do you see the contradiction here? MMT says that government spending and money creation are two sides of the same coin, and the practical limit for both is inflation. Whether you agree with that identity or not, we've certainly seen a lot of both during the pandemic (government subsidies, tax breaks etc.), which is where the current inflation pretty uncontroversially originates.
rajnathani 3y ago
> Last time we reduced the annual deficit to zero, the usual debt hawks all reversed their position and said "this is terrible". (Side: You’re likely referring to the 90s during Clinton’s administration) Reducing the deficit to 0 barely means anything when the overall debt is high. Besides, for your family example, it’s all well and good but families do not have to be concerned about the valuation of an international currency that they’re basing their borrowing off of.

rajnathani 3y ago

(Couldn’t edit my previous sibling comment as it is out of the edit period) > We owe a bit more than 1 year's GDP. > Most families that own a house owe substantially more than 1 year's income. Minor nitpick: A country’s income is not the GDP but rather the tax revenue collection. The US federal tax revenue is around $4.5T as of last year, which is just about 20% of the US’s GDP.

nickff 3y ago

Comparing a government's debt to its GDP is like comparing a couple's debt to their employers' total revenues. The country's government doesn't own all its residents' property, and is usually unable take their income streams. MMT says a lot of things, but people only seem to follow it when convenient.

ot 3y ago
Comparing debt to GDP is very much mainstream economics, not MMT. https://en.wikipedia.org/wiki/Debt-to-GDP_ratio https://en.wikipedia.org/wiki/Debt-to-GDP_ratio > is usually unable take their income streams It takes a percentage of that, through taxes. https://en.wikipedia.org/wiki/List_of_sovereign_states_by_tax_revenue_to_GDP_ratio#/media/File:Total-tax-revenues-gdp.png https://en.wikipedia.org/wiki/List_of_sovereign_states_by_ta...
- coffeemug 3y ago
  Comparing debt to GDP is mainstream economics, but it's very much different from the analogy of homeowners debts and their salaries. The proper analogy there would be government revenues, not GDP.
  - PaulDavisThe1st 3y ago
    The government doesn't owe the debt, we the people do. We authorized & enabled the government to incur that debt on our behalf.
    - hamilyon2 3y ago
      This is pretty non-mainstream macroeconomic point of view. It did not correspond to reality when latest sovereign debt default occurred in Greece. Then it was government, foreign banks who bought the debt and European Central Bank who was on the hook for restructuring, not citizens or general public.
      - PaulDavisThe1st 3y ago
        Who was on the hook for the effects of the debt restructuring deal?
cbsmith 3y ago
> Comparing a government's debt to its GDP is like comparing a couple's debt to their employers' total revenues. No. It's more like comparing a merchant's debts to the value of the turnover of their inventory. Sure, their revenue isn't the same as their income, but their income tends to be proportional to their revenue. Similarly, while GDP isn't representative of federal income, because most federal income is derived from taxation of activities that contribute to GDP, they tend to be closely correlated. Per Hauser's Law (https://en.wikipedia.org/wiki/Hauser%27s_law https://en.wikipedia.org/wiki/Hauser%27s_law), federal tax revenues have been roughly consistent with 20% of the GDP. Since increasing the share the government extracts from the economy produces net drag on the economy, you don't want to get in to a situation where you have to increase that ratio significantly without a dramatic change in what the federal government puts back in to the economy (which also generally doesn't happen). So yeah, the experts who look at debt to GDP ratios aren't crazy.
deleted 3y ago
[deleted]
PaulDavisThe1st 3y ago
The debt is owed by us, the American people. Thus we compare to the total (economic) resources available to us, the American people.
- dkjaudyeqooe 3y ago
  That's not true, it's not like if the US defaults you become personally liable. We're more like shareholders, and they are never debtors.
  - PaulDavisThe1st 3y ago
    "We the American people" is the corporation.
  - coldtea 3y ago
    >That's not true, it's not like if the US defaults you become personally liable. Citizens might not become "personally liable" in a legal sense, but they get similar consequences, reduction in wealth, poverty increase, etc, that somebody "personally liable" for their personal debt would get. A country wide failure of economy can be even more devastating to individuals than some personal debt they default on.
casercaramel144 3y ago
Except it can. The way it does that is by printing and taxing. Both can be used to pay debt and are "taking income streams" / "seizing property" in disguise.
coldtea 3y ago
>Comparing a government's debt to its GDP is like comparing a couple's debt to their employers' total revenues. The country's government doesn't own all its residents' property, and is usually unable take their income streams. Doesn't matter, since it's a relative comparison, not an absolute one. And as a proxy of the severity of the issue it's good. The government might not take "all its residents' property, and is usually unable take their income streams", but getting part of those is exactly where it gets the money to pay the debt (plus printing money, with its own side-effects).

berserk1010 3y ago

Take a look at Zeihan's video where he shows in a graph how US debt level compares to other major economies. https://youtu.be/mcZPOuI-vcU?t=939 https://youtu.be/mcZPOuI-vcU?t=939. US is in the middle of the pack. US is going to be ok. Also, watch until 20:38. You will see how screwed up some countries are when it comes to debt.

matthewaveryusa 3y ago
I started watching and couldn't stop until the end. Now the only question I have is how much should I believe Zeihan? He makes a lot of bold assertions, what's his track record?
- berserk1010 3y ago
  That's a valid question. He does have videos where he just speaks off top of his head, and I prefer the ones where he has charts and numbers that he speaks to. If you don't believe his charts and numbers, find ones online that you believe. I do think someone who can hold that much minute, dry details in his brain and can cross reference them is going to be smarter than most of us. He does after all consult for major corporations and the U.S government.
  - matthewaveryusa 3y ago
    Yeah, he sounds very smart and pieces a lot of things together, but in a very assertive way. For example he goes on to talk about how gas is used only in the butadien petrochemical vertical but could displace oil verticals and have competitive advantage over other countries. That's cool as a theory, but really isn't a commoditized market a more likely scenario in a capitalist global economy? If I'm Mr. Gas I'm going to sell my LNG at a higher price abroad instead of selling it for the same in the US for others to make a profit instead
    - toomuchtodo 3y ago
      https://www.whitehouse.gov/briefing-room/statements-releases/2024/01/26/fact-sheet-biden-harris-administration-announces-temporary-pause-on-pending-approvals-of-liquefied-natural-gas-exports/ https://www.whitehouse.gov/briefing-room/statements-releases...

bigstrat2003 3y ago

> The fact that "we" don't want to right now has more to do with Republican attitudes towards taxation than anything else. No, it has just as much to do with Democrat attitudes towards spending. You're right that the Republicans are partly to blame. But to balance a budget requires cutting spending as much as, if not more than, increasing revenues. The problem is that ~everyone thinks using their preferred approach ("just raise taxes"/"just cut spending") is more important than getting the budget balanced, so they are unwilling to compromise. And the American people get the shaft, as ever.

deleted 3y ago
[deleted]
PaulDavisThe1st 3y ago
A lot of Democrats (not all, for sure) would be very happy to massively cut defense expenditure, which is a vast slice of federal expenditure. Alas, that has two problems: (1) US military spending is our own national version of socialism, in which we prop up communities by providing massive state subsidies, along with housing, healthcare, education and more to a large group of people (2) because of (1), it is hard to convince elected representatives to cut these expenditures because of the very real and direct impact they will have on their communities. Although both D & R representatives experience the above somewhat equally, there is some imbalance in the relationship between D & R representatives and the military-industrial complex, and that leads to us to a situation where cutting these expenditures is even more difficult than it would be if the only factors were 1+2 above.
- thebradbain 3y ago
  The active duty military vote is not actually a solid republican voting block, contrary to popular belief: in 2020, they swung +8 for Biden [1]. It’s the veterans who are solidly (2/3) conservative, currently, but even that’s lessening [2]. Unfortunately I don’t think a majority of either party wants to reign in military spending, considering every admin including Obama and Biden has increased it since Carter, even though likely granting such a blank check is financially irresponsible (i.e. trillions unaccounted for in budget audits [3]). Both parties just want to please that bloc of votes, because it also has ripple effects on the rest of the nation’s votes to be seen as “good on military”. I personally think our military could be just as effective if we tightened the wallet, but I don’t think either party actually wants to. [1] https://www.economist.com/united-states/2021/10/14/military-bases-swung-hard-away-from-republicans-in-2020 https://www.economist.com/united-states/2021/10/14/military-... and https://www.nbcnews.com/think/amp/ncna1245542 https://www.nbcnews.com/think/amp/ncna1245542 [2] https://news.gallup.com/poll/118684/military-veterans-ages-tend-republican.aspx https://news.gallup.com/poll/118684/military-veterans-ages-t... (2009, but the trend has only gotten deeper) [3] https://www.reuters.com/world/us/pentagon-fails-audit-sixth-year-row-2023-11-16/ https://www.reuters.com/world/us/pentagon-fails-audit-sixth-...

slowhand09 3y ago

MMT basically says "its ok, we can just print more money". How did that work for Venuzuela? Lets see... 1.00 US Dollar = 3,615,588.83 Venezuelan Bolívares. The 6 inch thick stack of currency required to buy a roll of toilet paper would be more efficient than the toilet paper. Printing more money just devalues the work product of everyone before that. Republican attitudes about tax? Surely you jest.

PaulDavisThe1st 3y ago
[flagged]
sajisiajqha 3y ago
[flagged]
raincom 3y ago
MMT works well, if exporters want to swap their real assets (commodities, food, chips, metals, labor) with US dollars (nominal). No one wants to export their real stuff to Venezuela unless the latter pays in US dollars.
- KoolKat23 3y ago
  Don't know why you're being down voted, it's widely accepted that it only really works for currencies that are reserve currency status. It could also work if you were entirely self-sufficient with no exports/imports. All on the proviso that humans are quick to react to inflation, using perfect information, which we're not and which we don't have.
  - neilwilson 3y ago
    It works for all currencies. Some currencies have higher savings rates than other currencies. The problem is calling that saving 'debt' and then catastrophising about it.
    - KoolKat23 3y ago

throw0101d 3y ago

> We owe a bit more than 1 year's GDP. And who is this money owed to? $24T is owed to US domestic entities, while $7T is foreign owned: * https://usafacts.org/articles/which-countries-own-the-most-us-debt/ https://usafacts.org/articles/which-countries-own-the-most-u... Americans are mostly paying money to themselves.

_lvbh 3y ago
I might be completely off but wouldn’t having more foreign owned debt be better since America can just say “we won’t pay that” and nobody has the power to collect? The military can always just crush whomever disagrees.

csomar 3y ago

> MMT says we don't need to think about this the way we think about personal and corporate debt. I thought the recent inflation surge has debunked MMT (something which I almost bought, myself). Or is that not enough inflation?

lxgr 3y ago
Where do you see the contradiction here? MMT says that government spending and money creation are two sides of the same coin, and the practical limit for both is inflation. Whether you agree with that identity or not, we've certainly seen a lot of both during the pandemic (government subsidies, tax breaks etc.), which is where the current inflation pretty uncontroversially originates.

rajnathani 3y ago

> Last time we reduced the annual deficit to zero, the usual debt hawks all reversed their position and said "this is terrible". (Side: You’re likely referring to the 90s during Clinton’s administration) Reducing the deficit to 0 barely means anything when the overall debt is high. Besides, for your family example, it’s all well and good but families do not have to be concerned about the valuation of an international currency that they’re basing their borrowing off of.