Raising the Debt Ceiling is Not For New Debt

[Metsfanmax]

**My ideas wouldn't float though, as my first concern would be sticking it to the lenders. Yeah, that's right, The Fed being the primary recipient of my debt cutting wrath. There is no reason why we should have to pay interest on money the Fed creates out of thin air on the credit that Uncle Sam so generously extended to The Fed in the first place. The problem is a debt based currency system. That, above all else has to be dealt with first. After that, the debt problems will be much easier to deal with.

But ending the debt based monetary system is not even on the table, and thus, there is no way out of this debt spiral that the ill effects will always strike first those who can least afford it.

So, are we just screwed?

EDIT: I went and looked it up, it's a $39 billion cut to the $78 billion food stamp budget. It's worse than I thought, I thought it was only being cut in half. Yeah, that is a pretty bad thing considering that 85% of those receiving food stamp help are children, old people and the disabled.

78 divided by 2 is 39.

The threshold where the debt to GDP ratio becomes a drag on a society's economy is well documented and example after example is available throughout history to back up this line. It's around 110% or so, once that level is crossed, there is no coming back. At least no one has yet without a complete collapse of the currency and monetary system that has to be replaced.*

Did you not follow the mess related to the Reinhart/Rogoff work? Claiming such a distinct threshold is just not supported by the data. Rather, there is a smooth decline in future growth as a function of debt-to-GDP:



This is a very weak correlation and, more importantly, is not actually a causal mechanism. In order for your argument to make sense, we would need to believe that raising debt is what causes future growth declines. But in fact there could well be external factors influencing these. No one has convincingly shown a strong causal argument here, which is why austerity measures are not taken as gospel by economists.

That $78 billion yearly budget is going to be slashed by as much as half. Now I'm all for cutting money, don't get me wrong, but taking the food from old people, children and the disabled is pretty craven.

What precisely would you cut to bring our budget back to being neutral?

By the way, it's principal, not principle. And sorry for responding to things out of order and neglecting to respond to some things.

[BigBallinStalin]

1. There is no oversight. A.K.A. Someone/Group of People that are completely independent from the government that can regulate our federal budget.

Who watches the watchmen? By definition, any group of people that is responsible for regulating the federal budget is part of our government. It's a fool's errand to insist that if only we had external oversight or "real" checks and balances, that this problem will be solved. It's a smokescreen to suggest that a government cannot maintain an even budget by itself. Plenty of countries do this. Talking about freezing the debt ceiling to lower our debt is like taking aspirin to cure a fever.

So, the problem with Mets' argument is that he assumes that some government Oversight Committee would actually regulate politicians and bureaucrat behavior toward some optimal solution. The problem is that oversight committee's do not exert enough influence over the incentives already faced by politicians and bureaucrats (e.g budget expansion, high investments in rhetoric, low reward in actually understanding and resolving problems, no discipline mechanism--such as the market's profit and loss, uninformed voters encouraging poor governance, etc.).

Oversight Committees can't resolve the fundamental problems of central planning (i.e. government, which it essentially is). ]

The issue is not "blah blah smokescreen." It's the problem of democracy--specifically the politicians. Deficit spending is more politically profitable than taxation, but deficit spending is fueled by debt. For politicians, the path of long-term planning (taxation/reducing expenditures, greater risk of losing office, going against constituents' short-sighted desire to gain now instead of later) does not offset the gains short-term planning (deficit spending, minimal changes to taxes/budget spending, greater career security, giving government goodies at the expense of others today and in future generations--taxation is zero-sum, sometimes negative-sum, and hardly hardly ever positive-sum). No oversight committee can fix that.




The issue isn't just about 'external v. internal' control over government. It's rather about seeking substitutes for government, e.g. market activities and civil society activities (like mutual aid societies). If the electorate is generally uninformed (which it is), then we shouldn't be surprised that (1) people continually clamor for government intervention without understanding the outcomes nor the means, and that (2) we get poor outcomes from government (e.g. continual inflation, additional tax revenues servicing debt, half-assed policies, and policies which are conducive to special interest groups--at the expense of the general public).

None of this is resolved by insisting on more oversight committees within the institutions of government. Rather, the change would have to come from a more informed electorate.

[BigBallinStalin]

The logical thing is to not spend a single penny more than is taken in. If that's the case, there is no need to raise the debt limit at all, as no more debt will be taken on.

There are plenty of sensible reasons to run a government budget deficit (e.g. if your deficit spending stimulates growth, which results in a higher tax revenue that repays the deficit). Your standard is too unsophisticated to match reality because what matters is not the absolute size of the debt but rather the debt-to-GDP ratio* (roughly). If we double our debt but also double our GDP in the same time period, then we are basically in the same situation that we were before (and as long as the ratio itself is enough to continue driving growth, then we are in a fine situation). What the actual appropriate level of that ratio is, or whether it is wise to continue this policy in perpetuity, are matters on which reasonable people can disagree. Insisting that deficit spending can inherently never work, demonstrates a lack of understanding of basic macroeconomics. It smacks of the same "logic" that isaiah's graphic illustrates: the idea that microeconomic/household fiscal policies are directly mappable to macroeconomic/government fiscal policies.

'Good' macroeconomics is rooted within microeconomics, and the macroeconomics which shifts further from the micro becomes marginally irrelevant to the real world. Sorry, Mets. Read more about economics (not math. econ./macroecon/econometrics), or stick to your astrophysics please.

With Mets' argument, if government kept borrowing in order to invest in trillions in weapons, then sure, 'GDP' would increase, but real wealth wouldn't necessarily increase, which is the problem Mets overlooks.

Not all exchanges made by government are on net positive; most are zero-sum or negative-sum. Think of arguing that all exchanges by theft are positive-sum. That's what Mets' position implies. GDP doesn't reflect the nuances of government spending and private spending.

[patches70]

And sorry for responding to things out of order and neglecting to respond to some things.

How about responding to just this-

So, what strings are you willing to accept with the raising of the debt limit?
What strings is Obama proposing with the raising of the debt limit?
Should there be strings attached?
If so, then how are those who are willing to add those strings somehow "holding the nation hostage" as Mr Obama claims?
If no strings should be attached, can you explain how that is wise and how that debt is going to be paid back?

[Metsfanmax]

And sorry for responding to things out of order and neglecting to respond to some things.

How about responding to just this-

So, what strings are you willing to accept with the raising of the debt limit?
What strings is Obama proposing with the raising of the debt limit?
Should there be strings attached?
If so, then how are those who are willing to add those strings somehow "holding the nation hostage" as Mr Obama claims?
If no strings should be attached, can you explain how that is wise and how that debt is going to be paid back?

I think that discussing "strings attached" misses the point. We cannot change our current federal fiscal policy without a fundamental change in perspective. I find quite dubious the idea that we can create such a shift through piecemeal reform implemented as an ultimatum.

As for holding the nation hostage, you made the point yourself when you discussed cuts to the food stamp program. Of course, one could reasonably make the argument that we need to hold the nation hostage in order to stop the increase in national debt -- but is that what you're arguing?

[patches70]

I don't blame you for not answering those questions. They force you to confront your beliefs in ways you don't want to confront.

I think that discussing "strings attached" misses the point. We cannot change our current federal fiscal policy without a fundamental change in perspective.

And how are we to change that perspective if we just keep increasing the debt ceiling and piling on more debt?

As for holding the nation hostage, you made the point yourself when you discussed cuts to the food stamp program. Of course, one could reasonably make the argument that we need to hold the nation hostage in order to stop the increase in national debt -- but is that what you're arguing?

No, I'm not arguing holding the nation hostage, I'm showing that when it comes to debt and the servicing of that debt, the poor, the young, the sick, the old, the taxpayer will be second fiddle to the banks. In other words, when it comes to debt and the line forms as to who gets paid first, guess who is at the front of the line?

And your idea seems to be that more debt is no big deal and is a good thing if done right. (correct me if I'm wrong on that).
All that does is make sure that those at the head of the line will just get a bigger share of what there is, at the detriment of everyone else.

[Metsfanmax]

I think that discussing "strings attached" misses the point. We cannot change our current federal fiscal policy without a fundamental change in perspective.

And how are we to change that perspective if we just keep increasing the debt ceiling and piling on more debt?

Well, that would be tough. I simply ask you to look at recent history if you think that attempts to freeze the debt ceiling have been effective at changing the perspective.

As for holding the nation hostage, you made the point yourself when you discussed cuts to the food stamp program. Of course, one could reasonably make the argument that we need to hold the nation hostage in order to stop the increase in national debt -- but is that what you're arguing?

No, I'm not arguing holding the nation hostage, I'm showing that when it comes to debt and the servicing of that debt, the poor, the young, the sick, the old, the taxpayer will be second fiddle to the banks. In other words, when it comes to debt and the line forms as to who gets paid first, guess who is at the front of the line?

What I am asking you is, how could we decrease the debt without also cutting funding for services for these groups?

And your idea seems to be that more debt is no big deal and is a good thing if done right. (correct me if I'm wrong on that).
All that does is make sure that those at the head of the line will just get a bigger share of what there is, at the detriment of everyone else.

I don't have a perspective on what the correct macroeconomic approach is. I generally listen to what economists think about the economy, just as I listen to what biologists think about biology (being an expert in neither). Since even the very best economists can be deeply divided on issues like macroeconomic policies and economic forecasting (likely because of incomplete data or computing power*), I find it a bit absurd when people with no particular expertise in the subject claim to be certain that they have a handle on what the solution is.

*In my astrophysics research I regularly use the biggest supercomputers in the world for simulations, and the thought of accurately modelling the U.S. economy frightens me.

[patches70]

Well, that would be tough. I simply ask you to look at recent history if you think that attempts to freeze the debt ceiling have been effective at changing the perspective.

Indeed, but show me a time when there was an actual serious attempt to freeze the debt ceiling. Hint: there hasn't been one. Just like there will be no serious attempt to stop the debt ceiling increase this time.

You do understand that Obama's comments, the rhetoric coming out of the current regime from it's cronies, is all BS and designed only to score political points and rile emotions, right?

What I am asking you is, how could we decrease the debt without also cutting funding for services for these groups?

There are lots of solutions. The biggest being that we stop paying interest on money created. Absolutely pay interest to the foreign nations and individuals who purchase our debt, but there is no reason at all that we should have to pay interest to The Fed simply for creating the needed currency that must exist anyway for there to even be a such thing as trade and an economy.

In other words, move away from a debt based currency.
You should really look into how money is created in the first place. When you truly understand that (and it's not very hard at all) then you will understand the absurdity of it all.

After that, we have to set some priorities as a society. Now that might be even harder than getting rid of the debt based currency system.

The big problem is that there are people who benefit greatly from this system and won't be willing to give it up easily. I can't say I blame them for that all too much, but the debt based currency system is the exact opposite for what money was originally intended to do. Abraham Lincoln had some things to say about the true purpose of money and it's well worth your time to look that up.

I don't have a perspective on what the correct macroeconomic approach is. I generally listen to what economists think about the economy,

Hey! That's just what the USG does! Hahahahahah! The same economists who never saw the crash coming! I hope at least you take into account whatever angle a particular economists is pushing when listening to one and forming your beliefs.

Look, Mets, the very best thing you can do to understand better is to start with how money is created in the first place, in our current system. When you get that then you'll see what I'm talking about and how it's impossible to get out of the debt spiral that one gets into with a debt based currency.

You are smart enough to figure it out and have the political temperament to understand the ramifications of such a system and seeing how detrimental it is in the long run to social stability and a just society.

[Metsfanmax]

You do understand that Obama's comments, the rhetoric coming out of the current regime from it's cronies, is all BS and designed only to score political points and rile emotions, right?

I don't care much about what President Obama thinks about the budget, actually. The responsibility to set a federal budget is that of Congress and talking about the President is a red herring that helps to absolve Congress of that responsibility.

What I am asking you is, how could we decrease the debt without also cutting funding for services for these groups?

There are lots of solutions. The biggest being that we stop paying interest on money created. Absolutely pay interest to the foreign nations and individuals who purchase our debt, but there is no reason at all that we should have to pay interest to The Fed simply for creating the needed currency that must exist anyway for there to even be a such thing as trade and an economy.

In other words, move away from a debt based currency.
You should really look into how money is created in the first place. When you truly understand that (and it's not very hard at all) then you will understand the absurdity of it all.

After that, we have to set some priorities as a society. Now that might be even harder than getting rid of the debt based currency system.

I thought my question was clear enough, but I suppose not: how can we balance the budget while still supporting services for the poor in a way that is actually likely to happen in this universe?

The big problem is that there are people who benefit greatly from this system and won't be willing to give it up easily. I can't say I blame them for that all too much, but the debt based currency system is the exact opposite for what money was originally intended to do. Abraham Lincoln had some things to say about the true purpose of money and it's well worth your time to look that up.

Money was originally intended to settle debts. I don't understand what you even mean by "debt based currency;" that is, to me, a redundant statement.

Hey! That's just what the USG does! Hahahahahah! The same economists who never saw the crash coming! I hope at least you take into account whatever angle a particular economists is pushing when listening to one and forming your beliefs.

I just said I don't have beliefs on the subject. I think most people should not. If my choice is listening to someone with years of professional experience and an advanced degree in economics, and some guy on the internet who read the Wikipedia entry on fiat money, I'll give a little more credence to what the economist says -- but since neither of them are likely to truly understand in full our economy, I am glad I am not the one responsible for setting fiscal policy.

[Phatscotty]

Night Strike, just out of curiosity, do you think you are smarter than President Obama?

how could we judge that? Do you even know how smart Obama is? Did he get straight A's through college or did Obama coast through with C's and skip class a lot? Nobody knows

I would bet money Strike got better grades than Obama did. But of course that isn't the only way intelligence is measured. Obama has been on this earth a lot longer than Strike, so he has that advantage. But I think you are asking the wrong question.

What Obama said is definitely meant for the low information voter. It's meant to be manipulative.
Let's test the theory....So if the debt ceiling were to drop....does that mean we have less debt? Of course it does!!!

What happened here is government overspent at profligate levels, and now they are handing us the bill. Do we treat them like a spoiled brat and just pay it? Or do we teach them some discipline??

[Metsfanmax]

Night Strike, just out of curiosity, do you think you are smarter than President Obama?

how could we judge that? Do you even know how smart Obama is? Did he get straight A's through college or did Obama coast through with C's and skip class a lot? Nobody knows

I would bet money Strike got better grades than Obama did. But of course that isn't the only way intelligence is measured. Obama has been on this earth a lot longer than Strike, so he has that advantage. But I think you are asking the wrong question.

So the university system is dominated by Liberals and Leftists and doesn't represent true intelligence, except when it's convenient for your argument?

[Phatscotty]

Night Strike, just out of curiosity, do you think you are smarter than President Obama?

how could we judge that? Do you even know how smart Obama is? Did he get straight A's through college or did Obama coast through with C's and skip class a lot? Nobody knows

I would bet money Strike got better grades than Obama did. But of course that isn't the only way intelligence is measured. Obama has been on this earth a lot longer than Strike, so he has that advantage. But I think you are asking the wrong question.

So the university system is dominated by Liberals and Leftists and doesn't represent true intelligence, except when it's convenient for your argument?

no, it's just one way to judge who is smarter (not the only way, not the best way) By all means, bring up some other ways. I see what you are trying to do with my crusade to prove Universities are really just left wing seminaries, but that will get us way off point. I'm making a thread about that guys study that proves it, we can get into that there if you like.

[Phatscotty]

Can Obama or any Democrats/Lefties at least admit that raising the debt ceiling means spending already went up?

[Phatscotty]

1. There is no oversight. A.K.A. Someone/Group of People that are completely independent from the government that can regulate our federal budget.

Who watches the watchmen? By definition, any group of people that is responsible for regulating the federal budget is part of our government. It's a fool's errand to insist that if only we had external oversight or "real" checks and balances, that this problem will be solved. It's a smokescreen to suggest that a government cannot maintain an even budget by itself. Plenty of countries do this. Talking about freezing the debt ceiling to lower our debt is like taking aspirin to cure a fever.

In principled theory, We The People are responsible in the end, and we are part of the government. It doesn't really work like that right now, but it has before and it could now. The people are the final check and balance.

History is replete with powers that got in trouble trying to manage too much debt. There is no currency in history that has not eventually reverted back to zero worth. We are totally ignoring history. We should freeze the debt ceiling now to prevent future overspending. It has to start somewhere. Nobody else is going to do it. The People have to organize and unite on some common sense principles here.

[Night Strike]

The logical thing is to not spend a single penny more than is taken in. If that's the case, there is no need to raise the debt limit at all, as no more debt will be taken on.

There are plenty of sensible reasons to run a government budget deficit (e.g. if your deficit spending stimulates growth, which results in a higher tax revenue that repays the deficit).

Night Strike, just out of curiosity, do you think you are smarter than President Obama?

Your question is too vague.

OK, fair enough. Refined question: do you think you understand the U.S. economy better than President Obama?

Considering Obama (and you by the other section of your post that I left above) believes that Keynesian economics works, then yes, I'm smarter than Obama when it comes to the US economy. If Keynesian economics worked, then the USSR would have been the richest nation in the world. When they believe that every dollar of government spending provides a 50% increase in economic output, even though successful companies such as the evil oil companies only see a 7% increase in economic output, it's clear that their beliefs in economics are completely wrong.

[Phatscotty]

the cherry on top

Then we never have to worry about the economy again.... we should just spend a trillion dollars an hour, because we'll get 1.5 trill back....

[Night Strike]

EDIT: I went and looked it up, it's a $39 billion cut to the $78 billion food stamp budget. It's worse than I thought, I thought it was only being cut in half. Yeah, that is a pretty bad thing considering that 85% of those receiving food stamp help are children, old people and the disabled.

Don't forget that this is the federal government we're talking about. Any time you see a large dollar amount such as $39 billion being cut from an annual budget of $78 billion, the $39 billion amount is actually a 10 year amount, not annual. They're only cutting $3.9 billion a year from food stamps, which is a 5% cut, not 50%. That's how the progressives actively work to fool people.

[Phatscotty]

EDIT: I went and looked it up, it's a $39 billion cut to the $78 billion food stamp budget. It's worse than I thought, I thought it was only being cut in half. Yeah, that is a pretty bad thing considering that 85% of those receiving food stamp help are children, old people and the disabled.

Don't forget that this is the federal government we're talking about. Any time you see a large dollar amount such as $39 billion being cut from an annual budget of $78 billion, the $39 billion amount is actually a 10 year amount, not annual. They're only cutting $3.9 billion a year from food stamps, which is a 5% cut, not 50%. That's how the progressives actively work to fool people.

tru dat. And then there is the states. My state, and I'm sure almost every state has a food assistance program, as well as other federal and state food aid programs. We are cutting 20 million in food stamps too and having a battle with Governor of the billionaire Soros bought and paid for boytoy billionaire Mark Dayton of the Dayton dynasty.

I personally know a lot of people who get food stamps and still bowl in a league every week, go to the bar every friday and saturday, go to the casino once a week for years now, and make sure their kids don't have to share their PS3's (all 3 kids have one). I want those people's food stamps to be cut. I do not want for disabled peoples aid to be cut, or for people down on hard times to be cut. I just know for a fact there is TONSSSSS of waste, therefore, PLENTYYYYYYY of room for cuts.

Our state government shut down over a budget battle a few years ago, but the good thing was the Tea Party won and the budget was immediately balanced and we even turned a surplus. Of course, the Democrats got elected here based on their greed for all the surplus money and new stadiums and new government programs up the wazoo, and they spent all the surplus and we are already in debt again and Minneapolis has had it's credit rating downgraded and is on the list of the top 10 troubles cities in America (maybe even top 5) so now we have to cut again. Of course, none of this is the Democrats fault, and it's all the Republicans fault.

[Phatscotty]

I thought this was interesting:

Hey, I guess as long as the family keeps making those minimum credit card payments every month, everything is hunky dory. Heh heheh.

Ahhh yes, wisdom in action, I love it.

and even if the time does come when you can't meet your minimum monthly payments ....just get a new credit card! Then you can brag about how your main debt is not going up, and even make fun of people who think you are just shell gaming more debt.

[thegreekdog]

And sorry for responding to things out of order and neglecting to respond to some things.

How about responding to just this-

So, what strings are you willing to accept with the raising of the debt limit?
What strings is Obama proposing with the raising of the debt limit?
Should there be strings attached?
If so, then how are those who are willing to add those strings somehow "holding the nation hostage" as Mr Obama claims?
If no strings should be attached, can you explain how that is wise and how that debt is going to be paid back?

I think that discussing "strings attached" misses the point. We cannot change our current federal fiscal policy without a fundamental change in perspective. I find quite dubious the idea that we can create such a shift through piecemeal reform implemented as an ultimatum.

As for holding the nation hostage, you made the point yourself when you discussed cuts to the food stamp program. Of course, one could reasonably make the argument that we need to hold the nation hostage in order to stop the increase in national debt -- but is that what you're arguing?

I've actually thought about that (the last sentence). There does not appear to be any incentive for our current politicians (no matter the "D" or "R" designation) to reform fiscal policy in any meaningful way. My knee-jerk reaction is to hold the nation hostage. Then I think about how just a few years ago we had a balanced budget (during the Clinton administration and Republican-held House) and wonder whether we can get back there again without holding the nation hostage. Of course, even in that hallowed era of Clinton/Newt, we still had obscene spending levels, so I'm not sure I'd even like that.

[chang50]

The logical thing is to not spend a single penny more than is taken in. If that's the case, there is no need to raise the debt limit at all, as no more debt will be taken on.

There are plenty of sensible reasons to run a government budget deficit (e.g. if your deficit spending stimulates growth, which results in a higher tax revenue that repays the deficit).

Night Strike, just out of curiosity, do you think you are smarter than President Obama?

Your question is too vague.

OK, fair enough. Refined question: do you think you understand the U.S. economy better than President Obama?

Considering Obama (and you by the other section of your post that I left above) believes that Keynesian economics works, then yes, I'm smarter than Obama when it comes to the US economy. If Keynesian economics worked, then the USSR would have been the richest nation in the world. When they believe that every dollar of government spending provides a 50% increase in economic output, even though successful companies such as the evil oil companies only see a 7% increase in economic output, it's clear that their beliefs in economics are completely wrong.

The reason the USSR failed has zero to do with Keynesian economics and everything to do with a corrupt Marxist economy failing largely under the pressure of the US inspired cold war.

[Phatscotty]