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This is a very naive way of thinking about debt. Cash has a time value. Cash now is worth more than cash later. I have a mortgage. This mortgage is worth more

This is a very naive way of thinking about debt. Cash has a time value. Cash now is worth more than cash later. I have a mortgage. This mortgage is worth more than the cash I own. That doesn't mean I'm bankrupt. The mortgage is paid on a fixed schedule over 30 years, and during those 30 years I'll have a home and be able to accrue other assets. If I didn't get a mortgage then I would still be saving for my home. The same is true with the US balance sheet. It has accrued 35T in debt, but it's used that to fund it's operations. Those operations generate more for the US. As long as the US has enough to pay it's obligations over the next few decades there are no issues That of course doesn't change the fact that tax loopholes can be problematic

sweezyjeezy 2y ago
I think it's rarely valid to compare countries' economics to your own personal finance, macroeconomics are a lot more complicated. Example: for employed people, going into (or avoiding) debt generally won't affect their yearly wages, but analogously it can for countries (e.g. well spent debt can stimulate economic growth).
- b112 2y ago
  The downside of state debt is the downward spiral. If you spend 1/2 your tax income on just servicing the debt, that means either fewer services for people, or borrowing yet more, just to keep things going. If you borrow more, then it gets even worse. I really prefer that 1/2 my tax bill doesn't go to interest payments.
  - woah 2y ago
    Let's say a city builds a bridge that doubles its tax income by opening up a lot of economic opportunities. It pays for this with a 35 year bond. During these 35 years, the entire additional income that the bridge generated goes towards paying off the bond. After the 35 years the bond is paid off and the city enjoys permanently raised tax income (not to mention better economy for residents). Was there a problem that the city spent 1/2 of tax income on just servicing the debt?
    - b112 2y ago
      Yes. I could go into a lot of reasons, but I'll keep it simple. It is incredibly rare for governments to break that cycle. This has been demonstrated over and over. Thus, there is no end in 35 years. There is just perpetual 50% taxes to interest on debt. This means that as it is a persistent state, not perpetually losing 50% tax revenue would make an enormous difference. It's just not helpful.
      - martinald 2y ago
        Think of it the other extreme though. Imagine governments never borrowed and only used actual 'cash' to build things. I suspect that virtually nothing would have been built over the past 200 years and the world economy would be 1% the size it currently is. I think you are right in that governments (probably?) shouldn't be funding day to day spending anywhere near as much as they do with debt. This has been a more recent (post WW2) phenomenon with huge expansions of social security programs. But capital expenditure virtually has to be paid with debt. It's easy to say with trillions of dollars of debt funded infrastructure debt is too high, but imagine the counterfactual - would you be happy with virtually no infrastructure but no debt?
        b112 2y ago
        Think of it the other extreme though. Imagine governments never borrowed and only used actual 'cash' to build things. I suspect that virtually nothing would have been built over the past 200 years and the world economy would be 1% the size it currently is. 200 years ago had vastly different taxation methods than today, so I'll stick to the last 100 years. Your point is countered, by the fact that governments build roads, bridges, and more without any debt or by borrowing money. I think you are underestimating how large a budget governments of all levels have, especially when 50% of it is being used to finance debt. That 50% of tax income, literally disappearing to pay only interest on debt, instead could (for larger cities) literally be used to plop down cash for a bridge in one year. A lot of this could be solved by better allocating taxation to its intended purpose. There are gas taxes, but often those taxes are appropriated into a general budget. Far better if those taxes were only used for roads, and adjusted accordingly. (Even if you decide that some gas tax should be an 'environmental' tax, a portion of that gas tax can be allocated as 'road tax', and the above still gels. This could also be a 'tire' tax, or a 'register your car' tax, the method does not matter.) There is a lot of nuance with taxation, but quite literally throwing 50% of tax revenue away just to pay interest to bankers is very poor form. I want to add here that, as a Canadian, this isn't a "team" thing in the mental sphere of US politics. And regardless, every single government in the US, federal, state, and often city engages in this practice, regardless of political bent. This is a "governments love to give things to get votes" problem, which covers all political spheres, and harms us all.
- Mordisquitos 2y ago
  > Example: for employed people, going into (or avoiding) debt generally won't affect their yearly wages, but analogously it can for countries While I do agree that personal finances are a bad analogy for state finances, that is not an illustrative example as to the reasons. An employed person can absolutely improve their yearly wage by going into debt, be it for investing in education to aspire to better paying positions, buying a car which increases their employment catchment area, or even —for a flexible definition of wage— investing in setting up a business.
  - sweezyjeezy 2y ago
    I did say generally, but fair point :b
    - Detrytus 2y ago
      Generally, there are two types of debts: consumer debt, which you just spend and the debt you invest in something profit-bringing, like business. Average people generally only accrue the first kind and rarely the second.
lowbloodsugar 2y ago
>The mortgage is paid on a fixed schedule over 30 years But now imagine that you are never allowed to pay it off: you only pay the interest. And the debt will be passed to your children, and their children. This is the US Govt debt. In feudal times, you worked for your lord and master. If you didn't pay, armed men would come and take your stuff. In modern times, you still work for your lords and masters, and if you don't pay, armed men will come and take your stuff. How they did this was to create an income tax, and then have their cronies in the house and senate spend more and more and never "pay off the mortgage".
- lotsofpulp 2y ago
  In modern times, the lord and master is older generations (or soon to be old generations) that vote for greater and greater benefits and lower taxes for themselves.
andy_ppp 2y ago
> This is a very naive way of thinking about debt. Well it’s how this economist and Citibank’s former number 1 trader describes our debt based money system. So maybe you’re the naive one here. Please watch this video and enlighten yourself: What is Money? https://youtu.be/_gcNMu40jqs https://youtu.be/_gcNMu40jqs > As long as the US has enough to pay it's obligations over the next few decades there are no issues This is rather my point, as more wealth is transferred from individuals and governments to the rich (who the tax system is largely optional for) there simply won’t be that tax take to support the debt.
lukifer 2y ago
> Cash now is worth more than cash later. This is accurate, regarding preferences for optionality, and how our economy currently works. But I think it's worth questioning the expectation that giving up that optionality deserves compensation, whether morally or practically (resulting in compounding "money-on-money returns", usually at low risk if sufficiently diversified). The Italian economist Silvio Gesell noted, that no other good besides currency works this way. Every other good with a use value (food, houses) tends to lose value over time (entropy being fundamental to the universe), and/or, to carry risk (a share of stock which represents unpredictable ROI). There is course an exception in land, which doesn't intrinsically depreciate, but whose value trends upwards thanks to location value (and which can be addressed separately via Georgist land tax). Gesell proposed a "demurrage currency" [0], which gradually loses value as it is held: the idea being, rather than being entitled to a return, retaining high long-term optionality is actually a privilege that one should have to pay for, since the real-world value it represents is depreciating. And the incentive to invest (whether at high or low risk) instead becomes to break even (with the rate of demurrage tracking what we currently call the discount rate). I have no idea if such a concept is practical in a trans-national, growth-dependent global economy (with deflationary crypto-currencies as a BATNA!); if anything, I'm fairly confident it's not. But it's at least worth thinking about: that it's not at all axiomatic that holders of value should be entitled to compensation for "forgoing consumption" (not only because the wealthy don't necessarily need such an incentive, but also because increased consumption can mean an increase in the velocity of money, and more total value created, per the multiplier effect, and the "hotel riddle" [1]). [0] https://en.wikipedia.org/wiki/Silvio_Gesell#Economic_philosophy https://en.wikipedia.org/wiki/Silvio_Gesell#Economic_philoso... [1] https://www.econlib.org/archives/2012/01/an_answer_to_a.html https://www.econlib.org/archives/2012/01/an_answer_to_a.html

sweezyjeezy 2y ago

I think it's rarely valid to compare countries' economics to your own personal finance, macroeconomics are a lot more complicated. Example: for employed people, going into (or avoiding) debt generally won't affect their yearly wages, but analogously it can for countries (e.g. well spent debt can stimulate economic growth).

b112 2y ago
The downside of state debt is the downward spiral. If you spend 1/2 your tax income on just servicing the debt, that means either fewer services for people, or borrowing yet more, just to keep things going. If you borrow more, then it gets even worse. I really prefer that 1/2 my tax bill doesn't go to interest payments.
- woah 2y ago
  Let's say a city builds a bridge that doubles its tax income by opening up a lot of economic opportunities. It pays for this with a 35 year bond. During these 35 years, the entire additional income that the bridge generated goes towards paying off the bond. After the 35 years the bond is paid off and the city enjoys permanently raised tax income (not to mention better economy for residents). Was there a problem that the city spent 1/2 of tax income on just servicing the debt?
  - b112 2y ago
    Yes. I could go into a lot of reasons, but I'll keep it simple. It is incredibly rare for governments to break that cycle. This has been demonstrated over and over. Thus, there is no end in 35 years. There is just perpetual 50% taxes to interest on debt. This means that as it is a persistent state, not perpetually losing 50% tax revenue would make an enormous difference. It's just not helpful.
    - martinald 2y ago
      Think of it the other extreme though. Imagine governments never borrowed and only used actual 'cash' to build things. I suspect that virtually nothing would have been built over the past 200 years and the world economy would be 1% the size it currently is. I think you are right in that governments (probably?) shouldn't be funding day to day spending anywhere near as much as they do with debt. This has been a more recent (post WW2) phenomenon with huge expansions of social security programs. But capital expenditure virtually has to be paid with debt. It's easy to say with trillions of dollars of debt funded infrastructure debt is too high, but imagine the counterfactual - would you be happy with virtually no infrastructure but no debt?
      - b112 2y ago
        Think of it the other extreme though. Imagine governments never borrowed and only used actual 'cash' to build things. I suspect that virtually nothing would have been built over the past 200 years and the world economy would be 1% the size it currently is. 200 years ago had vastly different taxation methods than today, so I'll stick to the last 100 years. Your point is countered, by the fact that governments build roads, bridges, and more without any debt or by borrowing money. I think you are underestimating how large a budget governments of all levels have, especially when 50% of it is being used to finance debt. That 50% of tax income, literally disappearing to pay only interest on debt, instead could (for larger cities) literally be used to plop down cash for a bridge in one year. A lot of this could be solved by better allocating taxation to its intended purpose. There are gas taxes, but often those taxes are appropriated into a general budget. Far better if those taxes were only used for roads, and adjusted accordingly. (Even if you decide that some gas tax should be an 'environmental' tax, a portion of that gas tax can be allocated as 'road tax', and the above still gels. This could also be a 'tire' tax, or a 'register your car' tax, the method does not matter.) There is a lot of nuance with taxation, but quite literally throwing 50% of tax revenue away just to pay interest to bankers is very poor form. I want to add here that, as a Canadian, this isn't a "team" thing in the mental sphere of US politics. And regardless, every single government in the US, federal, state, and often city engages in this practice, regardless of political bent. This is a "governments love to give things to get votes" problem, which covers all political spheres, and harms us all.
Mordisquitos 2y ago
> Example: for employed people, going into (or avoiding) debt generally won't affect their yearly wages, but analogously it can for countries While I do agree that personal finances are a bad analogy for state finances, that is not an illustrative example as to the reasons. An employed person can absolutely improve their yearly wage by going into debt, be it for investing in education to aspire to better paying positions, buying a car which increases their employment catchment area, or even —for a flexible definition of wage— investing in setting up a business.
- sweezyjeezy 2y ago
  I did say generally, but fair point :b
  - Detrytus 2y ago
    Generally, there are two types of debts: consumer debt, which you just spend and the debt you invest in something profit-bringing, like business. Average people generally only accrue the first kind and rarely the second.

lowbloodsugar 2y ago

>The mortgage is paid on a fixed schedule over 30 years But now imagine that you are never allowed to pay it off: you only pay the interest. And the debt will be passed to your children, and their children. This is the US Govt debt. In feudal times, you worked for your lord and master. If you didn't pay, armed men would come and take your stuff. In modern times, you still work for your lords and masters, and if you don't pay, armed men will come and take your stuff. How they did this was to create an income tax, and then have their cronies in the house and senate spend more and more and never "pay off the mortgage".

lotsofpulp 2y ago
In modern times, the lord and master is older generations (or soon to be old generations) that vote for greater and greater benefits and lower taxes for themselves.

andy_ppp 2y ago

> This is a very naive way of thinking about debt. Well it’s how this economist and Citibank’s former number 1 trader describes our debt based money system. So maybe you’re the naive one here. Please watch this video and enlighten yourself: What is Money? https://youtu.be/_gcNMu40jqs https://youtu.be/_gcNMu40jqs > As long as the US has enough to pay it's obligations over the next few decades there are no issues This is rather my point, as more wealth is transferred from individuals and governments to the rich (who the tax system is largely optional for) there simply won’t be that tax take to support the debt.

lukifer 2y ago

> Cash now is worth more than cash later. This is accurate, regarding preferences for optionality, and how our economy currently works. But I think it's worth questioning the expectation that giving up that optionality deserves compensation, whether morally or practically (resulting in compounding "money-on-money returns", usually at low risk if sufficiently diversified). The Italian economist Silvio Gesell noted, that no other good besides currency works this way. Every other good with a use value (food, houses) tends to lose value over time (entropy being fundamental to the universe), and/or, to carry risk (a share of stock which represents unpredictable ROI). There is course an exception in land, which doesn't intrinsically depreciate, but whose value trends upwards thanks to location value (and which can be addressed separately via Georgist land tax). Gesell proposed a "demurrage currency" [0], which gradually loses value as it is held: the idea being, rather than being entitled to a return, retaining high long-term optionality is actually a privilege that one should have to pay for, since the real-world value it represents is depreciating. And the incentive to invest (whether at high or low risk) instead becomes to break even (with the rate of demurrage tracking what we currently call the discount rate). I have no idea if such a concept is practical in a trans-national, growth-dependent global economy (with deflationary crypto-currencies as a BATNA!); if anything, I'm fairly confident it's not. But it's at least worth thinking about: that it's not at all axiomatic that holders of value should be entitled to compensation for "forgoing consumption" (not only because the wealthy don't necessarily need such an incentive, but also because increased consumption can mean an increase in the velocity of money, and more total value created, per the multiplier effect, and the "hotel riddle" [1]). [0] https://en.wikipedia.org/wiki/Silvio_Gesell#Economic_philosophy https://en.wikipedia.org/wiki/Silvio_Gesell#Economic_philoso... [1] https://www.econlib.org/archives/2012/01/an_answer_to_a.html https://www.econlib.org/archives/2012/01/an_answer_to_a.html