The Blue Board

Just as tax revenue is not required to fund government spending, public debt is in no way needed to fund budget deficits. There is no need for the government to borrow in order to fund its net spending, because it can create its own money at will. Yet, currently, the government does issue public debt, so this requires explanation. The debt must be serving other purposes, even if the government really does think the debt funds its deficit expenditure.

At present, government debt does indeed serve various functions, though none are indispensable. One function is operational. The central bank uses government-debt management as a means of controlling the short-term interest rate. Whenever there is a net flow of funds out of the banking system or a net flow into it, the central bank buys or sells short-term government bonds to put the system back in balance and maintain its target interest rate.

The effect of a budget deficit is to cause a net inflow of funds, because it involves the government crediting private bank accounts (spending) more than it debits them (taxing). As a result, there is an overall increase in private bank deposits and a corresponding increase in the reserves of private banks, which are held in accounts with the central bank. Banks will be keen to exchange their excess reserves for short-term bonds, to earn higher interest, but because the system is in surplus, there will be excess demand for available bonds.

If the central bank stood aside and left private banks to compete for existing bonds, the price of the bonds would skyrocket and the interest rate, which is inversely related to the bond price, would approach zero. If the central bank’s official interest-rate target is above zero, it has to step in and mop up the excess liquidity by selling government bonds (issuing public debt) in exchange for the excess reserves. In other words, debt is issued to control the interest rate, not to fund the net expenditure.

Government debt also provides the private sector with a vehicle for saving. Bonds provide a risk-free return that exceeds the interest rate paid on bank reserves, and so are sought by private-sector agents.

I am not opposed to Medicaid , food stamps or SS payments to people that paid into it and are getting it back. But the people who collect SSI for simply breathing is a joke. I don't think most republicans have a problem with helping the "working poor". But the "unmotivated poor" is where the issue is. The govt should not be your sugar daddy. I think most of the govt programs were set up to lend a hand until you could get back on your feet. Not support you until you die

What doesn't make sense is the idea that people people will stop buying bonds based on principal. People will stop buying bonds because they are worthless and they won't ever get their money back. That's the concern, not this stupid vigilante crap you are spewing.

Instead of sitting back and responding by calling people stupid, morons, and retards, why don't you describe your ideal solution? Tell us what you would like to be done and how that may play out. Go on....

Edit: and btw...most of what I have posted is not expressing my personal preferences, but defining the system as is.

Money isn't hard to figure out. We try to make it hard, but it just isn't. There are some things that just are what they are. Spending more money than you have is never a good situation, not ever, not for individuals not for business not for government not for anybody or any entity.

What you all are trying to do is rationalize bad financial management. But actually it is worse than that you are going as far as to promote and encourage it. It's insane. A small manageable amount of debt isn't a bad thing as without some debt there would be no safe reliable T-bonds for sale that investor and institutions could use to hedge against the more eradict equity markets.

Also from time to time it is necessary to borrow for things we need like infrastructure etc. But we are borrowing just to pay the bills. It's like a mortgage isn't bad debt, but payday loans are. That what we are doing, taking out low rate payday loans.

I understand the basis behind the theories you have discussed. But it is obvious to me that it isn't sustainable. You can't perpetually increase a debt without ever paying down the principal at some point the interest will eat up very large chunks of your budget.

Right now about %10 of yearly federal expenditures are interest payments on the national debt, it's I believe roughly %15 of revenue too lazy to do the math. Those are big percentages, at least to the financially responsible. They are not acceptable. We can't get into a situation where like 25% of revenue goes toward interest, surely you can see that would be a bad thing.

We can't pay down the debt tomorrow nor should we start slashing expenses today, but a 10-20+ year process to get to a balanced budget and start slowly paying off the debt would be a good thing.

And no you will never convince me that balanced budgets are bad that really is just damn stupid.

LOL. This is the basis for any borrowing. A mortgage, a loan for a new factory, a bond to build a school.

No we aren't. We are explaining to you the system of surpluses and deficits and how they relate to the entire economy. Every single person ITT has said $1T annual deficits are bad. Where at least I'm telling you you are wrong, is annual deficits as small as a few basis points of GDP is not going to bring out the bond vigilantes and will actually lower the debt to gdp ratio.

So that's why people are advocating to cut the current deficit now and use current costs to borrow for infrastructure. If someone paid you to borrow to buy a house or build a factory, it would be a no-brainer.

If your interest and principle grow by a smaller rate than your ability to pay or your assets are growing, then no it isn't a problem. Again, if deficits are only growing by basis points each year, it's being drowned out by growing gdp and ergo receipts.

Yes. The current fiscal situation is unacceptable. No one disagrees.

LOL at your second to last paragraph. You rip me for pages about the inconsistent variability long-term projections , but you want to take twenty years to balance the budget? The deficit will cut itself in half naturally via the economy in at least three. It would take one BCA to get it on a path to surplus in less than five and as that point gets nearer, Congress can decide what to do with the surplus.

You keep using these absolutist terms like "never". That's horseshit and you know it. If the country has a surplus or BB and a recession hits, there is zero reasoning not to ease out. So for the bajillionth time, please make sure you are keeping everything in context.

Understood. I'm genuinely asking here because I have not seen this before. Can you provide a link to a study or paper from some reputable source (i.e., not a blog or simple newspaper article) that examines the amount of money a person can receive from the federal government just, as you put it, by breathing. Whether or not medicare and SS are indexed properly to ensure people aren't getting way more than they put in is definitely a problem, but that doesn't appear to be the issue you raise. You make it seem like there are a whole class of people smarter than the system who have figured out how to receive substantial sums of money just by filing government paperwork and doing literally nothing else. I'm curious as to how much these people receive and for how long they are eligible for the benefits. I'm genuinely asking here because I haven't seen a study that indicates it's nearly as big of a problem as you make it out to be, so could you please provide a link so I can read it? Maybe you're talking about the EITC, but it seems like you're referencing other stuff too. I'm just curious what programs are out there to support lazy people until they die. I'm genuinely asking.

I have read this study before but thanks for posting it again. It will be interesting to see if there is any similar type study done which has significantly different results.

My argument isn't that there aren't people who actually use the system the way it was intended. I would dispute what people are allowed to use as a "disability". Again , this is only from my personal experience and I have not conducted any research outside if my day to day dealings with those individuals. My experience has been it doesn't take much to be deemed "disabled". I'm not talking missing a leg, I'm talking I look at you deal with you over a period if time and I can't see any difference between them and me. Yet they get a SSI check monthly. Also when they have a child, within months of birth, that child is magically on SSI. I know this because it affects what the part if the rent they pay me. The housing subsidy is a while separate issue. That I can assure is set up to take care of you til you die. Once your on , your on. There is about a 2 yr waiting list to get a voucher where I live. If you can manage to keep out of jail you can stay on for as long as you see fit. No reason to work it only penalizes you if you do so. I am sure there are other programs that are similar to these I just sighted these because I have dealt with both these for about 20 years.
Edit: for cock at law. The county I live in pays out $1.2/ month in housing subsidy to private landlords. As I stated there are no time limits on how long you receive subsidy