US politics - wheeling and dealing, avoiding debt ceiling

[IheartIheartTesla]

A bit backward looking, but whatever. I think there was a bit of good discussion in the last thread about the utility of a national debt and its differences from personal or corporate debt.

Personally I understand the need for debt for both the former and the latter as a way to maintain growth; however, the issue is the complicated nexus between the various entities holding various kinds of it, and the fact that one thread of this unraveling can sometimes collapse the economy. The layperson has no way of either preventing it or even understanding it (to make rational choices for their mortgage companies or governments, just to give a few examples)

Edited June 2, 2023 by IheartIheartTesla

[Varysblackfyre321]

That’s MY president.

[Week]

Then he attacked the military for focusing on woke instead of how to kill bad guys. 

He's so good at staying on message for the duration of the clause falling out of his mouth. A full sentence of consistency and coherence is too much to ask let alone a whole 24 hours.

[Kalbear]

The only reason he's doing it is to attack DeSantis. As soon as he's done with that douchebag he'll use it if it flits through his sociopathic mind.

[DMC]

Yeah, enjoy Trump talking about other people's inability to define terms. 

Reminds me - I was going over religiosity yesterday, and one of my students raised his hand and was like "that word sounds made up."  So, like Thor, I was actually able to respond "all words are made up."  These are the little things that keep me going.

[Varysblackfyre321]

14 minutes ago, Kalnestk Oblast said:

The only reason he's doing it is to attack DeSantis. As soon as he's done with that douchebag he'll use it if it flits through his sociopathic mind.

If he says desantis is obsessed with woke, or is woke I will vote for him at least 50 times./s

[Kalbear]

6 hours ago, IheartIheartTesla said:

A bit backward looking, but whatever. I think there was a bit of good discussion in the last thread about the utility of a national debt and its differences from personal or corporate debt.

Personally I understand the need for debt for both the former and the latter as a way to maintain growth; however, the issue is the complicated nexus between the various entities holding various kinds of it, and the fact that one thread of this unraveling can sometimes collapse the economy. The layperson has no way of either preventing it or even understanding it (to make rational choices for their mortgage companies or governments, just to give a few examples)

It's not just a way to maintain growth. The US debt and deficit spending has a number of massively powerful and net good features for the US and the globe.

- Because interest rates are so low every dollar spent via the government gets an absurd return back depending on what it's spent on. We're talking something like 10-20% compared to 3% cost. Interest rates would have to get back to 1970s levels before this becomes a problem.

- Because the US is acting as the currency of the world virtually every nation has a vested interest in investing in the US money. That makes them massively tied to the US and allows huge economic policy influence everywhere. As an example of this (both good and bad) because of the large interest rate hikes in the US Argentina is going through nearly 100% inflation.

- This also means that US currency policy and buying power is the defacto rule of economies almost everywhere, in the same way that English is the default language of international business and international academic collaboration. US monetary policy can change tourism, trade deficits, manufacturing and tariffs almost instantaneously in a way that no other country can wield.

 

It's a reasonable question for the global market if it's worth having the US have that much power and if they should divest, but for the US it's almost all positive values that have basically nothing to do with the concept of being in debt and having issues paying that off. The concept is just not comparable to personal or even corporate debt because unlike personal debt the US has the power to simply produce more money to deal with their debt. If you can magically just get income whenever you need it and you get a 20% return on that income, how does it make sense to not do that?

[Week]

^Really excellent points - specifically the return on investment of some/many government investments. Things like universal Pre-K, expanded SNAP, expanded Medicaid, etc. are typically at worst neutral over the long run and are mostly quite positive.

Pouring money into the MIC - not so much although not always a full loss either.

[Kalbear]

Pouring money into the MIC is an interesting dichotomy. The spending amounts are a major source of growth for the economy, a fantastic way to project power and an indirect way to improve tech advancement and science. The problem is that it is probably one of the least efficient ways to do all of those things. The science is narrow and often useless. The growth is targeted at very specific areas of the economy and very specific groups of people which tend to favor folks who are already rich, meaning it does not help growth broadly either. The power projection is probably the biggest deal but it is not clear how capable the US is going to be in the future of war; our warfighting plans have largely revolved around making the most powerful, expensive and dangerous single sources around that can do massive damage on their own (aircraft carriers, stealth planes, nukes and subs) but concentrating all that power into a single source when drones and other incredibly cheap swarm attacks exist is likely not going to be an economically useful way to wage war. 

Arguably if the US was spending $300bn/year (half of the MIC budget) on infrastructure, scientific improvements and societal growth we would be massively more powerful economically. 

[Kalbear]

I guess another issue with the deficit and debt is that the US currently has the stupidest political policy around their debt spending that exists in the world, and is currently playing with causing a global economic collapse every 2 years based entirely on remarkably small amounts of spending and one party's desire to set the world on fire. This is obviously massively dangerous, reckless and idiotic but has little to do with the debt itself and much more to do with the US political system.

That said, it's probably a reasonable thing to try and divest from the US because there is little sign that the US political system will be changing back to something sane any time soon and every reason to fear it becoming more illiberal, more autocratic, more whimsical and less serious as a world steward. None of that because of debt being a problematic issue in the same way my credit card debt is; it's much more analogous to the old adage of 'if you owe someone $1000 it's a problem for you; if you owe someone $100 million it's a problem for them".

Edited June 2, 2023 by Kalnestk Oblast

[Mr. Chatywin et al.]

Deficit spending is by no means a bad thing, but you cannot do it every year, especially when there's a consistent push to drive down taxes when we actually need to raise them in times of prosperity. I don't know what the exact rate should always be because different times call for different policies, but general rule of thumb should be to try and bring in $1.05 for every $1 you spend so in leaner times you have reserves. 

Totally agree about diverting money away from the MIC though. It's incredibly inefficient compared to other spending programs and is just that, a glorified jobs plan. And even if we cut it in half we're still working on a largely antiquated concept. 

What we need more than anything is investing in education, housing, healthcare and childcare. And no more corporate welfare for large companies that are sitting on a ton of money. 

[Kalbear]

1 minute ago, Tywin et al. said:

Deficit spending is by no means a bad thing, but you cannot do it every year

Yes, you can. Why can't you? 

1 minute ago, Tywin et al. said:

, especially when there's a consistent push to drive down taxes when we actually need to raise them in times of prosperity. I don't know what the exact rate should always be because different times call for different policies, but general rule of thumb should be to try and bring in $1.05 for every $1 you spend so in leaner times you have reserves. 

Again, we're bringing in FAR more money than $1.05 for every $1 spent. In some areas (like SNAP or medicare) the returns are ridiculously higher.

 

[DMC]

Feel like it should be emphasized that housing, education, childcare - those are exactly the "discretionary" funding that will suffer due to this deal.  The GOP has figured out it's not politically advantageous to try and cut SS and Medicare - even Medicaid - so this is where their "cuts" are focused on.

And, that's shitty.  Even if it required deficit spending, there are clear things we could be doing - again e.g. the child tax credit - that we're not.  It's frankly really not that hard.

Edited June 2, 2023 by DMC

[horangi]

1 hour ago, Kalnestk Oblast said:

 None of that because of debt being a problematic issue in the same way my credit card debt is; it's much more analogous to the old adage of 'if you owe someone $1000 it's a problem for you; if you owe someone $100 million it's a problem for them".

Well since you, quite rudely, already posted eloquent responses to the topics I was going to address (including the MIC), I will just have to nibble on the remaining scraps.  To put the national debt/deficit into a more relatable example, it would be like someone offering you a credit card with a 1 billion dollar limit at .5% APR with no restrictions on how its used, including to pay the monthly interest bills using that card.  Assuming you aren't going to pull a lottery winner special and blow it all on booze, boats, and... blow, you'd be insane not to take them up on the offer and invest it in low-risk money markets and bonds.  You'd make out like a bandit and then could spend the proceeds on booze and boats, if one had the hankering.

That said, back to the national scale, there would be a point where the benefits from deficit spending would zero out then go negative.  A historical example would be imperial Spain tanking their economy through gold extraction (i.e. theft) from the new world.  The crown had too much money to spend and everyone knew it and we welcome in hyper-inflation.  And it had nothing to do with the government printing too much cash.  A nice irony to all the gold bugs out there lauding the metal against fiat currency.  I wonder if over time economists will be able to parse out how much of the current inflation is due to pandemic/infrastructure spending vs the supply chain/actual impact of the pandemic itself.   It would be nice to know what the sweet spot is, but alas, dismal science and all.

Edited June 2, 2023 by horangi
e.g. vs i.e.- always flip them

[Ran]

A period of high inflation and low unemployment is the correct time to do some modest deficit reduction. Not 0 deficit, but less. The CRFB iays out the argument in a way that I think pretty sound. As it happens, the IRA provided a modest deficit reduction according to the CBO scoring. The Economist also had a good piece last year looking at the issue globally, but talking about the US as well, explaining how the rising interest rates and servicing the debt will squeeze budgets for many nations.

But aiming to 0 deficit? Doesn't really make sense, the budgetary pain it would cause is not worth the effort.

Edited June 2, 2023 by Ran

[Zorral]

The POTUS who went for and did 0 debt cratered the US economy, into the longest and deepest and most severe economic depression the country ever experienced until the Great Depression in this nation's economic system of cyclic boom and bust, which only stopped with FDR regulation, and now has re-started thanks to de-regulation.

This POTUS, btw, was Andrew Jackson.

The only people who didn't feel the depression were those who owned many slaves in the slave states, since wealth there was embodied literally.

[Week]

Cutting spending to increase the deficit. Brilliant.

[Zorral]

 BTW, if you all haven't seen this hilarious bit from the FL meatball, he recently whined that his wife has been denied the cover of Vogue and a photo spread inside ... so did another FL creep who doesn't really care about anything but self, named Melania.  

[Kalbear]

1 hour ago, Ran said:

A period of high inflation and low unemployment is the correct time to do some modest deficit reduction. Not 0 deficit, but less. The CRFB iays out the argument in a way that I think pretty sound. 

I think that's a fine reason to not spend as much, but that is kind of independent of deficit spending. That would be true if you were below deficit to start with as well. That is, as the article states, a choice of fiscal policy.

[Martell Spy]

Quote

Cutting spending to increase the deficit. Brilliant.

The CBO projected that 2.1 billion more will be spent over a decade due to the work requirements deal. Literally different people are getting coverage as other people get cut.

Changes to food aid in debt bill would cost money, far from savings GOP envisioned

https://apnews.com/article/debt-bill-default-work-requirements-food-stamps-a42064f794b4466903ca06ca140b9013

Quote

 

WASHINGTON (AP) — A Republican attempt to expand work requirements for federal food aid in debt legislation moving through Congress would increase federal spending by $2.1 billion over 10 years — far from the cuts GOP lawmakers had promised.

A compromise on the food aid requirements between House Republicans and President Joe Biden as the nation nears a disastrous government default may have backfired for the Republicans, who won the new work requirements in the Supplemental Nutrition Assistance Program for some able-bodied recipients in exchange for Democratic demands to drop work requirements for some other, more vulnerable recipients such as veterans and homeless people.

An estimate from the nonpartisan Congressional Budget Office released late Tuesday said that while the new work requirements in SNAP would save money, the added benefits pushed by Democrats would cost more — and add almost 80,000 people to the rolls in an average month.

 

Edited June 2, 2023 by Martell Spy