United States loses AAA credit rating from S&P • Hacker News Board

Re: United States loses AAA credit rating from S&P

#201

Post by hooande » Sat, Aug 06, 2011, 3:33 AM UTC

I find that this graph summarizes my thoughts on the US debt in relation to the world economy: http://www.china-mike.com/wp-content/uploads/2011/04/china-w...

The United States produces so much more in terms of GDP than the next largest nations that it's a stretch to compare them. I think the fact that we produce more than 2X what the next largest single nation produces means that debt may function differently for us. The global economy is complex enough that relative position can mean more than short term profit and loss.

Debt is a bad thing. But the debt ceiling we just fought over extending represents 1 year of USD GDP. In everyday terms, someone expected to make $100k per year being $100k in debt. To me that sounds more like a student loan than a national crisis.

Should we make changes, cut spending and increase revenue? Sure. But we should also keep the bigger picture in mind, and look at our debt as it fits into the context of a global economy.

Re: United States loses AAA credit rating from S&P

#202

Post by mdkess » Sat, Aug 06, 2011, 3:35 AM UTC

eazolan wrote: post #186

mdkess wrote: post #97

Earlier quoted context omitted.

That's exactly what I thought the response would have been. Cheap money, low employment - hire lots of people to do stuff. But it seems like the public opinion is that this debt is bad, and I'm don't understand why entirely. I mean, I see a lot of comparisons to credit card debt, so is it just lack of education/understanding?

Why do you think borrowed money is "cheap"? We're not paying it back. Any of it. At best we can cover the interest payments. Why do you think this won't blow up in our faces?

Interest has not become a huge issue, but in any case - so what? They got the money for cheap, it has (presumably) fueled growth. Beating 1.5% over five years is not difficult - the idea is to borrow money to accelerate growth - increase prosperity of America, which would return more than 1.5%. Not all debt is bad.

Re: United States loses AAA credit rating from S&P

#203

Post by ramanujan » Sat, Aug 06, 2011, 3:37 AM UTC

ohyes wrote: post #171

darksaga wrote: post #142

Earlier quoted context omitted.

Even if you tax the hell out of the rich, it still leaves this country TRILLIONS in debt. It's a fact - you don't tax your way out of a recession and you sure as hell don't tax people to create jobs. It simply doesn't work. And yeah, great idea. Let's cut military funding while we're fighting a war on terror in three countries. Apparently you don't remember Clinton's military cuts which removed almost 300,000 people…

>It's a fact - you don't tax your way out of a recession and you sure as hell don't tax people to create jobs. It simply doesn't work. If it is a fact, where is the data? Economies are stimulated by people spending money. A tax cut to someone making 50,000 dollars a year is going to have a greater percentage of it spent than a tax cut to someone making 5,000,000 a year. Conversely, a 5-10% tax increase isn't going to…

You take the Keynesian view. It's difficult to discuss this in more than a soundbite, but the Hayekian view is well explained by these two videos:

  http://www.youtube.com/watch?v=d0nERTFo-Sk
  http://www.youtube.com/watch?v=GTQnarzmTOc

Well worth watching if you haven't seen them.

In short, the opposite/Hayekian view contends that taxation is seizure of resources from profitable/efficient entities and redistribution towards unprofitable/inefficient entities. We saw this in extremis in the bank bailout, and more controversially in microcosm with individual redistribution.

If you accept this -- that "profitable" correlates with "efficient", and conversely, though the correlation is not perfect -- then taxation is not a Robin Hood sort of thing that increases well being, but rather a move that ties the legs of the efficient sectors of the economy -- those that can post a profit even in tough times -- to those that are already underwater.

Re: United States loses AAA credit rating from S&P

#204

Post by bubbleRefuge » Sat, Aug 06, 2011, 3:37 AM UTC

eazolan wrote: post #186

mdkess wrote: post #97

Earlier quoted context omitted.

That's exactly what I thought the response would have been. Cheap money, low employment - hire lots of people to do stuff. But it seems like the public opinion is that this debt is bad, and I'm don't understand why entirely. I mean, I see a lot of comparisons to credit card debt, so is it just lack of education/understanding?

Why do you think borrowed money is "cheap"? We're not paying it back. Any of it. At best we can cover the interest payments. Why do you think this won't blow up in our faces?

Having a free floating fx sovereign currency issuing regime such as the US,UK,Japan. The federal debt is equal to the private sector savings. Paying of the debt eliminates our savings. This would throw us into great depression ii. We should have perpetual deficits.

Re: United States loses AAA credit rating from S&P

#205

Post by [deleted] » Sat, Aug 06, 2011, 3:38 AM UTC

pyoung wrote: post #96

ristretto wrote: post #53

Earlier quoted context omitted.

Naive question: the money that gets de-invested will be reinvested where? France? UK?

I don't think de-invest is an actual word, but I will role with you on this. Investors treat U.S. Treasury bonds like cash. A lot of financial transactions are actually done with Treasury notes, because they are considered extremely safe and reliable, and unlike cash, they generate interest payments. If investors don't like the downgrade, then they will sell off their bonds for cash. Cash is theoretically the safest…

[deleted]

Re: United States loses AAA credit rating from S&P

#206

Post by winestock » Sat, Aug 06, 2011, 3:40 AM UTC

trevelyan wrote: post #185

winestock wrote: post #72

Earlier quoted context omitted.

You're more liberal than conservative. I'm more conservative than liberal. Bless your heart, I agree with all of your points. At the end of the Cold War, other conservatives were making the same noises that you're making now. For their pains, their careers were destroyed by the people who run the current mainstream conservative movement. Let's take a look at those points of yours. Points 1 & 2. Cut defense spending a…

Why do you - as a conservative - consider it rational to cut social security? The program is popular and self-sustaining. and if you read the trustees' reports you'll see it has been in surplus and perfectly solvent since 1985. In a few years it will stop generating surplus revenue for a few decades as the baby boomers move through the system, but it isn't threatened with insolvency. There is an ethical problem with…

First, both parties have raided Social Security, not just Republicans. In fact, both parties have been complicit in the government's financial misfeasance for a long time.

Second, you mention the money "to pay back the workers who contributed." There was never any money to pay back. Social Security was always a pay-as-you-go system. Current revenue pays for current appropriations. There was never any "trust fund," another fact that smoothed the way for Congresscritters to raid Social Security and replace the surplus with Treasury IOUs.

This system was feasible when there were ten workers being taxed for each retiree receiving benefits. With the graying of the Baby Boomers, that ratio will approach parity. Another commenter on this thread mentioned that the best thing to have done to Social Security would be to build an electric fence around it. A good idea. Too late. Congress has fleeced it.

Re: United States loses AAA credit rating from S&P

#207

Post by guelo » Sat, Aug 06, 2011, 3:41 AM UTC

ubernostrum wrote: post #149

winestock wrote: post #72

Earlier quoted context omitted.

You're more liberal than conservative. I'm more conservative than liberal. Bless your heart, I agree with all of your points. At the end of the Cold War, other conservatives were making the same noises that you're making now. For their pains, their careers were destroyed by the people who run the current mainstream conservative movement. Let's take a look at those points of yours. Points 1 & 2. Cut defense spending a…

The thing with Social Security is that it's such a huge, tempting cookie jar for Congress to reach into -- remember that this is a program that easily runs a surplus when we just leave it the hell alone. So instead of cutting it, how about we build a big damn electrified fence around it? ;)

You mean like a Al Gore's lockbox? Ahhhh what could have been, what could have been.

Re: United States loses AAA credit rating from S&P

#208

Post by [deleted] » Sat, Aug 06, 2011, 3:43 AM UTC

[deleted]

Re: United States loses AAA credit rating from S&P

#209

Post by pyoung » Sat, Aug 06, 2011, 3:43 AM UTC

usaar333 wrote: post #163

pyoung wrote: post #118

Earlier quoted context omitted.

You cannot compare 'person' and 'business' with government. The government has the ability to print money, whereas the other two do not. The only reason they don't print money to pay off all their debts is because it will result in massive inflation. The reason the European debt crises is so serious is because the adoption of the euro means that no individual contry can print their own money to avoid default.

Inflating your way out of debt is as bad to debt holders as a (partial) default.

I agree that is bad for debt holders, but from a political stand point, it is easier to gradually print money to devalue your debt than it is to default.

Re: United States loses AAA credit rating from S&P

#210

Post by BrianLy » Sat, Aug 06, 2011, 3:43 AM UTC

gte910h wrote: post #198

aaronbrethorst wrote: post #69

Earlier quoted context omitted.

Letting the Bush tax cuts expire next year, and winding down operations in Iraq and Afghanistan would go a long way to balancing the Federal budget. As far as reducing the deficit goes, I have less insight into this. Except that making the Federal government's budget revenue-neutral is a critical first step.

The terms of the debt ceiling deal look like it will force one/the other/both: http://www.editedforclarity.com/2011/08/01/debt-ceiling-deal...

I listened to an NPR segment on this topic and it seems like Congress has several ways around doing the things that journalists think can be forced through. I'm an immigrant to the US so this a learning exercise for me, perhaps someone else can explain in more detail.