Is President Obama playing an April Fool's joke on us?

[DinoDoc]

Of course. Kinda like when a Nobel winning economist tells you the deficit problem isn't really a major problem, and the natural Poly response is 'OMG SLASH EVERYTHING!!!'.

Why worry about deficits? There is a huge army on the march. Baby Boomers are getting older. this enormous generation will being turning 65 in 2010. Their ranks will swell inexorably. This aging population will create huge, foreseeable budget problems.

The numbers are fairly simple. Medicare and Social Security have both promised the great majority of people benefits that are much larger than their contributions…..Those paying in will stagnate, those making claims will explode. The result will be a completely predictable budget crisis. [...]

We know and surely as you can know anything about the economic future at 15 years from now our obligations will face large increases. Borrowing ourselves ever deeper into debt is Startlingly Irresponsible behavior by any standard.... It will create a severe political crisis.

We must act soon or there will be a real problem with solvency.

Paul Krugman "The Age of Diminished Expectations" in 1997

[giblets]

I'm no nobel peace winner, but I do know that if interest rates on T-bills rise three or four hundred basis points, then we are screwed. It is only a matter of time. Eventually, the government will have to let inflation run rampant in order to devalue the debt. There is no good outcome without beginning to exercise some fiscal responsibility.

If you believe interest rates are going to rise maybe you should start short selling treasuries

[PLATO]

If you believe interest rates are going to rise maybe you should start short selling treasuries

Do I believe interest rates are going to rise? No...I am SURE interest rates are going to rise. The question is "WHEN are interest rates going to rise?" It is a near certainty that sometime in the next 10 years that they will rise...at that time, the treasury will have to "refinance" retiring debt at higher rates. This is a no brainer gribbler.

Anyone who thinks that the feds buying binge of $2 Trillion in treasuries hasn't kept rates low simply doesn't know squat. Two very relevant questions are "What happens when they stop buying?" and "What happens if they don't?"

Neither scenario bodes well for long term interest rates.

[Jon Miller]

Now is not the time, though.

The time was during 1992-2008.

Clinton and the Republicans could do it. Bush and the Democrats could not (and made it far worse).

JM

[Jon Miller]

But if we implement "Financial Responsibility" now, we are screwing ourselves by lowering our GDP growth for a significant part of the future.

It is sort of like the stock market. You could buy high and sell low. Or you can buy low and sell high. Which is smarter? Which is actually financial responsible?

You and the other 'deficit hawks' or 'pro-austerity' or 'financial responsible' people want to spend when borrowing is expensive and the economy is running well and stop spending when borrowing is cheap and the economy is doing poorly.

It is a clear way to make things worse, not better.

Making the economy suck now is a clear way to make the economy suck in the future.

JM

[PLATO]

But if we implement "Financial Responsibility" now, we are screwing ourselves by lowering our GDP growth for a significant part of the future.

It is sort of like the stock market. You could buy high and sell low. Or you can buy low and sell high. Which is smarter? Which is actually financial responsible?

You and the other 'deficit hawks' or 'pro-austerity' or 'financial responsible' people want to spend when borrowing is expensive and the economy is running well and stop spending when borrowing is cheap and the economy is doing poorly.

It is a clear way to make things worse, not better.

Making the economy suck now is a clear way to make the economy suck in the future.

JM

Sounds good on paper, but let's look at some hard figures:

Federal Budget 2000: $1.789 Trillion
Federal Budget 2007(Bush's last year): $2.728 Trillion
Federal Budget 2012: $3.795 Trillion

Projected Revenue 2013: $2.902 Trillion

Clearly, there is a spending problem that has been going on for over a decade. Growth of this type is unsustainable in any economic environment.

[Ogie Oglethorpe]

Funny I've heard all these anti-austerity arguements before that reducing spending now means a hit to the already ailing economy. And yet, the entitlement reform that is required to have any shot of a path to sustainability comes with almost no present day consequences. Almost every measure discussed to date for SS or medicare reforms almost always exempt the current recipients and either means tests, raises the eligibility ages etc. for people of my generation (less than 50).

So entrenched is the sacred cow mentality of entitlements within the Dem party that even soak the rich 'means testing' approaches are not enough to get them to even bring up or discuss the subject.

[Ogie Oglethorpe]

Paul Krugman "The Age of Diminished Expectations" in 1997

Paul Krugman's a world famous economist, nobel prize winner? Who knew. Wow, I thought his claim to fame was as a noted Enron Advisor.

[DinoDoc]

Paul Krugman's a world famous economist, nobel prize winner? Who knew.

He likes telling people every chance he gets. He was also the source of ken's appeal to authority, so I thought he'd be the best rebuttal.

[giblets]

Do I believe interest rates are going to rise? No...I am SURE interest rates are going to rise. The question is "WHEN are interest rates going to rise?" It is a near certainty that sometime in the next 10 years that they will rise...at that time, the treasury will have to "refinance" retiring debt at higher rates. This is a no brainer gribbler.

Anyone who thinks that the feds buying binge of $2 Trillion in treasuries hasn't kept rates low simply doesn't know squat. Two very relevant questions are "What happens when they stop buying?" and "What happens if they don't?"

Neither scenario bodes well for long term interest rates.

What is your point exactly? The yield curve for treasuries slopes upward? Yes indeed, in fact right now the 10-year rate is 1.86%:

http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

And the 30-year rate is 3.08%. That's very likely to be less than rate of nominal GDP growth we'll have over the next 30 years, but I'm supposed to believe we're approaching some death spiral of unpayable interest?

[Jon Miller]

Sounds good on paper, but let's look at some hard figures:

Federal Budget 2000: $1.789 Trillion
Federal Budget 2007(Bush's last year): $2.728 Trillion
Federal Budget 2012: $3.795 Trillion

Projected Revenue 2013: $2.902 Trillion

Clearly, there is a spending problem that has been going on for over a decade. Growth of this type is unsustainable in any economic environment.

But austerity will decrease revenue and GDP and the economy now.

It is stupid.

It is indefensible.

It is the same as saying 'the stock market is going down, sell sell sell!' rather than saying 'the stock market is going down, let's hold until it goes back up again'.

JM

[Jon Miller]

Sounds good on paper, but let's look at some hard figures:

Federal Budget 2000: $1.789 Trillion
Federal Budget 2007(Bush's last year): $2.728 Trillion
Federal Budget 2012: $3.795 Trillion

Projected Revenue 2013: $2.902 Trillion

Clearly, there is a spending problem that has been going on for over a decade. Growth of this type is unsustainable in any economic environment.

But austerity will decrease revenue and GDP and the economy now.

It is stupid.

It is indefensible.

It is the same as saying 'the stock market is going down, sell sell sell!' rather than saying 'the stock market is going down, let's hold until it goes back up again'.

JM

[DinoDoc]

But austerity will decrease revenue and GDP and the economy now.

It is stupid.

It is indefensible.

It is the same as saying 'the stock market is going down, sell sell sell!' rather than saying 'the stock market is going down, let's hold until it goes back up again'.

JM

But austerity will decrease revenue and GDP and the economy now.

It is stupid.

It is indefensible.

It is the same as saying 'the stock market is going down, sell sell sell!' rather than saying 'the stock market is going down, let's hold until it goes back up again'.

JM

If US sovereign debt was a problem in 1997 according to a Nobel winning economist (tm), when did it cease to be a problem that should be dealt with?

[DaShi]

Maybe you should contact him.

[Jon Miller]

If US sovereign debt was a problem in 1997 according to a Nobel winning economist (tm), when did it cease to be a problem that should be dealt with?

When 2008/2009 happened and we were up against the zero lower bound as far as traditional monetary policy goes.

JM
(Note even if you are in favor of more non-traditional monetary policy, now would not be the time to impose financial responsibility somewhat because of expectations.)