How will the US pay back its debt? - Page 3 - Politics Forum.org | PoFo

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Everything from personal credit card debt to government borrowing debt.

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#14781564
Andropov wrote:It is mathematically impossible at this point, as this article suggests?: http://theeconomiccollapseblog.com/arch ... ional-debt

What happens if the country just keeps borrowing and borrowing and raising the debt ceiling higher and higher?

We all know the problem is in spending money we don't have in hand, eh? That "money in hand" is "tax revenue". So we didn't have enough tax revenue. Why? Was the spending really so great that it was unreasonable? I don't think so. Sure there is waste. There will always be waste. Sure there was excess. There will always be excess. So how did we get here?

Well, the government has gone out of its way to funnel lots of money into the hands of the rich. Our U.S. healthcare is twice what the average cost is among developed nations, but the income of health insurance companies' CEOs is the highest in the nation. And the waste in the defense department is legendary. But if we are going to pay those prices and fund those expenses, it made no sense at all to cut income taxes in the 1980s or to cut estate taxes and corporate income taxes. The two go hand-in-hand when we are not force to pay for enormous costs as in WWII.

The GDP is $18 trillion/year. That is production. It doesn't account for savings, pensions, and offshore accounts that amount to trillions. And yet the national debt was as high or higher after WWII and how did we pay it down? -We worked and produced our way out of it. Taxes were raised to address it. With inflation, over time, the impossible became possible. The national debt shrank in real dollars as normal inflation advanced. It became manageable. It was paid down to comfortable levels.

Our current debt could be addressed similarly if the Congress only had the courage to do what it must.
#14865725
My 3rd post on this site.
IIRC the US has had a debt for all of the last 175+ years. The debt from the Revolutionary War was paid off mostly by selling land recently stolen from the Native Americans. This is, of course, no longer possible. But, soon a new debt was taken on and it shot up in the Civil War. It was never paid off since then.
Neo-liberalism needs to be replaced. In about June, 2016 the IMF [International Monitary Fund] published a paper in which it admitted the austerity doesn't work they way they thought it would and other such admissions.
I like Modern Money Theory = MMT. MMT says that the debt should not be paid off. That it is held by insurance comp, banks, and foreign nations and banks, etc. The bonds and T-bills provide them with a good asset that they need to function. Let them keep their assets. MMT says that all 14 times the US Gov. ran a surplus this led to a bank panic or recession. The last one was Clinton's surplus and the Dot Com recession. MMT says this is because a surplus means the GOv. is taking taxes from the people [middle class] and not spending it so the middle class get it back; instead it becomes cash in the hands of insurance comp., etc. This can only go on for a year or 2 before the people have to stop spending, this cuts other people's incomes [one person's spending is always some other person's income], they stop spending, and this reduces economic growth which means a recession has started. The US Gov. should end the surplus and spend more to fight the recession. If it doesn't the people will replace them with Reps who will spend more.
MMT therefore says that paying off the national debt with tax revenues is not possible. Yes, it can be reduced as a %-age of the GDP by letting growth and inflation happen, but this is not "paying it off".

MMT says a lot of other stuff. If you want to know more google MMT and Wray for Prof. Wray a proponent of MMT.

One thing it says that I think it should back off from is -- like all IOUs when dollars return to the issuer [the US Gov.] usually thru taxes, they are "destroyed" as soon as they are deposited into the US Gov. account at the Fed. Res. bank. And ALL spending is therefore done with newly created dollars. This just confuses people and is not central to their other points. They say this because dollars are *in fact* just IOUs [I (=the US Gov.) owe you $1 worth of value against your tax liability]. The dollar is a "fiat currency", it is not backed by gold and is allowed to float freely on the international exchange system. This backing by taking them when you pay taxes is why [MMT says] the dollar has value. This I can agree with. The problem is that MMT then goes on the the general case of IOUs, that as soon as it is returned to the issuer, the issuer has no need for it any more and he destroys it. Because almost all payments today to the US Gov. are made by check drawn on a bank, no actual dollar bills are ever paid to the Gov. It is now all just computer memories being deducted from and added to. Thus no dollar bills are destroyed, but since the US Gov. can create all the dollars it wants to with key strokes when it pays its bills, it really has no need for the "dollars" it collects in taxes. Taxes do have other CRITICAL functions, however.

So, the US national debt will never be paid off. And since it has been there for over 175 years there doesn't seem to be any need to pay it off.
#14865735
The US doesn't see much wrong with having a debt. Most Americans take out loans on their education, house, car and even taking out loans for lavish vacations.

Your credit score improves dramatically if you take out a mortgage and you manage to pay it off.

In Accounting, students learn that businesses have a certain amount of liabilities such as loans from the bank. And it is accepted as long as the liabilities aren't too heavy on the business that the business cannot sustain itself.

I agree with Steve, the debt may never be fully paid off.
#14865990
Again, you don't really need to pay off the government debt. You just need a balanced budget, and keep it that way for a few decades. Inflation will reduce the debt to the point that it doesn't matter.

MistyTiger wrote:The US doesn't see much wrong with having a debt. Most Americans take out loans on their education, house, car and even taking out loans for lavish vacations.

Your credit score improves dramatically if you take out a mortgage and you manage to pay it off.

In Accounting, students learn that businesses have a certain amount of liabilities such as loans from the bank. And it is accepted as long as the liabilities aren't too heavy on the business that the business cannot sustain itself.

I agree with Steve, the debt may never be fully paid off.


Credit score is basically a racket created by the credit bureau. Basically, the formula to raise your credit score is to to never use more than 10% of your overall credit line. Even if you use 50% and pay it off every month without being charged interest, your score will not go up, and in fact, could go down. Solely because you're not at the 10% magic number. What this does is encourage people to take out more lines of credit so that their credit line is even higher so that they don't exceed that 10%. Why do the credit bureau like this? Well, each credit card you get, means a credit score is pulled, which means the credit bureau gets paid.

The whole thing is setup for the bureaus to make more money off more credit score pulls. It doesn't matter if you actually pay your shit off on time with no late feels.

Effectively, they score you on their ability to make money off you.
#14866035
Someone's debt is someone else's savings. The measurement of the US debt is simply the amount of private savings held by Americans, and others.

The size of the debt is meaningless. It doesn't need to be, and shouldn't be, the object of economic policy.

The US debt is "paid back" in its entirety, on average, every 7 years or so (the average maturity of a Treasury instrument). Neither the principal nor the interest is paid from tax revenue. Debt service, like all government spending, is self-financing.
Image
#14866617
Having fun, and trying to stay away from toxic politics. I've taken up volunteer work for local historical society - my "job" is transcribing 18th century letters of various minor historical figures, so that they can be examined by real historians. This is all done online, so basically it amounts to decoding handwriting.
#14866627
When the debt is owed to foreign sources, all that interest is lost. All that money which fund your kids' education, is Phtttt! Gone.
#14866643
@Stormsmith
I don't think that is exactly true.
All of the current debt is and will be rolled over and paid with new debt. This includes the interest. If someone willnot buy the T-bills then the US can just create dollars to repay the loans. All it has to do is realize that default is totally bad and especially bad for the rich, and to decide that it is better for the rich to create a few new dollars than to suffer as a result of a default.

Also foreign holders of US Bonds and T-bills have already taken the money away as a result of the balance of payments being negative.

Functionally, China (for example) is sending the US real manufactured goods in exchange for dollars which China then converts into T-bill and bonds. Just paper.
The US is trading paper for real stuff. I do wonder how long this can go on?
#14878003
Sorry, I have yet to figure out how to copy other's posts.
[q]"By Senter - 03 Mar 2017 05:15 Posts between 100 and 500
Like
Andropov wrote:
It is mathematically impossible at this point, as this article suggests?: http://theeconomiccollapseblog.com/arch ... ional-debt

What happens if the country just keeps borrowing and borrowing and raising the debt ceiling higher and higher?

We all know the problem is in spending money we don't have in hand, eh? That "money in hand" is "tax revenue". So we didn't have enough tax revenue. Why? Was the spending really so great that it was unreasonable? I don't think so. Sure there is waste. There will always be waste. Sure there was excess. There will always be excess. So how did we get here?

Well, the government has gone out of its way to funnel lots of money into the hands of the rich. Our U.S. healthcare is twice what the average cost is among developed nations, but the income of health insurance companies' CEOs is the highest in the nation. And the waste in the defense department is legendary. But if we are going to pay those prices and fund those expenses, it made no sense at all to cut income taxes in the 1980s or to cut estate taxes and corporate income taxes. The two go hand-in-hand when we are not force to pay for enormous costs as in WWII.

The GDP is $18 trillion/year. That is production. It doesn't account for savings, pensions, and offshore accounts that amount to trillions. And yet the national debt was as high or higher after WWII and how did we pay it down? -We worked and produced our way out of it. Taxes were raised to address it. With inflation, over time, the impossible became possible. The national debt shrank in real dollars as normal inflation advanced. It became manageable. It was paid down to comfortable levels.

Our current debt could be addressed similarly if the Congress only had the courage to do what it must.[/q]"
__________________________________________________________________

The *huge* difference between post WWII and now is that after WWII the rest of the world needed to buy stuff that the US could make and they couldn't because their factories were leveled by the war and the US produced more oil than it used. So, the US had a trade surplus.
. . Now, the US has a chronic trade deficit.
. . The US was able to reduce [but not pay off] the post war debt without damage to the economy because it loaned other nations money so they could buy our oil and stuff. Therefore, the tax surplus that paid down the debt was offset by the trade surplus.
. . Now-a-days, a tax surplus has the effect of taking cash from the people [along with flow of dollars overseas from the trade deficit] , so they have less to spend. When they spend less, the people [or comp] who would sell them stuff or services don't/can't sell them stuff and services; so their income goes down [or doesn't go up]. So, the GDP stops going up. This is the definition of the start of a recession.
#14921753
Andropov wrote:It is mathematically impossible at this point, as this article suggests?: http://theeconomiccollapseblog.com/arch ... ional-debt

What happens if the country just keeps borrowing and borrowing and raising the debt ceiling higher and higher?

This thread was started way back in Sept., 2011.
We are now able to see how Neo-Liberals behave when they are in power. They have now cut taxes on the rich and companies and the deficit will shoot up almost $2T over the next 10 years. It is obvious to me that the Neo-Liberals in Congress don't see any problem with borrowing and borrowing without limit.

That should put the OP's question to bed. The debt will never be paid off or even paid down.

But, let's look at what it would take to pay it off with tax revenues. The US would need to run a surplus of $1T per year for 20 years. Further, it can be inferred that the taxes will not be on the rich. So, what does this mean? It would mean that much the income and all of the wealth of some big part of the middle class would be sucked up by taxes for 20 years. that is the middle-class would have to convert its wealth into cash to pay their taxes. The lower class have no wealth and little income to tax so they can't contribute much to help the Gov. raise the $1T per year more than it spends [the Gov. needs to use surplus funds to pay down the debt]. The poor would be impacted though by the cuts to their support programs which cuts would decrease spending and so increase the surplus.

Does any person on the planet believe that this is possible without destroying the US economy? What good does it do the rich to keep all their companies can earn if there are no middle-class Americans to buy their products and services? No sales means no comp. income; and no income means no profit [not only no profit, but a loss because there are still some expenses].

Such a program would be 'austerity' on massive doses of steroids. It would never work.

- - - - - - - - - - - -
The current national debt is mostly the result of Gov. actions since Reagan. And mostly of Gov. actions when Repubs and Repuds were President and controlled Congress. Also, the deficits that were results of the GFC of 2008 that was caused by a Repud Pres.

So, Neo-Liberals created all the massive debt and there is *absolutely no way* to pay it off with tax revenues.
Nice going Neo-Liberals.
#14921775
In actuality the thing which is bankrupting the US is the military/war budget (i.e., that thing which is euphemistically called defense spending).

Given the devotion to imperialism, the military/war budget expresses itself as more or less a fixed cost. It is deducted off the top, and what's left over is that from which subsequent spending outlays are made.

Obama actually cut the military/war budget. That is the principal cause for which "the common theme across the services and the U.S. nuclear enterprise is one of force degradation".

It's actually a no win situation.

Moreover, it is a situation which is at once so obvious as to barely warrant mention on the one hand; and which on the other hand so inconvenient as to defy acknowledging by some groups in certain respects.

The US is a dying empire. As such, there is genuinely a particular form of real karmic justice at work.
#14922115
Crantag wrote:In actuality the thing which is bankrupting the US is the military/war budget (i.e., that thing which is euphemistically called defense spending).

Given the devotion to imperialism, the military/war budget expresses itself as more or less a fixed cost. It is deducted off the top, and what's left over is that from which subsequent spending outlays are made.

Obama actually cut the military/war budget. That is the principal cause for which "the common theme across the services and the U.S. nuclear enterprise is one of force degradation".

It's actually a no win situation.

Moreover, it is a situation which is at once so obvious as to barely warrant mention on the one hand; and which on the other hand so inconvenient as to defy acknowledging by some groups in certain respects.

The US is a dying empire. As such, there is genuinely a particular form of real karmic justice at work.

How is this related to the question of the OP?
Can the US pay off its debt?
I say it can't unless it does it with newly created dollars.
You say the whole problem is the military budget. If I understood your point.
But, even if it dropped the military budget to just defend America from invasion, I'm saying it makes no difference.
It still could not extract $20T from the US taxpayers over any length of time to pay off the debt.
Are you going to say how I'm wrong? Please do I would love to hear it.
#14922120
Steve_American wrote:How is this related to the question of the OP?
Can the US pay off its debt?
I say it can't unless it does it with newly created dollars.
You say the whole problem is the military budget. If I understood your point.
But, even if it dropped the military budget to just defend America from invasion, I'm saying it makes no difference.
It still could not extract $20T from the US taxpayers over any length of time to pay off the debt.
Are you going to say how I'm wrong? Please do I would love to hear it.

Yes silly me. The largest budget expenditure could not possibly have anything to do with the state of fiscal imbalance.

And you really didn't understand my post much. I described it as a no-win situation. The long term solution will work itself out eventually. At that time the US will not be the same US we are now accustomed to. The US is on an unsustainable path, though without real solutions. This is how it looks when an empire is slowly, and incrementally, dying.
#14922318
Crantag wrote:Yes silly me. The largest budget expenditure could not possibly have anything to do with the state of fiscal imbalance.

And you really didn't understand my post much. I described it as a no-win situation. The long term solution will work itself out eventually. At that time the US will not be the same US we are now accustomed to. The US is on an unsustainable path, though without real solutions. This is how it looks when an empire is slowly, and incrementally, dying.

Yes, I think America should stop acting like an Empire.
But, I want to take back control of the Gov. by the American people so what polls show are supported by 55+% of the people are the ones followed. Both economically and in foreign policy. And when the Gov. lies us into a war there are consequences for the liars.

However, all of that has zero effect on the Macroeconomic effect of a policy.
In this case, if America slashed its war spending and instead used the tax revenue to pay down the debt;
that the macroeconomic effect of this would be a never ending recession.

I know you don't agree with that conclusion. I think the reason is that you assume something that changes or negates
what MMT says when it says that "spending *must* always become someone's income".
Now that statement seems self-evident to me. I spend and someone gets income. The Gov. spends and someone gets income.
OTOH, when the Gov. taxes, someone loses part of his income so he can't spend it. The Gov. has that money. If the Gov. uses it to pay off a US Bond, then you think the ex-bondholder must now spend the money that he got. But he doesn't need to. He has other options; he can take it overseas, he can put in a bank, etc. These uses do not add to any American's income. [Banks (as you said) do not loan out deposits; they lend out new money they created by making the loan.]
. . . However, when the Gov. doesn't spend a big chunk of its tax revenue, the result is a drop in the incomes of people and companies. When their incomes drop they can't spend the money they didn't receive. This drop in spending drops the GDP. When the GDP drops to equal what it was last month, or zero growth; we call that a recession.

Obviously Neo-liberal economic theory denies all this. It thinks that Austerity by the Gov. has no effect [or a small effect] on the GDP of the nation. I deduce this because the IMF and ECB have forced austerity onto several European nations. I think the IMF & ECB expected a different result than what happened. They didn't expect a 10 year long recession or depression. They expected that GDP would hold fairly firm, so tax revenues would hold firm, and the incomes of the people would mostly hold firm. Instead, the people's incomes fell, so tax revenues fell, and GDP fell.

The point of this thread was --- can the US pay off the debt [with tax revenues instead of newly created dollars].
. . . I claim that even if the US gov. slashed war spending to pay off bonds, this would *not* lead to a good economy that would keep tax revenues constant. You think it would lead to a good economy that would keep tax revenues constant. This disagreement is the heart of where we disagree.
#14922328
Like talking to a brick wall.

The US doesn't 'act like an empire.'

The US is an empire.

I'm not looking for ways to make America better. America is a lost cause.

I'll tell you where we disagree, or as it seems to me.

You believe in the lie of 'American exceptionalism'. You also expect others to do so.

I don't.

And I never suggested the US slash the war budget. I never suggested this because I live in the real world and I know that is not going to happen.

The US is slowly crumbling. Too slowly, though, for my liking.
#14922350
Crantag wrote:Like talking to a brick wall.

The US doesn't 'act like an empire.'

The US is an empire.

I'm not looking for ways to make America better. America is a lost cause.

I'll tell you where we disagree, or as it seems to me.

You believe in the lie of 'American exceptionalism'. You also expect others to do so.

I don't.

And I never suggested the US slash the war budget. I never suggested this because I live in the real world and I know that is not going to happen.

The US is slowly crumbling. Too slowly, though, for my liking.

OK, I finally understand where you stand and what you want to see.

You attack me for caring about what happens to average Americans. I want to improve the lives of average Americans.
Based on my reading of your post above, you not only don't care; you want Americans to suffer living shitty lives; the sooner the better.

If anyone else said that I'd call them evil. In your case I'm confused.

Anyway, yes I'm a BRICK WALL when it comes to actually wanting humans to suffer for the misdeeds of others.
So, it will be rare indeed that I'll respond politely to any of your posts. I'll mostly ignore you.
#14922356
Good and well. I don't come here to argue I come here to try and learn. I think you just like to argue.

Americans aren't anything special. I just don't want others around the world to suffer for Americans to continue enjoying exhorbitant privilege.

But mostly I am just a realist. What I or anyone else may or may not want is actually quite irrelevant.
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