Debt ceiling to be raised again very shortly

[fskimospy]

Originally posted by: Darwin333

The point I am trying to make is I think your analogy is oversimplified. The internal debt we hold isn't like my wife loaning my $20 out of her (or the families) disposable income and therefor not effecting future obligations. We are spending money that must be paid back in order to meet our obligations. We will either have to raise taxes or issue bonds to cover it and unfortunately, I don't see how we could possibly raise taxes enough.

No, it doesn't have to be paid back, nor would you ever pay it all back. Government debt can (and will) be rolled over in perpetuity.

Furthermore, the idea that borrowing money from ourselves is borrowing future productivity from our own country is a completely nonsensical idea. We don't have a DeLorean, and I'm not even sure half the cars we make can get up to 88 miles per hour anymore regardless.

I think it's a really vital point to make that a lot of people miss, because they think of public debt as something akin to private debt: our children will get to consume whatever it is that they produce, nothing more, nothing less, the same that we do today. No matter what debts we run up internally in this way, there's simply no way that we could create a situation in which our children would somehow have to sacrifice their productivity to 'pay back' people here in 2009 for the productivity we somehow borrowed. (how would they even if they wanted to?)

 

[blackangst1]

Originally posted by: eskimospy

Originally posted by: Darwin333

The point I am trying to make is I think your analogy is oversimplified. The internal debt we hold isn't like my wife loaning my $20 out of her (or the families) disposable income and therefor not effecting future obligations. We are spending money that must be paid back in order to meet our obligations. We will either have to raise taxes or issue bonds to cover it and unfortunately, I don't see how we could possibly raise taxes enough.

No, it doesn't have to be paid back, nor would you ever pay it all back. Government debt can (and will) be rolled over in perpetuity.

Furthermore, the idea that borrowing money from ourselves is borrowing future productivity from our own country is a completely nonsensical idea. We don't have a DeLorean, and I'm not even sure half the cars we make can get up to 88 miles per hour anymore regardless.

I think it's a really vital point to make that a lot of people miss, because they think of public debt as something akin to private debt: our children will get to consume whatever it is that they produce, nothing more, nothing less, the same that we do today. No matter what debts we run up internally in this way, there's simply no way that we could create a situation in which our children would somehow have to sacrifice their productivity to 'pay back' people here in 2009 for the productivity we somehow borrowed. (how would they even if they wanted to?)

Who was it that said deficits dont matter?

/tease

I get what youre saying, and for the most part agree. Im still looking for a more definitive answer about public/private debt from earlier convo. I'll find it sometime.

 

[GTaudiophile]

Why aren't people rioting in the streets over this?

When money gets tight me, guess what? I curtail my spending. Why is this not an option?

But I think the comments here say it best:

http://thehill.com/homenews/se...debt-ceiling-above-12t

 

[Engineer]

Originally posted by: GTaudiophile
Why aren't people rioting in the streets over this?

Why should they? Do you feel this in your every day life? Are you sent a bill each month with your portion to pay to the government? Until people "feel" this, they're not going to give a shit.

 

[Schadenfroh]

Originally posted by: Engineer

Originally posted by: GTaudiophile
Why aren't people rioting in the streets over this?

Why should they? Do you feel this in your every day life? Are you sent a bill each month with your portion to pay to the government? Until people "feel" this, they're not going to give a shit.

Which is exactly why taxes should be raised across all income brackets (that pay taxes) once the economy stabilizes, voters should feel the cost of government spending / services.

 

[fskimospy]

Originally posted by: Engineer

Originally posted by: GTaudiophile
Why aren't people rioting in the streets over this?

Why should they? Do you feel this in your every day life? Are you sent a bill each month with your portion to pay to the government? Until people "feel" this, they're not going to give a shit.

'Feel' what though? We already do feel the cost of government services, as they naturally consume productivity.

 

[Engineer]

Originally posted by: eskimospy

Originally posted by: Engineer

Originally posted by: GTaudiophile
Why aren't people rioting in the streets over this?

Why should they? Do you feel this in your every day life? Are you sent a bill each month with your portion to pay to the government? Until people "feel" this, they're not going to give a shit.

'Feel' what though? We already do feel the cost of government services, as they naturally consume productivity.

Do you personally feel that really? When I get a bill in the mail, I feel it when I pay it. Other than my regular taxes, which are at 50 year lows, what do I feel? With my pay down, my taxes are down. I feel less now than I did. People don't feel the deficit in the way that they feel personal bills...they just don't. Until they do, it will not matter (or change).

 

[BoberFett]

Originally posted by: eskimospy

Originally posted by: BoberFett

If paying interest to ourselves is OK, then shouldn't you be OK with high profit margins? We're just paying profit to ourselves. But you sure do find ways to complain about how much insurance or oil companies make.

So which is it? Does the destination of income matter or not? If the US debt is held by the wealthy, then doesn't paying them interest equal further concentration of wealth by borrowing from them and paying them interest?

Make up your mind.

Huh? I have no problem with high profit margins, nor have I ever. There are other considerations present with profits the same as there are with debt, but the principle is most certainly one that I am not against.

The distribution of income definitely matters to me, but since government spending disproportionately favors the not-so-wealthy at rates notably higher than the interest rates of treasury securities as compared to yearly deficits, I haven't the slightest idea why interest payments would cause me to oppose government deficit spending on a concentration of wealth principle.

Stop making up things for me to say?

My bad, I figured you were just another one of the leftist morons running around here with torches and pitchforks every time the quarterlies come out from an industry you don't like.

Edit: And if deficits really don't matter, then why stop now? Why not borrow more? Hell, borrow another $10 trillion tomorrow. Just think of all the shit we could buy.

 

[fskimospy]

Originally posted by: Engineer

Originally posted by: eskimospy

Originally posted by: Engineer

Originally posted by: GTaudiophile
Why aren't people rioting in the streets over this?

Why should they? Do you feel this in your every day life? Are you sent a bill each month with your portion to pay to the government? Until people "feel" this, they're not going to give a shit.

'Feel' what though? We already do feel the cost of government services, as they naturally consume productivity.

Do you personally feel that really? When I get a bill in the mail, I feel it when I pay it. Other than my regular taxes, which are at 50 year lows, what do I feel? With my pay down, my taxes are down. I feel less now than I did. People don't feel the deficit in the way that they feel personal bills...they just don't. Until they do, it will not matter (or change).

Well that's because the deficit isn't the same as a personal bill. There are inflationary pressures we feel from the debt, but mild inflation is actually a good thing. As I've said before, it's not like the government's debt is somehow borrowed productivity from the future, while personal debt most certainly is. That's an important difference, and it's a big reason why we will probably never 'feel' the debt like that.

 

[BoberFett]

Originally posted by: eskimospy

Originally posted by: Engineer

Originally posted by: eskimospy

Originally posted by: Engineer

Originally posted by: GTaudiophile
Why aren't people rioting in the streets over this?

Why should they? Do you feel this in your every day life? Are you sent a bill each month with your portion to pay to the government? Until people "feel" this, they're not going to give a shit.

'Feel' what though? We already do feel the cost of government services, as they naturally consume productivity.

Do you personally feel that really? When I get a bill in the mail, I feel it when I pay it. Other than my regular taxes, which are at 50 year lows, what do I feel? With my pay down, my taxes are down. I feel less now than I did. People don't feel the deficit in the way that they feel personal bills...they just don't. Until they do, it will not matter (or change).

Well that's because the deficit isn't the same as a personal bill. There are inflationary pressures we feel from the debt, but mild inflation is actually a good thing. As I've said before, it's not like the government's debt is somehow borrowed productivity from the future, while personal debt most certainly is. That's an important difference, and it's a big reason why we will probably never 'feel' the debt like that.

So that money that's simply a payment of the interest on our debt couldn't be put to any other use?

What kind of box did you pull your economic degree from? Cracker Jack or Lucky Charms?

 

[babylon5]

Originally posted by: BoberFett

Edit: And if deficits really don't matter, then why stop now? Why not borrow more? Hell, borrow another $10 trillion tomorrow. Just think of all the shit we could buy.

What should we get first? So much choices...

 

[Patranus]

Borrow and spend to spur borrowing and spending to solve the problems brought on by too much borrowing and spending...

...ya, sounds like a great plan.

 

[fskimospy]

Originally posted by: BoberFett

Originally posted by: eskimospy

Well that's because the deficit isn't the same as a personal bill. There are inflationary pressures we feel from the debt, but mild inflation is actually a good thing. As I've said before, it's not like the government's debt is somehow borrowed productivity from the future, while personal debt most certainly is. That's an important difference, and it's a big reason why we will probably never 'feel' the debt like that.

So that money that's simply a payment of the interest on our debt couldn't be put to any other use?

What kind of box did you pull your economic degree from? Cracker Jack or Lucky Charms?

You're asking if money that we're paying to ourselves could be put towards any other use? Of course, and it is.

I'm not saying that high levels of government debt are a good thing. High enough government debt can cause big time inflation, and that's really bad. What I am saying is that government debt is nothing like your personal debt. Government checks can literally never bounce, I assume yours can.

 

[Darwin333]

Originally posted by: eskimospy

Originally posted by: Darwin333

The point I am trying to make is I think your analogy is oversimplified. The internal debt we hold isn't like my wife loaning my $20 out of her (or the families) disposable income and therefor not effecting future obligations. We are spending money that must be paid back in order to meet our obligations. We will either have to raise taxes or issue bonds to cover it and unfortunately, I don't see how we could possibly raise taxes enough.

No, it doesn't have to be paid back, nor would you ever pay it all back. Government debt can (and will) be rolled over in perpetuity.

Furthermore, the idea that borrowing money from ourselves is borrowing future productivity from our own country is a completely nonsensical idea. We don't have a DeLorean, and I'm not even sure half the cars we make can get up to 88 miles per hour anymore regardless.

I think it's a really vital point to make that a lot of people miss, because they think of public debt as something akin to private debt: our children will get to consume whatever it is that they produce, nothing more, nothing less, the same that we do today. No matter what debts we run up internally in this way, there's simply no way that we could create a situation in which our children would somehow have to sacrifice their productivity to 'pay back' people here in 2009 for the productivity we somehow borrowed. (how would they even if they wanted to?)

We "borrow" $100 out of the SSI trust fund today and spend it. That $100 was taxed from someone so we are spending current productivity right?

Fast forward to the point SSI runs out of money because the trust fund (or whatever its called) is filled with IOU's. Does anyone believe a politician is going to tell Grandma that her check is getting cut? Hell no, they are going to either issue bonds to cover the IOUs or increase taxes both of which cost future productivity right?

I understand your point that it doesn't HAVE to be paid back but in the political reality that I see, there is no way in hell we don't somehow make the payments.

2nd problem that I see, the politicians have been spending the SSI surplus, therefor adding that money to the economy, for years. When there is no longer a surplus do you think they will cut spending (Hint: it happened this year due to greatly reduced tax receipts). The bottom line is they are using the surplus as income so when the surplus runs out not only will our income go down but expenditures will start rising at the same time.

The credit numbers that just came out make matters even worst. The .Gov is trying to pull forward demand with debt to replace consumer spending in an attempt to limp the economy along until the consumer recovers. If the consumer doesn't come back as fast as the government expects, what are the consequences of the government continuing its policy of pulling forward demand via debt?

One last question, in your opinion, what is the maximum (as a % of GDP) yearly interest payments on .gov debt that our economy can realistically afford?

 

[Zensal]

Alright, I'm missing a few parts and need some clarification.

Internally held debt is like borrowing $20 from my wife. I take the money and spend it on something now. Later, I have to pay her back, with interest, for a total of $22. That is not in my budget to pay her back because I am constantly deficit spending, so I borrow $22 from my son and give it to my wife. Hence the eternal debt that we never have to pay back. Now I owe my son $22 and my total internally held debt has increased, and I just cycle it back and forth between generations.

Now some questions.

As the "Head of Household/Govt" I know that I can inflate the value of money so that $20 = $22. Why would people borrow from me in the first place if I am really just deflating my money?

Typically people buy govt debt in terms of T-bills and govt bonds right? I thought those were at very, very low rates since 2001, so why would people still invest if inflation is 2x - 3x interest? And if no one is investing, who is buying all this publicly held debt?

 

[fskimospy]

Originally posted by: Zensal
Alright, I'm missing a few parts and need some clarification.

Internally held debt is like borrowing $20 from my wife. I take the money and spend it on something now. Later, I have to pay her back, with interest, for a total of $22. That is not in my budget to pay her back because I am constantly deficit spending, so I borrow $22 from my son and give it to my wife. Hence the eternal debt that we never have to pay back. Now I owe my son $22 and my total internally held debt has increased, and I just cycle it back and forth between generations.

Now some questions.

As the "Head of Household/Govt" I know that I can inflate the value of money so that $20 = $22. Why would people borrow from me in the first place if I am really just deflating my money?

Typically people buy govt debt in terms of T-bills and govt bonds right? I thought those were at very, very low rates since 2001, so why would people still invest if inflation is 2x - 3x interest? And if no one is investing, who is buying all this publicly held debt?

The government will always have a buyer for its debt, because it can price it wherever it wants as it controls the currency. (government debt in the currency it controls by definition cannot default, so it is a 100% sure thing) The real risk recently has been deflation, not inflation. People buy securities at exactly the percentage they think they are worth.