Barack Obama: Deficit Hawk

[walksalone]

price of oil is probably what comes to mind first...

I don't think that I've seen that connection. What's the theory?

 

The fact that the cost at the pump has more of an immediate effect on your average american than what is happening with the deficit...

[sd'sker]

So what's the issue?

 

that is what i want to know, but i meant not as big of an issue as some want to make it.

 

if i believed that the money saved from paying our debt and decreasing the deficit would go to fund schools, infrastructure, jobs programs, etc., i would be all for it. but there is a certain group of people that always want to cut spending and exploit the debt/deficit 'issue' to persuade policy. it is the same group that always wants to cut taxes and pounce on a surplus as a justification. they are agenda driven, not driven by any real effects of the debt/deficit.

[BigRedBuster]

I think the fact that this question is even being asked by someone who obviously has at least an above average intelligence should tell us why we are in the situation we are in right now with our debt. You have obviously been conditioned to think it means nothing.

 

http://www.slate.com/articles/news_and_politics/explainer/2010/02/uncle_sam_wants_you_.html

 

Like I said earlier, every year the budget is not balanced, the debt increases. When the debt increases (assuming interest rates stay the same) the amount of our taxes that simply go to paying interest goes up. What does that mean to the average American? That means that future generations have an even harder time paying for the things that all of us actually find important.

 

Now, here is another problem. Interest rates are not going to stay this low. If we get into an era of bad inflation, the most widely used method of controlling inflation is to raise interest rates. It is not a stretch at all to think that interest rates could double in that scenario from what they are right now.

 

That means, even if everything stays just the way it is right now, our interest payments go from $360,000,000,000 to $720,000,000,000. Immediately, there is that much money that CAN NOT be used to pay for anything else. BUT, guess what, you aren't the one that has that problem, it is our kid's who have that problem because we spent the money.

 

It is conceivable that in the not too distant future, we could be paying over $1 trillion in NOTHING but interest.

 

Another question I can't even believe was asked is what is the big deal about the money going to Asia. Really???

 

First of all, it is absolutely impossible to negotiate on a level playing field when the other partner in negotiations holds a large part of your debt. Basically, you are at their mercy. Ever wonder how China, with all their environmental and human rights issues, gets preferential treatment in trade agreements?

 

Second, there is a figure (I think it's 5X) that economists used to show the effects of one dollar spent in a community. Meaning, let's say a consumer comes into a small town and spends $1. That $1 spent actually means $5 to that community because that business owner then spends it somewhere and that business owner pays an employee and then that employee buys something...etc.

 

Now, let's look at this interest payment to China. That first business owner gets that dollar and has to pay the US government in taxes for which then pays China. There is absolutely no added benefit to the economy.

 

Now, if you still don't get it, I can't help you and you are proof of why we are where we are.

[krill]

Now, here is another problem. Interest rates are not going to stay this low. If we get into an era of bad inflation, the most widely used method of controlling inflation is to raise interest rates. It is not a stretch at all to think that interest rates could double in that scenario from what they are right now.

 

Your comments are all based on "ifs". In the present and near future, the federal government is borrowing money at effectivly negative interest. In short the interest on debt issued is lower than the rate of inflation. So the idea that defcit spending during Obama's tenue will cripple future generations is patently false. In fact, there are some who believe we should be borrowing as much as possible at these rates to build things that will benefit future generations and provide jobs now. This would certainly be more beneficial than borrowing money to offset lower tax revenue, which is the long and short of what we're doing. Differant dicussion though, and one that is clearly not palpable to people that are lasered in on the numerical deficit without really understanding what debt is and who holds it.

 

I won't pretend to be an expert on monetary policy, but it's impossible to predict what effect our policies will really have in the future since much of it is based on intangibles. The Euro is in trouble, Japan has been fighting deflation for over a decase with similar policies, and China has resisted a more open currency at every turn to make their exports competitive. As we curtail outflows from military occupations and oil imports, this also makes the dollar a stronger currancy. It's not likely that we will have a sudden surge in inflation like the late 70s due to oil embargoes and shattered consumer confidence. Of course if housing collapses again and / or recession sets in again, it's a different ball game.

[carlfense]

Much of this is owned by foreign governments so the American public doesn't even get the benefit of much of this in income.

Somewhat less than half.

 

We pay the following for programs people think are very important.

 

Social Security - $860 billion

Medicare - $524 billion

Medicaid - $304 billion

 

Now, wouldn't it be much easier to pay for these things if we weren't paying about the same amount to countries like China?

Are you just hoping that no one knows the facts or do you actually believe this?

[carlfense]

Would it be an abstract concept if you took 25% of your personal household budget and lit it on fire every year? I understand your question about demonstrable effects but surely you can appreciate what that amount of money could better be doing and realize that it is having a negative effect.

Lit in on fire? What?

[carlfense]

price of oil is probably what comes to mind first...

I don't think that I've seen that connection. What's the theory?

 

The fact that the cost at the pump has more of an immediate effect on your average american than what is happening with the deficit...

I agree . . . that's why I'm confused as to why you said that in response to my asking how the debt/deficit is affecting the average American.

[BigRedBuster]

Much of this is owned by foreign governments so the American public doesn't even get the benefit of much of this in income.

Somewhat less than half.

 

We pay the following for programs people think are very important.

 

Social Security - $860 billion

Medicare - $524 billion

Medicaid - $304 billion

 

Now, wouldn't it be much easier to pay for these things if we weren't paying about the same amount to countries like China?

Are you just hoping that no one knows the facts or do you actually believe this?

 

 

Congratulations. Typical Carl argument. Nit pick a couple words out of an entire explanation and act like that proves something or some how tears my points apart.

 

Great job.

[carlfense]

Congratulations. Typical Carl argument. Nit pick a couple words out of an entire explanation and act like that proves something or some how tears my points apart.

Typical response. I suppose that you'd prefer that I ignore your factual inaccuracies.

 

 

 

You could easily avoid it if you'd leave out the false statements. But hey . . . if you'd rather blame me for pointing out your mistakes . . . I guess that says something.

[BigRedBuster]

Congratulations. Typical Carl argument. Nit pick a couple words out of an entire explanation and act like that proves something or some how tears my points apart.

Typical response. I suppose that you'd prefer that I ignore your factual inaccuracies.

 

 

 

You could easily avoid it if you'd leave out the false statements. But hey . . . if you'd rather blame me for pointing out your mistakes . . . I guess that says something.

 

 

You just always use that as a way of derailing the discussion off of the main topic.

[carlfense]

You just always use that as a way of derailing the discussion off of the main topic.

Makes sense. I have a real problem with the guy who started this main topic.

[BigRedBuster]

Now, here is another problem. Interest rates are not going to stay this low. If we get into an era of bad inflation, the most widely used method of controlling inflation is to raise interest rates. It is not a stretch at all to think that interest rates could double in that scenario from what they are right now.

 

Your comments are all based on "ifs". In the present and near future, the federal government is borrowing money at effectivly negative interest. In short the interest on debt issued is lower than the rate of inflation. So the idea that defcit spending during Obama's tenue will cripple future generations is patently false. In fact, there are some who believe we should be borrowing as much as possible at these rates to build things that will benefit future generations and provide jobs now. This would certainly be more beneficial than borrowing money to offset lower tax revenue, which is the long and short of what we're doing. Differant dicussion though, and one that is clearly not palpable to people that are lasered in on the numerical deficit without really understanding what debt is and who holds it.

 

I won't pretend to be an expert on monetary policy, but it's impossible to predict what effect our policies will really have in the future since much of it is based on intangibles. The Euro is in trouble, Japan has been fighting deflation for over a decase with similar policies, and China has resisted a more open currency at every turn to make their exports competitive. As we curtail outflows from military occupations and oil imports, this also makes the dollar a stronger currancy. It's not likely that we will have a sudden surge in inflation like the late 70s due to oil embargoes and shattered consumer confidence. Of course if housing collapses again and / or recession sets in again, it's a different ball game.

 

 

Correct as it states in this article.

 

Link

 

However, as it states in this article, there is wide spread disagreement on how long interest rates will remain low.

 

Let's think about the process of government spending. If this was your house hold or my house hold, we could easily make an investment decision at a split second and borrow when the borrowing is good and stop borrowing more when it gets bad.

 

The government doesn't work that way. It takes months if not years to actually do the spending and borrowing that is discussed and voted on in congress. So, if congress is going to take this stance, they only have somewhat of a guess as to what inflation and rates will be when the borrowing is actually done (months if not years down the road).

 

As stated at the bottom of the article, this is somewhat of an enigma.

[JJ Husker]

Would it be an abstract concept if you took 25% of your personal household budget and lit it on fire every year? I understand your question about demonstrable effects but surely you can appreciate what that amount of money could better be doing and realize that it is having a negative effect.

Lit in on fire? What?

 

IMO spending money on interest rather than anything tangible is akin to lighting money on fire. It serves no purpose other than to service the debt. Look at it this way. Let's assume person A & B purchase the exact same things each and every month. Person A carries no credit card debt, they pay off their full balance each and every month. So, the money they spend paying their credit card bill goes strictly to the items they purchased with no interest charges. Person B carries credit card debt balance of $10,000. Person B has to pay interest every month as well as paying current charges. Person B is spending more money but only getting the same benefit. I call that lighting money on fire because it is a total waste.

[carlfense]

IMO spending money on interest rather than anything tangible is akin to lighting money on fire. It serves no purpose other than to service the debt. Look at it this way. Let's assume person A & B purchase the exact same things each and every month. Person A carries no credit card debt, they pay off their full balance each and every month. So, the money they spend paying their credit card bill goes strictly to the items they purchased with no interest charges. Person B carries credit card debt balance of $10,000. Person B has to pay interest every month as well as paying current charges. Person B is spending more money but only getting the same benefit. I call that lighting money on fire because it is a total waste.

I'm paying interest on my mortgage and on student loans but I don't consider those a total waste. I would have preferred to pay cash up front but that wasn't an option. I think that it will be worth it in the end . . . (in my own example).

[KJ.]

Would it be an abstract concept if you took 25% of your personal household budget and lit it on fire every year? I understand your question about demonstrable effects but surely you can appreciate what that amount of money could better be doing and realize that it is having a negative effect.

Lit in on fire? What?

 

IMO spending money on interest rather than anything tangible is akin to lighting money on fire. It serves no purpose other than to service the debt. Look at it this way. Let's assume person A & B purchase the exact same things each and every month. Person A carries no credit card debt, they pay off their full balance each and every month. So, the money they spend paying their credit card bill goes strictly to the items they purchased with no interest charges. Person B carries credit card debt balance of $10,000. Person B has to pay interest every month as well as paying current charges. Person B is spending more money but only getting the same benefit. I call that lighting money on fire because it is a total waste.

IMO spending money on interest rather than anything tangible is akin to lighting money on fire. It serves no purpose other than to service the debt. Look at it this way. Let's assume person A & B purchase the exact same things each and every month. Person A carries no credit card debt, they pay off their full balance each and every month. So, the money they spend paying their credit card bill goes strictly to the items they purchased with no interest charges. Person B carries credit card debt balance of $10,000. Person B has to pay interest every month as well as paying current charges. Person B is spending more money but only getting the same benefit. I call that lighting money on fire because it is a total waste.

I'm paying interest on my mortgage and on student loans but I don't consider those a total waste. I would have preferred to pay cash up front but that wasn't an option. I think that it will be worth it in the end . . . (in my own example).

You're both right. It's just a matter of either looking at the entire situation or just looking at it prospectively. When it comes to making decisions, you need to analyze it prospectively because everything in the past is sunk and gone. But if you want to evaluate overall decisions and their impact, you need to look at the whole thing.