Bush's deficits and the coming crunch.

[Reader81]

I dont know about average American, but I'm live in American, mostly people I knew dont care about Government because they think Government is all Bull****, at least where I live, since I talk about it, I wish we american overthrow government, no more Republicans, Houses, Senate, Presidency, and Supreme Court, We People rule our own Taxes and Laws, no more one leader, no more rich people who running government or senate or any of kind running Government No Government, they wont work!, Whole, every person who live in american rule taxes and law, Beside vote person wont work, Problem how can I make american willing to overthrow government? Hmmm, it's should be soon, it's there some american people getting angery at USA Government. Well, I dont know how long? It's matter of time, I hope.
Edit
Why? Because they full of lie and steal our money by use taxes.

[Vanguard]

LOL. The only reason we have decent economic growth in the US is because we are borrowing huge amounts of money from overseas. Once we can no longer do that, we will instantly lose a large amount of growth.

This makes all predictions of "growing our way out of increased debt" complete nonsense. Once we can no longer borrow from overseas, our average growth rate will drop from, say, 2.5% per year to 1.0% per year. At that point, things get bad in a hurry. Slower growth means lower revenues, and since we will no longer be able to simply increase the deficit, we either have to cut spending dramatically or we have to raise taxes. Either alternative cuts growth even more. Which decreases revenues.... You can see where this is going.

Even worse, slower average growth (and the resulting bankrupcy of all the companies in the US which provide health care) will dramatically increase social outlays by the government at the same time that revenues are falling.

And all this basically arises out of Bush's stupid (or worse) tax cut for the wealthy.

[The Mad Viking]

I think it's laughable all these great economic minds who complicate matters and eventually confuse themselves about the benefits of deficit spending.

The fact of the matter is that deficit spending is simply not sustainable.

If you continue to run a deficit, eventually, you will reach a point where the cost to service the accumulated debt is greater than the deficit itself.

At that point, you are now collecting more money than you are spending, not the other way around.

The current generation is now worse off on a day-to-day basis, and you have hung a corpse around the neck of the next generation. To say nothing of the negative influences on the economy of having large debts - restricting your flexibility with interest rates, reducing the yield on your debt instruments, etc.

So deficits should be used (as Keyne's intended) only in special circumstances, for a short periods, when there is a great need.

The greatest need of the US right now is to compete with China in the world marketplace. Deficit spending as it is now taking place is precisely the worst thing they could be doing.

[KrazyHorse]

Originally posted by The Mad Viking
I think it's laughable all these great economic minds who complicate matters and eventually confuse themselves about the benefits of deficit spending.

The fact of the matter is that deficit spending is simply not sustainable.

If you continue to run a deficit, eventually, you will reach a point where the cost to service the accumulated debt is greater than the deficit itself.

At that point, you are now collecting more money than you are spending, not the other way around.

The current generation is now worse off on a day-to-day basis, and you have hung a corpse around the neck of the next generation. To say nothing of the negative influences on the economy of having large debts - restricting your flexibility with interest rates, reducing the yield on your debt instruments, etc.

So deficits should be used (as Keyne's intended) only in special circumstances, for a short periods, when there is a great need.

The greatest need of the US right now is to compete with China in the world marketplace. Deficit spending as it is now taking place is precisely the worst thing they could be doing.

On the contrary, deficits up to the rate of long-term growth of the economy are sustainable. They're not necessarily a positive thing, though.

[Ted Striker]

In Other News

Oerdin's girlfriend pleaded not guilty and got 3 years house arrest, 7 years probation.

Man she's trapped at home bored out of her mind? Conjugal visits I'm in to win!!!!

[Vanguard]

On the contrary, deficits up to the rate of long-term growth of the economy are sustainable. They're not necessarily a positive thing, though.

Since deficits, other things being equal, inherently and inevitably go up at above the rate of growth (due to a little thing known as "interest"), this is completely irrelevant. If our interest rate (and therefore our deficit) doesn't go up then our growth rate will go down.



Is that the guy's wife? Niiiiice.

[The Mad Viking]

Originally posted by KrazyHorse
On the contrary, deficits up to the rate of long-term growth of the economy are sustainable. They're not necessarily a positive thing, though.

No. Don't believe whoever taught you this.

Run a model. Watch how the debt service cost continues to increase, even in a growing economy. Eventually the annual debt service cost will surpass the annual deficit, destroying, from that point forward, the benefit to society.

Besides that, with deficit spending you have two choices- cut back real spending immediately, because after just one year you have increased the portion of your budget going to interest expense; or raise the deficit as a percentage of your budget just to maintain spending level from the previous year.

It is ONLY beneficial (to society) if you generate a disproportionate revenue increase by stimulating the economy.

Of course, it is beneficial to many individuals short term interests. Usually not mine, and ceratinaly not our childrens'.

[DinoDoc]

Re: In Other News

Originally posted by Ted Striker
Oerdin's girlfriend pleaded not guilty and got 3 years house arrest, 7 years probation.

Man she's trapped at home bored out of her mind? Conjugal visits I'm in to win!!!!

You're too old for her. Maybe you could send a 13 year old her way.

[Kuciwalker]

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[Kuciwalker]

Originally posted by The Mad Viking
Run a model. Watch how the debt service cost continues to increase, even in a growing economy. Eventually the annual debt service cost will surpass the annual deficit, destroying, from that point forward, the benefit to society.

Bonds are paid off after a fixed amount of time.

[KrazyHorse]

Originally posted by The Mad Viking


No. Don't believe whoever taught you this.

Run a model. Watch how the debt service cost continues to increase, even in a growing economy. Eventually the annual debt service cost will surpass the annual deficit, destroying, from that point forward, the benefit to society.

In an economy running at a growth rate greater than the interest rate on the debt a national debt equal in size to the GDP is sustainable (i.e. the deficit will never be smaller than the debt service). Such a debt is maintained by annual deficits equal in size to the amount of growth in the economy.

If you want to maintain the exact same level of indebtedness as a percentage of GDP then the maximum sustainable deficit is equal to the size of your debt times the growth rate of your economy.

[KrazyHorse]

Originally posted by Kuciwalker


Bonds are paid off after a fixed amount of time.

Irrelevant. New bonds are issued to pay for this.

[KrazyHorse]

Attached excel spreadsheet shows an economy starting at debt 40% of GDP, running at 3.5% growth rate in economy, deficits of 3.5%, debt service rate of 2.7%, running for 50 years

Furthest right column shows the size of the deficit above and beyond debt service charges as a percent of GDP. This number is asymptotically approaching the difference between the growth rate of the economy and the debt service rate, i.e. 0.8%

[KrazyHorse]

forgot attachment

[JimmyCracksCorn]

Originally posted by The Mad Viking


No. Don't believe whoever taught you this.

Wow, Mad Viking. You're just full of radical insights. First you teach us all that slavery is wrong, now we're learning that deficit spending is bad.

Don't ever quit.