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U.S. on Track to Add $19T in New Debt over 10 Years

nytimes.com

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Re: U.S. on Track to Add $19T in New Debt over 10 Years

#41

Post by LikesPwsh »

gitfan86 wrote: post #29
legitster wrote: post #16

I encourage people interested in this topic to read up on the Fiscal Theory of the Price Level. I flippantly refer to it as "MMT without the magic". But it really did a good job of explaining our current situation. When you have a long-term fixed rate mortgage, only some of the value is paid off by principal payments. The rest is being paid off naturally by inflation. Imagine paying off a mortgage made in 2003 dollar…

This is what the bitcoin people got right. The dollar is going down A LOT. This is also what the bitcoin people got wrong. You don't want to to denominate your asset in dollars. Yes BTC will hit 100k some day. But 100k will only buy a crappy used car at that point.

I wouldn't take those bitcoin forecasts too seriously.

Some of them honestly believe that halving inflation doubles price no matter how many times you do it.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#42

Post by rayiner »

What's distressing to me about the debt situation is that Americans are willfully living in a total fantasy land about spending and taxes. The most recent pre-pandemic budget deficit was $1 trillion, while last year it was $1.4 trillion.

Even the folks solidly on the left like Warren and AOC aren't talking about tax increases that would come close to closing that deficit. Their wealth and 70% top tax bracket proposals would raise less than $200 billion annually at the beginning. And of course, they want to combine that with $1 trillion+ in new spending.

The issue is that Reagan dramatically lowered taxes on the middle class and upper middle class in the 1980s, and there's literally nobody in Congress willing to roll those back.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#43

Post by TexanFeller »

legitster wrote: post #27
avalys wrote: post #20

In discussions like this, it's worth reviewing where total government spending in the US actually goes. This is actually not the easiest thing to pin down, but the best analysis I've seen is at https://www.usgovernmentspending.com/year2022_0.html . In summary: 17% to pension programs (e.g. social security) 23% to healthcare 19% to education 12% to defense 7% to welfare 3.6% to police/fire/prisons 4% to transportation…

This is a bit misleading though as it includes state spending as well. For the purpose of federal debt, we really only have three sources of spending that can move the needle: - Health Care 28% - Pensions 24% - Defense 20% Defense seems like an easy cut, but we are not currently in any major conflicts anyway. And our allies might not take to kindly if we start pulling bases from around the world. Pensions are entitle…

> we are not currently in any major conflicts anyway

Disagree. The war with Russia has been slowly but steadily escalating and more directly involving NATO countries. It's not unthinkable it could turn into WW3.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#44

Post by lotsofpulp »

legitster wrote: post #27
avalys wrote: post #20

In discussions like this, it's worth reviewing where total government spending in the US actually goes. This is actually not the easiest thing to pin down, but the best analysis I've seen is at https://www.usgovernmentspending.com/year2022_0.html . In summary: 17% to pension programs (e.g. social security) 23% to healthcare 19% to education 12% to defense 7% to welfare 3.6% to police/fire/prisons 4% to transportation…

This is a bit misleading though as it includes state spending as well. For the purpose of federal debt, we really only have three sources of spending that can move the needle: - Health Care 28% - Pensions 24% - Defense 20% Defense seems like an easy cut, but we are not currently in any major conflicts anyway. And our allies might not take to kindly if we start pulling bases from around the world. Pensions are entitle…

This website has military spend at closer to 15% of all federal government expenses.

https://www.thebalancemoney.com/u-s-federal-budget-breakdown...

> The government expects to spend $6.011 trillion in 2022. More than 65% of that pays for mandated benefits such as Social Security, Medicare, and Medicaid.

> Military spending includes the Departments of Homeland Security, State, and Veterans Affairs. All of these military costs combined equal $943.9 billion.

> Pensions are entitlements and we can't really touch those.

They are touched all the time. Implicitly via decreased purchasing power of currency that is not made up for via cost of living adjustments, and explicitly via things like increasing retirement age and changes to benefit formula.

Healthcare spending is also frequently adjusted via reduced remuneration and policies for remuneration to providers changing the quantity and quality of services received.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#45

Post by everforward »

arrosenberg wrote: post #26
sashu123 wrote: post #6

Earlier quoted context omitted.

The simple answer is we are debasing our currency in a very complex way, that we cannot measure how much we debased it. In the past kings printed new coins to fund their wars or whatever and it was easier to track how much the currency lost value. In the present because economies have gotten complex + tools to debase have gotten complex we cannot estimate how much we have actually debased our currency by. If it’s 100…

You don't debase fiat currency, since there isn't a limited supply. Markets are distorted because of a poor distribution of money (too much where demand is low, too little where demand is high), because the Fed handed out money to the wealthy (who hoard it in the form of assets) and Congress refuses to tax it back and redistribute it to the working class who can't currently pay their rent.

> You don't debase fiat currency, since there isn't a limited supply.

That doesn't sound correct. There isn't a limited supply, but introducing more currency into circulation can reduce the value of it, which is a proper use of debasing.

As a contrived example, if the treasury printed 100 trillion dollars and handed it out to everyone, I'm doubtful that bread would still be $1 a loaf.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#46

Post by TexanFeller »

mijamo wrote: post #30
gizmondo wrote: post #5

Earlier quoted context omitted.

I wonder how the first camp reconcile their views with the current struggle Italy has with their debt caused by excessive deficit spending in the past.

Mostly by saying this is Italy's fault for being in the Eurozone and thus not being able to print its own money. Also the USA is in a unique situation in the world due to the status of the dollar, so comparison with other countries have very little validity. If argentina prints money it just loses value immediately and triggers crazy inflation. If the US prints money it is still not that big of a deal compared to all…

> Also the USA is in a unique situation in the world due to the status of the dollar

I hope this remains true. I fear for the USD's status as the world's reserve currency due to our abusing it to print, our oil producing Arab allies starting to accept other currencies, our disconnecting Russia from our financial system motivating countries to try to be independent of us etc.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#47

Post by legitster »

TexanFeller wrote: post #43
legitster wrote: post #27

Earlier quoted context omitted.

This is a bit misleading though as it includes state spending as well. For the purpose of federal debt, we really only have three sources of spending that can move the needle: - Health Care 28% - Pensions 24% - Defense 20% Defense seems like an easy cut, but we are not currently in any major conflicts anyway. And our allies might not take to kindly if we start pulling bases from around the world. Pensions are entitle…

> we are not currently in any major conflicts anyway Disagree. The war with Russia has been slowly but steadily escalating and more directly involving NATO countries. It's not unthinkable it could turn into WW3.

I don't disagree that it might very well escalate. But to the extent that the current conflict has already impacted our budget or the forecasted budget as outlined in the linked article I think is pretty negligible.

My point was that we are unlikely to find any "easy" cuts in defense spending - and a major conflict could make us regret it.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#48

Post by legitster »

gautamcgoel wrote: post #37
legitster wrote: post #27

Earlier quoted context omitted.

This is a bit misleading though as it includes state spending as well. For the purpose of federal debt, we really only have three sources of spending that can move the needle: - Health Care 28% - Pensions 24% - Defense 20% Defense seems like an easy cut, but we are not currently in any major conflicts anyway. And our allies might not take to kindly if we start pulling bases from around the world. Pensions are entitle…

I agree that our allies would not be happy if we started closing bases, but I think that is a small price to pay for fiscal responsibility.

The small price to pay would be millions of deaths and constant economic anxiety for upwards of a billion people around the globe.

Alternatively we could raise taxes a little bit.

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#49

Post by arrosenberg »

everforward wrote: post #45
arrosenberg wrote: post #26

Earlier quoted context omitted.

You don't debase fiat currency, since there isn't a limited supply. Markets are distorted because of a poor distribution of money (too much where demand is low, too little where demand is high), because the Fed handed out money to the wealthy (who hoard it in the form of assets) and Congress refuses to tax it back and redistribute it to the working class who can't currently pay their rent.

> You don't debase fiat currency, since there isn't a limited supply. That doesn't sound correct. There isn't a limited supply, but introducing more currency into circulation can reduce the value of it, which is a proper use of debasing. As a contrived example, if the treasury printed 100 trillion dollars and handed it out to everyone, I'm doubtful that bread would still be $1 a loaf.

It doesn't reduce the value of the currency, it increases the supply of available money. This can drive additional demand and drive inflation that way.

That's different than (e.g.) Roman-era debasement where they were using less valuable metals to mint coins and the value of the coin was based on the perceived metal content of the coin, rather than being fiat currency that follows supply and demand trends.

If the currency was debased, inflation would have occurred fairly evenly across the economy, since the currency would be literally worth less. Instead we saw inflated prices chase sectors of the economy where there was either an over supply of money (e.g. PE buying up housing, driving up the price) or an undersupply of product (e.g. cheap eggs).

Re: U.S. on Track to Add $19T in New Debt over 10 Years

#50

Post by Andaith »

TexanFeller wrote: post #43
legitster wrote: post #27

Earlier quoted context omitted.

This is a bit misleading though as it includes state spending as well. For the purpose of federal debt, we really only have three sources of spending that can move the needle: - Health Care 28% - Pensions 24% - Defense 20% Defense seems like an easy cut, but we are not currently in any major conflicts anyway. And our allies might not take to kindly if we start pulling bases from around the world. Pensions are entitle…

> we are not currently in any major conflicts anyway Disagree. The war with Russia has been slowly but steadily escalating and more directly involving NATO countries. It's not unthinkable it could turn into WW3.

Yes it is. Russia is bogged down and unable to make any progress while fighting the poorest country in Europe, who is 1/3rd their size, has been equipped with whatever leftovers NATO was getting rid of anyway, and has conditions on using NATO tech to target Russia proper.

There is zero chance of this becoming WW3. Any Russian escalation targeting NATO countries will likely be met with increased border defenses, possibly a no-fly zone, and giving Ukraine another 1% of defense spending collectively across NATO, but this time with all the long range missiles they want, the freedom to target Russia, and whatever aircraft NATO has in the back of the pantry...

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