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You're only proving the opposing case with such a toothless argument. Generally speaking, debt is defined as something that is expected to be paid back. That's

You're only proving the opposing case with such a toothless argument. Generally speaking, debt is defined as something that is expected to be paid back. That's what makes it debt and not a gift. In many cases, taking debt increases growth. Maybe you took convertible debt or a loan to fund your startup? I don't imagine you told investors or bankers that taking on debt would slow the growth of your company. Did your 10-slide pitch deck show upward growth because you intend to stop growing as soon as they fund you? Why would investors lend you money if they knew your growth would slow down as soon as they did it? Now, consider government. What happens when your community outgrows its roads? Do new businesses continue opening in that area? Do well-paid executives and engineers move to a city with lousy, outdated schools, poor telephone service, and minimal broadband Internet service?

crusso 14y ago
I don't imagine you told investors or bankers that taking on debt would slow the growth of your company Businesses use limited amounts of debt to fuel growth because they have a justifiable case that shows that the servicing of the debt is less than the returns on the investments made with the debt. Often, businesses are wrong about whether or not their "justifiable case" is true. When wrong, their debt may just cut into the other assets on their balance sheet. Perhaps creditors will allow them to refinance so that their debt servicing is below their investment. Perhaps they'll go bankrupt. Perhaps they'll close their doors. The US government 1. Has a really crappy track record of finding a return for its investments. 2. Will cause much more world disruption if it has guessed wrong on the whole "returns on investment vs debt servicing" equation. Finally, businesses do not borrow money without limits. Their borrowing of money is based upon the amount of credit that outside parties give them. Given the US Government's downgrade in its rated ability to service its debt, shouldn't we be concerned that we're overextending ourselves?
- bubbleRefuge 14y ago
  They were downgraded on "willingness" to service their debt. Not ability. Notice that after the downgrade, interest rates went down. What does that tell you?
  - crusso 14y ago
    No, willingness to pay debt was never at issue. That was a red herring put out by the Administration and lapped up by an unquestioning media. We take in more than enough on a monthly basis to service our debt. Willingness to increase the debt ceiling to pay for government programs that we haven't actually borrowed the money for yet was the issue. Interest rates are down worldwide and has more to do with inflation and "the savings glut". They say nothing particularly positive about the US Government's credit worthiness.
    - mncolinlee 14y ago
      Like the authors, you have causality backwards. You're implying that I cannot find an example where inflation was almost 15% and interest rates were over 16% back in the 1980s. Fed interest rates were lowered after the 2008 crisis to limit deflation. Inflation did not cause low T-bill rates. In fact, logic would dictate that high inflation would increase Treasury rate expectations and the demand for inflation-protected TIPS. The reason interest rates were low after Congress nearly defaulted on their debts is because federal bonds were considered a safer risk/reward than the markets. Wall Street trusted our treasury to pay its interest this last year more than they trusted blue chips to both hold their value and pay dividends with an unstable recovery. They were even holding onto T-bills while losing to inflation at times.
- anigbrowl 14y ago
  The US government 1. Has a really crappy track record of finding a return for its investments. I question this premise, which seems to have become an article of faith with a lot of people. Could you explain what you base this view on?
  - crusso 14y ago
    Every time the government gets involved in something, it destroys it. It perverts the economic efficiencies and causes a mess that "Oh darnit! We need a bigger government program to solve it!" Then, when it racks up failure after failure after failure trying to solve a problem; it never takes the blame for its intrusion by shutting the programs down and allowing for other solutions. It asks for more money, more authority, more regulations/laws. There is no testing in government for usefulness. There is no refactoring. It is the worst kind of spaghetti code that grows endlessly. - I mean, we just had a Depression because of government's involvement in housing pricing and lending. - Public Education. Ever increasing money spent, never increasing results. - Student Loans and Higher Education pricing is the next disaster that they have brewed by getting involved. - Healthcare, as bad as it was with the mess of state regulations it had on it is becoming astoundingly worse with Obamacare. - Social Security, Medicare, etc. are all financial disasters that have created huge obligations that we will be unable to pay. - Airport security has done nothing to make us safer since the TSA, but there it is. A huge behemoth that makes travel painful. I'd add the Military in there as well since it's a huge money suck that is extraordinarily wasteful - but it's one of those few necessary evils that we don't have a choice on to some extent. Plus, since it's results oriented (kill or be killed) - it's actually gotten to be pretty good at what it does. [edit: hit post too soon]
NoPiece 14y ago
You make a great point - businesses have get money from bankers who expect a return. If government had that restriction on raising debt we wouldn't have a problem. We are 5 years into massive deficit, and massive debt, how much better are the schools? Execs and engineers are migrating back to Detroit now? The biggest problem is that for all that debt, there is very little to show for it.

crusso 14y ago

I don't imagine you told investors or bankers that taking on debt would slow the growth of your company Businesses use limited amounts of debt to fuel growth because they have a justifiable case that shows that the servicing of the debt is less than the returns on the investments made with the debt. Often, businesses are wrong about whether or not their "justifiable case" is true. When wrong, their debt may just cut into the other assets on their balance sheet. Perhaps creditors will allow them to refinance so that their debt servicing is below their investment. Perhaps they'll go bankrupt. Perhaps they'll close their doors. The US government 1. Has a really crappy track record of finding a return for its investments. 2. Will cause much more world disruption if it has guessed wrong on the whole "returns on investment vs debt servicing" equation. Finally, businesses do not borrow money without limits. Their borrowing of money is based upon the amount of credit that outside parties give them. Given the US Government's downgrade in its rated ability to service its debt, shouldn't we be concerned that we're overextending ourselves?

bubbleRefuge 14y ago
They were downgraded on "willingness" to service their debt. Not ability. Notice that after the downgrade, interest rates went down. What does that tell you?
- crusso 14y ago
  No, willingness to pay debt was never at issue. That was a red herring put out by the Administration and lapped up by an unquestioning media. We take in more than enough on a monthly basis to service our debt. Willingness to increase the debt ceiling to pay for government programs that we haven't actually borrowed the money for yet was the issue. Interest rates are down worldwide and has more to do with inflation and "the savings glut". They say nothing particularly positive about the US Government's credit worthiness.
  - mncolinlee 14y ago
    Like the authors, you have causality backwards. You're implying that I cannot find an example where inflation was almost 15% and interest rates were over 16% back in the 1980s. Fed interest rates were lowered after the 2008 crisis to limit deflation. Inflation did not cause low T-bill rates. In fact, logic would dictate that high inflation would increase Treasury rate expectations and the demand for inflation-protected TIPS. The reason interest rates were low after Congress nearly defaulted on their debts is because federal bonds were considered a safer risk/reward than the markets. Wall Street trusted our treasury to pay its interest this last year more than they trusted blue chips to both hold their value and pay dividends with an unstable recovery. They were even holding onto T-bills while losing to inflation at times.
anigbrowl 14y ago
The US government 1. Has a really crappy track record of finding a return for its investments. I question this premise, which seems to have become an article of faith with a lot of people. Could you explain what you base this view on?
- crusso 14y ago
  Every time the government gets involved in something, it destroys it. It perverts the economic efficiencies and causes a mess that "Oh darnit! We need a bigger government program to solve it!" Then, when it racks up failure after failure after failure trying to solve a problem; it never takes the blame for its intrusion by shutting the programs down and allowing for other solutions. It asks for more money, more authority, more regulations/laws. There is no testing in government for usefulness. There is no refactoring. It is the worst kind of spaghetti code that grows endlessly. - I mean, we just had a Depression because of government's involvement in housing pricing and lending. - Public Education. Ever increasing money spent, never increasing results. - Student Loans and Higher Education pricing is the next disaster that they have brewed by getting involved. - Healthcare, as bad as it was with the mess of state regulations it had on it is becoming astoundingly worse with Obamacare. - Social Security, Medicare, etc. are all financial disasters that have created huge obligations that we will be unable to pay. - Airport security has done nothing to make us safer since the TSA, but there it is. A huge behemoth that makes travel painful. I'd add the Military in there as well since it's a huge money suck that is extraordinarily wasteful - but it's one of those few necessary evils that we don't have a choice on to some extent. Plus, since it's results oriented (kill or be killed) - it's actually gotten to be pretty good at what it does. [edit: hit post too soon]

NoPiece 14y ago

You make a great point - businesses have get money from bankers who expect a return. If government had that restriction on raising debt we wouldn't have a problem. We are 5 years into massive deficit, and massive debt, how much better are the schools? Execs and engineers are migrating back to Detroit now? The biggest problem is that for all that debt, there is very little to show for it.