I am not crazy about the solution: Tax Reforms (aka Tax Increases) because, in our current situation they would stymie the growth part - this is not the 1950s any more. However, I would agree on condition we have a truly balanced budget - no borrowing and includes all debt service and a debt pay-down no matter how small.
I agree with the comment about the Detroit Lions. No one riding the gravy-train in DC will do anything after the SHTF, new leadership will emerge and go to work.
'After me, the deluge', Louis XV of France (1710–74) -- French Revolution began in 1789.
Yeah. The scenario is looking pretty grim and there is no incentive for those in power to deal with it as it's going to inevitably make them look bad (by spending less). It's very difficult to convey the complexities of govt debt to the general public.
So this is going to be more like something that works till it doesn't and then we will have to come up with something drastic.
First, Japan's national debt is already so high that half the annual budget goes towards its servicing. I keep waiting for them to collapse but they never do, though there are many differences in their situation of course.
Second, I doubt that higher spending on education will help improve productivity. The US already spends more per capita on education than most other developed countries.
Third, you know the old joke: if you owe the bank a million dollars you have a problem but if you owe the bank a billion dollars the bank has a problem. If the United states can't service its debts, the world has a problem.
Personally I believe this is a serious concern and something needs to be done before it is too late (that's if we have not passed that threshold already). Do you believe if we hit the critical point it will gravely effect investment accounts? (I do not like the idea of working hard to money away for 20-30 years and then when it comes time to reap the rewards the economy goes to sh**). Or will people paying social security now not be able to claim it when the time comes because the government has focused on paying the interest on their debt? Sorry I know two questions :)
As soon as we have to "prioritize interest obligations over social security and infrastructure", we'll have some kind of nuclear bomb go off in our society! It would be so life changing in a negative way that I can't even imagine how the country will respond. Very badly for sure. It would be our grandchildren paying the price for our fiscal sins.
To expect a "ship to come in" with some kind of boom also seems so unlikely, as you say, that it's not realistic to consider it. If it happens, then so much the better, but certainly don't count on it or even hope for it. That's not a plan.
I gotta say, like so many other issues in our society, we have become irresponsible, and we think we can put our heads in the sand with no consequence. Am I wrong to expect our day of reckoning to definitely arrive? Let's talk about why that most likely outcome doesn't motivate us to be responsible. That's where the problem and solution lies.
It is statements like the above that keeps our government stumbling along towards a fiscal cliff.
Firstly, it is commonly understood that nobody actually paid those high tax rates. There were basically more loopholes than taxes, and actual tax revenue was not that high. That, together with the old Laffer curve...
Secondly, those projections may be a little optimistic. Once the inflation genie is out of the bottle. It's worth bearing in mind that Zimbabwe's main interest rate is standing at 200% at the moment and it's GDP growth was 5.85% in 2021, up from -6.25% in 2020. So r>>>>>g, by a lot, and very, very quickly once the ball starts rolling too.
The big thing is that thinking of taxes as government income doesn't work in a free-floating fiat currency environment. Government doesn't earn money by taxing, and doesn't spend money disbursing currency. Money takes on a very different role for government, and it is because of this that price controls and taxation won't fix the problem or improve growth.
Thank you for addressing this subject. There's a lot of good info to absorb. There seems to be no will power in our government to do much, if anything, about our national debt. So, it "hitting the fan" is coming. While I do not expect the country to go "out of business", there has to be some severe consequence. Realistically, what will that look like??
Realistically nothing will happen. We will keep on paying higher and higher interest on our debt till it reaches the point that we have to prioritise interest payments over basic social security and infrastructure.
One unlikely scenario is our growth explodes (something similar to another tech boom either in the case of AI, Energy, Renewables etc.) that accelerates our revenue and GDP that the debt becomes more manageable.
I can't take John Oliver seriously. All his arguments can be summed up as: "Clearly these laws are not working. So what we need now, (bounces in chair) are more laws!"
Haha. I find him more of an entertainer than actually useful discussions. In this case, you can just watch the first 8 minutes. Also, he is extremely left leaning so don't expect an unbiased take on stuff.
Interesting.
I am not crazy about the solution: Tax Reforms (aka Tax Increases) because, in our current situation they would stymie the growth part - this is not the 1950s any more. However, I would agree on condition we have a truly balanced budget - no borrowing and includes all debt service and a debt pay-down no matter how small.
I agree with the comment about the Detroit Lions. No one riding the gravy-train in DC will do anything after the SHTF, new leadership will emerge and go to work.
'After me, the deluge', Louis XV of France (1710–74) -- French Revolution began in 1789.
Haha. I love the quote.
Yeah. The scenario is looking pretty grim and there is no incentive for those in power to deal with it as it's going to inevitably make them look bad (by spending less). It's very difficult to convey the complexities of govt debt to the general public.
So this is going to be more like something that works till it doesn't and then we will have to come up with something drastic.
I have three comments on this issue.
First, Japan's national debt is already so high that half the annual budget goes towards its servicing. I keep waiting for them to collapse but they never do, though there are many differences in their situation of course.
Second, I doubt that higher spending on education will help improve productivity. The US already spends more per capita on education than most other developed countries.
Third, you know the old joke: if you owe the bank a million dollars you have a problem but if you owe the bank a billion dollars the bank has a problem. If the United states can't service its debts, the world has a problem.
Personally I believe this is a serious concern and something needs to be done before it is too late (that's if we have not passed that threshold already). Do you believe if we hit the critical point it will gravely effect investment accounts? (I do not like the idea of working hard to money away for 20-30 years and then when it comes time to reap the rewards the economy goes to sh**). Or will people paying social security now not be able to claim it when the time comes because the government has focused on paying the interest on their debt? Sorry I know two questions :)
As soon as we have to "prioritize interest obligations over social security and infrastructure", we'll have some kind of nuclear bomb go off in our society! It would be so life changing in a negative way that I can't even imagine how the country will respond. Very badly for sure. It would be our grandchildren paying the price for our fiscal sins.
To expect a "ship to come in" with some kind of boom also seems so unlikely, as you say, that it's not realistic to consider it. If it happens, then so much the better, but certainly don't count on it or even hope for it. That's not a plan.
I gotta say, like so many other issues in our society, we have become irresponsible, and we think we can put our heads in the sand with no consequence. Am I wrong to expect our day of reckoning to definitely arrive? Let's talk about why that most likely outcome doesn't motivate us to be responsible. That's where the problem and solution lies.
It is statements like the above that keeps our government stumbling along towards a fiscal cliff.
I have some issues with this.
Firstly, it is commonly understood that nobody actually paid those high tax rates. There were basically more loopholes than taxes, and actual tax revenue was not that high. That, together with the old Laffer curve...
Secondly, those projections may be a little optimistic. Once the inflation genie is out of the bottle. It's worth bearing in mind that Zimbabwe's main interest rate is standing at 200% at the moment and it's GDP growth was 5.85% in 2021, up from -6.25% in 2020. So r>>>>>g, by a lot, and very, very quickly once the ball starts rolling too.
The big thing is that thinking of taxes as government income doesn't work in a free-floating fiat currency environment. Government doesn't earn money by taxing, and doesn't spend money disbursing currency. Money takes on a very different role for government, and it is because of this that price controls and taxation won't fix the problem or improve growth.
It's all about trust.
Trust in what exactly? You cannot consider US in a vacuum right - Our debt is spread across the world and its still the reserve currency.
Comparison to Zimbabwe is not exactly useful since they have an extremely small economy and bail outs are possible. Imagine bailing out the U.S.
I am interested to know more about the taxation from 1950's - 80's - Do you have any source on that?
Thank you for addressing this subject. There's a lot of good info to absorb. There seems to be no will power in our government to do much, if anything, about our national debt. So, it "hitting the fan" is coming. While I do not expect the country to go "out of business", there has to be some severe consequence. Realistically, what will that look like??
Realistically nothing will happen. We will keep on paying higher and higher interest on our debt till it reaches the point that we have to prioritise interest payments over basic social security and infrastructure.
One unlikely scenario is our growth explodes (something similar to another tech boom either in the case of AI, Energy, Renewables etc.) that accelerates our revenue and GDP that the debt becomes more manageable.
I can't take John Oliver seriously. All his arguments can be summed up as: "Clearly these laws are not working. So what we need now, (bounces in chair) are more laws!"
Haha. I find him more of an entertainer than actually useful discussions. In this case, you can just watch the first 8 minutes. Also, he is extremely left leaning so don't expect an unbiased take on stuff.