Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Will America's debt doom us?

usatoday.com

Post reply on HN
Print view View original

31–40 of 251 posts

Re: Will America's debt doom us?

#31

Post by pjc50 »

_edo wrote: post #11

> Because debt-to-GDP is apples-to-nonsense. No it's not. Debt is measured in dollars. GDP is dollars per year. Debt/GDP is $/($/yr)=yr This ratio converts debt, a number it's hard to have intuition for, to years. It tells us how many years of productivity we owe. For those of us who don't manage $30 billion in assets years of productivity probably carries more meaning than big numbers with 12 zeros.

How long do we expect roads to last? Or the investments that have to be made over someone's lifetime to enable them to retire? Even the big "high tech" weapons and aircraft investments which consume a big chunk of spending have 30-50 year project lifetime. The B-52 fleet is 55 years old, not counting the design time. Is it not reasonable to spread payment for that over the lifetime of the asset?

Re: Will America's debt doom us?

#32

Post by pjc50 »

topkai22 wrote: post #26
_edo wrote: post #11

> Because debt-to-GDP is apples-to-nonsense. No it's not. Debt is measured in dollars. GDP is dollars per year. Debt/GDP is $/($/yr)=yr This ratio converts debt, a number it's hard to have intuition for, to years. It tells us how many years of productivity we owe. For those of us who don't manage $30 billion in assets years of productivity probably carries more meaning than big numbers with 12 zeros.

His proposed alternate metric, interest as a percentage of tax revenue is also deeply flawed- it misses the obligation to pay the principal, which has tripled since the low point in the early 2000s. I like the finance wonks word for debt- leverage. Taking on debt is like going out further on a lever- the debter is more exposed to swings in the overall economy. While it's worked out fine so far, a high debt to gdp rat…

But so long as the debt rollover remains straightforward, the principal never has to be repaid. Large parts of the economy probably couldn't survive repayment of all outstanding treasury bonds, they're too useful. They behave more like huge denomination bills with a tiny coupon.

Re: Will America's debt doom us?

#33

Post by pjc50 »

MuffinFlavored wrote: post #15
crusso wrote: post #4

Like the housing bubble, our debt hasn't been a problem and it's not going to be a problem right up until it is a problem. It will be a black swan event and afterward everyone will claim that they saw it coming and "the other guy" ignored it.

In the mean time, are us Americans ever going to get a president that focuses on paying down the debt? How much would taxes have to go up (because spending can't go down, right?) for citizens to contribute their fair share of paying down the debt?

But why would you do that? That forgoes growth and investment now in exchange for .. what exactly?

Re: Will America's debt doom us?

#34

Post by commandlinefan »

MuffinFlavored wrote: post #15
crusso wrote: post #4

Like the housing bubble, our debt hasn't been a problem and it's not going to be a problem right up until it is a problem. It will be a black swan event and afterward everyone will claim that they saw it coming and "the other guy" ignored it.

In the mean time, are us Americans ever going to get a president that focuses on paying down the debt? How much would taxes have to go up (because spending can't go down, right?) for citizens to contribute their fair share of paying down the debt?

I’m super libertarian and even I would like to see somebody raise taxes and cut spending to cut the deficit… although it would be a battle to get them to lower taxes again once the debt was paid off.

Re: Will America's debt doom us?

#35

Post by wcunning »

decoyworker wrote: post #30
MuffinFlavored wrote: post #15

Earlier quoted context omitted.

In the mean time, are us Americans ever going to get a president that focuses on paying down the debt? How much would taxes have to go up (because spending can't go down, right?) for citizens to contribute their fair share of paying down the debt?

Bill Clinton accomplished that but at some cost. My father still laments the cancellation of the superconducting supercollider that he had the pleasure to work on.

Clinton ran a current account surplus, but overall debt grew because Medicare and Social Security were still losing money at the time. Not to mention that it wasn't all Clinton, some of it was the opposition Congress.

Re: Will America's debt doom us?

#36

Post by JackFr »

topkai22 wrote: post #26
_edo wrote: post #11

> Because debt-to-GDP is apples-to-nonsense. No it's not. Debt is measured in dollars. GDP is dollars per year. Debt/GDP is $/($/yr)=yr This ratio converts debt, a number it's hard to have intuition for, to years. It tells us how many years of productivity we owe. For those of us who don't manage $30 billion in assets years of productivity probably carries more meaning than big numbers with 12 zeros.

His proposed alternate metric, interest as a percentage of tax revenue is also deeply flawed- it misses the obligation to pay the principal, which has tripled since the low point in the early 2000s. I like the finance wonks word for debt- leverage. Taking on debt is like going out further on a lever- the debter is more exposed to swings in the overall economy. While it's worked out fine so far, a high debt to gdp rat…

> it misses the obligation to pay the principal

But you never really have to do that. You can just keep rolling them. If we could keep the debt at the same absolute level inflation and productivity increases would drive it into insignificance.

Of course the idea of keeping it at the same level is a fantasy.

Re: Will America's debt doom us?

#37

Post by pjc50 »

NTDF9 wrote: post #3
whatshisface wrote: post #2

The interest rates on US debt are artificially low because their default risk is based on the willingness, not the ability, of the USG to repay them. That's because the ability is a given, since the government can print the currency the debt is denominated in. Corporate bonds are a bad analogy because their risk is mostly in defaulting, whereas if something goes sideways in America, Treasury bonds will fail by causin…

There's a difference. The govt doesn't have this ability to print money and pay debt. The Fed does. Which means that the Fed has been keeping interest rates already artificially low by printing money. It'll take one misstep or one recession for the debt requirements to be so high that the Fed will have to make a choice between keeping rates low, causing massive inflation vs high causing massive drop in gdp and jobs.…

The normal management of inflation by raising interest rates works by slowing economic growth. There's no reason to raise rates in a recession.

Re: Will America's debt doom us?

#38

Post by Pigo »

MuffinFlavored wrote: post #15
crusso wrote: post #4

Like the housing bubble, our debt hasn't been a problem and it's not going to be a problem right up until it is a problem. It will be a black swan event and afterward everyone will claim that they saw it coming and "the other guy" ignored it.

In the mean time, are us Americans ever going to get a president that focuses on paying down the debt? How much would taxes have to go up (because spending can't go down, right?) for citizens to contribute their fair share of paying down the debt?

Since most candidates are running on a platform of promising more free things, it doesn't seem likely.

Re: Will America's debt doom us?

#39

Post by treis »

_edo wrote: post #11

> Because debt-to-GDP is apples-to-nonsense. No it's not. Debt is measured in dollars. GDP is dollars per year. Debt/GDP is $/($/yr)=yr This ratio converts debt, a number it's hard to have intuition for, to years. It tells us how many years of productivity we owe. For those of us who don't manage $30 billion in assets years of productivity probably carries more meaning than big numbers with 12 zeros.

>It tells us how many years of productivity we owe.

That's not accurate though. We can pay off the debt tomorrow and skip the years of productivity. It really is an apples to oranges comparison. The debt isn't denominated in productivity. It's denominated in dollars that the government can create for "free". Of course there are knock on effects of creating enough dollars to zero out the debt, but it's not equivalent to the entire country working for years.

Post reply on HN