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BamaLivesFootba said...
The debt does not matter right now. We still have borrowing rates at relative lows. We still are essentially the world's currency and greatest investment.
The bigger task is getting the economy on track. If the economy is at 3.5-5% GDP growth and unemployment under 6% and the deficit relatively cut---compared to current levels---people won't give two shits if the debt hits a nominal level like $20T.
Because if the economy is growing and the deficit decreasing, the ratio grows smaller or at least grows at a smaller rate.
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TroyTide said...
We would need an economic boom first and foremost.
As of now we would have to cut 1/3 of federal spending just to have a balanced budget, them of the two thirds left 300billion+ will have to be spent every year on interest alone. Then you have to cut even deeper to actually start paying down the principle. You are looking at about %40+/- cut to federal expenditures to make any significant dent in our debt, and even then you are looking at about a 20+ year process, robably more.
Now that is if you just make cuts, raising taxes would help...some. But them you have to be extremely careful in doing that or you risk suppressing any eceonomic boom which is the best thing we could have to help us out with this. But it will take a combination of all three.
We are in an awful situation here and most Americans don't have a clue how bad it is. And the debt does matter, it's not just some number, there are real consequences to what we are doing. Devaluing our currency at an alarming rate being the biggest one.
Also we won't have the low interest rates too much longer. It's becoming more and more clear to our investors that there is an almost 0% probability that we will pay them back.
Personally I think we intend to default at some point. I don't believe our government has any intention of paying it down, because it knows realistically...it can't.
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TroyTide said...
We would need an economic boom first and foremost.
As of now we would have to cut 1/3 of federal spending just to have a balanced budget, them of the two thirds left 300billion+ will have to be spent every year on interest alone. Then you have to cut even deeper to actually start paying down the principle. You are looking at about %40+/- cut to federal expenditures to make any significant dent in our debt, and even then you are looking at about a 20+ year process, robably more.
Now that is if you just make cuts, raising taxes would help...some. But them you have to be extremely careful in doing that or you risk suppressing any eceonomic boom which is the best thing we could have to help us out with this. But it will take a combination of all three.
We are in an awful situation here and most Americans don't have a clue how bad it is. And the debt does matter, it's not just some number, there are real consequences to what we are doing. Devaluing our currency at an alarming rate being the biggest one.
Also we won't have the low interest rates too much longer. It's becoming more and more clear to our investors that there is an almost 0% probability that we will pay them back.
Personally I think we intend to default at some point. I don't believe our government has any intention of paying it down, because it knows realistically...it can't.
"A political call, the fall guy accord...We can't afford to be neutral on a moving train..."
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appoo said...
You realize the world's economy is hinged upon America being the least riskiest source of financing in the world? You'd see a depression that would make the 20s look like a bump in the road, if America defaulted. If you worried about America debt now, when our interests are almost ZERO, imagine what they'd look like at 1 or 2%?
That was the absurdity of the debt limit debate, and this tea party idea of letting us default. That would have been worse than any terrorist could have done to us.
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TroyTide said...
LOL. You are talking Dollar System theory now. Yes it's true that as long as the world relies on the dollar that we can borrow indefinitely. But they will only go along for so long. Once a few countries or OPEC or whoever remove us as the reserve currency, reality hits.
Get used to the idea of default, because it is going to happen.
"A political call, the fall guy accord...We can't afford to be neutral on a moving train..."
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TroyTide said...
LOL. You are talking Dollar System theory now. Yes it's true that as long as the world relies on the dollar that we can borrow indefinitely. But they will only go along for so long. Once a few countries or OPEC or whoever remove us as the reserve currency, reality hits.
Get used to the idea of default, because it is going to happen.
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BamaLivesFootba said...
All we have to do is lower the deficit to a level lower in terms of GDP than the GDP growth in a given year.
We are never going to erase our debt. Having debt is not a bad thing.
As long as the debt is growing at a slower pace than the economy then the ratio will lower. That is the only real number that matters.
By the way,there is a lot of economic theory that involves closed systems that just doesn't always prove true. There is almost no significant data that higher income tax levels have large negative effects on the economy, especially if tax raises are planned and gradual.
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TroyTide said...
Yes I know carrying a debt balance is not a bad thing.
A desirable debt to GDP ratio is 60% or less I believe. Anything over 90% starts to hurt an economy we are over 100% right now. We still have a ways to go.
I believe we are about 4th or 5th in the world for worse debt to GDP ratio. All the countries in front of us are staring default in the face. We aren't immune to the laws of economics.
You can think what you want, but this isn't sustainable.
"A political call, the fall guy accord...We can't afford to be neutral on a moving train..."
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TroyTide said...
Huh?
We are going to continue to print until we can't any longer, at some point we will lose our reserve currency status due to the devaluation from trying to print our debt payments. Not long after that we will have a very difficult time borrowing money, a default will be imminent at that point,
"A political call, the fall guy accord...We can't afford to be neutral on a moving train..."
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