What are the mechanics behind the US seemingly able to have infinite debt?
U.S. on Track to Add $19T in New Debt over 10 Years
51–60 of 70 posts
Re: U.S. on Track to Add $19T in New Debt over 10 Years
#52Earlier quoted context omitted.
> 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, possi…
> has been equipped with whatever leftovers NATO was getting rid of anyway
That’s really inaccurate; a lot of what Ukraine got is modern kit. It’s true that a lot of the really heavy equipment was ex-Soviet gear that was (or is now, if it wasn’t before) being replaced by more modern Western gear, and some of the rest was for speed current operational gear that the operators could do without even if it wasn’t planned for imminent replacement. But even some of the heavy gear (especially more recently) is new and modern, like NASAMS, and that seems to be more than case with announced and upcoming deliveries (heck, for the Ground-Launched Small Diameter Bomb – a funny name for a long-range artillery rocket – they are not merely getting new and modern Western kit, they are going to be the first operator.)
Re: U.S. on Track to Add $19T in New Debt over 10 Years
#53In 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…
> The US budget deficit doesn’t come from overspending in any particular area
You are right, but even more, the US budget deficit doesn’t come from overspending at all. The deficit is about 2% of GDP. The US taxes at about 8.5% of GDP less than the OECD average. The US deficit is from undertaxing.
Re: U.S. on Track to Add $19T in New Debt over 10 Years
#54Earlier quoted context omitted.
> 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, possi…
There's a reason actions you suggest like a no fly zone have not and probably will never be taken by NATO. Russia is a nuclear superpower capable of destroying most life on earth.
Re: U.S. on Track to Add $19T in New Debt over 10 Years
#55In 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…
> The US budget deficit doesn’t come from overspending in any particular area You are right, but even more, the US budget deficit doesn’t come from overspending at all . The deficit is about 2% of GDP. The US taxes at about 8.5% of GDP less than the OECD average. The US deficit is from undertaxing.
Bingo. And (as much as this crowd hates to admit it) the US undertaxes the middle class and poor to an incredible amount compared to other first world countries.
OECD tax vs GDP [1]
OECD rates US most progressive [2] (the rich pay more of the tax base, even when relative to their share of income).
[1] https://www.oecd.org/coronavirus/en/data-insights/tax-to-gdp...
[2] https://taxfoundation.org/news-obama-oecd-says-united-states...
Re: U.S. on Track to Add $19T in New Debt over 10 Years
#56What are the mechanics behind the US seemingly able to have infinite debt?
> What are the mechanics behind the US seemingly able to have infinite debt?
The root reason is due to the US government's control over its own currency.
If you have your own currency, and if a lot of your debts are denominated in said currency, you can slowly make that debt less valuable over time with inflation. When debts almost always become less valuable relative to present value via inflation, there's less pressure to rein in on government spending than if your debts are denominated in another country's currency.
This will eventually always happen even if a country decides to stick to a 1% annual inflation target. Within 100 years, said debt will be close to 37% of its current value:
1/(1.01**100) = 0.369711212
Even a 4% annual inflation target can cut that debt's Net Present Value (NPV) by to about the same level within a quarter of a century:
1/(1.04**25) = 0.375116802
The methods by which you can achieve this 1% inflation can be done in any number of ways, from quantitative easing, to regular old money printing, to government bond interest rate adjustments. Regardless of the methods used, inflation inherently makes any government debts held less valuable over time, making it easier for the government to eventually pay it off.
Re: U.S. on Track to Add $19T in New Debt over 10 Years
#57Earlier quoted context omitted.
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.
Must be sad for other countries to have an independent financial system, right?
Re: U.S. on Track to Add $19T in New Debt over 10 Years
#58In 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…
It can be misleading looking at the budget this way. As to your last statement, they could cut the budget by a trillion, and still have 17% go to pensions, 23% to healthcare, etc. In any case, doing a comparison in percentage terms to other areas of spending won't indicate whether they are overspending in any particular area. There could be huge wastes in some categories.
Re: U.S. on Track to Add $19T in New Debt over 10 Years
#59Earlier quoted context omitted.
> 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 cur…
> If the currency was debased, inflation would have occurred fairly evenly across the economy
Nothing makes this necessarily true. As an example, if the government printed everyone in the world 100 trillion dollars, and everyone used it to buy as much house they could, and nothing else, then houses would skyrocket in price as this money spurred demand for houses causing a shortage of housing stock (as prices are a matter of supply vs demand). Bread wouldn't change a dime in this scenario, because no one used the new money to buy more bread than normal, causing a supply shortage of bread. Ergo, nothing necessitates that inflation occurs evenly across the economy. Not even in Roman times. Inflation only occurs where demand happens. If demand, demands it be stored in bank accounts, then bank accounts inflate.
Re: U.S. on Track to Add $19T in New Debt over 10 Years
#60In 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…
> it's worth reviewing where total government spending in the US actually goes. Is it also worth reviewing 1. are we likely to ever increase incoming tax revenue (which loopholes stand to benefit the country's income the most without hurting it's citizens/economy/the businesses (and its employees who are basically the citizens) inside of it) enough to offset the debt-GDP ratio 2. if we are (or even if we aren't) goin…
I hate to say it but yah. There is no institutional backbone in Congress anywhere to do course correct. If memory serves corp taxes are down about 20pct from Reagan while my W2 taxes are high. I've been in the apple building in Cupertino. Nobody really thinks it's Irish for tax purposes.