4 ms·

I think the US gov has become too addicted, structurally and incentive-wise, to this hack which lets them spend more each year than they take in organically thr

I think the US gov has become too addicted, structurally and incentive-wise, to this hack which lets them spend more each year than they take in organically through taxes/fees/etc. I can not realistically picture them ever paying the debt off or going back to a zero deficit. I bet the most likely endgame will be some kind of future war against The Bad Guys (which they'll make sure to do sufficient propaganda demonization against for the low-brow general public) and then they could use that situation to justify "retiring" (not honoring) the debt. There is historical precedent. And while there are many good and honest human beings working throughout the US gov it would be a naive mistake to think the most important decisions are made by "good" people. History suggests the opposite. In (almost) all countries. Throughout history. And again, ignore words. Any words that come out of a politician's mouth just ignore. Only weigh actions, results and tangibles. Looking at those, the weight of evidence suggests they'll never eliminate the yearly deficit or debt. Just keep increasing it until some huge "oopsie!" reset excuse is found. The kind that will likely involve much loss of blood by the working/labor/non-wealthy classes, world-wide That's the historical record, reinforced many times over millenia.

themartorana 12y ago
We did it not that long ago. Not only did the Clinton administration balance the budget but drew a surplus from 1998-2001. [0] Of course tax receipts were much higher as we were in a bull market and had very low unemployment. Since then, a tech bubble burst, we hopped in to numerous endless wars, and Wall St. sent half the world tumbling in to recession or depression and the housing market collapsed. But it's not that far fetched that it could happen again. [0] http://www.factcheck.org/2008/02/the-budget-and-deficit-under-clinton/ http://www.factcheck.org/2008/02/the-budget-and-deficit-unde... Edit: this is speaking to zero deficit, not zero debt.
- minot 12y ago
  I'd go as far as to say that a zero debt situation is worrisome. It'd mean that we don't have anything (such as infrastructure) that we'd like to spend money on... It'd mean that the situation is bleak for everyone.
  - bunderbunder 12y ago
    It wouldn't mean that; the gov't could always just plunk down cash on things like infrastructure development. If the cash on hand isn't available, then run a budget surplus in order to save up money. But there are arguments to be made that, assuming a healthy economy, it's better to borrow and spend than it is to save and spend for anything that's worth the money.
    - logfromblammo 12y ago
      Except you can't assume a healthy economy if no one has any savings to spend. In a healthy economy, people save their surplus in expansions and spend it in recessions, or for larger purchases. Interest on debt means that the return on investment for projects financed by debt must be positive even after the interest payments, or the debt cannot be paid off. What I often see is that municipalities will do something stupid, like pay for a new, oversized sewage treatment plant, using bonds, and then the very optimistic growth in the sewer system does not occur, and people end up paying $500/month water bills for a plant running at 10% of capacity. You can't borrow if no one has anything to lend.
      - judk 12y ago
        You can always borrow people's labor. That's all fiat money is. Print some money, give it out, borrow it, pay idle people to work. This only fails if everyone is already working but failing to save, because they are only generating subsistence value from their labor.
    - judk 12y ago
      You are mistakenly believing that money exists like wool or oil or lumber or stone. It doesn't. Money is imaginary. It is simply an IOU to be exchanged for labor or services. It is subject to inflation if a society amasses too much, unlike durable goods which can be stockpiled until you have enough.
  - tempestn 12y ago
    Agreed. Zero debt really doesn't make sense as a goal, and this British bond repayment illustrates the case that if all goes well, inflation eventually reduces a constant debt to irrelevance. (Although it may take a few centuries.) That said, of course debt reduction still certainly has value, as there is obviously such a thing as too much debt.
- deleted 12y ago
  [deleted]
- jlarocco 12y ago
  He balanced the budget and had a surplus for those years, but the problem is, we'd need to maintain the Clinton era surpluses for 90+ years to actually pay off our current debt. I'd love to see it happen, but it doesn't seem likely.
nostromo 12y ago
I think it's much more likely we'll continue to do what we're doing now: printing money and reducing the value of existing debt via inflation.
deleted 12y ago
[deleted]
Amezarak 12y ago
> I can not realistically picture them ever paying the debt off or going back to a zero deficit "Back" was a long, long time ago. Nevertheless it is probable the deficit will be subsumed by growth nin the immediate future. > . I bet the most likely endgame will be some kind of future war against The Bad Guys (which they'll make sure to do sufficient propaganda demonization against for the low-brow general public) and then they could use that situation to justify "retiring" (not honoring) the debt. There doesn't need to be any "endgame" or debt retirement: this is a fundamental misunderstanding. The government is continually paying off old debt and issuing new debt as the US economy grows and government revenues increase. There is no big pile of debt which is continually accumulating and never paid off: the debt is paid off every single time a bond is redeemed. (Nevermind the fact that inflation reduces the amount of debt in the first place! The national debt as a percentage of GDP exceeded its modern numbers in 1945, but it was inflated away.) People often speak of the debt being "called in": this fundamental truth also happens to explain why that can't happen. A bond comes due when it is due, not when you want your money back. The situation is, indeed, entirely sustainable, unless you disbelieve the evidence of history and mainstream economics. Furthermore, the US government actually owes much of its debt it itself. The government owes itself 5 trillion dollars. This is pretty much just a silly accounting trick: the government could poof all that debt away and nobody would be the wiser so long as the government still funded the programs (such as Social Security) that bought those bonds. And since the government is the sole producer of US dollars, it should not find that too difficult. There's also the present reality that not borrowing money at the present interest rates would be insane. Real interest rates on federal debt are near-zero and have actually gone negative at some points. People are literally paying the government to hold their money. [1] You can go even more extreme and consider MMT. There is logic to it, though I suspect human psychology and the general terror of fiat currencies (especially of treating fiat currencies as if they were truly fiat currencies) would hamper any baldfaced implementation of MMT policies. Essentially, fiat currencies can be viewed as being created via government spending and destroyed via government taxation. The only worry the government need consider is the possibility of inflation, which is not (this is predicted by economics and demonstrated repeatedly, including by present experience, in which the Fed has increased the monetary base by 5x[3] while seeing inflation tick between 0-2%[4]) directly correlated only to the money supply and is relatively easily controlled. Governments issuing their own sovereign fiat currencies are working in this system whether they realize it or not. tl;dr There is nothing to worry about, people don't understand how debt owed in a country's sovereign currency works; there will never be any "reset excuse" necessary unless a future Congress goes absolutely mad and decides to accumulate truly absurd levels of debt (100x GDP) during economic booms or something. Sidenote: Government bonds provide a secondary, extremely valuable service. They are a safe, stable place to park your money. If the government stopped issuing bonds and only paid them off, there would be a tremendous outcry and people would start either keeping the money in bank accounts or under their mattress (where it does little good) or investing it into the stock market (riskier and probably increases the chances of a bubble.) References: [1] http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield http://www.treasury.gov/resource-center/data-chart-center/in... [2] Debt owed to foreign countries, by amount. Japan will soon overtake China: http://www.treasury.gov/ticdata/Publish/mfh.txt http://www.treasury.gov/ticdata/Publish/mfh.txt [3] http://research.stlouisfed.org/fred2/series/BASE http://research.stlouisfed.org/fred2/series/BASE [4] http://www.usinflationcalculator.com/inflation/current-inflation-rates/ http://www.usinflationcalculator.com/inflation/current-infla...
eru 12y ago
Wasn't there an American president that paid off all the debt in the 19th century?
- gargarplex 12y ago
  http://www.npr.org/blogs/money/2011/04/15/135423586/when-the-u-s-paid-off-the-entire-national-debt-and-why-it-didnt-last http://www.npr.org/blogs/money/2011/04/15/135423586/when-the...
Spooky23 12y ago
This period of runaway debt will end. It's fairly typical during wartime for countries to adopt out of control fiscal policies. We're somewhat unusual in that we've dumped trillions into other spending (ie Medicare Part D), while simultaneously having to spend federal budget dollars to pay for redeemed bonds held by Social Security.

themartorana 12y ago

We did it not that long ago. Not only did the Clinton administration balance the budget but drew a surplus from 1998-2001. [0] Of course tax receipts were much higher as we were in a bull market and had very low unemployment. Since then, a tech bubble burst, we hopped in to numerous endless wars, and Wall St. sent half the world tumbling in to recession or depression and the housing market collapsed. But it's not that far fetched that it could happen again. [0] http://www.factcheck.org/2008/02/the-budget-and-deficit-under-clinton/ http://www.factcheck.org/2008/02/the-budget-and-deficit-unde... Edit: this is speaking to zero deficit, not zero debt.

minot 12y ago
I'd go as far as to say that a zero debt situation is worrisome. It'd mean that we don't have anything (such as infrastructure) that we'd like to spend money on... It'd mean that the situation is bleak for everyone.
- bunderbunder 12y ago
  It wouldn't mean that; the gov't could always just plunk down cash on things like infrastructure development. If the cash on hand isn't available, then run a budget surplus in order to save up money. But there are arguments to be made that, assuming a healthy economy, it's better to borrow and spend than it is to save and spend for anything that's worth the money.
  - logfromblammo 12y ago
    Except you can't assume a healthy economy if no one has any savings to spend. In a healthy economy, people save their surplus in expansions and spend it in recessions, or for larger purchases. Interest on debt means that the return on investment for projects financed by debt must be positive even after the interest payments, or the debt cannot be paid off. What I often see is that municipalities will do something stupid, like pay for a new, oversized sewage treatment plant, using bonds, and then the very optimistic growth in the sewer system does not occur, and people end up paying $500/month water bills for a plant running at 10% of capacity. You can't borrow if no one has anything to lend.
    - judk 12y ago
      You can always borrow people's labor. That's all fiat money is. Print some money, give it out, borrow it, pay idle people to work. This only fails if everyone is already working but failing to save, because they are only generating subsistence value from their labor.
  - judk 12y ago
    You are mistakenly believing that money exists like wool or oil or lumber or stone. It doesn't. Money is imaginary. It is simply an IOU to be exchanged for labor or services. It is subject to inflation if a society amasses too much, unlike durable goods which can be stockpiled until you have enough.
- tempestn 12y ago
  Agreed. Zero debt really doesn't make sense as a goal, and this British bond repayment illustrates the case that if all goes well, inflation eventually reduces a constant debt to irrelevance. (Although it may take a few centuries.) That said, of course debt reduction still certainly has value, as there is obviously such a thing as too much debt.
deleted 12y ago
[deleted]
jlarocco 12y ago
He balanced the budget and had a surplus for those years, but the problem is, we'd need to maintain the Clinton era surpluses for 90+ years to actually pay off our current debt. I'd love to see it happen, but it doesn't seem likely.

nostromo 12y ago

I think it's much more likely we'll continue to do what we're doing now: printing money and reducing the value of existing debt via inflation.

deleted 12y ago

[deleted]

Amezarak 12y ago

> I can not realistically picture them ever paying the debt off or going back to a zero deficit "Back" was a long, long time ago. Nevertheless it is probable the deficit will be subsumed by growth nin the immediate future. > . I bet the most likely endgame will be some kind of future war against The Bad Guys (which they'll make sure to do sufficient propaganda demonization against for the low-brow general public) and then they could use that situation to justify "retiring" (not honoring) the debt. There doesn't need to be any "endgame" or debt retirement: this is a fundamental misunderstanding. The government is continually paying off old debt and issuing new debt as the US economy grows and government revenues increase. There is no big pile of debt which is continually accumulating and never paid off: the debt is paid off every single time a bond is redeemed. (Nevermind the fact that inflation reduces the amount of debt in the first place! The national debt as a percentage of GDP exceeded its modern numbers in 1945, but it was inflated away.) People often speak of the debt being "called in": this fundamental truth also happens to explain why that can't happen. A bond comes due when it is due, not when you want your money back. The situation is, indeed, entirely sustainable, unless you disbelieve the evidence of history and mainstream economics. Furthermore, the US government actually owes much of its debt it itself. The government owes itself 5 trillion dollars. This is pretty much just a silly accounting trick: the government could poof all that debt away and nobody would be the wiser so long as the government still funded the programs (such as Social Security) that bought those bonds. And since the government is the sole producer of US dollars, it should not find that too difficult. There's also the present reality that not borrowing money at the present interest rates would be insane. Real interest rates on federal debt are near-zero and have actually gone negative at some points. People are literally paying the government to hold their money. [1] You can go even more extreme and consider MMT. There is logic to it, though I suspect human psychology and the general terror of fiat currencies (especially of treating fiat currencies as if they were truly fiat currencies) would hamper any baldfaced implementation of MMT policies. Essentially, fiat currencies can be viewed as being created via government spending and destroyed via government taxation. The only worry the government need consider is the possibility of inflation, which is not (this is predicted by economics and demonstrated repeatedly, including by present experience, in which the Fed has increased the monetary base by 5x[3] while seeing inflation tick between 0-2%[4]) directly correlated only to the money supply and is relatively easily controlled. Governments issuing their own sovereign fiat currencies are working in this system whether they realize it or not. tl;dr There is nothing to worry about, people don't understand how debt owed in a country's sovereign currency works; there will never be any "reset excuse" necessary unless a future Congress goes absolutely mad and decides to accumulate truly absurd levels of debt (100x GDP) during economic booms or something. Sidenote: Government bonds provide a secondary, extremely valuable service. They are a safe, stable place to park your money. If the government stopped issuing bonds and only paid them off, there would be a tremendous outcry and people would start either keeping the money in bank accounts or under their mattress (where it does little good) or investing it into the stock market (riskier and probably increases the chances of a bubble.) References: [1] http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield http://www.treasury.gov/resource-center/data-chart-center/in... [2] Debt owed to foreign countries, by amount. Japan will soon overtake China: http://www.treasury.gov/ticdata/Publish/mfh.txt http://www.treasury.gov/ticdata/Publish/mfh.txt [3] http://research.stlouisfed.org/fred2/series/BASE http://research.stlouisfed.org/fred2/series/BASE [4] http://www.usinflationcalculator.com/inflation/current-inflation-rates/ http://www.usinflationcalculator.com/inflation/current-infla...

eru 12y ago

Wasn't there an American president that paid off all the debt in the 19th century?

gargarplex 12y ago
http://www.npr.org/blogs/money/2011/04/15/135423586/when-the-u-s-paid-off-the-entire-national-debt-and-why-it-didnt-last http://www.npr.org/blogs/money/2011/04/15/135423586/when-the...

Spooky23 12y ago

This period of runaway debt will end. It's fairly typical during wartime for countries to adopt out of control fiscal policies. We're somewhat unusual in that we've dumped trillions into other spending (ie Medicare Part D), while simultaneously having to spend federal budget dollars to pay for redeemed bonds held by Social Security.