The Debt Ceiling

[Spartans9312]

If you owe the bank $1,000, it’s your problem.

If you owe the bank $1,000,000 it’s the bank’s problem.

We’re too big to fail at this point. The process for selecting a new reserve currency that can handle being the global economy and unwinding global possession of US treasuries will take longer than any of us will live.

Until such time that another country’s bonds take the first spot. I tend to agree that it will take longer than any of us will live.

“The safest asset, currently U.S. government securities, can secure an almost limitless supply of cheap capital, while the next most safe asset trades at a substantial risk premium. Volatility in world markets, even if it makes Treasury bonds less safe, raises the risk premium even more — increasing the flow of capital to the United States and further depressing interest rates. This would explain why Treasury yields plummeted even as the U.S. financial sector was teetering on the brink of collapse and the economy was heading into a deep recession, and it would be consistent with the further decline in U.S. interest rates when Greece and other Euro-zone countries experienced debt crises.”

 

[snarlcakes]

Only if interest expense is growing faster than the overall economy. According do that article we spend about 1% of GDP on interest expense. Of course that was when rates were lower. Though long term rates haven't really moved that much higher.

The article is wrong. The debt is around 31 trillion and our economy is around 21-22 trillion. Rates would have to be below 1%. Also, we’re adding 1 - 2 trillion of new debt each year.

 

[TMFT]

The article is wrong. The debt is around 31 trillion and our economy is around 21-22 trillion. Rates would have to be below 1%. Also, we’re adding 1 - 2 trillion of new debt each year

Kind of. The entire debt isn’t on a variable rate, at least as I understand it. So if rates jump to, say, 10%, it will only be on new debt, not past issued debt. Still, the risk that rates will rise makes it more important than ever to get back to at least the Obama era annual deficits < $1T. The $1T+ deficits we ran in the Trump years were insane because when the COVID crisis hit we ended up spending SOOOOOOO much money. On top of that SS, Medicare, and defense spending are going to be a big chicken coming home to roost soon. If we had any wiggle room before to get this stuff in check, we’ve lost it.

Long term, I only see two things as having the potential to save us:
1) AI automating a bunch of jobs, increasing productivity a ton, and freeing up folks to fill other jobs. Admittedly at the risk of low skill workers being stuck in a really bad spot if they can’t adapt.
2) allowing in sufficient immigration to fill job openings and keep demand up, at the risk of continuing issues with housing shortages.

 

[snarlcakes]

Kind of. The entire debt isn’t on a variable rate, at least as I understand it. So if rates jump to, say, 10%, it will only be on new debt, not past issued debt. Still, the risk that rates will rise makes it more important than ever to get back to at least the Obama era annual deficits < $1T. The $1T+ deficits we ran in the Trump years were insane because when the COVID crisis hit we ended up spending SOOOOOOO much money. On top of that SS, Medicare, and defense spending are going to be a big chicken coming home to roost soon. If we had any wiggle room before to get this stuff in check, we’ve lost it.

Long term, I only see two things as having the potential to save us:
1) AI automating a bunch of jobs, increasing productivity a ton, and freeing up folks to fill other jobs. Admittedly at the risk of low skill workers being stuck in a really bad spot if they can’t adapt.
2) allowing in sufficient immigration to fill job openings and keep demand up, at the risk of continuing issues with housing shortages.

You're correct on the variable rates on new debt, but it could apply to old debt, as well. Depending on the duration of the debt. We're going to pay somewhere around 700 billion in interest payments this year, so it's closer to 3-4% of GDP.

 

[Boiler Buck]

Long term, I only see two things as having the potential to save us:
1) AI automating a bunch of jobs, increasing productivity a ton, and freeing up folks to fill other jobs. Admittedly at the risk of low skill workers being stuck in a really bad spot if they can’t adapt.
2) allowing in sufficient immigration to fill job openings and keep demand up, at the risk of continuing issues with housing shortages.

I noticed in your long term solutions did not include cutting Govt spending.

It also did not include a balance budget amendment.

As financial problems hit our own individual households, cutting spending & budgeting are always steps out of trouble. I find it interesting, that somehow the US Govt should've thought of differently?

 

[outside shooter]

Uncomfortable facts for the GOP:
25% of all US debt was incurred under Trump in 4 years.
<3% of all US debt has been incurred under Biden in 2.5 years.

The debt celing was raised, without conditions, 3 times under Trump, 7 times under GWB, 18 times under Reagan.

This is theater.

 

[Spartans9312]

Uncomfortable facts for the GOP:
25% of all US debt was incurred under Trump in 4 years.
<3% of all US debt has been incurred under Biden in 2.5 years.

The debt celing was raised, without conditions, 3 times under Trump, 7 times under GWB, 18 times under Reagan.

This is theater.

Can you post the votes for and against the spending bills while Trump was president.
I’m curious how each party voted.

 

[Boiler Buck]

Uncomfortable facts for the GOP:
25% of all US debt was incurred under Trump in 4 years.
<3% of all US debt has been incurred under Biden in 2.5 years.

The debt celing was raised, without conditions, 3 times under Trump, 7 times under GWB, 18 times under Reagan.

This is theater.

True.

But cannot spend like this forever. Yes, revenue can be raised.

But please give us 5-6 places cuts should be made?

 

[TMFT]

I noticed in your long term solutions did not include cutting Govt spending.

It also did not include a balance budget amendment.

As financial problems hit our own individual households, cutting spending & budgeting are always steps out of trouble. I find it interesting, that somehow the US Govt should've thought of differently?

A balanced budget amendment is a bad idea because government spending principles should be converse to household budgeting. Keynesian principles are to increase debt during lean times to soften landings and spur growth and to do the opposite during boom times. Households run differently.

With that said, they should aspire toward a balance budget during normal-good times. Unfortunately, with both parties it's not about deficit vs surplus, it's about deficit vs bigger deficit.

 

[Spartans9312]

A balanced budget amendment is a bad idea because government spending principles should be converse to household budgeting. Keynesian principles are to increase debt during lean times to soften landings and spur growth and to do the opposite during boom times. Households run differently.

With that said, they should aspire toward a balance budget during normal-good times. Unfortunately, with both parties it's not about deficit vs surplus, it's about deficit vs bigger deficit.

Stabilize the debt over the next 10 years ($8 trillion in deficit reduction)

 

[Baller23Boogie]

Can you post the votes for and against the spending bills while Trump was president.
I’m curious how each party voted.

I believe this is the last time we raised the debt ceiling under Trump.

Trump signs budget deal and suspends debt ceiling until 2021

The deal increases spending by $320 billion, pushing a contentious budget battle off until after the 2020 election

www.cbsnews.com

 

[Sope Creek]

According to Krugman we the US doesn't have to pay off it's debt...

Here's why the US doesn't have to pay off its $31 trillion mountain of debt, according to Paul Krugman

"When governments for one reason or another run up large debts, it is, as far as I can tell, unusual to pay those debts off," Nobel economist Paul Krugman said.

markets.businessinsider.com

Ennhhh . . . he's got a point. He's saying the obligation is to service the debt, ie, pay interest when due and principal when due . . . the question is whether lenders (you and I, plus institutional investors) would continue to buy bonds, ie, lend money to the US government, under that circumstance.

 

[Boiler Buck]

A balanced budget amendment is a bad idea because government spending principles should be converse to household budgeting. Keynesian principles are to increase debt during lean times to soften landings and spur growth and to do the opposite during boom times. Households run differently.

With that said, they should aspire toward a balance budget during normal-good times. Unfortunately, with both parties it's not about deficit vs surplus, it's about deficit vs bigger deficit.

Agree with that. But neither party is coming close to aspiring to a BB right now.

 

[IU_Hickory]

True.

But cannot spend like this forever. Yes, revenue can be raised.

But please give us 5-6 places cuts should be made?

I'll tell you what, when you start griping about the debt ceiling and spending when a republican is president, I'll start taking you more seriously.

Here's 1... cut out the tax breaks for the wealthy

 

[Boiler Buck]

I'll tell you what, when you start griping about the debt ceiling and spending when a republican is president, I'll start taking you more seriously.

Here's 1... cut out the tax breaks for the wealthy

Asked 2 board liberals to list 5-6 cuts to spending.....after I listed 5-6 programs I would add $ to.

Crickets. Shameful. Lol

 

[TMFT]

Asked 2 board liberals to list 5-6 cuts to spending.....after I listed 5-6 programs I would add $ to.

Crickets. Shameful. Lol

Defense
Medicaid
CMS
Social Security
Every other discretionary & non-discretionary budget item.

Everything needs to be looked at. Do we need it? Do we want it? Does it fit short or long term strategy? How do we pay for it?

It's just too touchy for anyone to take seriously in a discussion.

 

[Spartans9312]

I believe this is the last time we raised the debt ceiling under Trump.

Trump signs budget deal and suspends debt ceiling until 2021

The deal increases spending by $320 billion, pushing a contentious budget battle off until after the 2020 election

www.cbsnews.com

Omnibus Sept 2018: 5 Democrats voted no, 56 Republicans voted no in the House.
In the Senate: 6 Pubs voted no and Bernie voted no.

 

[Baller23Boogie]

Omnibus Sept 2018: 5 Democrats voted no, 56 Republicans voted no in the House.
In the Senate: 6 Pubs voted no and Bernie voted no.

And yet, it got through both the house and senate and Trump signed it.

What does that have to do with the debt ceiling?

 

[Spartans9312]

And yet, it got through both the house and senate and Trump signed it.

What does that have to do with the debt ceiling?

Nothing…shooter said a lot of the debt was added during the Trump years. He is correct. I was curious how the votes went.
Very few Republicans want to take on the spending issue. The number of Democrats is about +/- 1.5 in any given year. Based on their voting history.

 

[TMFT]

Nothing…shooter said a lot of the debt was added during the Trump years. He is correct. I was curious how the votes went.
Very few Republicans want to take on the spending issue. The number of Democrats is about +/- 1.5 in any given year. Based on their voting history.

The Republican "starve the beast" philosophy strategy works for them.
Step 1: Get in power and cut taxes predicting higher revenue
Step 2: Say we need to cut spending to match decreased revenue if it goes down or if it goes up lower than it needs to to make up for planned increases (e.g., Social Security). Bonus points if Rs not in power at this step.
Step 3: Repeat Step 1

You can say what you want, but Ds at least are open about raising taxes along with increased spending when they're in power. Then they just fight to not gut spending when they're not.

 

[Spartans9312]

The Republican "starve the beast" philosophy strategy works for them.
Step 1: Get in power and cut taxes predicting higher revenue
Step 2: Say we need to cut spending to match decreased revenue if it goes down or if it goes up lower than it needs to to make up for planned increases (e.g., Social Security). Bonus points if Rs not in power at this step.
Step 3: Repeat Step 1

You can say what you want, but Ds at least are open about raising taxes along with increased spending when they're in power. Then they just fight to not gut spending when they're not.

I am in no way defending the Rs. They suck as well.
Neither party will do the things needed:
1. Cut discretionary and mandatory programs
2. Limit future spending growth
3. Reform Medicare and Social Security (there is no way they will touch this topic) they will need to have an independent group to address

 

[snarlcakes]

The Republican "starve the beast" philosophy strategy works for them.
Step 1: Get in power and cut taxes predicting higher revenue
Step 2: Say we need to cut spending to match decreased revenue if it goes down or if it goes up lower than it needs to to make up for planned increases (e.g., Social Security). Bonus points if Rs not in power at this step.
Step 3: Repeat Step 1

You can say what you want, but Ds at least are open about raising taxes along with increased spending when they're in power. Then they just fight to not gut spending when they're not.

Sorry, but it's not true this time. Spending has went insane.



Skip to the 2 minute mark for the numbers on spending.

 

[snarlcakes]

I'll tell you what, when you start griping about the debt ceiling and spending when a republican is president, I'll start taking you more seriously.

Here's 1... cut out the tax breaks for the wealthy

I would actually be fine with raising the highest rates back to 41%, but it wouldn't move the needle much. They have to raise taxes in the middle classes to produce significant revenue.

 

[twenty02]

The Republican "starve the beast" philosophy strategy works for them.
Step 1: Get in power and cut taxes predicting higher revenue
Step 2: Say we need to cut spending to match decreased revenue if it goes down or if it goes up lower than it needs to to make up for planned increases (e.g., Social Security). Bonus points if Rs not in power at this step.
Step 3: Repeat Step 1

You can say what you want, but Ds at least are open about raising taxes along with increased spending when they're in power. Then they just fight to not gut spending when they're not.

Tax revenue has varied between 14-19% of GDP for the last 55 years. The all time high was 19.5% in 2000. Last year was 18.7%.

 

[TMFT]

Tax revenue has varied between 14-19% of GDP for the last 55 years. The all time high was 19.5% in 2000. Last year was 18.7%.

Total government spending as a % of GDP is coming down from the COVID highs too, even with increases in spending because GDP is still growing. A recession's double whammy of less revenue and higher automatic stabilizers will wreck that.

Federal Net Outlays as Percent of Gross Domestic Product

Graph and download economic data for Federal Net Outlays as Percent of Gross Domestic Product (FYONGDA188S) from 1929 to 2022 about outlays, Net, federal, GDP, and USA.

fred.stlouisfed.org

Similarly, defense spending as a % of GDP has been static for the last 20 years but is more than 2 1/2 times greater in raw dollars.

U.S. Military Spending/Defense Budget 1960-2023

Military expenditures data from SIPRI are derived from the NATO definition, which includes all current and capital expenditures on the armed forces, including peacekeeping forces; defense ministries and other government agencies engaged in defense projects; paramilitary forces, if these are...

www.macrotrends.net

And take the ACA, for example. It's maintained its overall popularity to the point that the Rs couldn't formulate a plan to repeal and replace and couldn't get the votes to pass what they eventually came up with anyway. It costs money, the people want to keep it in place broadly, so revenue has to go up.

Again, for sure, cut spending. But we didn't get here by one side spending. We got here from both sides spending and neither side caring about going into debt to do it.

 

[twenty02]

Total government spending as a % of GDP is coming down from the COVID highs too, even with increases in spending because GDP is still growing. A recession's double whammy of less revenue and higher automatic stabilizers will wreck that.

Federal Net Outlays as Percent of Gross Domestic Product

Graph and download economic data for Federal Net Outlays as Percent of Gross Domestic Product (FYONGDA188S) from 1929 to 2022 about outlays, Net, federal, GDP, and USA.

fred.stlouisfed.org

Similarly, defense spending as a % of GDP has been static for the last 20 years but is more than 2 1/2 times greater in raw dollars.

U.S. Military Spending/Defense Budget 1960-2023

Military expenditures data from SIPRI are derived from the NATO definition, which includes all current and capital expenditures on the armed forces, including peacekeeping forces; defense ministries and other government agencies engaged in defense projects; paramilitary forces, if these are...

www.macrotrends.net

And take the ACA, for example. It's maintained its overall popularity to the point that the Rs couldn't formulate a plan to repeal and replace and couldn't get the votes to pass what they eventually came up with anyway. It costs money, the people want to keep it in place broadly, so revenue has to go up.

Again, for sure, cut spending. But we didn't get here by one side spending. We got here from both sides spending and neither side caring about going into debt to do it.

And to think 23 years ago we had a surplus and there was talk that we would pay off the debt entirely (not that that is wise policy either)

 

[TMFT]

And to think 23 years ago we had a surplus and there was talk that we would pay off the debt entirely (not that that is wise policy either)

Lol

To be young again

 

[GiggityGoo]

Republicans are going to get a win here if they take it. Good job McCarthy.

Biden was high on his own supply when he said anything other than a clean debt ceiling raise was unacceptable.

 

[NPT]

Uncomfortable facts for the GOP:
25% of all US debt was incurred under Trump in 4 years.
<3% of all US debt has been incurred under Biden in 2.5 years.

The debt celing was raised, without conditions, 3 times under Trump, 7 times under GWB, 18 times under Reagan.

This is theater.

You seem to think that a president is responsible for all the deficit that occurs under that president. In other words, if Biden in his last year, could double SS payments to all SS recipients the next president would be responsible when the deficit got a lot larger.

 

[Sope Creek]

You seem to think that a president is responsible for all the deficit that occurs under that president. In other words, if Biden in his last year, could double SS payments to all SS recipients the next president would be responsible when the deficit got a lot larger.

Hmmmm . . . well, Trump did cut taxes . . . .

 

[GiggityGoo]

Bush fought two wars. Obama had the most cratered economy since the Great Depression. Trump had a once in a century pandemic (or at least the economy reacted like it).

The Biden administration couldn’t even offer the courtesy of an excuse for their asinine levels of spending?

 

[NPT]

Hmmmm . . . well, Trump did cut taxes . . . .

He sure didn't cut mine.

Seriously I look at stats and wonder how revenue increased so much if he cut taxes. If you look at this or this it shows revenue increasing a lot under Trump's administration. If there had been no "tax cuts" would it have increased even more? I have no idea.... understanding all that is over my head.

 

[snarlcakes]

He sure didn't cut mine.

Seriously I look at stats and wonder how revenue increased so much if he cut taxes. If you look at this or this it shows revenue increasing a lot under Trump's administration. If there had been no "tax cuts" would it have increased even more? I have no idea.... understanding all that is over my head.

It’s unlikely it would have increased more. Generally, capital in the hands of private people is going to be better allocated than government and produce more growth and tax receipts.

I didn’t read the article, but the laffer curve is one theory on it.

Laffer Curve: History and Critique

The Laffer Curve displays the relationship between tax rates and tax revenue collected by governments.

www.investopedia.com

 

[TMFT]

He sure didn't cut mine.

Seriously I look at stats and wonder how revenue increased so much if he cut taxes. If you look at this or this it shows revenue increasing a lot under Trump's administration. If there had been no "tax cuts" would it have increased even more? I have no idea.... understanding all that is over my head.

My taxes probably went up a tick. But they’re easier to file and I’m a good Democrat who doesn’t bitch about taxes too much, lol.

I’m going to have to research that chart. Because there hasn’t been nearly the annual GDP growth since the TCJA that would account for that kind of jump in tax receipts.

Maybe it’s the IRS cracking down on evaders? Or Bitcoin millionaires cashing in? Something else?

Like @snarlcakes said, the Laffer Curve is definitely a thing. I don’t think it’s the answer or at least not the full answer here, but could be part of it. The rub with the LC is t the principle, it’s the practice of identifying which side of the line we’re on and picking an optimal tax rate.

 

[TMFT]

Federal tax receipts boom, powered by inflation

CBO says receipts this year will be highest since 2000, when dot-com bubble drove a big revenue increase.

www.politico.com

 

[NPT]

My taxes probably went up a tick. But they’re easier to file and I’m a good Democrat who doesn’t bitch about taxes too much, lol.

Yeah mine went up some also because we used to always go over the standard deduction in charitable donations alone and then you got the individual exemptions on top of that but then they raised the stand deduction so we normally fall right below that and you no longer get the individual exemptions. I do wish they had made the tax brackets a little more linear. They're kind of linear until they hit 24% and then the next bracket is 32%.

 

[TMFT]

Yeah mine went up some also because we used to always go over the standard deduction in charitable donations alone and then you got the individual exemptions on top of that but then they raised the stand deduction so we normally fall right below that and you no longer get the individual exemptions. I do wish they had made the tax brackets a little more linear. They're kind of linear until they hit 24% and then the next bracket is 32%.

Yep. Exact situation with us. I don’t miss going through the effort of itemizing though.

 

[Sope Creek]

Sorry, but it's not true this time. Spending has went insane.

View embedded media

Skip to the 2 minute mark for the numbers on spending.

View embedded media

Ted Cruz is a jackass.

The real problem is those extremists in Congress who want to exercise their political power and they'll hold the country hostage to do it.

It takes two to tango, Ted.

 

[snarlcakes]

Ted Cruz is a jackass.

The real problem is those extremists in Congress who want to exercise their political power and they'll hold the country hostage to do it.

It takes two to tango, Ted.

They aren't holding anyone hostage. The House already passed a Bill.

 

[UncleMark]

They aren't holding anyone hostage. The House already passed a Bill.

Yeah, and they voted 147 times to repeal Obamacare, too.