Look Guys, If You Really Care About Debt Reduction….
…please stop fucking around with the debt ceiling. The fluctuations in Treasury yields do horrible things to long-term debt servicing. In addition to whatever else this stunt did, it added well over 100 million dollars to the national debt just from treasury yield spikes.
This is akin to setting money on fire and using it to light your cigar. But in this case Congress held on to the dollar bill too long, burnt their fingers and couldn’t even finish lighting their cigar.
hey come on Nob, you don’t think the house republicans really care about the debt do you? caring about the debt is only fashionable when there is a democrat in the white house.Report
$100 million? We add that much every hour just from business as usual.Report
Brandon, ask somebody to explain the difference between business as usual and pissing away money on BS.Report
Is Sebilius available?Report
Barry, in all the time you’ve been posting here, I’ve yet to see you say one intelligent thing, ever. You don’t get to condescend to me.
And for our government, pissing away money on BS is business as usual.Report
I dunno, it seems a purely Republican thing — I mean, how much actual cash walked off in Iraq?
Democrats seem to want to actually get something from their money. Bridges, lunches for poor kids, that sort of thing.Report
Reportedly, the shutdown cost $24 Billion.Report
And my thanksgiving!Report
Specifically, that’s the effect on the economy, not the actual price to government. (At least as I’ve seen it reported.)Report
Yeah, that’s economic impacts.
The figure above is just the impact of treasury yields on deficits.
And yes… the amount is tiny by percentage of total federal spending, but it’s many many times the size of things that the “deficit hawks” love to put on the chopping block on a constant basis like public broadcasting or school lunch programs or whatever else.
And we’re talking about this being a cost simply from people no longer trusting the government as much. It’s just borrowing costs, it has a low, possibly even negative multiplier effect, which is what makes it really really stupid as a thing to pull.Report
So what?
Run the printing presses another few seconds. The Federal Reserve can create that new money in no time. What was the phrase? “When you’re talking billions of dollars, that’s real money”.Report
I find comments on topics like this interesting. For starters, it often shows that while “the debt” may be a big worry to some people, it is apparently not a big enough worry to learn even the simple basics — which makes it appear to be nothing more than a buzzword, or some sort of in-group signaling.
I’d have a hard time taking someone’s worry about, say, the migratory patterns of bald eagles if they — in their fretting — they reveal they believe bald eagles to be a type of cat.Report
Sorry, Damon — that honestly wasn’t meant to be addressed to you — I intended it to go on the end of the thread!Report
No wories Morat.
You make a good point whether in response to my post or not. 🙂Report
Well, you DID sorta make a teeny mistake in your comment but it wasn’t really applicable in general to comments about the debt, so I didn’t want to seem I was bagging on you.
Treasury has not authority to print money like that anymore. Federal Reserve manages the money supply. During the Great Recession, I saw a few economists point out that our economy was big enough to basically helicopter drop the debt away (literally print much cash and get rid of it), and it wouldn’t trigger massive inflation (given we’re still at the zero bound, inflation might be a good thing).
Now if we did it over and over and over again…..but once? A few points for a few years.
Our deficit is entirely manageable (it’s dropped in half since 2009) and while the Debt is large, compared to the US economy as a whole it’s not nearly the worst it’s ever been — which is why smart money is relatively unconcerned about it, and why long-term T-bill yields are so low. Nobody finds it risky to loan us money, because — Debt Ceiling idiocy aside — we’re financially quite secure.
Honestly, what I’d love to see is a deliberate abandonment of the ‘checkbook’ metaphor for government spending. It’s not even an accurate metaphor for home spending, much less business spending, and certainly not governmental spending — most people, when they think about their household budget or checkbook — think very short term.
They don’t consider the assets they own (cars, houses) just the bills they have due. They don’t think about college in terms of investment, but just a middle class expense. It’s very short-sighted, short-term cash flow and that’s it.
Which isn’t a bad thing, per se — but it’s pretty bad to use as a basis for long-term decisions about how government balance sheets should operate.Report
M,
Given the total liabilities of the federal gov’t is greater than 200 Trillion dollars, while our GDP is @ 16 Trillion, I think we have a problem. Note that this is the present value of ALL obligations currently in force–social security, medicare, all “off book” obligations, yadda yadda. This amount continues to increase. I think this is a problem.
Yep, you’re right about the Treasury, but the Fed’s doing “quantative easing” quite a bit. Several tens of billions per quarter if I’m not mistaken. I think that’s a problem too.
I will agree with you last comment 100%Report
Given the total liabilities of the federal gov’t is greater than 200 Trillion dollars, while our GDP is16 Trillion,
That is what we, in the industry, like to call “Utter BS designed for the rubes”. And by “industry” I mean “the industry of thinking adults”.
Stop for a second and analyze what you just said. The US is on the hook for 12 times it’s yearly earnings — what’s missing from that statement? If that statement is true, taken at face value, why would anyone loan us money? if you make 50k a year and owe 650k, who would keep loaning you 15k a year?
So either that statement is “false” or it’s missing critical, explanatory context. Akin to saying “The doctor is poisoning me, arrest him!” and leaving out the bit where it’s chemotherapy.
(As it happens, I know the context. It makes me feel insulted — “Do you think I’m stupid?” is my gut response)Report
Damon,
your numbers are wrong.
at 50 to 1 the other country takes you over, anyhow. (see Iceland).
So even if your numbers were right, it would still take a while.
Personally, I support obamacare and other deficit reducing measures.Report
morat,
My household accounting is doublebook.
(it also makes accountants cry.)
It’s a total pain in the arse, too.Report
@morat20
You’re right that public finance is not exactly like a household budget constraint, but that observation will only get you so far. And yes, the deficit has come down since 2009, but that has everything to do with an incredibly high deficit in 2009 and almost nothing to do with fiscal discipline. We still have a very severe long-term debt issue to contend with that we really have very little hope of growing our way out of.
Also, the market for US Treasuries is dominated by institutional investors who have to hold them for regulatory purposes, foreign central banks that hold them for monetary policy reasons, and the FED, which has committed to keeping asset prices from collapsing (and bond yields from taking off). If US debt were priced according to the same factors that other country’s debt was priced, it would be much more expensive. And all the things that make the US a special case are changing, which means that our debt will become more and more expensive to roll over and our interest payments will take a bigger and bigger chunk out of our yearly budgets.
Unless, of course, we were to actually begin addressing the underlying fundamentals, which we won’t – because that would mean some combination of raising taxes, which Republicans can’t stand, and undertaking meaningful entitlement reform, which Democrats won’t do – so, the cost of borrowing will rise. And that means that the government will at some point have no choice but to raise taxes and cut benefits anyway. The difference being that if we started now, we could do those things at a much slower and more comfortable pace than what we will end up having to do once there is no other choice.Report
Given the total liabilities of the federal gov’t is greater than 200 Trillion dollars…
First time I heard this trope it was something like $15T. A few months later it popped up again only it was $30T. A few more months go by and it’s $60T. Then $120T. Now it’s “greater than $200T”.
I tracked the source down once and it’s figured by extending outlays out however far you want to get as big a number as you like. The bigger the better, natch. And then you assume the government collects absolutely no tax revenue over that same period to pay for any of it. IOW, pure bullsnot.
Either you’re too stupid to understand what you’re talking about, or you’re assuming we are. Either way your credibility is nil with me. Good day, sir.Report
I assume that $200T is the present discounted value of all of our obligations from here to the heat death of the universe, right? As long as we’re taking the “apples divided by hydrogen = disaster” approach, we should adjust our figures. Our annual GDP is $16T, but our monthly GDP is a mere $1.3T. Daily, it’s barely $40B, so it’s probably better to use that number for shock value. $40B into $200T is almost nothing!Report
Rod,
Since it’s been disproved, please provide the link to said disproval. When I orginally made this statement a few months back, I provided a link. Please do so as well.Report
Here’s a link from Dean Baker that asks whether the study, given the methodology and assumptions used, is of any use in understanding our current and future fiscal situation.
Money quote
Report
So, basically what Rod said.Report
Thanks Gaelen. I hadn’t seen Baker’s takedown (nor for that matter the piece he refuted). It’s sort of gratifying to see someone of his stature come to the same conclusion I did.Report
I don’t need a link to back me up. I am the one who backs!
Seriously, it’s been months ago and I was working off the source provided by a proponent of your view. Some right wing blog, IIRC. The gist is that the SSA claims a projected cumulative shortfall of about $7T. This is figured on a cash accounting basis, looking at the projected revenues and payouts year to year over that period. That source then claimed that you had to add in all the projected payouts for everyone then in the system (basically everyone alive in 2088) without including any more revenues. Thereby getting a figure that’s much larger. But surely you see the switch there from cash accounting early in to accrual accounting at the far end? Pick one, I don’t care which, but stick to it! And if you’re going to count up payouts you have to also count projected revenues on an equivalent basis.
What you can’t do is insist that any and every government program start out with a pile of cash on hand sufficient to fund it in perpetuity. Do you have enough money in the bank to retire today and not starve? No? Oh my God! Unfunded liabilities!Report