National debt

[Ziggurat]

Last time I looked it up, the Chinese held 11%, about $800B.

China isn't the only overseas holder of US debt, which is why I didn't say China.

The vast majority is held domestically. Hmm, how to reconcile your 'huge' with my 'vast'?

Total foreign ownership of US treasuries was almost 28% as of 2008. In addition, since the US government itself held over 49% of those securities, the foreign ownership of debt owed by the government to anyone but itself would appear to top 50%. Intra-governmental debt is essentially just a book-keeping exercise.

So, yeah, I'd say that qualifies as a huge portion, even restricted to 28%.

And lately, our govt bonds have been selling for close to 0%.

I'm not sure what qualifies as "close", but I don't think this is true. The yield for treasuries on the secondary market can drop to zero or even go negative if interest rates rise or even if buyers expect them to in the future. But the yield is not the same as the interest rate. Newly-issued long-term securities aren't selling at interest rates that I would call close to 0%. And very short-term debt won't get retired, it will get rolled over, and even if interest rates are low now, they won't stay that way forever.

I guess I don't see the harm in raising debt levels interest freeley.

Our debt is not interest-free. Not even our new debt.

 

[Ziggurat]

So what? Borrowing from overseas is less of a drag on economic growth than borrowing domestically regardless of when it happens.

So we've already experienced the benefit, we're STILL doing badly, and the cost is yet to come.

I'm not trying to argue that we shouldn't have borrowed from abroad in the past. If we hadn't, maybe things would be worse now. But the benefits are already accrued, they don't have to be projected. Costs do. I'm comparing what happened to the debt post-WW2 to what's going to happen to it in the future. The fact that a significant fraction of the repayments will go abroad and NOT stay here is quite relevant to that calculation. You haven't actually tried to contest that.

 

[thaiboxerken]

We need to go back to the way Clinton did things, he balanced the budget.

 

[DavidJames]

Nope, for me it's a continuous transition of concern as debt mounts...Hell if I remember. I've got over 16,000 posts here, only some of them are memorable to me.

So why so upset now? I think I know (see below)

Well, there's always plenty of that to go around.

Yeah, that makes it right

I do. Not so much among Republicans in Congress (which is one reason that the Tea Party has also targeted incumbent Republicans), but outside of Congress, yeah, there were definitely plenty of Republicans who were vocal about their displeasure with his spending.

What politicians do on the sidelines means nothing. What matters is what politicians do when they are in power. So basically it boils down to If Democrats do it, it's bad.

No, but now it's worse. Significantly worse.

Refer to the end of my quote above.

 

[Ziggurat]

So why so upset now? I think I know (see below)

Ever heard of the idea of a preference cascade? While an individual's feelings on a topic such as deficit spending might vary smoothly, that doesn't mean that public action will.

Yeah, that makes it right

I don't know why you're giving a sarcastic response. Nothing I said suggests it is right. But it is, and given human nature probably always will be. I'm not approving of anything by saying that, I'm just describing reality.

What politicians do on the sidelines means nothing.

I'm not just talking about politicians.

So basically it boils down to If Democrats do it, it's bad.

It's bad, period. Do you not agree?

Perhaps I'm wrong, but you seem to be trying to avoid acknowledging that we do have a problem right now. Regardless of any hypocrisy on the part of some, current deficit spending is still unsustainable, if nothing changes those deficits will grow over time, painful cuts will be necessary to keep the debt from spiraling out of control, and the longer such cuts are put off the deeper they will have to be.

 

[SezMe]

The big 3 pieces of pie are defense, medicare et al, and social security.

As noted upthread, Social Security is not a big problem. And it could be permanently fixed (well, as far as can be reasonably projected) by removing the cap. I see no reason why the high-income people pay no SS tax on the overwhelming portion of their wages while the guy earning below $110K pays on 100%.

Or benefits could be means tested. Either approach - or some combination - eliminates any concerns.

 

[Francesca R]

So we've already experienced the benefit, we're STILL doing badly, and the cost is yet to come.

Still wrong. The benefit in respect of using overseas funding relative to being contrained to domestic funding continues to accrue until the debt is redeemed. You don't appear to grasp double entry book keeping (which is often misunderstood, but shouldn't be).

It is similar to people who say that "for the good of our children we should repay the national debt now!", completely ignoring that if that was done then the national inheritance would be impacted by an equal opposite amount to the debt (and by more in present values if the cost of capital is lower than the return on it)

The fact that a significant fraction of the repayments will go abroad and NOT stay here is quite relevant to that calculation.

Relevant to a calculation that considers only one side of the ledger as in: "Every time I have to pay for something I've bought, it's a drag on my economy". But since that's pretty meaningless it can be dispensed with.

 

[Ziggurat]

Still wrong. The benefit in respect of using overseas funding relative to being contrained to domestic funding continues to accrue until the debt is redeemed.

In the sense that being better off now will carry into the future, yes.

You don't appear to grasp double entry book keeping (which is often misunderstood, but shouldn't be).

I do understand what you mean, but you're not understanding what I mean. Perhaps I'm not conveying my meaning clearly enough. Yes, benefits carry forward, but they already exist, they don't have to be projected. And WITH those benefits, we're still doing badly.

Let me try to make my point as simply as possible. Let's say that the government needs to pay X dollars to somebody, and get nothing in return at the time of payment. If those X dollars are paid domestically, the impact is better than if those X dollars are paid to a foreign payee. Surely this much isn't in dispute, is it?

Now, you may object that this is only part of the picture, and I know that. But it's the part of the picture which will unfold in the future. The benefits that continuing to accrue are already part of our assets, for my purposes it doesn't matter where those assets came from. Again, I'm not claiming that it was a mistake to borrow from foreign sources, and I'm not claiming that we shouldn't do so in the future. But the fact that those repayments go to foreign sources still matters.

It is similar to people who say that "for the good of our children we should repay the national debt now!", completely ignoring that if that was done then the national inheritance would be impacted by an equal opposite amount to the debt (and by more in present values if the cost of capital is lower than the return on it)

That also depends on how much of the cut spending is capital in nature. If cut spending is simply consumption, then that obviously doesn't need to be true. In reality, it's going to be a mix, but your simple equivalence won't hold.

 

[Francesca R]

[ . . . ] And WITH those benefits, we're still doing badly.

Maybe, but that was not the part of what you've written that I am challenging.

Let me try to make my point as simply as possible. Let's say that the government needs to pay X dollars to somebody, and get nothing in return at the time of payment. If those X dollars are paid domestically, the impact is better than if those X dollars are paid to a foreign payee. Surely this much isn't in dispute, is it?

Now, you may object that this is only part of the picture, and I know that. But it's the part of the picture which will unfold in the future.

It is not meaningful. The domestic savings that were not used for government borrowing are still not being used for that purpose. Whatever else was done with them is not relevant to this point. Similarly what the government did with the money it borrowed is not relevant to it assuming it would have done the same thing regardless of who lent to it. It is simply not correct in any meaningful sense that the round-trip of borrowing from foreigners is more of a drag. And as for looking at part of the picture, you might as well say "That meal / college course / computer is/was/will be a great benefit to me . . . but now I have to pay for it it is a drag on my economy; I'd do much better if I could keep the money".

But the fact that those repayments go to foreign sources still matters.

As much as the fact that the borrowings have still come from foreign sources and have still not come from domestic sources.

 

[Ziggurat]

It is not meaningful. The domestic savings that were not used for government borrowing are still not being used for that purpose.

So what? They're already on the assets side of the ledger. You seem to think I'm comparing what would happen if we had borrowed only domestically with having borrowed domestically and internationally, but I'm not. I'm comparing having our current assets plus domestic-only liabilities with having our current assets and a significant fraction of foreign liabilities. And that comparison is relevant to my point about comparing our handling of the debt post-WW2 with our debt today, a point which you haven't even touched on.

 

[Francesca R]

I'm comparing having our current assets plus domestic-only liabilities with having our current assets and a significant fraction of foreign liabilities. And that comparison is relevant to my point about comparing our handling of the debt post-WW2 with our debt today, a point which you haven't even touched on.

See post 12: concentrated foreign ownership of US government liabilities is only relevant to the extent that a funding/currency crisis is more probable.

Not to the extent that it is a bigger drag on the economy, however often you assert that, because you ignore the accrued impact (which would otherwise not be there) that domestic savings have not been called on to the same degree.

 

[Ziggurat]

See post 12: concentrated foreign ownership of US government liabilities is only relevant to the extent that a funding/currency crisis is more probable.

Not to the extent that it is a bigger drag on the economy, however often you assert that, because you ignore the accrued impact (which would otherwise not be there) that domestic savings have not been called on to the same degree.

This isn't working. You think I'm making a mistake, I think you're not understanding my argument, and we're not making any progress. But the point of contention is secondary to begin with, so let's drop it.

My primary point was that dealing with the huge WW2 debt was easier than paying for our current and projected debt will be. This is a massive problem, there are no painless solutions, and delaying the inevitable is likely to make things worse.

 

[daenku32]

Wars in Iraq and Afghanistan (past overthrow of Taliban) were nothing but efforts to make social welfare programs "unaffordable". Once the conservatives realized that they couldn't starve the beast fast enough with tax cuts, they started wars to deprive the national government even more of its resources.

 

[Ziggurat]

Wars in Iraq and Afghanistan (past overthrow of Taliban) were nothing but efforts to make social welfare programs "unaffordable". Once the conservatives realized that they couldn't starve the beast fast enough with tax cuts, they started wars to deprive the national government even more of its resources.

Wrong forum.