What is the real reason the US is in so much debt?

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Discussion Overview

The discussion centers around the reasons behind the significant national debt of the United States, exploring various economic, political, and social factors. Participants examine historical trends, government spending, taxation, and the impact of military expenditures, among other topics. The conversation includes theoretical and practical implications of debt in the context of economics.

Discussion Character

  • Debate/contested
  • Exploratory
  • Technical explanation

Main Points Raised

  • Some participants suggest that the deficit problem transcends political parties, indicating a systemic issue rather than one tied to specific administrations.
  • One participant presents macroeconomic equations to illustrate the relationship between savings, investment, government spending, and trade deficits, arguing that the U.S. must borrow to maintain its trade deficit.
  • Another viewpoint emphasizes that debt can be beneficial if it funds investments that yield long-term returns, contrasting this with current spending on entitlement programs.
  • Some argue that successful companies operate debt-free, suggesting that the government should aim for similar fiscal responsibility.
  • A participant highlights the financial choices of individuals as analogous to government decisions, suggesting that taxpayer complicity contributes to the debt situation.
  • Military expenditures, particularly the costs associated with prolonged wars, are cited as significant contributors to the national debt, alongside issues of corporate tax contributions.
  • Concerns are raised about the overall revenue generation of the government, with some participants noting that large corporations often do not pay their fair share of taxes.

Areas of Agreement / Disagreement

Participants express a range of views on the causes of the national debt, with no clear consensus emerging. While some agree on the impact of military spending and corporate tax issues, others emphasize different factors such as political accountability and the nature of government spending.

Contextual Notes

Participants reference various economic models and theories, but there are unresolved assumptions regarding the implications of debt and the effectiveness of government spending. The discussion also touches on the complexities of fiscal responsibility and the role of individual and corporate contributions to the national debt.

  • #31
Re: What is the real reason the US is in so much debt?

The answer seems to be ... spend more than you make and you will be in debt. Grafts and charts and all the rest ... You seem to be arguing the 'why', and the 'how'
but the simple truth is, ( imo.. and yes .. it's simplistic. ) more out than in ... will result in debt.
My answer works for individuals, and I can't see why it doesn't work for any level up from there.
 
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  • #32
Alfi said:
The answer seems to be ... spend more than you make and you will be in debt...My answer works for individuals, and I can't see why it doesn't work for any level up from there.

It doesn't scale up from individuals because sovereign governments have a printing press. One can imagine a world where the government doesn't tax at all, and simply prints money to pay for services. In such a world, managing the central bank would probably be more difficult (and treasuries wouldn't exist as bench marks for safe investment), but its certainly possible. On some level, we run a deficit because we choose to- we've decided its a better way to manage an economy.

Further, even if it did scale up, the analogy implies the wrong things. For an individual, increasing income is hard, decreasing spending is easy. Therefore, the obvious way to decrease a deficit is to lower your spending.

A government on the other hand can increase income easily (printing money and adjusting taxation), but cutting spending is hard- unless we can somehow reverse an aging population, medicare and social security benefits will continue to increase.
 
  • #33
Alfi said:
The answer seems to be ... spend more than you make and you will be in debt.

Thanks for breaking that down. This thread is intended to go beyond that and investigate why this is happening.
 
  • #34
BobG said:
Procrastination?

Of course, on the bright side, if Bill Clinton hadn't implemented policies that http://clinton4.nara.gov/WH/new/html/Fri_Dec_29_151111_2000.html , we'd be in a real tight spot right now.

Equally positive, thanks to electing Al Gore President in 2000, the national debt will be eliminated by 2012. Had we foolishly elected George Bush, the national debt wouldn't be eliminated until 2016.

Unfortunately, we made the mistake of electing Barrack Obama. Under him, we get no promises to eliminate the national debt - only to reduce the national debt by $4 trillion dollars over the next 12 years.

Putting all four promises into perspective, Obama's promise is practically equivalent to admitting our government is doomed to financial collapse.

I maintain that it is OUR fault - WE The People - allow this irresponsible behavior to continue.
 
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  • #35
WhoWee said:
I maintain that it is OUR fault - WE The People - allow this irresponsible behavior to continue.

I whole-heartedly agree with this statement.

Since only like 1/2 people in the U.S. vote it's clearly a lack of will-power on our part. Admittedly, politicians could do more... but it's our responsibility as voters to make sure they do more.

(Admittedly 2004's polling numbers were 58% of the electorate that voted, but, that was also the highest percentage it has ever hit)

Alfi said:
Re: What is the real reason the US is in so much debt?

The answer seems to be ... spend more than you make and you will be in debt. Grafts and charts and all the rest ... You seem to be arguing the 'why', and the 'how'
but the simple truth is, ( imo.. and yes .. it's simplistic. ) more out than in ... will result in debt.
My answer works for individuals, and I can't see why it doesn't work for any level up from there.

This thread was to discuss the "why" and "how." And no, for governments (see: Macro-economics, where you are thinking Micro-economics), it is not simply as easy as "cut spending, receive bacon."

BobG said:
Procrastination?

Of course, on the bright side, if Bill Clinton hadn't implemented policies that http://clinton4.nara.gov/WH/new/html/Fri_Dec_29_151111_2000.html , we'd be in a real tight spot right now.

Equally positive, thanks to electing Al Gore President in 2000, the national debt will be eliminated by 2012. Had we foolishly elected George Bush, the national debt wouldn't be eliminated until 2016.

Unfortunately, we made the mistake of electing Barrack Obama. Under him, we get no promises to eliminate the national debt - only to reduce the national debt by $4 trillion dollars over the next 12 years.

Putting all four promises into perspective, Obama's promise is practically equivalent to admitting our government is doomed to financial collapse.

Clinton's plan would have eliminated the debt, or at least a good part of it (taking the housing bubble and subsequent crash into account it might not have been entirely gone, but a good bit of it would've been), Al Gore didn't get elected, Bush did, and Bush caused a lot of the debt/deficit as well. People forget the two very very costly wars and the 700 billion bailout that bush made and like to put it on Obama (not saying you are, just happens to be your post that brought this one out, don't worry. :P ).

The fact is: **** happens. We got a couple towers blown up, got into a few wars, then the housing bubble collapsed. A lot of people saw the debt coming, and a lot didn't. I think Obama's viewpoint is about as reasonable as it can get in terms of how much crap we've gotten ourselves into in the last decade.
 
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  • #36
Ryumast3r said:
People forget the two very very costly wars and the 700 billion bailout that bush made and like to put it on Obama (not saying you are, just happens to be your post that brought this one out, don't worry. :P ).

The fact is: **** happens. We got a couple towers blown up, got into a few wars, then the housing bubble collapsed. A lot of people saw the debt coming, and a lot didn't. I think Obama's viewpoint is about as reasonable as it can get in terms of how much crap we've gotten ourselves into in the last decade.
Wanting to spend even more than Bush is a reasonable viewpoint? I say nay. I say the spending under Bush was very unreasonable, and advocating spending even more is preposterous.
 
  • #37
Spending more is the reason. If you think it's a problem then I will tell you that a pound of gold being worth more than a pound of food is foolish!
 
  • #38
Al68 said:
I say the spending under Bush was very unreasonable

Here we go again. :smile:
 
  • #39
DrClapeyron said:
Spending more is the reason. If you think it's a problem then I will tell you that a pound of gold being worth more than a pound of food is foolish!
The word "foolish" is gibberish in this context, since you're not referring to anyone's choice or decision, unless you are calling God foolish.

A pound of gold is worth more than a pound of food as a result of nature, not human choice.
 
  • #40
Al68 said:
A pound of gold is worth more than a pound of food as a result of nature, not human choice.

The relative value of goods is entirely a human choice. Especially something like gold over food.

If tomorrow we collectively decided gold wasn't a valuable metal, its price would plummet precipitously
 
  • #41
Office_Shredder said:
The relative value of goods is entirely a human choice. Especially something like gold over food.

If tomorrow we collectively decided gold wasn't a valuable metal, its price would plummet precipitously
Nonsense. We determined, not decided, that gold is valuable. And human determinations of value are necessarily not collective. And collective determinations of price, such as by government price-setting, do not reflect the actual value of a commodity.

Of course we could collectively choose to ignore its value, possibly as a result of some epidemic mental disorder, and its price would plummet, but we were referring to what gold is worth, not necessarily its price. Gold is intrinsically worth more than food, pound for pound, regardless of its price.
 
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  • #42
Al68 said:
Gold is intrinsically worth more than food, pound for pound, regardless of its price.

I disagree.
 
  • #43
KingNothing said:
Al68 said:
Gold is intrinsically worth more than food, pound for pound, regardless of its price.
I disagree.
Then let's make a deal. I'll trade you food for gold at a ten to one ratio, all you want. :biggrin:

In fact, I'll even do the same for silver.
 
  • #44
When I said it's valuable because we say it is, I mean that it doesn't do anything. Gold doesn't get you to work in the morning, gold doesn't feed you, it doesn't house you, it doesn't help you communicate with other people. Yes, it can be used in electronics but gold is not valued because of any utility that it has, rather it's valued mostly on the basis of being rare.

Similar to how a baseball with Babe Ruth's signature is valued because it's rare - but that's only because we collectively decided that Babe Ruth is a player whose signature is desirable. It's not like god created his signature better than all others
 
  • #45
Office_Shredder said:
When I said it's valuable because we say it is, I mean that it doesn't do anything. Gold doesn't get you to work in the morning, gold doesn't feed you, it doesn't house you, it doesn't help you communicate with other people. Yes, it can be used in electronics but gold is not valued because of any utility that it has, rather it's valued mostly on the basis of being rare.
Rarity is half the equation, but it does have high utility. It's a ductile, malleable, durable metal that does not rust or tarnish, in addition to being a good electrical conductor. Gold has more practical utility for many uses than any other metal. If it were not scarce, it would be used for everything from building materials to car parts to silverware instead of cheaper, inferior materials. It doesn't "do much" because it's too expensive (scarce and valuable) to use, not because it's not useful.

Do you really think humans have valued gold so highly just because it's pretty?
 
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  • #46
Al68 said:
Then let's make a deal. I'll trade you food for gold at a ten to one ratio, all you want.

Deal, so long as neither of us can ever sell our products after the trade.
 
  • #47
KingNothing said:
Deal, so long as neither of us can ever sell our products after the trade.
LOL. Deal. I'll have it made into spoons and forks and toothpicks. How many pounds you want to trade?
 
  • #48
Al68 said:
LOL. Deal. I'll have it made into spoons and forks and toothpicks. How many pounds you want to trade?

Just enough to run your stock of food to nothing, then after you starve, I will raid your place and take my gold back. Boom.
 
  • #49
KingNothing said:
Just enough to run your stock of food to nothing, then after you starve, I will raid your place and take my gold back. Boom.
LOL. I think it's safe to say I can spare more pounds of food without starving than you can spare pounds of gold. Could be wrong, though.

But going back to the point, comparing food to gold in pounds is silly. Of course the value of food as a whole is greater than the value of gold as a whole, but you have to divide the value of each as a whole by the total number of pounds available of each to get value per pound. In other words, gold as a whole is much less valuable than food, but it's value is just far more concentrated, and takes up less volume and weight than food.
 
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  • #50
Well, I guess it's settled then - the US should borrow Gold and re-pay in canned goods (by weight).
 
  • #51
WhoWee said:
Well, I guess it's settled then - the US should borrow Gold and re-pay in canned goods (by weight).

Yup. Nothing more to see here, guys. Case closed.
 
  • #52
Al68 said:
Wanting to spend even more than Bush is a reasonable viewpoint? I say nay. I say the spending under Bush was very unreasonable, and advocating spending even more is preposterous.

Take it into context, one was unreasonable because it didn't need to happen, the other is reasonable because if it hadn't happened, our recession would've become a great depression instead of just a recession.

Spending more in general, no, not reasonable. Spending more to prevent more damage was, imo, very reasonable.

KingNothing said:
Here we go again. :smile:

Yes.
 
  • #53
Ryumast3r said:
Take it into context, one was unreasonable because it didn't need to happen, the other is reasonable because if it hadn't happened, our recession would've become a great depression instead of just a recession.

Spending more in general, no, not reasonable. Spending more to prevent more damage was, imo, very reasonable.

If you're talking about spending as in the bailout of the financial system, then yes, but if you mean the stimulus, there is no way to claim that that prevented any great depression. In fact, it may have only lengthened out the current recession we are in.
 
  • #54
Al68 said:
Rarity is half the equation, but it does have high utility. It's a ductile, malleable, durable metal that does not rust or tarnish, in addition to being a good electrical conductor. Gold has more practical utility for many uses than any other metal. If it were not scarce, it would be used for everything from building materials to car parts to silverware instead of cheaper, inferior materials. It doesn't "do much" because it's too expensive (scarce and valuable) to use, not because it's not useful.

Do you really think humans have valued gold so highly just because it's pretty?

Those things don't necessarilly make it valuable though. It may be great for electrical conducting and not rust at all, but it is rarely used for any of that because of its scarcity. So for all intents and purposes, it is pretty worthless. There isn't any demand for it for those particular things. It only really has value because humans say it does and because you can make shiny things with it.

It would be akin to if the world had only a tiny amount of petroleum and someone saying, "Petroleum has immense potential to be used in everything from manufacturing to consumer products to energy production. It is one of the most useful substances of all materials on Earth. If it wasn't so scarce, it would be used in almost everything to some degree." Now imagine that despite this, petroleum is valued very highly nonetheless, but is only demanded because it also is great for making shiny things.

If gold was a greyish sludge color, it probably would not be valued very highly at all.
 
  • #55
CAC1001 said:
Those things don't necessarilly make it valuable though. It may be great for electrical conducting and not rust at all, but it is rarely used for any of that because of its scarcity. So for all intents and purposes, it is pretty worthless. There isn't any demand for it for those particular things. It only really has value because humans say it does and because you can make shiny things with it.
That's putting the effect before the cause. Humans say gold has value because of its value, not vice versa. Humans make shiny things out of it because it's valuable. And value (per unit) is a function of scarcity, so it makes no sense to say it's scarce instead of valuable.

Is the relationship between scarcity and value that hard to understand?
 
  • #56
Al, I don't think everyone carries the same definition of "value" in their head that you do.
 
  • #57
KingNothing said:
Al, I don't think everyone carries the same definition of "value" in their head that you do.
I'm referring to value in the economic sense, which includes all value, not just whatever value you or I consider important or justified. And remember, we were referring specifically to value per unit mass, which logically must be a function of scarcity.

A pound of food is just too easy to produce to compare to gold. Easier to produce and plentiful means less valuable. A pound of dirt has virtually zero value, regardless of how important dirt is, because it is plentiful. That's just reality.
 
  • #58
CAC1001 said:
If gold was a greyish sludge color, it probably would not be valued very highly at all.

If the only way to use gold were to turn into gaseous carbon emissions, it probably wouldn't have the same value, either.

The fact that gold doesn't lose its value when used is important, as well.

Food is only useful for consumption, same as using petroleum for fuel. Worse yet, most food has to be consumed fairly soon or it becomes worthless even for consumption.

A better analogy of an artificially valued object would be diamonds. They're as valuable as flint. Incredibly useful provided one has the skill to cut or break it into useful objects and those objects last for a long time, but there's no way to return it to the potential it had before it was actually used. But both diamonds and flint have a longer lasting value than food.
 
  • #59
Al68 said:
Is the relationship between scarcity and value that hard to understand?

At best, it's only approximate.

Gold is $50K/kg. Rhenium, which has less than half the abundance and about 2% of the annual production is $6K/kg.
 
  • #60
Vanadium 50 said:
At best, it's only approximate.

Gold is $50K/kg. Rhenium, which has less than half the abundance and about 2% of the annual production is $6K/kg.
Sure, scarcity is one factor, not the only factor.
 

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