[ArtK78]

I am not a practicing Economist, so I really can't answer your question. But it is not a problem. As has been stated by others in other threads, the debt is actually a smaller percentage of GNP now than it has been in the past, and we are still here.

Let me know when the US has a going out of business sale. But I don't expect it to happen anytime soon.

[kenberg]

Let me shift a minute to illustgrate a point. I have a friend who thinks the Federal Reserve is a menace. It isn't. But what is dangerous, and I think we are seeing it, is to place too much faith in the Federal Reserve. I am sure that Janet Yellen is brilliant and dedicated. Same for Ben Bernanke, Alan Greenspan, Paul Volker, many others. But they are not gods, and they would probably be the first to note their own limitations, and the limitations of their powers regardless of their brilliance. The danger is that we decide we do not have to make sound decisions ourselves because if a problem arises the Fed will fix it. Maybe saints perform miracle, maybe not, but we don't and won't have a miracle performing saint running the Fed.

And this same danger applies to the debt. It's one thing to say that a little debt won't kill us, possibly even is good for us (maybe), but it is another thing entirely to say that the quite large debt, and our massive overall commitment, is nothing to worry about. We just cut some military retirement commitments. I doubt that this will be the last cutback needed in our commitments.


I also do not expect the immanent collapse of the United States. But again that is different from thinking we are in great shape. If we accept a responsibility to give future generations a strong and prosperous country, it is fair to ask how this plan is going. So-so, in my view.

[Winstonm]

ArtK78, on 2014-January-09, 16:09, said:

No, as there has never been a time in modern history that the National Debt has been close to zero.

But it really doesn't matter what you (or, for that matter, what I) believe about that hypothetical situation. The main point is that the debt as it exists and as it will exist in the future (no doubt at still higher levels) is not a serious problem.

I do know that when there were serious attempts to pay down the debt (or to not borrow because it would increase the debt) the economy suffered.And that is a contrast between trying to equate individual behavior and government behavior. For an individual, it is often (but not always) beneficial to pay down debt. For a government, it is often (but not always) harmful to pay down debt.

Perhaps someone could write a story along the lines of Dr. Strangelove except use the National Debt as the bogeyman instead of the atomic bomb - "How I Learned to Stop Worrying and Love the National Debt."

(empahsis added)

I ususally agree with you but in this instance I think you are amiss. It does matter what people think as this misconception about government debt is at the heart of the tea party movement, which successfully shut down the US government over ideological beliefs, which shows there is a real world connection between beliefs and actions.

[32519]

sfi, on 2014-January-10, 00:37, said:

1835 was the only time the US had a zero national debt. Shortly after that the country went into the longest depression in the nation's history.

Planet Money discussed this in 2011.

There is a major difference between 1835 and now. Back then Andrew Jackson TOOK ADVANTAGE of a huge real-estate bubble to SELL OFF GOVERNMENT OWNED LAND, and so pay off the national debt.

Now it is the federal government CREATING A BUBBLE, this time in the stock market. Following Ben Bernanke’s policy of printing money to stimulate the economy, the world will soon reap the unintended consequences of that policy as much of that money is ending up in the stock market, driving prices up.

What will be the catalyst bursting the bubble? I have no idea. The banks were responsible for the 2008 crisis with their sub-prime policy. Maybe the collapse of the Euro? The Eurozone Crisis has been simmering since 2009. There are already enough governments there unable to repay or refinance their debt. A fresh crisis in the Eurozone which somehow spilled over to the USA in ways unforeseen could possibly be the catalyst.

[billw55]

ArtK78, on 2014-January-10, 00:38, said:

I am not a practicing Economist, so I really can't answer your question. But it is not a problem. As has been stated by others in other threads, the debt is actually a smaller percentage of GNP now than it has been in the past, and we are still here.

Let me know when the US has a going out of business sale. But I don't expect it to happen anytime soon.

Where are you getting your information? A quick google search tells me that debt/GDP is at an all time high, other than the world war 2 debts, which were paid down by 1960 or so. That includes higher than world war 1 and the great depression. Most projections seem to show debt/GDP continuing to increase, with a few showing it steady.

All businesses operate some revolving debt. But it must be kept to a reasonable percentage of revenue. Same goes for governments. Greece, Spain, Ireland .. bad things do happen when debt gets out of control.

So Art, how high is too high?

[ArtK78]

billw55, on 2014-January-10, 08:56, said:

Where are you getting your information? A quick google search tells me that debt/GDP is at an all time high, other than the world war 2 debts, which were paid down by 1960 or so. That includes higher than world war 1 and the great depression. Most projections seem to show debt/GDP continuing to increase, with a few showing it steady.

All businesses operate some revolving debt. But it must be kept to a reasonable percentage of revenue. Same goes for governments. Greece, Spain, Ireland .. bad things do happen when debt gets out of control.

So Art, how high is too high?

Sorry. I was wrong about that. The debt increased so much during the Bush years that it is higher now as a percentage of GDP than at anytime since WWII. But even that doesn't bother me. And the debt is projected to decline (slightly) over the next 6-10 years as a percentage of GDP. Not because the debt will decline. The US is not operating at a surplus. But the GDP is expected to increase at a faster rate than the increase in the debt. And that is typically the case, except when the US is engaged in military operations.

How high is too high? Interesting question. No one really knows. But the US, with its enormous ability to produce goods and services, is in a better position to weather a large debt than the countries that you cited.

Comparing the financial practices of businesses or individuals to national government is an absurdity. Businesses and individuals do not have the ability to tax or wage war. Those differences, among others, makes any comparison absurd. States and localities typically must have balanced budgets, so any comparison between them and the national government is also highly inappropriate.

Personally, I don't lose any sleep over the national debt of the US.

[billw55]

ArtK78, on 2014-January-10, 09:31, said:

Sorry. I was wrong about that. The debt increased so much during the Bush years that it is higher now as a percentage of GDP than at anytime since WWII.

Are you sure? This chart at wikipedia shows a noticeable decline in the later Clinton years, a small increase under Bush, and a steep increase after Obama came into office. Of course you can argue that this latest increase should be blamed on the recession, and not on Obama. Then again, you can blame the (much smaller) bump in the Bush years on 9/11 and our responses. In any case, it does not seem accurate to say that debt/GDP increased significantly under Bush.

ArtK78, on 2014-January-10, 09:31, said:

But even that doesn't bother me. And the debt is projected to decline (slightly) over the next 6-10 years as a percentage of GDP. Not because the debt will decline. The US is not operating at a surplus. But the GDP is expected to increase at a faster rate than the increase in the debt. And that is typically the case, except when the US is engaged in military operations.

How high is too high? Interesting question. No one really knows. But the US, with its enormous ability to produce goods and services, is in a better position to weather a large debt than the countries that you cited.

Comparing the financial practices of businesses or individuals to national government is an absurdity. Businesses and individuals do not have the ability to tax or wage war. Those differences, among others, makes any comparison absurd. States and localities typically must have balanced budgets, so any comparison between them and the national government is also highly inappropriate.

Personally, I don't lose any sleep over the national debt of the US.

Yes, government is different. Yes, we can carry debt better than most nations. But eventually, there is a level that is unsustainable and/or harmful. I don't know what that level is, but I don't want to find out by reaching it.

[32519]

ArtK78, on 2014-January-10, 09:31, said:

How high is too high? Interesting question. No one really knows. But the US, with its enormous ability to produce goods and services, is in a better position to weather a large debt than the countries that you cited.

As a % of GDP, the USA looks good versus the United Kingdom. Check out this List of Countries by External Debt.

[barmar]

billw55, on 2014-January-10, 10:00, said:

Yes, government is different. Yes, we can carry debt better than most nations. But eventually, there is a level that is unsustainable and/or harmful. I don't know what that level is, but I don't want to find out by reaching it.

I vaguely remember my 8th or 9th grade Social Studies teacher telling us that the definition of a "nation" is that they can essentially have unlimited debt. They can print money, they can raise taxes, they decide their own credit limit.

Government debt is definitely necessary to the economy. How many things are tied to US Treasury rates? When someone wants the "safest" investment, they buy US bonds. Where would they go if we stopped selling bonds?

[32519]

Here is another very interesting read, Political debates about the United States federal budget.

[Winstonm]

billw55, on 2014-January-10, 08:56, said:

Where are you getting your information? A quick google search tells me that debt/GDP is at an all time high, other than the world war 2 debts, which were paid down by 1960 or so. That includes higher than world war 1 and the great depression. Most projections seem to show debt/GDP continuing to increase, with a few showing it steady.

All businesses operate some revolving debt. But it must be kept to a reasonable percentage of revenue. Same goes for governments. Greece, Spain, Ireland .. bad things do happen when debt gets out of control.

So Art, how high is too high?

People continually make this unfounded assumption that an analogy using private or corporate debt as a proxy for a nation and its debt can in some way be used to describe the government/debt relationship when the truth is that they are not even related.

The proper actions concerning debt for a family of four has no bearing whatsoever on the proper actions of a nation and its borrowing.

[ArtK78]

billw55, on 2014-January-10, 10:00, said:

Are you sure? This chart at wikipedia shows a noticeable decline in the later Clinton years, a small increase under Bush, and a steep increase after Obama came into office. Of course you can argue that this latest increase should be blamed on the recession, and not on Obama. Then again, you can blame the (much smaller) bump in the Bush years on 9/11 and our responses. In any case, it does not seem accurate to say that debt/GDP increased significantly under Bush.

Obama inherited a disaster from Bush. The immediate effect of the fix to the economy was a continuation of the increase of the debt in excess of the rise in GDP. That is now behind us, and has been for some time.

Quite frankly, while I am reasonably sure that the eventual success of Obamacare will be a large part of President's Obama legacy, his fix of the economic disaster left to him by Bush should also be viewed very well in the light of history.

[kenberg]

billw55, on 2014-January-10, 10:00, said:

Yes, government is different. Yes, we can carry debt better than most nations. But eventually, there is a level that is unsustainable and/or harmful. I don't know what that level is, but I don't want to find out by reaching it.

Not for the first time, you and I are in agreement.

Having some concern over debt does not make me a member of the Tea Party nor, I think, does it make me an idiot. Republicans are making mistake if they marginalize everyone who fails to adhere to Tea Party dogma. Democrats are making a mistake if they marginalize everyone who is concerned about debt, entitlements and budgets. There is an election coming up and it will be interesting to see which party is interested in trying to appeal to me. Quite possibly, the answer will be neither one of them, they will both opt for ideological purity.

[billw55]

kenberg, on 2014-January-10, 12:17, said:

Having some concern over debt does not make me a member of the Tea Party nor, I think, does it make me an idiot.

I know how you feel. It seems that anyone who is the least bit bothered by it must be ridiculed as an ignorant rube. Meanwhile they go on thinking that any amount of debt at all is perfectly ok, for lots of fancy economic reasons. Plus, some 8th grade teacher says so. And anything bad that happens is Bush's fault anyway, so who cares what we do?

kenberg, on 2014-January-10, 12:17, said:

Republicans are making mistake if they marginalize everyone who fails to adhere to Tea Party dogma. Democrats are making a mistake if they marginalize everyone who is concerned about debt, entitlements and budgets. There is an election coming up and it will be interesting to see which party is interested in trying to appeal to me us. Quite possibly As sure as the sun rises in the east, the answer will be neither one of them, they will both opt for ideological purity.

Fixed.

[barmar]

When quoting my teacher I didn't intend to suggest that it's a good idea to keep running the debt infinitely. But a default would be of our own causing -- there's no creditor out there who's going to call a bunch of huge notes at once. No one is going to foreclose on Yosemite National Park. It would only happen because Congress makes an arbitrary decision to stop allowing the debt to increase. There's no magic amount of debt that's "too high".

There are economic priorities, and paying down the debt is not at the top of it. For private individuals, the best financial advice you can give them is often to clean up their credit card debt. But that's not a good analogy to the government. First of all, credit cards charge huge rates -- it's almost impossible to get enough return on anything to keep up with it. Conversely, government bonds have extremely low interest rates.

It would be nice if we could solve the problems that have higher priority than the debt. In fact, I suspect if we addressed them, a side effect would be that we would reduce our deficity. So we shouldn't worry about the debt itself, just work on improving the economy and the debt will take care of itself.

[kenberg]

barmar, on 2014-January-10, 11:28, said:

I vaguely remember my 8th or 9th grade Social Studies teacher telling us that the definition of a "nation" is that they can essentially have unlimited debt. They can print money, they can raise taxes, they decide their own credit limit.

Government debt is definitely necessary to the economy. How many things are tied to US Treasury rates? When someone wants the "safest" investment, they buy US bonds. Where would they go if we stopped selling bonds?

I am certaily interested in safety, I am even more interested in simplicity. I have no interest in complex risky schemes to double or triple my wealth so that I can have a great bash in fifteen years on my ninetieth birthday. But I own no government bonds and I am not sure I know anyone who does. When I was very young, we bought War Bonds. That was different. At the elementary school we were encouraged to bring in small amounts of money and eventually get a bond, i think they were as small as ten bucks. A different time.

[Vampyr]

kenberg, on 2014-January-10, 07:37, said:

I also do not expect the immanent collapse of the United States.

Is 'immanent' a Freudian slip? Perhaps in your heart you believe that collapse in inherent in the system.

[kenberg]

Vampyr, on 2014-January-10, 17:06, said:

Is 'immanent' a Freudian slip? Perhaps in your heart you believe that collapse in inherent in the system.

Just me being careless. Although I guess Freud would reject that explanation as a matter of principle.

In high school I scored in the 35th percentile on the test we took in clerical speed and accuracy, So I think that it's a good bet to go with carelessness.

[Vampyr]

billw55, on 2014-January-10, 08:56, said:

Where are you getting your information? A quick google search tells me that debt/GDP is at an all time high, other than the world war 2 debts, which were paid down by 1960 or so. That includes higher than world war 1 and the great depression. Most projections seem to show debt/GDP continuing to increase, with a few showing it steady.

All businesses operate some revolving debt. But it must be kept to a reasonable percentage of revenue. Same goes for governments. Greece, Spain, Ireland .. bad things do happen when debt gets out of control.

So Art, how high is too high?

I suppose there must be a level at which 100% of revenue is used to service the debt. That would be too high.

[mike777]

Vampyr, on 2014-January-10, 17:36, said:

I suppose there must be a level at which 100% of revenue is used to service the debt. That would be too high.

but what is that? again vamp you seem to not care...really

over and over in your posts you say spend other peoples money