3 ms·

This is misleading. Owe 35T and pay off 100% the interest and next year you nominally owe the same amount, but it’s a smaller burden every year. Similarly it’

by Retric 3y ago

This is misleading. Owe 35T and pay off 100% the interest and next year you nominally owe the same amount, but it’s a smaller burden every year. Similarly it’s possible for the nominal debt increase while things are getting better. What matters is how the debt burden is changing over time and critically if borrowers are requiring higher interest rates on new debt. Understanding the impact of national debt is a lot more complicated than a single number, though obviously what’s actually happening is unsustainable it’s not as simple as how much a single number changes over time.

dgfitz 3y ago
> This is misleading. Owe 35T and pay off 100% the interest and next year you nominally owe the same amount, but it’s a smaller burden every year. This is actually misleading. You’re only right if the US stops spending. Biden has already said he wants to increase taxes to increase spending.
- JKCalhoun 3y ago
  Unless of course the increase in tax revenue is greater than increase in spending. Further, if that spending goes into the economy it can lead to more people paying even more in taxes thereby increasing tax revenue even more....
  - dgfitz 3y ago
    Show me any time in the past 50 years where taxes went up and the deficit went down.
    - Terr_ 3y ago
      Were you around for the late 90s?
      - dragonwriter 3y ago
        That’s looking back 20+ years longer than is necessary.
        wormius 3y ago
        The comment is in reply to this statement: " dgfitz 1 hour ago | root | parent | next [–] Show me any time in the past 50 years where taxes went up and the deficit went down." Maybe you meant to reply to the parent? Because the 90s is within the time frame.
        Terr_ 3y ago
        I interpreted is as: "There are more-recent examples than the 90s, which may make for better evidence and/or a better retort."
        dragonwriter 3y ago
        Exactly, while the 90s are certainly within the past 50 years, you can find examples with a much smaller lookback window. https://news.ycombinator.com/item?id=40362029 https://news.ycombinator.com/item?id=40362029
        dgfitz 3y ago
        I’ve been around enough to know that you have an agenda and I’m not interested in engaging. Not a fan.
    - Retric 3y ago
      Clinton presidency is what comes to mind. Higher taxes, lower deficit, there was a real concern what would happen if the government stopped borrowing money. More taxes and lower defense spending made a huge impact, though solid economic growth obviously helped. We had an actual budget surplus from 1998 to 2001 though it was quickly ended by Bush.
      - seanmcdirmid 3y ago
        Republicans always care about the deficit more when a Democrat is president, so the Republican revolution had to do something useful, and they decided to focus on the debt and the deficit since Russia and China were too peaceful back then, and they were wary to go after illegal immigration after Pete Wilson losing California. Bill Clinton, being a blue dog, really had no problem with that (they also got to cut a lot of welfare that Bill Clinton also didn't care much about). But this actually horrified the Republican leadership, as what they say and what they want are usually very different, hence Dick Cheney's comment on surpluses being evil.
    - dragonwriter 3y ago
      Just recently! Federal revenue as a share of GDP (the best measure of across-the-economy effective tax rate) went up from 2020 (16.0%) to 2021 (17.2%) and from 2021 (17.2%) to 2022 (19.0%). Federal deficit in both nominal and share of GDP terms dropped in the same intervals, 2020 ($3.13 trillion, 14.7%) to 2021 ($2.78 trillion, 11.8%) to 2022 ($1.38 trillion, 5.3%).
      - dgfitz 3y ago
        Hmm, I didn’t ask about effective tax rate at all.
        Terr_ 3y ago
        > I didn't ask about Well what did you (intend to) ask for then? The ball's in your court to clarify, because the phrase "taxes went up" could mean total collections in real dollars, it might mean total collection in real dollars per capita, or top theoretical marginal income rate, or average effective rate (which you just denied), or just income taxes and not other taxes, or income taxes and payroll taxes, ad nauseam. There's no point finding historical examples only for you to declare that it doesn't count because it doesn't match your unstated hidden idea.
        dragonwriter 3y ago
        You asked about “taxes went up”. There were (as is frequently the case) both tax increases and decreases in both years. How would you assess whether, overall, “taxes went up” or not other than by the economy-wide effective tax rate?
- dragonwriter 3y ago
  > This is actually misleading. You’re only right if the US stops spending This is actually misleading, your statement is only correct if “spending” is replaced with “additional borrowing”. (Assuming the federal government has non-zero revenue, “spending” does not imply “additional borrowing”.) Moreover, GP’s broader point – that the burden of federal debt can be reduced even if the total amount is not – applies more broadly than just the static-total-debt case, it can be true with additional net borrowing, so long as the debt service cost at year y+1 is a smaller share of the GDP than in year y (assuming debt service relative to debt for simplicity, this would hold if the debt: GDP ratio was the same or less, irrespective of the nominal, or even real, level of debt increasing.) E.g., suppose the US has $25 trillion GDP and 37.5 trillion national debt. Over the course of one year, it reaches $26.25 trillion nominal GDP, $38.625 trillion nominal national debt, and has experienced 2% annual inflation, so that, in base year terms, real GDP is $25.735 trillion, real debt is $37.828 trillion. Nominal debt is up, Real debt is up. So is this worse? No, because debt:GDP dropped from 1.5 to 1.47, so – again, assuming constant debt service costs per $ of debt – the share of output needed to service the debt is reduced.
jessriedel 3y ago
But the headline compares it to defense, which also tends to grow with GDP. So it's a substantive fact that debt service is more than defense spending.
- Retric 3y ago
  It’s really not a consistent fraction of GDP, and it’s near a record low right now. Defense spending was officially 2.7% of GDP in 1999 and that’s roughly where it is today, but that’s really low by historic standards. It was 4.9% GDP in 2009 in the middle of a war but sat at 8% through the fifties even after the Korean War ended, and hit 11.3% during it. https://www.defense.gov/Multimedia/Photos/igphoto/2002099941/ https://www.defense.gov/Multimedia/Photos/igphoto/2002099941... PS: Though this ignores Veterans Affairs spending, but arguably that should be included when people served rather than just when they received care.
  - jessriedel 3y ago
    Holding the country fixed, I think defense spending as a fraction of GDP probably varies less than debt over time? Like, defense spending of course spikes during wars, but so does debt! (Which is indeed how it is often funded.)
    - Retric 2y ago
      It’s more about politics than your assuming. Defense spending was almost twice has high in 1958 despite no war going on as it was during the Iraq and Afghan war.
      - jessriedel 2y ago
        I'm not assuming anything about the cause
paulddraper 3y ago
> What matters is how the debt burden is changing over time It is increasing. (Namely, to greater than the defense budget.) > Understanding the impact of national debt is a lot more complicated than a single number, As single numbers go, interest as % of GDP is a good one. For the last 20 years, it's been <= 1.8%. Last year it was 2.4%. [1] [1] https://fred.stlouisfed.org/series/FYOIGDA188S https://fred.stlouisfed.org/series/FYOIGDA188S

by Retric 3y ago

dgfitz 3y ago

> This is misleading. Owe 35T and pay off 100% the interest and next year you nominally owe the same amount, but it’s a smaller burden every year. This is actually misleading. You’re only right if the US stops spending. Biden has already said he wants to increase taxes to increase spending.

JKCalhoun 3y ago
Unless of course the increase in tax revenue is greater than increase in spending. Further, if that spending goes into the economy it can lead to more people paying even more in taxes thereby increasing tax revenue even more....
- dgfitz 3y ago
  Show me any time in the past 50 years where taxes went up and the deficit went down.
  - Terr_ 3y ago
    Were you around for the late 90s?
    - dragonwriter 3y ago
      That’s looking back 20+ years longer than is necessary.
      - wormius 3y ago
        The comment is in reply to this statement: " dgfitz 1 hour ago | root | parent | next [–] Show me any time in the past 50 years where taxes went up and the deficit went down." Maybe you meant to reply to the parent? Because the 90s is within the time frame.
        Terr_ 3y ago
        I interpreted is as: "There are more-recent examples than the 90s, which may make for better evidence and/or a better retort."
        dragonwriter 3y ago
        Exactly, while the 90s are certainly within the past 50 years, you can find examples with a much smaller lookback window. https://news.ycombinator.com/item?id=40362029 https://news.ycombinator.com/item?id=40362029
        dgfitz 3y ago
        I’ve been around enough to know that you have an agenda and I’m not interested in engaging. Not a fan.
  - Retric 3y ago
    Clinton presidency is what comes to mind. Higher taxes, lower deficit, there was a real concern what would happen if the government stopped borrowing money. More taxes and lower defense spending made a huge impact, though solid economic growth obviously helped. We had an actual budget surplus from 1998 to 2001 though it was quickly ended by Bush.
    - seanmcdirmid 3y ago
      Republicans always care about the deficit more when a Democrat is president, so the Republican revolution had to do something useful, and they decided to focus on the debt and the deficit since Russia and China were too peaceful back then, and they were wary to go after illegal immigration after Pete Wilson losing California. Bill Clinton, being a blue dog, really had no problem with that (they also got to cut a lot of welfare that Bill Clinton also didn't care much about). But this actually horrified the Republican leadership, as what they say and what they want are usually very different, hence Dick Cheney's comment on surpluses being evil.
  - dragonwriter 3y ago
    Just recently! Federal revenue as a share of GDP (the best measure of across-the-economy effective tax rate) went up from 2020 (16.0%) to 2021 (17.2%) and from 2021 (17.2%) to 2022 (19.0%). Federal deficit in both nominal and share of GDP terms dropped in the same intervals, 2020 ($3.13 trillion, 14.7%) to 2021 ($2.78 trillion, 11.8%) to 2022 ($1.38 trillion, 5.3%).
    - dgfitz 3y ago
      Hmm, I didn’t ask about effective tax rate at all.
      - Terr_ 3y ago
        > I didn't ask about Well what did you (intend to) ask for then? The ball's in your court to clarify, because the phrase "taxes went up" could mean total collections in real dollars, it might mean total collection in real dollars per capita, or top theoretical marginal income rate, or average effective rate (which you just denied), or just income taxes and not other taxes, or income taxes and payroll taxes, ad nauseam. There's no point finding historical examples only for you to declare that it doesn't count because it doesn't match your unstated hidden idea.
      - dragonwriter 3y ago
        You asked about “taxes went up”. There were (as is frequently the case) both tax increases and decreases in both years. How would you assess whether, overall, “taxes went up” or not other than by the economy-wide effective tax rate?
dragonwriter 3y ago
> This is actually misleading. You’re only right if the US stops spending This is actually misleading, your statement is only correct if “spending” is replaced with “additional borrowing”. (Assuming the federal government has non-zero revenue, “spending” does not imply “additional borrowing”.) Moreover, GP’s broader point – that the burden of federal debt can be reduced even if the total amount is not – applies more broadly than just the static-total-debt case, it can be true with additional net borrowing, so long as the debt service cost at year y+1 is a smaller share of the GDP than in year y (assuming debt service relative to debt for simplicity, this would hold if the debt: GDP ratio was the same or less, irrespective of the nominal, or even real, level of debt increasing.) E.g., suppose the US has $25 trillion GDP and 37.5 trillion national debt. Over the course of one year, it reaches $26.25 trillion nominal GDP, $38.625 trillion nominal national debt, and has experienced 2% annual inflation, so that, in base year terms, real GDP is $25.735 trillion, real debt is $37.828 trillion. Nominal debt is up, Real debt is up. So is this worse? No, because debt:GDP dropped from 1.5 to 1.47, so – again, assuming constant debt service costs per $ of debt – the share of output needed to service the debt is reduced.

jessriedel 3y ago

But the headline compares it to defense, which also tends to grow with GDP. So it's a substantive fact that debt service is more than defense spending.

Retric 3y ago
It’s really not a consistent fraction of GDP, and it’s near a record low right now. Defense spending was officially 2.7% of GDP in 1999 and that’s roughly where it is today, but that’s really low by historic standards. It was 4.9% GDP in 2009 in the middle of a war but sat at 8% through the fifties even after the Korean War ended, and hit 11.3% during it. https://www.defense.gov/Multimedia/Photos/igphoto/2002099941/ https://www.defense.gov/Multimedia/Photos/igphoto/2002099941... PS: Though this ignores Veterans Affairs spending, but arguably that should be included when people served rather than just when they received care.
- jessriedel 3y ago
  Holding the country fixed, I think defense spending as a fraction of GDP probably varies less than debt over time? Like, defense spending of course spikes during wars, but so does debt! (Which is indeed how it is often funded.)
  - Retric 2y ago
    It’s more about politics than your assuming. Defense spending was almost twice has high in 1958 despite no war going on as it was during the Iraq and Afghan war.
    - jessriedel 2y ago
      I'm not assuming anything about the cause

paulddraper 3y ago

> What matters is how the debt burden is changing over time It is increasing. (Namely, to greater than the defense budget.) > Understanding the impact of national debt is a lot more complicated than a single number, As single numbers go, interest as % of GDP is a good one. For the last 20 years, it's been <= 1.8%. Last year it was 2.4%. [1] [1] https://fred.stlouisfed.org/series/FYOIGDA188S https://fred.stlouisfed.org/series/FYOIGDA188S