Fiscal Cliff/Debt - Page 2 - Politics Forum.org | PoFo

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Everything from personal credit card debt to government borrowing debt.

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#14123569
No, mom and pop businesses aren't corporations. LLC's, perhaps, but corporations are a different beast.

Also, money is created by lending in our current system. The government paying down debt is a deflationary act, which is only appropriate during good economic periods, which we're not in. The proper response to debt is to grow out of it, not eliminate it, at least under a fractional-reserve system.
By Someone5
#14123636
Figlio di Moros wrote:No, mom and pop businesses aren't corporations. LLC's, perhaps, but corporations are a different beast.


An LLC--Limited Liability Corporation--is a corporation; an S corporation.
By Oldmanonfire
#14123645
Figlio di Moros wrote:No, mom and pop businesses aren't corporations. LLC's, perhaps, but corporations are a different beast.

Also, money is created by lending in our current system. The government paying down debt is a deflationary act, which is only appropriate during good economic periods, which we're not in. The proper response to debt is to grow out of it, not eliminate it, at least under a fractional-reserve system.


Nearly a half century later, S corporations are the most popular corporate structure in America. The IRS estimates that there were 4.5 million S corporation owners in the United States in 2007 – about twice the number of C corporations.
And the popularity of S corporations has accelerated over the years. In just the last 10 years, the number of S corporations has grown from 2.7 to 4.5 million. Small businesses are the cornerstone of the American economy, and S corporations are the cornerstone of America’s small business community.
But while the S corporation community grew and evolved, the rules governing S corporations remained largely the same. The number of shareholders is still limited, an S corporation may have only a single class of stock, and the rules still limit who or what may own shares in an S corporation.
Moreover, while S corporations are the most common form of business structure, the advent of the Limited Liability Corporation has given entrepreneurs a new, popular option when forming their businesses.
LLCs have several advantages over S corporations. There’s no limitation in the number of shareholders, no limitation on multiple classes of stock, and more flexible management options. Because of this flexibility, the number of LLCs has grown nearly ten-fold since 1995, rising from fewer than 120,000 to more than a million today. As a result, entrepreneurs starting a business today are more likely to choose an LLC than an S corporation.

Regarding the debt, agree that a nation must grow out of it, but I also don't want the nation to add to debt when the citizenry can pay more taxes and/or government spending can be reduced...except in national emergency scenarios...
#14123783
Except that a balanced budget would increase the debt through deflation. If we had a $7T dollar stimulus, at $.7 T per year, or 7% M2 per year, for things like high-speed rail, new reactors, microgeneration, smartgrid technology, etc., we'd double the supply of money in ten years- halving business liabilities in relation to corporate assets, perhaps more because we'd be creating new assets. The end result of that spending would be to go from $16T debt in w/ a $14T economy, or 114% debt/GDP, to $26T debt in a $28T economy not including new business borrowing, or 92% debt/GDP- in other words, deficit spending would reduce our debt.

On the other hand, I've illustrated elsewhere how a balanced budget would have the opposite effect. We've had a stagnant recovery that keeps shrinking as our deficit's reduced, because as businesses continue to pay down liabilities the supply of money decreases. If we had a truly balanced budget where we only pay down the principle, while businesses paid back their loans, two things happen- first, the real value of the principle rises in relation, and, two, the real value of corporate libalities rise as they pay them off. This not only increases the debt-to-GDP ratio, but prolongs the recovery and could hurt businesses far more as their relative cashflow shrinks (since the nominal value of their products would decline from resources to finished product). This is why austerity measures in Europe have been an utter failure.

I understand why balancing the budget seems like a good idea; on the personal economic level, if you have a debt you need to pay it off in order to get out of debt. However, the individual, and to a lesser extent the singular business, is neglible to the overall supply of money. You paying off $100k debt doesn't effect a $10T money supply; 20 million households paying off $100K debt simultaneously, though, eliminates $2T from the money supply, unless it's being offset elsewhere.

[youtube]lEbVMs7imCU[/youtube]
By RhetoricThug
#14123827
Don't give me that crap about working and middle class wasting all this money on "non-essentials" that make their life slightly bearable. You know damn well corporations are the ones using the government for their profit-machines that are undermining the national interest.
Earnest to the bone
By Oldmanonfire
#14124192
="Figlio di Moros"]Except that a balanced budget would increase the debt through deflation. If we had a $7T dollar stimulus, at $.7 T per year, or 7% M2 per year, for things like high-speed rail, new reactors, microgeneration, smartgrid technology, etc.,


Who owns the $16 trillion in debt? 2/3rds of it is held by people and business in the USA. Therefore, paying about $10.5 trillion to people and business in the USA will certainly stimulate the economy. The debt payment to China, Japan and many other nations won't do much if anything for the US economy.

Currently the US is paying $450 billion in annual debt interest payments. This is taxpayer funds. If this debt interest payment was not in place, this means $450 billion per year can either be allocated elsewhere or result in less taxation.

Both of the above, IMO, will not cause deflation but instead will stimulate the economy.

Regarding your $7 trillion stimulus, at $700 billion per year over ten years, it is guaranteed the stimulus money will be spent but there is no guarantee that the economy will grow any faster than current growth numbers. The $7 trillion will create a false economy while the money is being spent but no guarantee that the private economy can act in parallel.

I have written in these forums that if we budget $500 billion per year for infrastructure projects, and if the government feels the need to stimulate the economy, then if $5 trillion WAS going to be spent over ten years, go ahead and condense that to 4-5 years, spending about $1 trillion per year. However, the caveat would be that between year 5 and 10, infrastructure spending would need to be greatly reduced, in order to stay on budget over the ten year period. Even in this scenario, there is no guarantee the private economy will grow fast enough over five years to take over where the stimulus money leaves off.

Lastly, instead of only government infrastructure projects, I'd like to see government partner with private enterprise to resolve future issues with potable water and clean energy. I'd like to see 250 more fresh water reservoirs, including hydro-electric power generation, ocean water desalination, and a distribution system of canals and pipelines transporting water to most all areas of the USA. And let's build several solar and wind farms in the areas which allow these systems to be most efficient. Most all of this can be done with private enterprise with government backed loan guarantees. All of this will create millions of jobs and will grow the economy!
By RhetoricThug
#14124202
mikema63 wrote:Is that paradigm in the video? :?: :eh:

It has to be, too similar Haha
#14124309
mikema63 wrote:Is that paradigm in the video? :?: :eh:


I think so, I checked out some other videos after I found it- some philosophy stuff on the fallacy of interconnectedness, promoting anarchism, and a segment on Fascism that actually knew what fascism was. My first thought was, well, maybe Paradigm was a fan of this guy- but I'm thinking that's him.

BTW, selected it by complete accident. It was three videos down and it wasn't until it started playing I made the connection.

Oldmanonfire wrote:Who owns the $16 trillion in debt? 2/3rds of it is held by people and business in the USA. Therefore, paying about $10.5 trillion to people and business in the USA will certainly stimulate the economy. The debt payment to China, Japan and many other nations won't do much if anything for the US economy.


Except that paying $10.5 T would be nearly impossible. You completely ignored my point on endogenous money- as the government paid those $10.5 off, to banks, btw, who have no current demand for loans, it'd deflate the monetary supply in turn, increasing the value of remaining liabilities for itself and for business. It would have the opposite effect- nobody has demand for loans, the banks to create new money and no-one invests in anything.

OMoF]Currently the US is paying $450 billion in annual debt interest payments. This is taxpayer funds. If this debt interest payment was not in place, this means $450 billion per year can either be allocated elsewhere or result in less taxation.[/quote]

$225 billion per annum, not $450b/yr. You've nearly doubled the value- not that there isn't a point there, but you're still completely ignoring monetary policy.

[quote="OMoF wrote:
Both of the above, IMO, will not cause deflation but instead will stimulate the economy.


Based on what? You're pulling money out of existance, that's called "deflation". You don't seem to realize, paying down debt doesn't return money into circulation, it erases it. By borrowing, we have new money to offset personal liability repayments and continue circulation.

OMoF wrote:Regarding your $7 trillion stimulus, at $700 billion per year over ten years, it is guaranteed the stimulus money will be spent but there is no guarantee that the economy will grow any faster than current growth numbers. The $7 trillion will create a false economy while the money is being spent but no guarantee that the private economy can act in parallel.


1) I highlighted the effects of debt assuming there were no economic changes; if values remain the same while we double the supply of money, we still end up w/ roughly the equivolent of $3T less than today.
2) In order to assume it won't grow faster over that period, you have to ignore the impact of various spending projects- such as high-speed rail on transportation costs, microgeneration on household economies and supply of energy, etc- while simultaneously ignoring the impact on private debt, i.e. business liabilities shrink in comparison to capital asset values, allowing them to begin borrowing again sooner.

I explained these previously, I'm not sure why you insist on ignoring these factors.

OMoF wrote:I have written in these forums that if we budget $500 billion per year for infrastructure projects, and if the government feels the need to stimulate the economy, then if $5 trillion WAS going to be spent over ten years, go ahead and condense that to 4-5 years, spending about $1 trillion per year. However, the caveat would be that between year 5 and 10, infrastructure spending would need to be greatly reduced, in order to stay on budget over the ten year period. Even in this scenario, there is no guarantee the private economy will grow fast enough over five years to take over where the stimulus money leaves off.

Lastly, instead of only government infrastructure projects, I'd like to see government partner with private enterprise to resolve future issues with potable water and clean energy. I'd like to see 250 more fresh water reservoirs, including hydro-electric power generation, ocean water desalination, and a distribution system of canals and pipelines transporting water to most all areas of the USA. And let's build several solar and wind farms in the areas which allow these systems to be most efficient. Most all of this can be done with private enterprise with government backed loan guarantees. All of this will create millions of jobs and will grow the economy!


I don't disagree on either front-loading debt, the need for new infrastructure, or public-private partnerships as a means of growth. The numbers I chose, $700b, was based on the fact our M2 is ~$10T and 7% growth will double value in ten years. Really, though, the real value of corporate liabilities will decrease enough well before the end of ten years to allow them to begin borrowing again, which is why I see a need to constrain the conditions of borrowing and leveraging, to reduce or prolonge the possibility of a Minsky moment.
By RhetoricThug
#14127415
The government is borrowing at record low interest rates, investors are still piling into Treasuries.


The closer I take a look at these low interest rates, the more I notice how they come around during times of 'Boom' followed by 'Bust'
Essentially what you are looking at is a typical economic bubble. .com, housing market, etc. They are always going to be a good sign to investors, but wait when the returns don't come back around.
By Allerton
#14127738
It still blows my mind that the US hasn't instituted a federal sales tax. What's up with this constant fetishization of income tax? Just levy a 5% consumption tax on everything (except for food).
By Allerton
#14127832
Unless I'm mistaken, the state sales tax doesn't go towards the federal budget. Canada has both provincial and federal sales tax, although recently we've been muddling about trying to combine the two at the register and then splitting them up later, but you get the idea.
By mikema63
#14128101
Sales taxes are regressive, so democrats oppose it on that ground (not that our income tax is progressive in anything but name) and republicans generally oppose taxes in general so it's never happened.

Aside from the fair tax proposal for replacing income tax with a national sales tax entirely.

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