Just the Facts: S&P's $2 Trillion Mistake • Hacker News Board

Re: Just the Facts: S&P's $2 Trillion Mistake

#221

Post by onemoreact » Mon, Aug 08, 2011, 1:43 PM UTC

yummyfajitas wrote: post #194

mscarborough wrote: post #176

Earlier quoted context omitted.

> It isn't our current debts that have people concerned. It's the combination of current debts and unsustainable future obligations, which are so large that they in fact can't be paid down by just raising taxes. Who is proposing that we only raise taxes, without cuts? The entire Democratic 'compromise' is effectively all cuts. > The "evil Republicans" are the only ones taking actions that may mean that Social Securit…

As a result of the spending cuts, the discretionary budget will be 0.6% lower in 2012 than it was in 2011 and 18% higher in 2021 than it is in 2012. http://www.economist.com/blogs/democracyinamerica/2011/08/de... Those democrats, how could they agree to such harsh cuts! (The media is describing it as a "cut" because the growth rate of government spending has been cut.)

Comparing fixed dollar amounts when the GDP is changing is silly.

http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&#...

PS: If growth avergages less than 1.6% for the next 9 years we are going to have an issue. But, a few of those 5+% years and things start to look vary diffrent. Except for SS which recives little benifit from GDP growth only population growth.

Re: Just the Facts: S&P's $2 Trillion Mistake

#222

Post by commandar » Mon, Aug 08, 2011, 1:47 PM UTC

varjag wrote: post #202

ams6110 wrote: post #170

Earlier quoted context omitted.

If you count income taxes, sales taxes, property taxes, other "sin" taxes and various and sundry fees, it's a lot more.

It's a lot more in the places you compare against it then, too.

seriously. Most western nations have VATs that dwarf sales tax rates in any part of the US, for example.

Re: Just the Facts: S&P's $2 Trillion Mistake

#223

Post by burgerbrain » Mon, Aug 08, 2011, 2:17 PM UTC

gareim wrote: post #195

burgerbrain wrote: post #134

Earlier quoted context omitted.

"I suppose the one about someone else accidentally taking my homework? I don't think I could have helped that and any reasonable teacher might have given me half credit." If I were your teacher and you told me that story you would be lucky if I didn't accuse you of academic dishonesty on the spot and filed the relevant paperwork. In the absolute best case scenario, assuming your total honesty, it's yet another lame v…

The Units (that's what they're called) are passed back to our tables the schoolday before we turn them in (she makes us turn them in 3 days before that so she can spot check them in for some reason). I was talking to her while they were being passed back and by the time I get back, it's nowhere to be found and 5 minutes later, class ends. Turns out that my friend had grabbed hers to take home but accidentally grabbed…

Shit happens. You're going to have to learn to deal with that.

Re: Just the Facts: S&P's $2 Trillion Mistake

#224

Post by bubbleRefuge » Mon, Aug 08, 2011, 2:20 PM UTC

CWuestefeld wrote: post #183

bubbleRefuge wrote: post #179

Earlier quoted context omitted.

Issuing currency is identically equal to inflation No. There is demand pull inflation and cost push inflation. If you remember from econ, inflation or price level is the intersection of supply and demand curves. Since demand and supply are not constant, it is possible to issue greater amounts of currency in the face of greater amounts of supply and still see prices decline if the increase in supply outweighs the incr…

inflation or price level is the intersection of supply and demand curves As I understand your claim, you seem to be regarding the entire market as a single monolithic commodity -- a common Keynesian error. Sure, the prices of discrete commodities fluctuate as their quantities supplied and demanded fluctuate. That's not at all the same thing as devaluation of the currency due to increase in the money supply. That said…

Was referring to aggregate demand and aggregate supply.

Re: Just the Facts: S&P's $2 Trillion Mistake

#225

Post by sethg » Mon, Aug 08, 2011, 2:45 PM UTC

gojomo wrote: post #135

fauigerzigerk wrote: post #98

Earlier quoted context omitted.

The government can always pay its nominal debt with interest. I didn't say they were not going to inflate the debt away or that this would be OK. But S&P did not make that assumption in its rating. S&P assumes a 2% inflation rate.

Whether S&P says it or not, then, we should consider part of the 'default' risk being that USGov intentionally, strategically breaks those stated inflation assumptions.

If there is a risk that the US will significantly inflate the currency, then that risk should be reflected in the ratings for all dollar-denominated bonds, not just Treasuries. But there are still AAA-rated corporate bonds. Heck, S&P still rates the bonds of 13 states as AAA, which makes no sense to me.

Re: Just the Facts: S&P's $2 Trillion Mistake

#226

Post by yummyfajitas » Mon, Aug 08, 2011, 3:02 PM UTC

onemoreact wrote: post #221

yummyfajitas wrote: post #194

Earlier quoted context omitted.

As a result of the spending cuts, the discretionary budget will be 0.6% lower in 2012 than it was in 2011 and 18% higher in 2021 than it is in 2012. http://www.economist.com/blogs/democracyinamerica/2011/08/de... Those democrats, how could they agree to such harsh cuts! (The media is describing it as a "cut" because the growth rate of government spending has been cut.)

Comparing fixed dollar amounts when the GDP is changing is silly. http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&#... PS: If growth avergages less than 1.6% for the next 9 years we are going to have an issue. But, a few of those 5+% years and things start to look vary diffrent. Except for SS which recives little benifit from GDP growth only population growth.

Why would the cost of the government grow with gdp? If people are richer, it costs more to build roads and aircraft carriers?

Growing with population or inflation makes sense, at least for costs which scale with population. Growing with gdp is nonsensical.

Re: Just the Facts: S&P's $2 Trillion Mistake

#227

Post by jeffreymcmanus » Mon, Aug 08, 2011, 4:00 PM UTC

michaeldhopkins wrote: post #192

jeffreymcmanus wrote: post #160

Earlier quoted context omitted.

Unless he's a multi-millionaire who has one of the worst tax preparers in history, he doesn't have a 40% tax rate. The reason why he thinks his tax rate is 40% is because he's making the mistake that common among financial illiterates, which is confusing the maximum tax rate with the marginal (i.e., actual) tax rate. The highest Federal tax rate is currently 35%. That bracket applies to people who earn $379,150 or mo…

This is true, yet often when it is brought up as you have done it is a straw man. The OP has in his mind that taxes collected are excessive. If you show him that rates are progressive, he won't decide that enough money is being collected after all. He is only using the tax rate as a rhetorical point -- he points elsewhere for proof that too much is collected. Edit: should clarify I prepare taxes among other things. I…

Most people in the middle and upper middle class complain that their taxes are too high in hopes that benevolent, democratically elected lawmakers will lower them. But it's a fact that Americans enjoy an effective tax rate that is quite low by both international and historical standards.

Of course, we're about to learn the consequences of that as we slowly decimate our educational system and national infrastructure, but that's probably a separate discussion.

Re: Just the Facts: S&P's $2 Trillion Mistake

#228

Post by onemoreact » Mon, Aug 08, 2011, 4:04 PM UTC

yummyfajitas wrote: post #226

onemoreact wrote: post #221

Earlier quoted context omitted.

Comparing fixed dollar amounts when the GDP is changing is silly. http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&#... PS: If growth avergages less than 1.6% for the next 9 years we are going to have an issue. But, a few of those 5+% years and things start to look vary diffrent. Except for SS which recives little benifit from GDP growth only population growth.

Why would the cost of the government grow with gdp? If people are richer, it costs more to build roads and aircraft carriers? Growing with population or inflation makes sense, at least for costs which scale with population. Growing with gdp is nonsensical.

Wealth only indirectly influences GDP. If you had 1billion dollars’ worth of Sony stock and don't buy, sell, or receive dividends then the impact on US GDP of you owning that stock vs. someone in Japan is zero.

When you break it down short term GDP growth is dominated by the size of the working population and changes in the value of your currency. Over the long term you need to consider technology and infrastructure improvements but wealthy society’s both expect more from the government and can afford to have their government provide more so that's not really an issue. Thus linking government spending to GDP is fairly healthy activity.

PS: I would happily to drastically cut a lot of government spending, but I also realize doing so quickly would be vary damaging to our economy. I think a flat 25% federal tax including social security that starts at 70 and universal healthcare and excluding any and all tax breaks would be close to optimal, but good luck getting that passed.

Re: Just the Facts: S&P's $2 Trillion Mistake

#229

Post by btilly » Mon, Aug 08, 2011, 5:01 PM UTC

OstiaAntica wrote: post #139

btilly wrote: post #73

Earlier quoted context omitted.

S&P's guidance was based on an analysis that made the $2.1T mistake. So $2T+ in cuts plus $2.1T error puts us exactly where we would have been if they were originally right and then we cut $4T.

But we didn't cut that, the deal only cut about a trillion and kicked the other cuts to a super committee.

We did cut that. Where the cuts will come is not yet decided, but that they will come has been finalized.

Re: Just the Facts: S&P's $2 Trillion Mistake

#230

Post by Hisoka » Mon, Aug 08, 2011, 5:07 PM UTC

Are there standards that govern exactly what constitutes an AAA vs an AA? If so, who makes those standards? S&P? A third party that oversees all these organizations? If the standards are vague, then it's all subject to interpretation. One person saying it's AA might be the same as another saying it's AAA. S&P isn't giving a perfect rating to the USA... because the USA debt situation isn't perfect. I mean, we judge human beings the same way - noone's perfect. Why should we be any different towards the USA? Just because it supports democracy, has an emotional national anthem, and has a rich history? NO.