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At what point does the spending stop?


Thalmor
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So as of the typing of this, the US debt clock says that the US nation debt is just under $40,000,000 away from being 20 trillion: http://www.usdebtclock.org/

 

I'm fiscally conservative. I want to see that number go down. I understand that would be controversial- after all, you'd need drastic tax increases and spending cuts. However, at what point does the spending stop? Politicians on both sides just want to keep spending. While the Republicans preach spending control and the Democrats preach more spending, both the Republicans and Democrats just want to keep the spending. The Republicans do show some restraint, but honestly, they're not any better (this is coming from a Republican).

 

So, yeah, what's the end game here? This topic is addressed to the more liberal members of the P&W community. I, a conservative, am legit throwing this question out there in good faith and just for my own education. I'm putting this in General Debate, but that's only because it's such a divisive topic. I actually don't want to participate in any debate. I just want someone to give me a decent answer:

 

What's the end game here (yes, I know I'm repeating myself)? Clearly that number has to have some meaning or else nobody would pay attention to it. At which point is it to much? 50 trillion? 100 trillion? 200 trillion? Do you guys think it's okay to just like that number go on indefinitely?

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Things are changing now - but the way I see it, since the recession interest rates have been very, very low. Lots of foreigners want to invest in the United States (i.e. buy our debt) and at the current prices, it makes sense, in my opinion, to borrow their money and invest it into our infrastructure, which will promote future economic growth and allow us to pay back the debt in the future.

 

Now, whether the government is using the money in a worthwhile way that promotes future economic growth is another question. But, in theory, I think it makes sense for us to be taking on debt. As I started though - it looks like interest rates are set to rise, and ideally (fingers crossed no jump in military spending by getting involved in another war) we'll be back to producing a surplus soon and be able to pay down some of that debt.

 

That last bit might be a fantasy if Trump slashes taxes without offsetting in reduced spending, though.

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The national debt is a problem if we can’t pay it off. I think the hypothetical debt level after which we’d no longer be able to pay off the debt is the qualitative threshold at which it would be too much.

 

There’s obviously a problem with this assessment, though: the amount that U.S. can pay off isn’t known with certainty and also varies with government policy, GDP, and other aspects of the U.S. and global economies. The simplest measures of how much the U.S. can afford to pay, though, is what our debt to GDP ratio is.

 

There are several caveats:

 

 


 

  1. There isn’t a “magic†debt to GDP ratio that countries shouldn’t go past. There was a paper in 2010 that quite a few Republicans/conservatives cited as definitive proof that there was, but several fairly large errors in the paper’s datasets were exposed after it was published and the authors never said high public debt causes slow economic growth (link to article about paper).
  2. The U.S. borrows in its own currency. This means that U.S. debt is both less risky to investors and to the U.S. government because the Federal Reserve can issue new currency – “print money†– to avoid default. The Wikipedia article on the subject is worth a glance. There are costs to doing this, but they’re not as bad as most debt hawks would have you believe. Devaluing your currency hurts lenders (loans receivable are worth less) and importers (imports are more expensive) but actually helps debtors (debts payable are worth less) and exporters (their products are cheaper for foreigners to buy, making them more competitive). It’s useful to figure which, if any, of these four groups debt hawks are members of and which, if any, they seem to be advocating for.
  3. Government debt probably isn’t as important as private debt (link to article on the subject). This is the essence of what people are getting at when they talk about “secular stagnationâ€. The article is worth scrolling through just for the graph of China’s private debt, in light of the country’s slowing economic growth.
  4. Interest rates are low right now. This means that borrowing is relatively cheap for the moment. If you believe in the secular stagnation hypothesis, then you also likely believe that interest rates will stay pretty low for a while.
  5. The U.S. government owes some of its debt either to itself or to Americans. This makes the debt matter less because the government's creditors will be more directly, and negatively, impacted in the event of a default.
  6. What the money is spent on matters. There was a huge spike in U.S. national debt in the early years Obama’s presidency, but most of that increase was from spending on policies directly related to counteracting the effects of the recession. Not only was some of this “automatic†in the form of safety net programs – more unemployed people means more unemployment benefits and higher spending on food stamps and Medicaid – most of it was really good for economic growth. The housing bubble depressed aggregate demand by wiping out a lot of wealth (if you bought a house for more than it’s worth you’re less rich in very concrete terms than you were before), which reduced consumption spending (if you’re in debt or less rich than you thought you’d be, you’re less likely to spend and more likely to save). The policies that boost consumption in the short run are those that get money to people who will go out and spend it – unemployed, newly impoverished people, for instance. Other government policies that boost economic growth are those that boost productivity – keeping auto workers employed or building infrastructure to lower transportation costs for the private sector are examples from 2009-10. If your economy grows faster than your debt, you’re probably fine, and policies that make this more likely to happen are usually beneficial even if they increase debt.

 

 

 

Liberals don't like debt either, but they tend to view it as a tool with costs and benefits rather than something that is ideologically anathema (see Grover Norquist's tax pledge if you want a clearer picture of what I mean by that). They tend to believe debt's benefits can be bigger than conservatives do (my massive spoilered list lays out why) and they also tend to think that the downsides of debt depend on the policies that caused the debt. For instance, they decried Reagan's increases in military spending because those increases almost certainly didn't boost productivity in the way that more spending on infrastructure or education likely would have. They also disliked Bush 43's tax cuts in part because they went to rich people with low marginal propensities to spend.

 

Democratic politicians also tend to be wary of bipartisan or "bipartisan" initiatives to decrease the deficit because of Republicans' track record of employing "starve the beast" tactics. That, and the macroeconomic inadvisability of cutting government spending in a depressed or recovering economy, is what makes many liberals react the way they do to mentions of tax cuts when the topic is supposed to be deficit reduction, even if there ends up being a net tax increase as there was in that article.

 

 

 

So, the tl;dr is that debt is a problem, but it’s one for the medium to long term, not the short term, because of a combination of low interest rates, America’s unique ability to borrow in its own currency, and the economic benefits of certain types of government spending, even when that spending is funded by borrowing.

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You have to have both sides working together to make the tax system more fair, increase taxes on the wealthy, and cut spending.

 

I can always balance the budget using any number of online budget simulators.

 

There's a ton of "detailed" provisions that help the budget, such as eliminating the cap on social security contributions.  For example, if you make 118,500 you pay a certain amount of social security tax.  If you make 750,000,000, you pay the exact same number, because it caps out when your income is 118,500.

 

There is no magic bullet solution.  No single tax increase or spending cut will balance the budget alone.  Politicians like to lie about it.  Right wingers blame welfare queens, and liberals blame corporate welfare on the spending side.  

 

Don't expect honesty from our cowardly status-quo politicians or the new breed of compulsive liar narcisist politicians.

Duke of House Greyjoy

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Don't expect honesty from our cowardly status-quo politicians or the new breed of compulsive liar narcisist politicians.

 

The biggest problem with American Democracy is that it's basically an oligarchy. Politicians (many of whom have been in office for decades) care to much about re-election to want to support any really dramatic legislation.

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The biggest problem with American Democracy is that it's basically an oligarchy. Politicians (many of whom have been in office for decades) care to much about re-election to want to support any really dramatic legislation.

What America needs is new leadership tbh. There should be a term limit for both houses. Too bad we couldn't ever get that passed :/

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There are currently excess funds in the global economy caused by an high levels of saving and low levels of investment.

 

Factors which cause the high levels of saving include the aging population of the western world (people are saving for pension funds), very high levels of inequality (the wealthy save much more than the poor), and the growing savings of the Asian middle class.

 

Factors which cause low levels of investment include the austerity policies of European governments (which are a result of the German demand for fiscal conservatism due to the lack of a fiscal union in the EU), low investment by many governments across the world due to high levels of sovereign debt, and the relatively low levels of investment required by new industries (tech industries do not require the same levels of start up investment as say, automobile industries).

 

These factors, coupled with the effects of the excess cash pumped into the system by quantitative easing, have resulted a huge quantity of excess funds in the global economy and rock bottom interest rates. It is certainly a good time for governments to borrow. But when they are doing so, they must keep an eye on their current level of debt.

 

US dollar's status as the global reserve currency has long allowed it to get away with excessive borrowing. However, debt has now reached massive and potentially unsustainable levels. Most notably, the USA has become dependent on borrowing to just meet its daily needs rather than to fund extra projects which might increase growth and make borrowing worthwhile in the long run. This is not a good sign.

 

If the USA continues along the way it is currently going, eventually confidence in the dollar will be eroded and another currency will take its place as the global reserve currency. Should this happen, the USA would experience massive hyperinflation and would have to abandon the dollar in favor of a new currency. This event would also signal the end of the USA's global hegemoney.

Edited by Ishmael
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The biggest problem with American Democracy is that it's basically an oligarchy. Politicians (many of whom have been in office for decades) care to much about re-election to want to support any really dramatic legislation.

 

Increase taxes on an upturn in the economy (i.e. maybe a year into the Trump administration). It would serve as a two-fold effect: One, to actually start decreasing the national debt and increase the fiscal power of the government (by what Edward I said, which is to decrease the ratio between GDP and debt). Two, to curb excessive speculation and prevent a bubble int he market. 

 

Problem is, increasing taxes across the board is extremely unpopular. You could potentially get away with increasing taxes on a certain class group (i.e. Rich corporations), and if you are really politically adept, increase taxes on the middle or lower income class. No senator/representative is willing to commit that level of political suicide, and would actually benefit from opposing such an agenda if a president puts it forward. 

It's a useful mental exercise. Through the years, many thinkers have been fascinated by it. But I don't enjoy playing. It was a game that was born during a brutal age when life counted for little. Everyone believed that some people were worth more than others. Kings. Pawns. I don't think that anyone is worth more than anyone else. Chess is just a game. Real people are not pieces. You can't assign more value to some of them and not others. Not to me. Not to anyone. People are not a thing that you can sacrifice. The lesson is, if anyone who looks on to the world as if it was a game of chess, deserves to lose.

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Realistically thinking, the spending will never stop so long as money/government is a thing. As long as there's a government, there will always be spending on their part for whatever they think is right to "purchase". The same could be said about money, so long as a currency exists it can be spent on whatever the entity who possess it wants to spend it on. It's a paradox to think that money won't be spent on something the people don't want (whether due to corruption in politics, or the nature of Government spending on daily costs and what not).

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What America needs is new leadership tbh. There should be a term limit for both houses. Too bad we couldn't ever get that passed :/

I seem to recall a variety of state term limits laws passed in the 90's and the Supreme Court ruled them unconstitutional.  Let's use google-fu 

 

A search for  "term limits supreme court invalidate" revealed this nice summary on Wikipedia.  https://en.wikipedia.org/wiki/U.S._Term_Limits,_Inc._v._Thornton

Duke of House Greyjoy

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I seem to recall a variety of state term limits laws passed in the 90's and the Supreme Court ruled them unconstitutional.  Let's use google-fu 

 

A search for  "term limits supreme court invalidate" revealed this nice summary on Wikipedia.  https://en.wikipedia.org/wiki/U.S._Term_Limits,_Inc._v._Thornton

From the Majority Opinion: 

 

Finally, state-imposed restrictions, unlike the congressionally imposed restrictions at issue in Powell, violate a third idea central to this basic principle:

 

It could very possibly be allowed at the federal level due to SCOTUS treating the two differently. 

Edited by WISD0MTREE

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From the Majority Opinion: 

 

 

It could very possibly be allowed at the federal level due to SCOTUS treating the two differently. 

It would go to the court almost right away if it wasn't a constitutional amendment.  The Congress can't pass a law to invalidate parts of the constitution, generally speaking.  The constitution lays out the requirements.  

 

Also, term limits will be a net gain in executive power and a net loss in legislative power.  So this will tend to see further power centralization in the white house.  I guess I trust 535 elected representatives and senators more then 1 elected president.  So, i'd probably have to vote against term limits if I had a vote.

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  • 3 weeks later...

US debt is odd anyway, most of it is owed between government departments it seems. Imo just seems like a really inefficient system lol.

[11:52 PM] Prefontaine: But Keegoz is actually bad. [11:52 PM] Prefontaine: He's my favorite bad leader though.

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I'm going to interject here for a moment.

 

We will always be in debt, that's how current political systems work. Save for a few small city-size nations, of course.

 

The reason is pretty simple, Political Survival incentivises going into debt for both autocracies and democracies. For autocracies, that money usually goes either straight to the autocrats bank account, or the accounts of his supporters. For democracies, that money is used to support programs that a politicians constituents favor. The thing is, most constituents don't really care about the debt since lowering the debt isn't as important for them than other things.

 

Total Defense Spending is expected to pass 1 trillion this year

Federal Spending Charts

 

A Democratic constituent tends to want Defense Spending to be reduced, Social Spending raised, and taxes raised

A Republican constituent tends to want Social Spending to be reduced, Defense Spending raised, and taxes reduced

 

If the Democrats get their way, Republican politicians are at risk of being ousted. Likewise, if the Republicans get their way, Democratic politicians are at risk of being ousted. So instead of either of them getting their way, they fight over spending and raise the debt ceiling constantly so that they both maintain their positions. The really twisted part is, in a two party system, there is also a risk that their supporters will vote for the other party if they aren't happy with their elected representatives as that's the only "real choice" that they have. So on top of potentially losing their position, there's a chance that in doing so, the rival party could gain more power and strengthen themselves via polices or straight up gerrymandering districts during certain periods, further entrenching the oppositions support. This risk incentivises the party itself to use whips to keep their members in line as well, and even if a politician doesn't really agree with the spending priorities of the party, they are at risk of getting their support pulled and losing their political office, further preventing any real negotiations or bipartisan agreements.

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Well, Republicans control the House, Senate and White House. They own the debt now. Last time they controlled government, they turned a surplus into debt and ran the economy into the ground, making the debt worse. Here's hoping this time is better.

 

They've also controlled Congress for a long time. "All bills for spending shall originate in the House of Representatives". So they kind of already owned it.

Edited by Aisha Greyjoy

Duke of House Greyjoy

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The biggest problem with American Democracy is that it's basically an oligarchy. Politicians (many of whom have been in office for decades) care to much about re-election to want to support any really dramatic legislation.

Wait I have an idea for this then 

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Edited by Seryozha Nikanor
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