Fix the Debt's Fuzzy Math

from the "you're a dope if you're worried about the deficit or debt" case files, part 17:

http://www.thenation.com/article/...uzzy-math#

"The deficit expanded enormously in 2008 and peaked in 2009 at 11.1 percent of GDP. But this wasn’t caused by some extravagant spending spree or an orgy of permanent tax cuts. It was caused by the fall in tax collections that occurs every time the economy goes into a downturn, coupled with the increase in spending for countercyclical programs like unemployment insurance and food stamps."

"The large deficits of recent years are not an accident caused by recklessness or irresponsibility; they’re a deliberate policy aimed at supporting the economy."

"There is no plausible story whereby private demand would increase if the deficit were to shrink."

"This means the people who want to reduce current deficits want slower growth and higher unemployment. "

"deficit hawks want to provoke irrational fears of large numbers."

Trouble is, some people profit from a shrinking economy, and they really don't care if the vast majority suffers.

For someone with an inherent distrust (bordering on hatred) of the market you sure do like dividing how much more the government spent than it plundered by the total production of the market in an attempt to marginalize the record amounts spent over what it took from the private sector.

Quote from Danman114 : For someone with an inherent distrust (bordering on hatred) of the market you sure do like dividing how much more the government spent than it plundered by the total production of the market in an attempt to marginalize the record amounts spent over what it took from the private sector.

You're complaining about normalizing the debt as a percent of GDP?

Why not just say that?

Seems clear that paying down the debt doesn't directly help the economy. However, you must realize that the interest we pay on the debt is money we can't spend on other things. Other things we could spend that money on include:
Jobs Programs
Trade Programs
Infrastructure (roads, communications, power, ...)
...


These are things that impact the economy. So while it is true that cutting the debt does not help our current economy, it is vital to our future economy. If we had cut spending in the past, we would not be paying the interest now. We would be far better off. Lets try planning for the future again instead of living only for the present.

I wouldn't recommend large cuts today. I would recommend committing to large cuts starting in the not too distant future.

Once the debit is paid down, the money we needed for interest payments could help advance our country through government or by being returned to the tax payers to reinvest (spend) in the economy.

We spent around $220,000,000,000.00 on interest payments on our debt just in 2012. That is 220 billion. I think the zeros have more meaning than the word.

Quote from jplayland : Seems clear that paying down the debt doesn't directly help the economy. However, you must realize that the interest we pay on the debt is money we can't spend on other things. Other things we could spend that money on include: Jobs Programs Trade Programs Infrastructure (roads, communications, power, ...) ... These are things that impact the economy. So while it is true that cutting the debt does not help our current economy, it is vital to our future economy. If we had cut spending in the past, we would not be paying the interest now. We would be far better off. Lets try planning for the future again instead of living only for the present.

^ This assumes the borrowed money was not used to enhance the economy with

Jobs Programs
Trade Programs
Infrastructure (roads, communications, power, ...)
etc.

IOW, if the borrowed money grows the economy, that increased productivity could more than pay for the interest.

Quote from 124nic8 : ^ This assumes the borrowed money was not used to enhance the economy with Jobs Programs Trade Programs Infrastructure (roads, communications, power, ...) etc. IOW, if the borrowed money grows the economy, that increased productivity could more than pay for the interest.

I wasn't assuming anything, but I agree with your point anyway.

I think the programs that have been past were a failure. I think a better though out jobs program or trade program might be more successfull. I mean, they really just threw money at the problem like the old IBM commercial. [youtube.com]

Quote from thikthird : from the "you're a dope if you're worried about the deficit or debt" case files, part 17: http://www.thenation.com/article/...uzzy-math#

"The Nation" eh? the self-described "flagship of the left"...maybe someone needs to tell them how their leftist policies have FAILED in EVERY country it has been tried...their own business is a failure....they have been around since 1865, and LOST MONEY in ALL years of their existence except for 3 or 4, and only exist because of about 30,000 communist donors [wikipedia.org] willing to keep throwing their money into the bottomless pit of failure that is "The Nation"

sorry, I do not need economic advice from a failed outfit that hasn't made money in over 150 years, an outfit whose policies have eventually failed each and every single time in history, resulting in a collapse of each nation's economy and society.

Just FYI, not paying down the debt leads to ever increasing interest rates, which stifles and kills the economy, as well as diverting billions of the people's dollars to paying interest instead of keeping it. It might work out in the short term, but eventually one more little straw will break the camel's back.

oh yeah, but I DO agree with you about the fuzzy debt math....if the government wasn't running a fraudulent scam using its own special rules for itself that it doesnt let anyone else use, and had to use the same GAAP accounting standards that it forces on everyone else, the REAL financial reports would report a REAL debt of $122 Trillion, not $16.5 Trillion.

Quote from Radeck : It might work out in the short term, but eventually one more little straw will break the camel's back.

Actually we could sustain the current and even more debt for a while. Eventually we'd hit a point where the interest on the debt is overwhelming, but we're no where near the point of Republican hysteria.

Quote from Radeck : "The Nation" eh? the self-described "flagship of the left"...maybe someone needs to tell them how their leftist policies have FAILED in EVERY country it has been tried... sorry, I do not need economic advice from an outfit whose policies have eventually failed each and every single time in history, resulting in a collapse of each nation's economy and society. Just FYI, not paying down the debt leads to ever increasing interest rates, which stifles and kills the economy, as well as diverting billions of the people's dollars to paying interest instead of keeping it. It might work out in the short term, but eventually one more little straw will break the camel's back.

Well said. I'm more concerned that one or more of the European countries will join Greece in default and start heaping straws onto our camel. The debt of our allies also weakens us. This is our short and medium term concern and nightmare.

Quote from Lilian : Actually we could sustain the current and even more debt for a while. Eventually we'd hit a point where the interest on the debt is overwhelming, but we're no where near the point of Republican hysteria.

really? in under 4 years the debt will be over $20 trillion. If the interest rates were to rise to a historically low 5% (it was higher than that about 10 years ago, I remember buying a 1 year CD at 7%), that will mean we will have to pay ONE TRILLION dollars PER YEAR on INTEREST ALONE, let alone pay down the principal or pay for Obamacare or the rest of the clap-trap.

that is assuming a 5% rate, which as i said is historically low...once the inevitable ratings downgrades start coming fast and furious, we will be back at the 10%+ of the seventies (and almost 20% mortgage rates !!!!!!), and TWO TRILLION per year in INTEREST ALONE.
If you don't think 20% consumer and mortgage interest rates and 10%+ inflation will drastically harm the economy, then I can't help you...I can only lead a horse to water, but I can't make him drink.

keep telling yourself that we are no where near the point of danger....but that is a lie and you are only deceiving yourself. Learn from history, and we aren't talking about ancient history here...the 1970's weren't that long ago.

Quote from Lilian : Actually we could sustain the current and even more debt for a while. Eventually we'd hit a point where the interest on the debt is overwhelming, but we're no where near the point of Republican hysteria.

How high would you go? We are over 100% debt to gdp ratio. Greece effectively failed less than 5 years after they hit that mark. They are only being held up now by the Germans and a few other countries propping them up because they are "too big to let fail" like the auto companies.

Unless the world economy starts to grow and with it ours and our tax rev, we have less than a decade before we follow Greece. We need to take this seriously and responsibly. We can cut some now and reinvest it in places that will better help our economy, then when the economy is stable, redirect those funds to pay off the debt.

If only those Bush tax cuts had paid for themselves as promised; along with the Iraq war....

I guess they did for a while before the shit hit the fan and the economy came to near collapse.

Quote from 124nic8 : If only those Bush tax cuts had paid for themselves as promised; along with the Iraq war.... I guess they did for a while before the shit hit the fan and the economy came to near collapse.

I think it had more to do with Bush pulling a Democrat move and passing Medicare Part D.

But any money you spend that doesn't earn more back is money lost from the economy and potential new debt.

The few trillion extra that Obama spent after taking office didn't help much either though. By the end of Obama's second term I expect he will have been in office when over 50% of the debt was created. This will be what he will be remembered for.