Republicans no longer a viable party?

[SixNein]

Mitch McConnell wants Congress to abrogate its responsibility and cede the authority to raise the debt limit to Obama. That way, the GOP can use that tar-baby plan to point to Obama when they rail about the debt, without having their fingerprints on it. Normally, the debt-limit is raised quietly and without fuss whenever necessary, but the GOP has picked this fight and wants to use it against Obama in 2012. Where are the responsible adults in the GOP?

It is sad to see elected officials willing to drive our economy right back into the ditch in order to score political points. Hopefully, Obama (constitutional scholar) will insist that Congress pass the resolution and hand it to him for his signature. It is unconstitutional for him to assume that responsibility as President.

http://www.huffingtonpost.com/2011/07/17/washington-insiders-say-m_n_900940.html

I wonder if damage is not already occurring from pushing it so close to the deadline. Our government looks very dysfunctional, and it could create a situation where enough confidence is lost that we end up losing our ratings anyway.

At any rate, I agree about the constitutionality of the plan. One of the dangesr is if it is challenged, the courts could make a decision that puts America in immediate default. And I think the courts would likely rule it unconstitutional.

 

[turbo]

I wonder if damage is not already occurring from pushing it so close to the deadline. Our government looks very dysfunctional, and it could create a situation where enough confidence is lost that we end up losing our ratings anyway.

It could well happen. Unfortunately there are enough morons in the US to ensure that the GOP message of "Obama caused it" will stick with them. Very few people have the intelligence or the resources to research the history of raising debt limits in Congress, so the right-wing will probably be able to smear Obama with this, as if it is his fault that Congress abrogated their responsibilities.

 

[CAC1001]

I take issue with the notion that one party wants limited government. The GOP has never found any fault with military spending (erroneously called "defense spending", IMO). We have the largest military budget in the world, the largest navy in the world, and foreign military bases that probably number well over a thousand if the covert bases were revealed. I find it incomprehensible that our elected representatives can't find any way to cut spending except to roll back SS, Medicare, and Medicaid. Drop 2-3 carrier groups, close 600+ foreign military bases, and stop buying and building planes that the Pentagon doesn't even want. Is that so hard?

Defense spending isn't something that kills the budget, it's the entitlements that kill the budget. I also don't see how our having the largest military budget or the largest navy is a reason to reduce the size of them. It isn't so much that the U.S. overspends as everyone else spends very little. Remember too that the U.S. already halved the size of the Navy after the Soviet Union broke up, and significantly reduced the size of the Army and Air Force as well. The Navy as it currently is is really too small, and likely should be increased in size, not decreased. Same with the Army. But the money isn't there. Also, what planes are they building that the Pentagon doesn't want? The Air Force very much wanted the F-22, what blew that was the cost.

 

[turbo]

Defense spending isn't something that kills the budget, it's the entitlements that kill the budget.

SS and Medicare are self-funded by payroll taxes. Those "entitlements" are not sinking us. Untrammeled spending is.

 

[CAC1001]

I wonder if damage is not already occurring from pushing it so close to the deadline. Our government looks very dysfunctional, and it could create a situation where enough confidence is lost that we end up losing our ratings anyway.

At any rate, I agree about the constitutionality of the plan. One of the dangesr is if it is challenged, the courts could make a decision that puts America in immediate default. And I think the courts would likely rule it unconstitutional.

The country would not go into default if the debt ceiling was not raised. The problem would be all the other areas of government that get their funding cut, which could mess up the economy, and also things like SS possibly not being paid out (which if a legitimate problem shows that the whole claim many have made for years that the SS trust fund is solvent and self-funding is utter nonsense; if SS is paid from taking on debt, it is not self-funding).

 

[CAC1001]

SS and Medicare are self-funded by payroll taxes. Those "entitlements" are not sinking us. Untrammeled spending is.

That's a claim often made, but if the debt ceiling is not raised, many are saying it means SS and I supposed Medicare might not be paid out, which would mean that they are not self-funding.

 

[turbo]

The country would not go into default if the debt ceiling was not raised. The problem would be all the other areas of government that get their funding cut, which could mess up the economy, and also things like SS possibly not being paid out (which if a legitimate problem shows that the whole claim many have made for years that the SS trust fund is solvent and self-funding is utter nonsense; if SS is paid from taking on debt, it is not self-funding).

SS is solvent, and can be made so for many decades by lifting the maximum cap. The general treasury borrows money from the SS surplus and pays it back in the form of interest from government bonds. None of this is a secret. Can you provide any support for your claim that SS is not solvent?

 

[SixNein]

I take issue with the notion that one party wants limited government. The GOP has never found any fault with military spending (erroneously called "defense spending", IMO). We have the largest military budget in the world, the largest navy in the world, and foreign military bases that probably number well over a thousand if the covert bases were revealed. I find it incomprehensible that our elected representatives can't find any way to cut spending except to roll back SS, Medicare, and Medicaid. Drop 2-3 carrier groups, close 600+ foreign military bases, and stop buying and building planes that the Pentagon doesn't even want. Is that so hard?

The big government, small government slogan is meaningless. Just because a government is small does not imply that the government is efficient, nor does it imply its useful. If a smaller government is always more efficient then Somalia should be the most efficient nation on earth.

 

[SixNein]

The country would not go into default if the debt ceiling was not raised. The problem would be all the other areas of government that get their funding cut, which could mess up the economy, and also things like SS possibly not being paid out (which if a legitimate problem shows that the whole claim many have made for years that the SS trust fund is solvent and self-funding is utter nonsense; if SS is paid from taking on debt, it is not self-funding).

The country would be making the choice to default, but it's still a default. In addition, the real problem is loss of confidence in the American system by members around the world. If the US is so dysfunctional that it can't agree to pay its bills, how can anyone expect it to do other needed actions? Right now America is playing a political game with something extremely dangerous with very real and long term consequences. This situation is a economic black hole, and if America strays too close, it may never escape the pull.

I pray that people don't have to learn this the hard way. Especially since I have to suffer the consequences too.

 

[CAC1001]

SS is solvent, and can be made so for many decades by lifting the maximum cap. The general treasury borrows money from the SS surplus and pays it back in the form of interest from government bonds. None of this is a secret. Can you provide any support for your claim that SS is not solvent?

I'm not claiming it isn't solvent (as I don't know what the full truth is because I've seen multiple claims made), but that if the debt ceiling not being raised meant that SS wouldn't get paid out, it means it isn't self-funding. I was referring to two articles I had read:

http://www.washingtonpost.com/wp-dyn/content/article/2011/03/10/AR2011031005932.html

http://blogs.forbes.com/merrillmatt...-the-2-6-trillion-social-security-trust-fund/

 

[CAC1001]

The big government, small government slogan is meaningless. Just because a government is small does not imply that the government is efficient, nor does it imply its useful. If a smaller government is always more efficient then Somalia should be the most efficient nation on earth.

Somalia is an anarchy with really no government. The small government or limited government argument is not arguing for no government, just a limited government. Government by its very nature tends to be inefficient, that is one reason why you want it to be limited in size and scope.

 

[turbo]

I'm not claiming it isn't solvent (as I don't know what the full truth is because I've seen multiple claims made), but that if the debt ceiling not being raised meant that SS wouldn't get paid out, it means it isn't self-funding.

SS is self-funded. The money being paid for by payroll taxes adds to the surplus, and the government borrows those funds with interest being paid back by the bonds (promise to pay). The breathless pronouncements about the collapse of SS are a shallow attempt by the right to privatize some or all of the fund, relying on private funding that is not guaranteed, and would have plunged SS into an abyss during the current economic collapse. It is time to raise the maximum income-levels that can be subjected to payroll taxes to ensure the health of the SS funds. Nothing more is needed. No increased retirement ages, no reduced benefits, and no means-testing. This isn't rocket-science, just accounting.

 

[SixNein]

Somalia is an anarchy with really no government. The small government or limited government argument is not arguing for no government, just a limited government. Government by its very nature tends to be inefficient, that is one reason why you want it to be limited in size and scope.

Tends to be inefficient at what exactly?

 

[CAC1001]

The country would be making the choice to default, but it's still a default.

Not sure what you mean here, why would they choose to default?

In addition, the real problem is loss of confidence in the American system by members around the world. If the US is so dysfunctional that it can't agree to pay its bills, how can anyone expect it to do other needed actions? Right now America is playing a political game with something extremely dangerous with very real and long term consequences. This situation is a economic black hole, and if America strays too close, it may never escape the pull.

The U.S. does agree to pay its bills, as the debt would be serviced irregardless, the only reason the politics here are being played is because one party wants the debt to remain an issue while the other one doesn't want it to and neither party will just roll over for the other one.

Regarding other actions, I think many other countries around the world already are losing the expectation of the U.S. to do other actions. The countries of Eastern Europe question whether the U.S. will provide a counter to a more beligerent Russia, the countries of Asia question whether the U.S. will provide a counter to a more beligerent China, Israel questions whether the U.S. will continue to provide it with support (with the President's recent assertion that Israel should go back to the 1967 lines), etc...

I pray that people don't have to learn this the hard way. Especially since I have to suffer the consequences too.

I think they will raise the debt ceiling because to not do so would be catostrophic. If the onus is put on President Obama, he will fold and sign a bill that raises the debt limit for the short-term, if the onus is put on the Republicans, they will pass somethng, or else they will get the blame.

 

[ParticleGrl]

Because it likely wouldn't stimulate and would only drive the country deeper into debt.

Why wouldn't it stimulate anything? Are you telling me that employing electrical engineers to rebuild our embarrassing power grid wouldn't lower the unemployment rate? Also, real rates on 5 year treasuries ARE negative. Given that maintenance work in infrastructure MUST (absolutely MUST) be done at some point, doing it now will PREVENT FUTURE DEBT. If you are really concerned about the long term deficit, you should want to minimize long term expenditures, which means borrowing now while the rates are negative, not slashing now and borrowing in the future when the costs and rates are higher.

Every dollar of increased government spending must correspond to one less dollar of private-sector spending.

Simply not true- right now lots of companies and banks are hoarding money. One more dollar of borrowing by the government is one more dollar of private sector spending THAT ISN'T BEING PUT TO USE RIGHT NOW. Banks and companies both have cash on hand that isn't being used. I know that a negative real rate on government bonds is crazy and counter-intuitive, but seriously try to think through the actual implications.

Probably the most nortorious example is Japan which spent half their GDP trying stimulus and lots of infrastructure projects, with very anemic economic growth. Today they have the highest level of debt-to-GDP in the Western world (about 230%) and a AA bond rating.

Japan has roughly half our unemployment, and one of the highest qualities of life in the world, despite anemic GDP growth. And their government bonds are still high quality! Given that our problem right now is terrible unemployment, why not follow their example?

As for high-speed rail, that would take years... Infrastructure itself also takes time, as one cannot just suddenly start spending a bunch of money on infrastructure.

But planning for infrastructure employs people, and begins the process. Who cares if it takes a few years? Right now we have idle workers whose skills are getting rusty AND our infrastructure sucks. Why not use the former to fix the latter? Further, it will literally NEVER be cheaper to do the repairs (borrowing money is CHEAPER than paying cash!), and a stich in time saves nine, as they say. Doing it now costs less then doing it in five or ten years, and borrowing now costs less then cash!

Also, many of the projects suggested by civil engineers in the nations infrastructure report card (things like replacing failing parts in the power grid) could easily begin quickly.

There's also the corruption issues.

Welcome to life- there is corruption in pretty much everything, private or public sector. You can add this caveat to anything you do with your time or money.

The politics are because one party wants big government while the other party wants limited government

That isn't true- Republicans have proven to be just as much a big government party as the democrats. The republicans explicitly want business-friendly "big" government policies and democrats want social-safety-net friendly "big" government policies. However, the definition of "big" is actually quite limited for both parties- President Obama and his policies would be considered conservative in pretty much any other country

 

[CAC1001]

Tends to be inefficient at what exactly?

Take a look at government-run enterprises. The nature of government is to grow and grow. Part of this is just the incentives. No government program or agency seeks to spend as little money as possible. The goal for the head of a government program or agency is to increase its size, scope, and budget.

 

[CAC1001]

SS is self-funded. The money being paid for by payroll taxes adds to the surplus, and the government borrows those funds with interest being paid back by the bonds (promise to pay). The breathless pronouncements about the collapse of SS are a shallow attempt by the right to privatize some or all of the fund, relying on private funding that is not guaranteed, and would have plunged SS into an abyss during the current economic collapse.

I don't think anyone wants to fully privatize SS for the reasons you said, but to add some elements of privatization to it. Regarding it being funded, well I hope you are correct, but then that would mean President Obama and Timothy Geitner are being disingenious in saying the benefits won't get paid out if the debt ceiling isn't raised, right?

It is time to raise the maximum income-levels that can be subjected to payroll taxes to ensure the health of the SS funds. Nothing more is needed. No increased retirement ages, no reduced benefits, and no means-testing. This isn't rocket-science, just accounting.

The thing is that SS is "supposed" to be a program in which you get paid out what you paid in. So if you raise the maximum income levels that can be subjected to it, you are going to have to also up the amount SS pays out to those people, which many of the masses wouldn't like. If you raise the income level subjected to payroll taxes without increasing the amount paid out, you turn SS into a de-facto entitlement program.

 

[ParticleGrl]

I'm not claiming it isn't solvent (as I don't know what the full truth is because I've seen multiple claims made), but that if the debt ceiling not being raised meant that SS wouldn't get paid out, it means it isn't self-funding.

When it is suggested that social security is not paid out, what is being suggested is that the government default on the bonds that it holds first (specifically, the treasuries held by the social security trust), before defaulting on bonds held by others.

 

[SixNein]

Not sure what you mean here, why would they choose to default?

By not raising the debt limit, the government makes the choice to default.

The U.S. does agree to pay its bills, as the debt would be serviced irregardless, the only reason the politics here are being played is because one party wants the debt to remain an issue while the other one doesn't want it to and neither party will just roll over for the other one.

The treasury does not have the ability to service its obligations without a raise in the debt limit. Past obligations are being mixed with a discussion over future obligations. This debate should occur when congress forges a budget. Congress should not agree to use a credit card then debate when the bill comes due.

Regarding other actions, I think many other countries around the world already are losing the expectation of the U.S. to do other actions. The countries of Eastern Europe question whether the U.S. will provide a counter to a more beligerent Russia, the countries of Asia question whether the U.S. will provide a counter to a more beligerent China, Israel questions whether the U.S. will continue to provide it with support (with the President's recent assertion that Israel should go back to the 1967 lines), etc...

Whether the US should become involved in these military issues is a different debate. I'm specifically referring to the status of the United States as a financial safe haven.

I think they will raise the debt ceiling because to not do so would be catostrophic. If the onus is put on President Obama, he will fold and sign a bill that raises the debt limit for the short-term, if the onus is put on the Republicans, they will pass somethng, or else they will get the blame.

The markets are betting on them doing something as well; however, this is starting to get close enough to make people nervous. This situation could become a disaster before the august 2nd deadline. The real question is when will investors decide to bail.

 

[CAC1001]

Why wouldn't it stimulate anything? Are you telling me that employing electrical engineers to rebuild our embarrassing power grid wouldn't lower the unemployment rate?

If you take on debt to try to employ electrical engineers, you can be preventing the employment of other people via private investment because the added debt absorbs savings that would otherwise go into private investment. Employing people also isn't necessarilly going to stimulate the economy. That's like saying you just spend money to hire a lot of people to dig trenches and another group of people to fill them back in. If you want to greatly increase the number of people hired to do this, give them spoons as opposed to shovels. It also would take time to figure out exactly what projects to work on.

Also, real rates on 5 year treasuries ARE negative. Given that maintenance work in infrastructure MUST (absolutely MUST) be done at some point, doing it now will PREVENT FUTURE DEBT. If you are really concerned about the long term deficit, you should want to minimize long term expenditures, which means borrowing now while the rates are negative, not slashing now and borrowing in the future when the costs and rates are higher.

I think borrowing in the future provided the deficit would be a lot smaller or a surplus would be fine, even if it costs a bit more. Future debt is not a problem so long as it would not be excessive, the problem is the massive amounts of debt currently being taken on. Spending a lot on infrastructure right now could saddle the country with a massive amount of debt that hamstrings the economy from recovering completely and could also result in a massive amount of inflation in the future. Infrastructure can stimulate if it will result in increased future tax revenues for the government by facilitating more GDP growth, but there are some big ifs there.

Simply not true- right now lots of companies and banks are hoarding money. One more dollar of borrowing by the government is one more dollar of private sector spending THAT ISN'T BEING PUT TO USE RIGHT NOW. Banks and companies both have cash on hand that isn't being used. I know that a negative real rate on government bonds is crazy and counter-intuitive, but seriously try to think through the actual implications.

Given time, they will get tired of hoarding all that cash and start releasing it.

Japan has roughly half our unemployment, and one of the highest qualities of life in the world, despite anemic GDP growth. And their government bonds are still high quality! Given that our problem right now is terrible unemployment, why not follow their example?

Because the problem of their very anemic GDP growth was likely caused by their excessive amounts of spending. Japan's bonds are rated AA now, as they lost their AAA rating some years ago. Their national debt is so large that if they were to raise their interest rate by one percentage point, it would wipe out whole sectors of the Japanese government. They are likely able to get around doing this because Japan itself holds 90% of its own debt.

The U.S. doesn't hold 90% of its own debt, and if a AA bond rating results, interest rates will go up, which would greatly increase the amount of money it takes to service the debt (which also threatens the credit rating further). In addition, I would say many of the policies of the current administration, simply via creating a lot of uncertainty, are artificially keeping the unemployment rate higher than what it really should be.

But planning for infrastructure employs people, and begins the process. Who cares if it takes a few years? Right now we have idle workers whose skills are getting rusty AND our infrastructure sucks. Why not use the former to fix the latter? Further, it will literally NEVER be cheaper to do the repairs (borrowing money is CHEAPER than paying cash!), and a stich in time saves nine, as they say. Doing it now costs less then doing it in five or ten years, and borrowing now costs less then cash!

It employs people, over time, but the idea is that the economy should not be stuck in a recession for years, which means by the time such a stimulus begins to take effect, the economy would be recovering. Also provided it does start to reduce unemployment, it can create an artificial view of recovery, because if the private-sector remains depressed due to the infrastructure spending, then essentially we have a government debt-driven economy, which when the government reaches its limit and must curtail spending, we end up back at square one, only now with a lot more debt.

Also, many of the projects suggested by civil engineers in the nations infrastructure report card (things like replacing failing parts in the power grid) could easily begin quickly.

If the debt to do such projects wouldn't be excessive, that could be a good thing to work on I think if the work could begin quickly.

Welcome to life- there is corruption in pretty much everything, private or public sector. You can add this caveat to anything you do with your time or money.

Yes, but depending on the level of corruption, how much bang does one get for the buck exactly? Are the contractors going to try to milk the government for as much as they can and drag the length of the work out much longer than it really takes so as to get more money? It's like if you tried to stimulate by gunning up the defense budget, you would have to be very careful about defense contractors trying to drag things out and milk the taxpayer.

That isn't true- Republicans have proven to be just as much a big government party as the democrats. The republicans explicitly want business-friendly "big" government policies and democrats want social-safety-net friendly "big" government policies. However, the definition of "big" is actually quite limited for both parties- President Obama and his policies would be considered conservative in pretty much any other country

The people who vote Republican do not want big government. The Republican party wrt to the politicians themselves, yes, is really just a big-government party in disguise, something the Republican voters have always lamented. The Republican party tends to be a big government party for Big Business (which benefits from big government), while the Democrats tend to be a big government party for the social welfare state and the labor unions, trial lawyers, and the environmental lobby (all of which also benefit from big government, albeit a slightly different kind of big government then Big Business; Big Business likes regulations so long as they hurt smaller competitors, and also loves welfare if it means handouts for them).

 

[CAC1001]

By not raising the debt limit, the government makes the choice to default.

How so? The debt can be serviced from the revenues the government takes in.

The treasury does not have the ability to service its obligations without a raise in the debt limit. Past obligations are being mixed with a discussion over future obligations. This debate should occur when congress forges a budget. Congress should not agree to use a credit card then debate when the bill comes due.

If I am reading correctly, you mean the Treasury, even if it has the money, just technically can't do something like service the debt without a raise in the debt limit?

 

[ParticleGrl]

CAC1001, you have completely ignored my points. There are two really important factors- right now the private sector is holding a lot of uninvested cash, AND right now real interest rates on 5 year government treasuries are negative. Your responses are ignoring these points, which are really important, because that's the current reality.

Yes, sometimes the government selling treasuries decreases cash in the private sector (thought not always the US private sector, in recent years, selling treasuries in the US has largely influenced the private and public sectors of China and the Middle East). However, WHEN THE PRIVATE SECTOR ISN'T SPENDING, government borrowing is simply putting idle cash to work. It doesn't matter that they will "eventually" spend, because we are talking about taking it from them today, using it, and paying them back later (when they do want to spend).

You can see this in the treasury rates- if you have a little money chasing a lot of investments, then demand is low, and rates go up. In this case, flooding the market with treasuries will raise rates, and private sector investments get crowded-out. If you have a lot of cash, chasing few investments, demand is high, and rates go down. The key point is that you can see how much government borrowing is hurting the private sector by looking at rates. Right now, the market rates suggest that no, government borrowing isn't suppressing anything.

Think of interest rates in this case as some measure of opportunity cost imposed. If the government is taking money away from really useful private sector stuff, it has to compensate the private sector more (thats how markets work). What, then, does a low rate tell you?

I think borrowing in the future provided the deficit would be a lot smaller or a surplus would be fine, even if it costs a bit more.

The deficit doesn't matter nearly as much as the total debt. Doing the infrastructure project when rates are at their lowest AND costs are at their lowest is the best way to control the actual debt.

You are arguing that we should incur MORE total debt because of bad cash flow right now. Thats ludicrous. You want to spend more on the project, borrow money when we are out of recession (which will reduce private sector investment proportionally, because we will be at full capacity), AND pay proportionally more in debt service.

If debt is bad, and if the government should interfere as minimally as possible in the private sector THEN NOW IS THE TIME TO BUILD.

 

[SixNein]

Take a look at government-run enterprises. The nature of government is to grow and grow. Part of this is just the incentives. No government program or agency seeks to spend as little money as possible. The goal for the head of a government program or agency is to increase its size, scope, and budget.

The motivation of government entities is not profit but solutions to problems. And often times aspirations to solve problems don't agree with budgets. NASA is a very good example. The real question is if a situation needs improved and is government the most effective way to provide the solution. Just look at the state of the elderly before and after the implementations of social security and Medicare. In my opinion, this analysis must be made on a case by case basis. And in many of these cases, let the market decide is synonymous with let's ignore the problem. Sometimes the end may not justify the means, but sometimes the end does justify the means. There is no independent law to decide.

On a completely different note, I wonder if anyone has ever calculated the economic drag caused by religion?

 

[SixNein]

How so? The debt can be serviced from the revenues the government takes in.
If I am reading correctly, you mean the Treasury, even if it has the money, just technically can't do something like service the debt without a raise in the debt limit?

If we had the money to service our current obligations, there would be no need to raise the debt ceiling. In addition, even if we had enough money to do so, the money may be tied up which causes a need for short term credit.

 

[CAC1001]

The motivation of government entities is not profit but solutions to problems.

I think it depends. The motivation of government often is to grow, and in doing so, often creates more problems than solutions in the process. As a problem solver, government has a rather poor reputation. However, there are certain things only government can really do, or which government is more appropriate for doing.

And often times aspirations to solve problems don't agree with budgets. NASA is a very good example.

NASA is also a good example of how a government agency can blow insane amounts of money above and beyond what it should on various projects.

The real question is if a situation needs improved and is government the most effective way to provide the solution. Just look at the state of the elderly before and after the implementations of social security and Medicare. In my opinion, this analysis must be made on a case by case basis. And in many of these cases, let the market decide is synonymous with let's ignore the problem. Sometimes the end may not justify the means, but sometimes the end does justify the means. There is no independent law to decide.

On a completely different note, I wonder if anyone has ever calculated the economic drag caused by religion?

What makes you think religion creates an economic drag? (not saying you're wrong, just curious). The workaholic aspect of Americans is often attributed to the old Puritan work ethic of the country.

If we had the money to service our current obligations, there would be no need to raise the debt ceiling. In addition, even if we had enough money to do so, the money may be tied up which causes a need for short term credit.

We do have the money to service our current obligations if you mean the servicing the debt, as revenues can be used for that. What we do not have enough money for is all of the government spending, the things the government uses debt to finance.

 

[CAC1001]

CAC1001, you have completely ignored my points. There are two really important factors- right now the private sector is holding a lot of uninvested cash, AND right now real interest rates on 5 year government treasuries are negative. Your responses are ignoring these points, which are really important, because that's the current reality.

Yes, sometimes the government selling treasuries decreases cash in the private sector (thought not always the US private sector, in recent years, selling treasuries in the US has largely influenced the private and public sectors of China and the Middle East). However, WHEN THE PRIVATE SECTOR ISN'T SPENDING, government borrowing is simply putting idle cash to work. It doesn't matter that they will "eventually" spend, because we are talking about taking it from them today, using it, and paying them back later (when they do want to spend).

You can see this in the treasury rates- if you have a little money chasing a lot of investments, then demand is low, and rates go up. In this case, flooding the market with treasuries will raise rates, and private sector investments get crowded-out. If you have a lot of cash, chasing few investments, demand is high, and rates go down. The key point is that you can see how much government borrowing is hurting the private sector by looking at rates. Right now, the market rates suggest that no, government borrowing isn't suppressing anything.

Think of interest rates in this case as some measure of opportunity cost imposed. If the government is taking money away from really useful private sector stuff, it has to compensate the private sector more (thats how markets work). What, then, does a low rate tell you?



The deficit doesn't matter nearly as much as the total debt. Doing the infrastructure project when rates are at their lowest AND costs are at their lowest is the best way to control the actual debt.

You are arguing that we should incur MORE total debt because of bad cash flow right now. Thats ludicrous. You want to spend more on the project, borrow money when we are out of recession (which will reduce private sector investment proportionally, because we will be at full capacity), AND pay proportionally more in debt service.

If debt is bad, and if the government should interfere as minimally as possible in the private sector THEN NOW IS THE TIME TO BUILD.

Here is an interesting article that addresses the issue of spending and debt right now: http://www.bloomberg.com/news/2011-...t-grow-commentary-by-reinhart-and-rogoff.html

 

[SixNein]

What makes you think religion creates an economic drag? (not saying you're wrong, just curious). The workaholic aspect of Americans is often attributed to the old Puritan work ethic of the country.

I'm simply curious if a study as been performed on it or not. But let's let that be a topic for another time.

 

[ParticleGrl]

Here is an interesting article that addresses the issue of spending and debt right now: http://www.bloomberg.com/news/2011-0...nd-rogoff.html

The article is entirely about the debt, not the deficit. As I tried to make clear- borrowing money today at low rates in order to avoid borrowing tomorrow at higher rates LOWERS the expected debt.

If you seriously care about the debt, you should be advocating more infrastructure spending now, while its cheap.

We do have the money to service our current obligations if you mean the servicing the debt, as revenues can be used for that. What we do not have enough money for is all of the government spending, the things the government uses debt to finance.

Congress's budget is supposed to be legally binding. That means everything in the current budget is an obligation. The proper time to worry about spending is while making that budget. Once you order all those services, and the bill is due, you can't say "sorry, my spending was TOTALLY out of control." Or at least, you can't if you want to be taken seriously as a bond market.

 

[CAC1001]

The article is entirely about the debt, not the deficit.

The deficit is tied to the debt.

As I tried to make clear- borrowing money today at low rates in order to avoid borrowing tomorrow at higher rates LOWERS the expected debt. If you seriously care about the debt, you should be advocating more infrastructure spending now, while its cheap.

I linked to the article because it addresses this point though:

Indeed, there is a growing perception that today’s low interest rates for the debt of advanced economies offer a compelling reason to begin another round of massive fiscal stimulus. If Asian nations are spinning off huge excess savings partly as a byproduct of measures that effectively force low- income savers to put their money in bank accounts with low government-imposed interest-rate ceilings -- why not take advantage of the cheap money?

Although we agree that governments must exercise caution in gradually reducing crisis-response spending, we think it would be folly to take comfort in today’s low borrowing costs, much less to interpret them as an “all clear” signal for a further explosion of debt.

Changing Interest Rates

Several studies of financial crises show that interest rates seldom indicate problems long in advance. In fact, we should probably be particularly concerned today because a growing share of advanced country debt is held by official creditors whose current willingness to forego short-term returns doesn’t guarantee there will be a captive audience for debt in perpetuity.

Those who would point to low servicing costs should remember that market interest rates can change like the weather. Debt levels, by contrast, can’t be brought down quickly. Even though politicians everywhere like to argue that their country will expand its way out of debt, our historical research suggests that growth alone is rarely enough to achieve that with the debt levels we are experiencing today.

While we expect to see more than one member of the Organization for Economic Cooperation and Development default or restructure their debt before the European crisis is resolved, that isn’t the greatest threat to most advanced economies. The biggest risk is that debt will accumulate until the overhang weighs on growth.

It also points out that knowing the true amount of debt on the government is tricky because the federal government might have to bear the burden of many state and local governments as well. We see this in China right now which may have to handle as much as $2 trillion in local government debts.

Congress's budget is supposed to be legally binding. That means everything in the current budget is an obligation. The proper time to worry about spending is while making that budget. Once you order all those services, and the bill is due, you can't say "sorry, my spending was TOTALLY out of control." Or at least, you can't if you want to be taken seriously as a bond market.

I am no advocate for not raising the debt limit, that I think would be disastrous, I am just pointing out that the government's revenues could be used to pay the interest on the national debt.

 

[DevilsAvocado]

NASA is also a good example of how a government agency can blow insane amounts of money above and beyond what it should on various projects.

I understand it’s not an easy task to keep track on all those "Socialism-Tax-Threats", but I feel a strong need to inform you that the name of this site is Physics Forums.

Are you sure you’ve come to the right place??

What’s your solution for the future? Rear-gear full speed into the Medieval? Tea-Troglodytes carry out "maverick magic" to fix future problems? Or does your "theory" include the assumption that MacDonald’s will start fundamental research and space exploration, once the U.S. Government and NASA is closed down, so that future generations of reactionaries also will be able to spread their deranged ideas globally?

 

[CAC1001]

I understand it’s not an easy task to keep track on all those "Socialism-Tax-Threats", but I feel a strong need to inform you that the name of this site is Physics Forums.

Are you sure you’ve come to the right place??

What’s your solution for the future? Rear-gear full speed into the Medieval? Tea-Troglodytes carry out "maverick magic" to fix future problems? Or does your "theory" include the assumption that MacDonald’s will start fundamental research and space exploration, once the U.S. Government and NASA is closed down, so that future generations of reactionaries also will be able to spread their deranged ideas globally?

Not sure where you're getting all that from, however, if for example one points out how the different branches of the military can be prone to wasting money on certain weapons systems that aren't necessarilly needed, does this mean that they are advocating getting rid of the military?

Similarly, my pointing out how an agency like NASA can be prone to wasting money does not at all mean I am advocating closing down the agency.

 

[DevilsAvocado]

Not sure where you're getting all that from, however, if for example one points out how the different branches of the military can be prone to wasting money on certain weapons systems that aren't necessarilly needed, does this mean that they are advocating getting rid of the military?

Sounds coherent:

... I'd say one major area to gun up spending is on the national defense, as the military needs a lot of vehicles, equipment, and weapons replaced and upgraded,

But okay, could you please give us the name of one NASA project that you just know is a complete waste of money & time?

 

[CAC1001]

Sounds coherent:

When I said gun up spending on the defense, I meant on the stuff needed, and also pointed out how in doing so, care would have to be taken so as to make sure that the money is not blown on unnecessary projects that waste money.

But okay, could you please give us the name of one NASA project that you just know is a complete waste of money & time?

The Space Shuttle is the most infamous I'd say.

 

[WhoWee]

SS and Medicare are self-funded by payroll taxes. Those "entitlements" are not sinking us. Untrammeled spending is.

The expansion of those programs was never included in their design - correct? Websites like this help people to participate. my bold
http://www.allsup.com/about-ssdi/ssdi-guidelines-by-disability/bipolar-disorder.aspx

"3. Ask if the bipolar disability meets or equals a medical listing. Bipolar is listed under mental disorders. To satisfy the listing criteria for bipolar disorder, a number of variables are considered:
Anhedonia
Appetite disturbance
Sleep disturbance
Psychomotor agitation or retardation
Decreased energy
Feelings of guilt or worthlessness
Difficulty concentrating or thinking
Thoughts of suicide and hallucinations
Delusions or paranoid thinking
In assessing bipolar disability relative to a listing level impairment, the following areas of functioning are evaluated:
Restrictions of activities of daily living
Maintaining social functioning
Deficiencies of concentration
Persistence or pace
Repeated episodes of decompensation--each of extended duration
An individual who has four symptoms present from the depressive syndrome list, as well as extreme limitation in two of the four functional areas, would probably be eligible for benefits."

How many drunks qualify?

http://www.ssa.gov/compassionateallowances/

 

[DevilsAvocado]

The Space Shuttle is the most infamous I'd say.

And this proves you have absolutely no idea what you’re talking about. I guess you never heard of the Hubble Space Telescope and the International Space Station?

Space shuttle applications have included:

• Science
• Astronomy
• Crystal growth
• Space physics
• Crew rotation and servicing of Mir and the International Space Station (ISS)
• Manned servicing missions, such as to the Hubble Space Telescope (HST)
• Manned experiments in low Earth orbit (LEO)
• Components for the construction of the ISS
• Supplies in Spacehab modules or Multi-Purpose Logistics Modules
• Carried satellites with a booster, the Payload Assist Module (PAM-D)
• Chandra X-ray Observatory
• Many TDRS satellites
• Two DSCS-III (Defense Satellite Communications System)
• A Defense Support Program satellite
• Magellan probe
• Galileo spacecraft
• Ulysses probe

The whole point of fundamental research is that we know from the beginning that all projects won’t be successful. But some of them will be very successful, and make all the difference in the world.

I.e., we need to "waste" money, on some project that will not be successful, to find those that is very successful – that’s the whole point!

No one can handpick the "good stuff" in advance, not even Einstein. Not one person on this planet could predict the importance of the research by Albert Einstein, Niels Bohr, Erwin Schrödinger, Werner Heisenberg, et al, on quantum theory/quantum mechanics. Not one.

Still, without the hard work of these guys, there would be no nuclear power, no internet, no IC computers, no cellular phones, no communication satellites, no GPS, no LCD, no HDD, etc, etc, etc, etc...

What do you think Michele Bachman would have said to these QM geniuses?

- Sorry guys, it looks interesting, maybe, but we’re going to buy guns and bibles...​

Yes, there were tragic disasters in the Shuttle program, but there is no way for you today, to evaluate if the program was a complete waste of money, or not.

Unless Michele Bachman becomes President, the exploration of space has just begun, and all the knowledge gained in the Shuttle program will of course have great value in the future, for coming generations.

There's only one way forward, and that's forward.