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Posted
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msmash
ry 09, 2026 @09:59AM
from the closer-look dept.
Abstract of a paper on NBER: We construct an international panel data set comprising three distinct yet plausible measures of government indebtedness: the debt-to-GDP, the interest-to-GDP, and the debt-to-equity ratios. Our analysis reveals that these measures yield differing conclusions about recent trends in government indebtedness. While the debt-to-GDP ratio has reached historically high levels, the other two indicators show either no clear trend or a declining pattern over recent decades. We argue for the development of stronger theoretical foundations for the measures employed in the literature, suggesting that, without such grounding, assertions about debt (un)sustainability may be premature.
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The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
byAnonymous Coward writes:
Then you don't have to worry about this shit.
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byLocke2005 ( 849178 ) writes:
I respect the fiscal conservatives who advocate for that. Unfortunately they keep losing the argument in our "Greed is Good!" congress. Trump is NOT a fiscal conservative!
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bydj245 ( 732906 ) writes:
These people are all about balancing the budget until they get in charge, then it's just more spending on what THEY want. Same story with states rights / local authority.
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byfahrbot-bot ( 874524 ) writes:
These people are all about balancing the budget until they get in charge, then it's just more spending on what THEY want.
And tax cutting. Clinton had a surplus of $128 billion during his hast budget, with a GOP-controlled Congress that demanded spending cuts. Congress could have used that to pay down the debt, but George W. Bush and his GOP-controlled Congress used the money to fund the the Economic Growth and Tax Relief Reconciliation Act of 2001, commonly known as the Bush tax cuts. Clinton was the last administration to have a budget surplus.
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bySkjellifetti2 ( 7600738 ) writes:
Congress could have used that to pay down the debt, but George W. Bush and his GOP-controlled Congress used the money to fund the the Economic Growth and Tax Relief Reconciliation Act of 2001, commonly known as the Bush tax cuts.
Part of the blame for that falls on Alan Greenspan [federalreserve.gov] who was worried that paying down the debt would have implications for financial markets that depend on Federal debt as a proxy for what is known as a "risk free" investment against which other investment risk is measured. He was also concerned that long term, once the debt had been paid off, it would mean that the Federal Gov't would have to start investing its surplus in non-government private debt. This would allow the gov't to choose which private instruments to buy, leading to politicization of the surplus investment decisions. Those concerns helped give Bush and the GOP an excuse for their tax cuts.
Clinton was the last administration to have a budget surplus.
That surplus was much less than the $128 billion you quote. Revenue includes both income tax and Social Security taxes while expenditures include both the budget items and Social Security payments. Because us Boomers had not yet started to retire, annual Social Security payments were less than the Social Security taxes collected. If the future Social Security payments had been included on the expenditure side, the total surplus would have been less than $50 billion in 2000 [factcheck.org]. Basically, Clinton was using current Social Security tax revenue to help balance the budget at the expense of future Social Security payments, although fact check says the whole was still in surplus. But IIRC, it was Reagan who began doing that in order to make his own deficits look better than they technically were.
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bySkjellifetti2 ( 7600738 ) writes:
And to add another point, let us remember that Clinton had a nice "Peace Dividend" that allowed cuts to the Defense Dept after the collapse of the Soviet Union.
byfahrbot-bot ( 874524 ) writes:
That surplus was much less than the $128 billion you quote. ...
I just pulled that number from a few articles that came up on Google.
Thanks for the expanded explanation.
byjacks smirking reven ( 909048 ) writes:
And not only do they cut the tax rate they also cut the ability of the nation to collect the taxes at the rates they set. The tax gap is somewhere in the realm of $600-700B per year, that is money owed that is not paid. We can kvetch about services and such but that is literal theft, if you pay your taxes this is just letting other people skirt out of doing the same.
In 2022 with the Inflation Reduction Act allocated an additional $80B to the IRS to boost staffing after years of deliberate cuts, update systems and enable them to close the tax gap, mainly focussing on the +$400K earners and it was working, Overall, with the additional funding, the IRS made remarkable progress in the 2024 fiscal year, securing nearly $100 billion through its audits of filed tax returns. This represented an additional $25 billion in revenue from audits when compared with the year prior to the agency’s budget boost.
Republicans fought tooth and nail against it and when given the chance starting taking those funds away and thus we are leaving *legally owed* money on the table.
IRS Analysis: Inflation Reduction Act Funds to Raise More Revenue Than Expected [thomsonreuters.com]
New IRS funding boosted tax enforcement and improved taxpayer services during the Biden administration [clemson.edu]
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byshanen ( 462549 ) writes:
Feeding the troll didn't lead anywhere, did it? Notwithstanding your potentially ponderous handle.
Not that I have any constructive solution approaches at this point. I think the die has been cast. The pressure to spend more money is coming from inside the (White) House. For some years we had some sensible international negotiations to reduce military spending along the lines of "I'll reduce mine if you reduce yours." I can't detect any of that going on now, but rather the pressure is pretty much on every go
byjonsmirl ( 114798 ) writes:
What happens when interest expense exceeds 50% of tax collections? The U.S. government's interest expense consumes a significant chunk of its revenue, recently reaching around 19% of all federal revenue in FY 2025, with projections suggesting it could rise to 27% by 2035. Maybe we can support all of that debt, but we won't have any more government spending programs.
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byranton ( 36917 ) writes:
What happens when interest expense exceeds 50% of tax collections?
That problem, in isolation, is easily solved by increasing tax revenue. The real problem would be if there wasn't enough wealth in the country to tax. The US is #1 in total wealth and #1 in total wealth per capita among the top 75 highest population countries (small countries should be compared with individual US states or even cities). The US is #39 in external debt to GDP ratio and #91 in external debt to wealth ratio. The US is just fine.
Posturing about the US federal debt level is just politics. The por
byharuchai ( 17472 ) writes:
the fiscal conservatives would sooner submit to gender reassignment before they agree to wealth transfer away from the hoards of the "job creators"
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byrichardellisjr ( 584919 ) writes:
You can't tax your way out of it. If currently we're taxing say 10, the government spends 12. If you increase tax revenue to 13, the government will spend 16. The only way to fix the debt problem is to spend less than the government gets in revenue. Even if you get a balanced budget amendment and then increase taxes, the government will just spend all of it and not pay the debt. We need an amendment that says something like "The government will not spend more than it gets in revenue, and if there's an
byfluffernutter ( 1411889 ) writes:
Because the only people that pay full taxes is the middle class.
byblue trane ( 110704 ) writes:
Why can't you sell new bonds faster than old ones are redeemed, to the Fed if necessary (which forgives the interest)?
bymisexistentialist ( 1537887 ) writes:
Debasement. No reason why people can't get poorer and poorer while the elite stay in power and stay wealthy, lots of examples of countries that have operated that way for generations.
byZekolas ( 1029166 ) writes:
Its politically suicide
The voting public wants goverment services and welfare , while also not paying for it. I hate everyone who "blames" the goverment for this, when the people vote for people like Trump who keeps promising to raise spending and cut taxes
The goverment racking up debt is just doing what the voting public want, the voting public wants pensions, medical coverage for old people, a strong military , school funding, ect.
They also want low taxes. If someone ran on the promise to raise taxe
byjonsmirl ( 114798 ) writes:
Total government spending federal, state, local in total is around $10T with $7T of that being federal spending. There are 133 million households in the USA. Now divide. That works out to $75,000 per household per year in government spending. The US median household income is $83,000.
Does anyone really think we need more government spending? Maybe the problem is that the existing spending is not being effectively utilized.
byjacks smirking reven ( 909048 ) writes:
That's why taxes are progressive and not flat.
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byjacks smirking reven ( 909048 ) writes:
In absolute amounts? No, that's silly. In term's of the effective percentage of income, sometimes yes in fact the wealthy pay less. Not always to the poor but the middle class and upper middle class. That's just a fact, I mean, capital gains alone can net you a lower rate.
they are taxed to hell and back again
That doesn't mean anything, yes there's a line but historically, in the US, the upper bracket's are low to middle-ish, they've been higher.
There's also a $600B yearly tax gap primarily from the wealthy so I would ask can we at least agr
byComboman ( 895500 ) writes:
>> There are 133 million households in the USA. Now divide. That works out to $75,000 per household per year in government spending. The US median household income is $83,000.
You are comparing mean (simple average) spending with median income. Mean income is higher than median income due to income inequality.
bynewcastlejon ( 1483695 ) writes:
You are comparing mean (simple average) spending with median income. Mean income is higher than median income due to income inequality.
Are you sure you don't have that backwards?
byComboman ( 895500 ) writes:
Quite sure. A simplified example: If there are 9 people in the US, and their incomes are $2, $4, $5, $5, $5, $9, $12, $28 and $100, the median income is $5 (the middle value in the ordered list) and the mean is $18.89. It doesn't take very many billionaires to push the mean higher than the median.
bydfghjk ( 711126 ) writes:
"That works out to $75,000 per household per year in government spending. "
No it doesn't. Households do not carry the entire burden of government spending, the government has many sources of revenue other than taxation of private citizens.
Your child may have received a dollar from the tooth fairy last year, but that doesn't mean that there is $10T in government spending per tooth per year. The math may work but it doesn't say what you want it to.
"Does anyone really think we need more government spending?"
byinnocent_white_lamb ( 151825 ) writes:
""That works out to $75,000 per household per year in government spending. "
No it doesn't. Households do not carry the entire burden of government spending, the government has many sources of revenue other than taxation of private citizens."
It's still $75,000 per household per year in government spending, regardless of the source of the funds.
"That sandwich costs $4.95" doesn't change if the source of the funds is me or my grandmother or the guy across the street.
byjonsmirl ( 114798 ) writes:
Pretty sure that all taxes are paid by humans in one form or another, I don't think robots are paying taxes yet. Sure you can tax a corporation, but you are just indirectly taxing the shareholders, and they are people too.
You vastly overestimate the taxation capacity of the economy. Go read the fed's papers on optimal taxation and you will see that the US is close to the optimal rate right now. The theory of optimal taxation is to maximize tax collections over time. Sure you can raise taxes a lot right no
byjacks smirking reven ( 909048 ) writes:
Which Fed paper says that because the Fed publishes a bunch of papers from economists but as far as I know the Fed itself does not take a stance on "optimal taxation" as there is conflicting papers on that. Even if we just go by Laffer that really only says the optimal rate is somewhere between 0 and 100, IE it exists, not where it is.
Never-mind that Laffer himself was the tax consultant on the Kansas experiment [wikipedia.org] which was based on the prediction that cuts cuts would lead to jobs and economic growth and tha
byMr. Barky ( 152560 ) writes:
I really wish people didn't think that businesses were somehow separate from people. You tax a business, their prices go up.
I've said this before... I honestly think the best tax system would be tax business 0%. Taxes should be only money individuals. Capital gains should not be treated specially. But I know this will never happen.
bydryeo ( 100693 ) writes:
So what you are saying is that all wages paid by corporations should go up so the workers can pay their newly increased taxes. That would of course include new businesses that aren't yet profitable making it harder for them to become profitable as they can no longer write wages off.
Or perhaps you mean the debt should be increased to save corporations more money.
I don't think lowering peoples take home pay would be positive.
byMr. Barky ( 152560 ) writes:
I do not mean that the net taxes ought to be different (well, actually, I think they need to be higher because the deficit spending can't last forever, but that is a complete different debate). Also note: there can still be a debate over relative rates - "tax the rich" or "flat tax" or whatever.
The principal problem to me is that businesses concentrate power. This in turn gives the largest ones leverage over lawmakers to bend tax laws in their favor (at the same time as acting as a large corrupting force).
bydj245 ( 732906 ) writes:
Unlimited corporate and billionaire money going to re-election funds is a significant factor as well. The ultra wealthy can avoid paying any taxes at all by borrowing money against their stock holdings until they die; the loan is then settled without much taxation on the heirs.
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byjacks smirking reven ( 909048 ) writes:
That is a "loophole" I have heard proposals of law changes to close, if you want to take out a loan with stock holding as the collateral you should be taxed as if you were cashing out that stock.
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byMr. Barky ( 152560 ) writes:
The huge hole is that capital gains basis is reset upon death. So someone who inherits uses as a basis the price at time of death (or something like that). Essentially meaning families pay no capital gains,
bymhotchin ( 791085 ) writes:
The basis is reset, but only because the *estate* pays the taxes on the gain to that point. The term you are looking for is 'deemed disposition'.
bysdinfoserv ( 1793266 ) writes:
no, it isn't political suicide. when the GOP does not have the white house, they scream about 'FISCAL SPENDING" and BALANCED BUDGET. When ever they have the white house, they always deficit spend more than the democrats by giving away money to the rich with tax cuts. If it were political suicide, the GOP wouldn't have won the white house since Reagan's tax cuts to the rich required 11 tax increases on the middle class in his 8 years.
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bydrinkypoo ( 153816 ) writes:
Itwould have been political suicide, but Reagan cut education alongside taxes on the rich, so everyone who would have complained among the voting Reich is too stupid to understand what happened.
bydfghjk ( 711126 ) writes:
"The goverment racking up debt is just doing what the voting public want..."
That's false. Republicans run up the debt so they can look good while in power, then campaign against the debt when they aren't. It's called "two Santas" and it a primary foundation of their strategy. Generally speaking, Republicans raise debt by lowering revenues, not through increased spending, although they like military spending.
"the voting public wants pensions, medical coverage for old people, a strong military , school fun
bythegarbz ( 1787294 ) writes:
when the people vote for people like Trump who keeps promising to raise spending and cut taxes
At no point during the campaign has Trump at any point promised to raise spending. I don't know what weird alternate-universe you were in in 2024, but it wasn't the one with our Earth on it.
He actively ran on a platform of reducing wasteful spending to reduce the deficit. The fact that he was either lying through his teeth (very likely) or couldn't do the basic primary school math on his own policies (also likely), or both (almost certainly) is not withstanding.
Sure every analysis said his policies would co
byRobinH ( 124750 ) writes:
While I'm generally a fiscal conservative, you can't *always* balance the budget. The average person thinks that when the government spends more than it takes in, it's just like a household spending more than it has in income, and that's simply not true. When the government spends more, yes it has to borrow, but it's crucial to understand what the money is being spent on. If a homeowner borrows money on a credit card to buy a television, that's bad debt. But if a business borrows a million dollars to bu
byfortfive ( 1582005 ) writes:
As you suggest, debt at the US Federal Government level is so much more complicated, not least of which enforcing collection as a result of default is problematic for debt holders. It's extremely complicated, perhaps so complicated that no-one really knows, but the short answer is that since the money is technically a part of the US federal government it simply doesn't have the same meaning as household, business, or even state/local government debt. It's really more a tool for managing international financ
byblue trane ( 110704 ) writes:
When will you recognize that balanced budgets are only popular in theory, to zero-sum thinkers who ignore the reality that we've been printing faster than inflation for the etire history of the country?
byHiThere ( 15173 ) writes:
They aren't popular, but they would be more stable. Unfortunately, that means paying for what you spend, and nobody wants to do that. Every administration tries to find new ways to avoid it.
So you're correct, it's never been done. Rome engaged in counterfeiting the gold currency, so it's not just the US, and not just democracies.
In principle, inflation is just paying back the amount you borrowed. And remember, there is no good measure of wealth. (As the Spanish found when gold from the new world floode
bydryeo ( 100693 ) writes:
Canada ran a surplus for 8 years a couple of decades back. All the Conservatives did was bitch that the Liberals weren't lowering taxes instead of paying down the debt and when they finally formed government, it was a C$65 billion deficit, though in 2008, it was hard to avoid a deficit and perhaps the tax cuts helped the economy.
Note that the reason for the austerity was the governments credit rating being lowered and we're still haven't recovered from that austerity.
byHiThere ( 15173 ) writes:
If you depend on your credit rating, it's because you are borrowing rather than paying up front. And, yeah, just about everybody does that. But it's still borrowing.
OTOH, paying down the debt is the proper move...IF you depend on foreign trade. (Probably even moreso if you don't.) So your "Conservatives" weren't fiscal conservatives.
And, yes, sometimes it's hard to avoid a deficit. Sometimes, in an emergency, it's even necessary. But it should be paid off as quicly as feasible.
bydryeo ( 100693 ) writes:
Mostly agree, and yes the debt had grown too large. Borrowing for things like infrastructure can be a good move, especially if the infrastructure generates more wealth then the interest on the debt. I'm not an economist and generally run my life debt free so can't really comment on how much debt is acceptable. I do think when times are good, debt should be paid down, rather then more tax breaks.
byfluffernutter ( 1411889 ) writes:
Yes Musk thought that would be easy didn't he... The truth is that balancing the budget generally means a worse life for citizens because you need to take almost all services away. Education suffers, and people literally die when health support ends.
bysupabeast! ( 84658 ) writes:
Campaign finance reform and anti-corruption laws come first. We canâ(TM)t balance the budget when anybody can bribe politicians for handouts and tax cuts.
byreanjr ( 588767 ) writes:
What does that mean to you? That we spend our tax revenue and continue going further into debt? That we do interest only payments and continue to use debt as a driver for inflation? Or that we pay down the existing debt?
byMspangler ( 770054 ) writes:
Easier said than done of course.
1.7 trillion deficit, 170 million workers and it comes out to an extra $10,000 in taxes each.
Or by happy coincidence Medicare plus Medicaid is also 1.7 trillion. Cancel those two programs and you would be close to balanced.
bylarryjoe ( 135075 ) writes:
Then you don't have to worry about this shit.
Balancing the budget immediately solves the deficit problem. It does nothing for the debt problem, which requires extra money to pay down the debt.
However, the super huge catastrophic problem is that balancing the budget only solves the deficit problem for the present. Cutting off a trillion dollars of federal money will cause the US economy to enter an immediate recession and shortly thereafter a depression. Collected tax revenues will plummet, which will cause even more tightening of federal spending,
byLocke2005 ( 849178 ) writes:
Donald Jenius Trump!
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byArchieBunker ( 132337 ) writes:
However no expanse shall be spared when it comes to hassling everyone who isn't MAGA.
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bythrasher thetic ( 4566717 ) writes:
You are amazingly retarded.
byrsilvergun ( 571051 ) writes:
You can take back the 80 trillion dollars we have given to .1% since the 1960s. We can just take it back.
If that's too much for you then you could implement Medicare for all which according to the Congressional budget office would save half a trillion dollars a year and plow those savings into the national debt. Focused on the debt we are overseas and eliminate the Trump tax cuts for the extremely wealthy, keeping the tax cuts that you yourself got, and again the debt gets paid off.
But as usual there is a republican in the white house so deficits no longer matter and neither does debt.
If Donald Trump doesn't get a third term then we're going to have a democrat in the White House and deficits will matter again as will the debt...
The point is the national debt of America is a non-issue used to scare people who don't understand how national economies work and to steal money from them.
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bydfghjk ( 711126 ) writes:
"If Donald Trump doesn't get a third term then we're going to have a democrat in the White House and deficits will matter again as will the debt..."
A real optimist, huh? It's cute that you think there will be "terms" in the future. Donald Trump will not leave office, he will be forcibly removed or will die in office, there is no matter of a "third term", they are feeling that out but just canceling elections is easier to achieve.
Trump was not eligible to run in 2024, he participated in an insurrection and
byrsilvergun ( 571051 ) writes:
The individual states handle them and the swing States here are mostly held by democrats.
Voter suppression allowed Trump to win last time, there is solid evidence that 7 million people were denied the right to vote.
The funny thing is the Democrats were in a position to prevent that voter suppression they just didn't.
Democrats don't like wielding power. They prefer the run committee hearings and meetings and be general administrators. So they have a tough time dealing with actual fascists. Voters
byHiThere ( 15173 ) writes:
Actually, the national debt is about to matter a bunch more, because the dollar is starting to slip as a reserve currency among other countries. Perhaps we should watch the renminbi (China) to dollar ratio. (OTOH, the pound held up pretty well for over a decade after Britain stopped being the "top country".)
byhwstar ( 35834 ) writes:
Historically, the Jubilee was used in the Roman Empire to wipe out all debt.
Suppose the US government had one and then passed a constitutional amendment to balance the budget and prohibit deficit spending. Sure, the bond holders would be left with nothing, (Including all retirees who invested in government bonds), and a very deep economic depression (along with more deaths of people with severe health conditions) would occur as entitlements such as social security, medicare, and medicaid and military spendi
byjonsmirl ( 114798 ) writes:
You need to consider the currencies. The Romans had metals based hard currencies. Try doing this with a fiat currency like the USD and you'll be toting wheelbarrow loads of cash to the grocery store. Look at what is happening in Iran right now with loss of confidence in the currency, 56% inflation in a month.
byblue trane ( 110704 ) writes:
Are you saying some other country will become too the US what the US is to Iran? Which one would you trust with your money?
bydryeo ( 100693 ) writes:
The Roman's often debased their currency, starting with Nero with not much different results as printing fiat money. Interesting article on it, https://www.unrv.com/economy/c... [unrv.com]. To quote part of the article,
For centuries, Roman coins were struck from gold, silver and bronze of relatively high purity, ensuring that merchants, soldiers and citizens alike had confidence in their intrinsic value. Over time, however, external pressures - from military expenditures to dwindling mineral resources - drove the impe
byznrt ( 2424692 ) writes:
So what is better, living with the debt burden while managing it, or wiping the slate clean and pressing the reset switch?
i don't think increasing defense budget by 50% could be considered "debt management", and that would be the icing on the cake. also, you can't really live on debt indefinitely if one third of your bonds are held outside and are shrinking and uncertainty makes finding creditors progressively harder and interest rates higher. all of which would seem to point to the latter, a reset, and particularly in the form of war, which would inevitably be global. two birds one stone if it works out. a total clusterfuck i
byLocal ID10T ( 790134 ) writes:
i don't think increasing defense budget by 50% could be considered "debt management",
All dictators know that they rule only so long as the military backs them. We must increase military spending to reward the loyal service of our military...
byznrt ( 2424692 ) writes:
America on the other had just found $600 Billion dollars of fraud. It could increase its military spending from 1 Trillion to 1.5 Trillion and still use the other $100 Billion
that figure is a wild estimate and whatever the figure is that money is gone. it's only good for chest-thumping while the big fraud from the higher ups continues unabated. that's where a big portion of those 1.5trillion will go, right? oh and it's also good for justifying slashing welfare which will surely have some impact on consumption and economy. wait, why is unemployment hitting records? try again.
America's interest rates are also a tiny fraction of Russia's 20%
that was 2024. it's currently 16% and trending down. btw, russia's debt to gdp is around 20% (not 120%) an
bydfghjk ( 711126 ) writes:
Given that a lot of US debt is held by other countries, a deep depression could well be followed by an invasion. A drastic reduction in standard of living is a sure thing. While it's "bond holders" that would be "left with nothing", a large portion of those bond holders is the Chinese government.
byblue trane ( 110704 ) writes:
How come during the last Great Depression the US won a world war?
byMr. Barky ( 152560 ) writes:
Because the Russians helped out? They played a bigger role than most US histories recount. Note: I am not defending current or past Russian policies... but the reality is that without the Russians taking a huge, huge toll, Hitler would have been very hard to defeat. American histories focus on the greatness of America but there was a larger war going on that didn't have a lot to do with Americans except a common enemy.
byDarkOx ( 621550 ) writes:
Sorry can't get behind using interest in a measure of indebtedness because its already the mix implicitly.
More debt generally should be more GDP in almost all cases, other then perhaps paying tribute to another nation or something, and more debt is generally always going to mean more interest unless people are lending for free. So the two are really coupled in exactly the same way the more traditional measure debt-to-GDP are.
but...
Interest is affected by the demand for government debt which is of course tie
bycoofercat ( 719737 ) writes:
Instead of interest on its own, how about the percentage of your tax take that's required to pay that interest?
If that percentage gets too high, then people just see you taking loads of tax off them, but "nothing" happening in return - which means pitchforks and lynching. If the percentage is too low, then you're perhaps missing an opportunity to invest in some infrastructure that would get your tax take higher and ultimately result in a *lower* percentage, even though your national debt was actually higher
byDarkOx ( 621550 ) writes:
Not a bad plan but we could get the same impact just showing tax pays what portion of federal revenue was used to pay interest on debt. I guess that is not entirely accurate as there are federal revenues that we don't nominally consider taxes, but that is pretty small portion.
It might not matter much either as its all fungible. It looks for FY2025 (ended in October) about 19 cents of every federal dollar went to interest. So you could reasonably claim that 19% of everyone individual liability goes to inte
bydfghjk ( 711126 ) writes:
The two metrics are the same as long as interest rates are stable. Historically they have been because the US government is the safest borrower there is. That is changing, though, and if interest rates destabilize the metrics become different.
"fiscal health should not be about being healthy relative to your peers (global debt markets a.k.a interest rates) it should be about absolute terms."
The US government has had NO PEERS as long as we've been alive. Sadly, that is no longer the case, and once the US d
byblue trane ( 110704 ) writes:
How come that same prediction has been made for centuries?
byWhateverthisis ( 7004192 ) writes:
I prefer interest to GDP, and probably better interest to tax receipts, because it's more indicative of when a problem might surface. Debt is a balance sheet item, it carries over year after year. GDP is an annualized number, so even from a time-scale perspective they have very little relationship. Tax receipts are not quite as good because unlike a business, the government has the ability to essentially print money. But the current measure doesn't tell us anything; when and at what percent of debt-to-
byceoyoyo ( 59147 ) writes:
Debt to GDP (or tax revenue) measures the risk. It's the thing that indicates when a problem *might* arise. Interest to X measures the already existing problem.
byWhateverthisis ( 7004192 ) writes:
THey use it to measure risk, but it doesn't measure risk at all. What happens when debt is 300% of GDP? 500%? Does it matter? if the government can cover the payments and still make essential services then it doesn't matter. However 50% debt to GDP with interest payments that a government can't cover will lead to inflation or cuts in services.
No, they use it as a normalizing factor, to measure nations of different strengths relative to each other. But even with a normalizing factor there's a huge
byceoyoyo ( 59147 ) writes:
The size of the payments are a measure of the present problem. The size of the actual debt is a measure of risk because it exposes you to the chance of greater interest payments (i.e. the problem) if interest rates go up.
if the government can cover the payments and still make essential services then it doesn't matter.
IF. Also, it does matter even if the government doesn't default. If you pay, say 30% of your budget as interest then that means a) your taxes have to be higher than otherwise or b) your deficit
byblue trane ( 110704 ) writes:
Is this why the Fed forgives interest on the Treasuries it purchases?
byAnonymous Coward writes:
:-) Easy to do when you can just print whatever you need
byBranMan ( 29917 ) writes:
But at least you get the chicks for free!
byNewID_of_Ami.One ( 9578152 ) writes:
Debt is fine, just a way to cover/fund your investments till your returns catch up, but an ever increasing debt level trend is bad. By any yardstick or ratio you use.
Unless you are investing in significantly better or more profitable stuff continuously year on year - which is improbable when dealing with government or big businesses.
Obviously it is not possible to have any absolute number for good or bad, only the trend
But historically, governments have usually solved it by taking over assets of other coun
byblue trane ( 110704 ) writes:
Why isn't Japan a hyperinflationary failed state?
bykurkosdr ( 2378710 ) writes:
Because Japan's citizens buy all that government debt, something the average American will never do. And even then, the Japanese government is slowly running out of ideas.
byPseudonymous Powers ( 4097097 ) writes:
YOU, AN INDIVIDUAL CITIZEN: broke, stupid, irresponsible, immoral, bound for debtor's prison
THE NATIONAL GOVERNMENT: savvy, growth-minded, admirable, trustworthy, gotta spend money to make money
byjacks smirking reven ( 909048 ) writes:
Yes, actually. Me an individual economic actor cannot create currency, I cannot tax to destroy currency or raise revenue. I have to work on timelines of quarters, government can work on timelines of decades.
The finances of a sovereign nation with currency control are nothing like what an individual or business has to manage. This is why "run the government like a business" is somewhat incoherent. It's a good soundbite but that's all it is.
byvolcan0 ( 1775818 ) writes:
You were doing pretty good until about half-way.
bysdinfoserv ( 1793266 ) writes:
One of the beauties of inflation is that is it lowers the debt. Double inflation and you 1/2 the debt.
bywakeboarder ( 2695839 ) writes:
The system will balance it self out. If you don't charge taxes for government spending, it will end up as debt and then they can use inflation to devalue everything else to 'tax' money for the spending. The nice thing about it is you also tax everyone who holds a dollar, including billionares and those outside of your country who hold dollars.
byTailhook ( 98486 ) writes:
One very good reason to care is interest. The widely cited figure for 2024 was $880 billion of interest, so 103% of the entire DOD. Abject clown world interest figures.
Apparently, that's not enough, so we need experts to develop helpful new rationalizations for why we can go on racking up more, and fund all our fabulous schemes, like helping refugees invest in real-estate in the country they supposedly escaped from, because that's what our virtue requires of us.
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bykurkosdr ( 2378710 ) writes:
What most people here forget is that, unlike countries like Greece or France, the US owns the central bank that defines the interest rate for the US dollar. So, all the government has to do is appoint someone who wants low interest rates to the chair of the Federal Reserve, and the interest rates will go down. So, the US government doesn't care about the interest rate because it knows it can always print more money (which also increases the GDP).
tl;dr: The US governments are treating money as fun coupons
byRightwingNutjob ( 1302813 ) writes:
Borrowing expands the money supply.
Private borrowing extends it as does government borrowing.
Private lenders tend to be stingy...they want to earn back a profit on their investment so they require collateral. Either real property or a cut of future earnings on economically productive activity. This is why you can't just get a loan...you either have to put up something of value or convince your lender you will make money with your investment.
Governments generally don't make money, they raise taxes. And they
byDaChesserCat ( 594136 ) writes:
First point: just because you can measure it, doesn't mean it is useful. The truly useful metrics typically require some significant analysis, which tends to make it much easier to "game" the numbers.
Case in point: unemployment rate. It's only people who unemployed and are actively looking for employment. If you've managed to get on disability, you are no longer looking, so you don't count against that metric. Many states were, at one point (are?), seeking to get their unemployed people on federally-paid
bydrinkypoo ( 153816 ) writes:
Many states were, at one point (are?), seeking to get their unemployed people on federally-paid disability so they wouldn't qualify as "unemployed" anymore
So what? The determinations of disability are made by the SSA, so all the state can do is assist with applications. Most disability applications are denied on the first application.
And we wonder why Social Security is so badly under-funded.
Not if we have a brain. Then we know it's the contribution cap.
byFeelGood314 ( 2516288 ) writes:
The economy has two inputs - Capital and Labour.
The economy has two outputs - Consumption and Capital
Almost all of our governments spending is directed towards immediate consumption. Thus when the government borrows to spend even more, they increase the amount of consumption in the economy. The economy doesn't magically make more of everything. So government spending crowds out capital creation.
Interest on the government debt goes eventually to individuals. Depending on who those individuals are the interest could go to more capital or be a transfer of consumption from future tax payers to the present investors.
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bySkjellifetti2 ( 7600738 ) writes:
So government spending crowds out capital creation.
This is only true if the total consumption is equal to the ability of the economy to produce that level of consumption goods and services. The Great Depression and the 2009 housing crash are a couple of instances where consumption was much less than what could be produced and running big deficits were required to bring employment and consumption back up to what the economy could produce.
byOrangeTide ( 124937 ) writes:
Economics less political than question of what text editor you prefer.
byreg ( 5428 ) writes:
Hate to feed the trolls, but the tagline was always "news for nerds, stuff that matters." This was never a purely tech site.
byPPH ( 736903 ) writes:
The only reason why the US is able to keep pulling this off with increasing debt is that people believe in the dollar.
People MUST [congress.gov] believe. It's the law.
We simply can't have some random child point out that the emperor is in fact naked [brainyquote.com].
bydfghjk ( 711126 ) writes:
"...rich people love inflation. It means their assets grow..."
That is totally backwards. Inflation benefits debtors, the rich are not debtors.
Now, assets may grow in value to track inflation, but that is not guaranteed AND the increased "amount" returned by a sale is countered by the reduced buying power of the money. Assets do NOT benefit from inflation unless their values grows at a rate in excess of inflation.
How do people not understand this? Why is the typical /. poster so stupid? The SuperKendalli
byblue trane ( 110704 ) writes:
Has the S&P 500 index grown much, much faster than inflation?
byceoyoyo ( 59147 ) writes:
Inflation benefits debtors, the rich are not debtors.
Of course they are. Having money means you can borrow money on favourable terms. Even more than that, it means you can borrow money to do things like start or buy businesses instead of buy food. Elon Musk personally owes $13 billion dollars just for his Twitter acquisition, plus smaller personal debts, and billions more as his share of SpaceX, Tesla and other corporate debt.
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