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US debt as a percentage of GDP (i.e. our ability to pay off our debt) has basically remained static since COVID. I agree that the US requires a serious debate a

US debt as a percentage of GDP (i.e. our ability to pay off our debt) has basically remained static since COVID. I agree that the US requires a serious debate about our fiscal priorities and the appropriate levels of spending and taxation, particularly with automatic social security cuts looming. But it is nowhere near an emergency and fiscal decisions are the responsibility of Congress, not the executive.

Aloisius 2y ago
Surely taxes/fees represent our ability to pay off debt, not GDP?
- SubiculumCode 2y ago
  We have a fiat currency. The only real limit to the ability is its effect on inflation.
  - roenxi 2y ago
    You're upgrading from a crisis that impoverishes a bunch of people to ... a crisis that impoverishes everyone. Unclear what the improvement was. And potentially literally how you get Hitlers running the government, inflation is one of those effects that breeds political instability.
    - SubiculumCode 2y ago
      I did not recommend an action. You are projecting.
      - roenxi 2y ago
        You said we - possibly there is a flaw in my grammer. How should I be referring to this "we"? Isn't the "I" to "We" transform applied to "you" still "you"? I thought "you" could be plural for groups. I don't think going from "we" to "they" would be appropriate although in hindsight it might have been a better choice.
  - whimsicalism 2y ago
    there are distributional impacts from crowding out and potential long term effects on AS, never to mention that the inflation risks are very real… debt is likely already politically constraining the fed right now
- deleted 2y ago
  [deleted]
roenxi 2y ago
"Since COVID" is a bad baseline, I would draw a parallel with someone who's condition "stayed stable since they entered the hospital a few days ago". It is too recent and the situation pre-COVID was quite bad. The US is the most indebted entity [0] in history. But it is not obviously the most productive; since that title may sit with China now. It is a precarious position. [0] https://en.wikipedia.org/wiki/Net_international_investment_position#List_of_countries_and_regions_by_net_international_investment_position_(NIIP) https://en.wikipedia.org/wiki/Net_international_investment_p...
- amrocha 2y ago
  Complaining about the “national debt” is the clearest sign that someone does not understand economics. What do you think happens if the debt goes up? Do you think the government is gonna go bankrupt? That’s literally not how it works. Do you think inflation is gonna happen? Again, literally not how it works. In fact, too low public spending means you get deflation which is even worse than inflation.
  - roenxi 2y ago
    1. I don't think you have a theory for how it works. > means you get deflation which is even worse than inflation 2. People regularly come up with this theory that prices dropping is a terrible thing. An extraordinary claim for which I've never seen an argument I accepted and the evidence is as thin as a rake. Typically the countries that experience the horrors of deflation go on to be unusually wealthy and prosperous - I'd like to see more of it. But it is easy to see why the governments would believe deflation is bad that since they are typically enormous debtors and inflation favours debtors. Frankly I suspect that if prices go down all else equal most people will be better off and able to afford more stuff. Wild take, I know.
    - chr1 2y ago
      People who bring up this theory, bring the great depression as evidence, forgetting that the problem there was caused by the law forbidding to reduce salaries, which made prices going down equivalent to minimal wage going up, which of course leads to unemployment.
cheald 2y ago
Another way to look at that time series is that US debt as a percentage of GDP has doubled from 62% to 121% since 2007. https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S
- derektank 2y ago
  My point is that our debt only grows unsustainably in response to severe crises (the great financial crisis, COVID). Our deficit is otherwise sustainable during "normal" times as our economy grows alongside it. We of course should want our debt to GDP ratio to be declining during periods of peace and prosperity (and it is evidence of political malfeasance that we haven't seen that happen since the late 90s). But our current spending is not a crisis in it's own right.
  - amrocha 2y ago
    Why should you care if the national debt goes up or down? Why is it bad if it goes up? Do you actually understand the underlying mechanics, or have you just built a lot of eloquent abstractions around the idea of “number go up is bad”?
    - derektank 2y ago
      I'm not an expert but I think I have a reasonable understanding of the situation. If the US debt to GDP ratio gets too high, purchasers of US Treasuries (bills, notes, and bonds) will lose confidence in the US government's ability to service that debt and demand a higher yield on US Treasuries at auction, which increases the cost of servicing the debt. At that point, the government has two choices; pay the higher yield which eventually results in fewer services/higher taxes and a contraction in the real economy, or to default on the debt which would result in very bad things happening (this is where I cop to ignorance on the scale and exact details of the badness). We should get ahead of that by reducing our services/raising taxes now so that we don't risk a loss of confidence that would restrict our ability to borrow in a time of crisis.
      - 2y ago
TeaBrain 2y ago
>US debt as a percentage of GDP (i.e. our ability to pay off our debt) US debt as a percentage of GDP doesn't demonstrate the continued ability to pay off the debt, since the ability to pay off the debt is dependent on that debt's interest. The issue with the debt in the current environment is that it is going to start rolling over into higher interest rates. If the debt is structured to pay higher interest then that lessens the ability to pay off the debt even if the debt as a percentage of GDP stays the same.
- bux93 2y ago
  Ripping apart institutions is a great way to increase interest rates.
jimkleiber 2y ago
Some people have a lot of unexpressed sadness and anger and fear from the pandemic (and housing crisis before that) and are projecting it on to indirectly or totally unrelated things.

Aloisius 2y ago

Surely taxes/fees represent our ability to pay off debt, not GDP?

SubiculumCode 2y ago
We have a fiat currency. The only real limit to the ability is its effect on inflation.
- roenxi 2y ago
  You're upgrading from a crisis that impoverishes a bunch of people to ... a crisis that impoverishes everyone. Unclear what the improvement was. And potentially literally how you get Hitlers running the government, inflation is one of those effects that breeds political instability.
  - SubiculumCode 2y ago
    I did not recommend an action. You are projecting.
    - roenxi 2y ago
      You said we - possibly there is a flaw in my grammer. How should I be referring to this "we"? Isn't the "I" to "We" transform applied to "you" still "you"? I thought "you" could be plural for groups. I don't think going from "we" to "they" would be appropriate although in hindsight it might have been a better choice.
- whimsicalism 2y ago
  there are distributional impacts from crowding out and potential long term effects on AS, never to mention that the inflation risks are very real… debt is likely already politically constraining the fed right now
deleted 2y ago
[deleted]

roenxi 2y ago

"Since COVID" is a bad baseline, I would draw a parallel with someone who's condition "stayed stable since they entered the hospital a few days ago". It is too recent and the situation pre-COVID was quite bad. The US is the most indebted entity [0] in history. But it is not obviously the most productive; since that title may sit with China now. It is a precarious position. [0] https://en.wikipedia.org/wiki/Net_international_investment_position#List_of_countries_and_regions_by_net_international_investment_position_(NIIP) https://en.wikipedia.org/wiki/Net_international_investment_p...

amrocha 2y ago
Complaining about the “national debt” is the clearest sign that someone does not understand economics. What do you think happens if the debt goes up? Do you think the government is gonna go bankrupt? That’s literally not how it works. Do you think inflation is gonna happen? Again, literally not how it works. In fact, too low public spending means you get deflation which is even worse than inflation.
- roenxi 2y ago
  1. I don't think you have a theory for how it works. > means you get deflation which is even worse than inflation 2. People regularly come up with this theory that prices dropping is a terrible thing. An extraordinary claim for which I've never seen an argument I accepted and the evidence is as thin as a rake. Typically the countries that experience the horrors of deflation go on to be unusually wealthy and prosperous - I'd like to see more of it. But it is easy to see why the governments would believe deflation is bad that since they are typically enormous debtors and inflation favours debtors. Frankly I suspect that if prices go down all else equal most people will be better off and able to afford more stuff. Wild take, I know.
  - chr1 2y ago
    People who bring up this theory, bring the great depression as evidence, forgetting that the problem there was caused by the law forbidding to reduce salaries, which made prices going down equivalent to minimal wage going up, which of course leads to unemployment.

cheald 2y ago

Another way to look at that time series is that US debt as a percentage of GDP has doubled from 62% to 121% since 2007. https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S

derektank 2y ago
My point is that our debt only grows unsustainably in response to severe crises (the great financial crisis, COVID). Our deficit is otherwise sustainable during "normal" times as our economy grows alongside it. We of course should want our debt to GDP ratio to be declining during periods of peace and prosperity (and it is evidence of political malfeasance that we haven't seen that happen since the late 90s). But our current spending is not a crisis in it's own right.
- amrocha 2y ago
  Why should you care if the national debt goes up or down? Why is it bad if it goes up? Do you actually understand the underlying mechanics, or have you just built a lot of eloquent abstractions around the idea of “number go up is bad”?
  - derektank 2y ago
    I'm not an expert but I think I have a reasonable understanding of the situation. If the US debt to GDP ratio gets too high, purchasers of US Treasuries (bills, notes, and bonds) will lose confidence in the US government's ability to service that debt and demand a higher yield on US Treasuries at auction, which increases the cost of servicing the debt. At that point, the government has two choices; pay the higher yield which eventually results in fewer services/higher taxes and a contraction in the real economy, or to default on the debt which would result in very bad things happening (this is where I cop to ignorance on the scale and exact details of the badness). We should get ahead of that by reducing our services/raising taxes now so that we don't risk a loss of confidence that would restrict our ability to borrow in a time of crisis.
    - 2y ago

TeaBrain 2y ago

>US debt as a percentage of GDP (i.e. our ability to pay off our debt) US debt as a percentage of GDP doesn't demonstrate the continued ability to pay off the debt, since the ability to pay off the debt is dependent on that debt's interest. The issue with the debt in the current environment is that it is going to start rolling over into higher interest rates. If the debt is structured to pay higher interest then that lessens the ability to pay off the debt even if the debt as a percentage of GDP stays the same.

bux93 2y ago
Ripping apart institutions is a great way to increase interest rates.

jimkleiber 2y ago

Some people have a lot of unexpressed sadness and anger and fear from the pandemic (and housing crisis before that) and are projecting it on to indirectly or totally unrelated things.