I have a couple questions about the debt crisis we're facing - not about the dumb politics going on, but about the numbers.
I was looking around online, but I couldn't be sure the data I was finding was accurate.

1) In 2010, the US Federal government took in roughly $2.15 trillion in revenue, is that correct?
2) In 2010, the US Federal government spent roughly $3.45 trillion, is that also about right? (I'm also seeing $2.78 trillion as the Federal spending - which is it?)
3) So our 2010 net loss was about $1.30 trillion, right?
4) So, roughly every year, assuming 2010 is standard (and I'm not saying that it is), we go about $1.30 trillion more in debt?

I'm trying to get an accurate picture of the numbers.

My other question is, these bills (the rival or the bipartisan ones) that the Senate and House are trying to get passed, when they throw around numbers like "$800 billion in government spending cuts by 2025!" (or whatever cut and year), are they talking about reducing the annual spending of the government by $800 billion a year (gradually more and more reductions, until in 2025 our annual savings will be $800 billion), or are they talking about the total value of the reductions from here to 2025 (gradually reduce the spending more and more, until by 2025 our total savings over the past 14 years will be $800 billion)?

If it's the latter, that'd really suck.

The way I see it.

" So, roughly every year, assuming 2010 is standard (and I'm not saying that it is), we go about $1.30 trillion more in debt?"

Wouldn't seem beyond imagining given the size of the US economy. For comparison the UK's economy is about 1.5Tr pounds and the UK government is running 130Bn in deficit spending each year on top of 500bn in actual income being spent.


"are they talking about reducing the annual spending of the government by $800 billion a year or are they talking about the total value of the reductions from here to 2025"

I think this is one of the things they're arguing about.


I have a different question about the discussions -- several times people have mentioned a bill being "tabled"[1], with the implication that that means nothing's being done with it -- the bit I don't understand is the process for this. It seems like it happened without any discussion -- I'm wondering if the leader of the largest party gets some sort of veto over the house business in some way?




[1] I'm guessing from the usage that this is the opposite of here where a motion which is "tabled" is being discussed and voted on.

3) So our 2010 net loss was about $1.30 trillion, right?
4) So, roughly every year, assuming 2010 is standard (and I'm not saying that it is), we go about $1.30 trillion more in debt?

Both of these are wrong - not because of the numbers involved, but because of what you seem to believe that those numbers mean.

See, when the federal government spends $1.30 trillion more than it takes in taxes, this net spending does not magically disappear. It means that dollar for dollar, the non-government sectors had $1.30 trillion more in income than they spent.

For example, this means that there are many people who privately are now richer (that is, own more money) than they were last year. Perhaps you are one of them and if so, why would you talk about your loss? Of course, there are also many people in the US who are in a bad situation right now because of mortgages and unemployment - clearly, there is a problem in that the riches are very unevenly distributed.

It is also true that the external sector had more income than outlays, and so overall, other countries now own more US$ than they did last year. But again, does this represent a loss for US citizens? Not necessarily: the reason that other countries now hold more US$ is that those countries have been sending ships full with useful real goods to the US, and the US as a whole has been able to enjoy these goods without working for them. I would not call that a loss, though of course you have to be aware that at some point in the future, the US may no longer be able to enjoy net imports to such a large extent as it does today.

Overall, I have to say that it is very weird to watch all this debt hysteria going around in the US and elsewhere, considering that there really is no debt crisis at all. It's all just a political trick to be able to savage the few social safety nets that still exist.

Note that there is a real economic crisis, but it is entirely unrelated. The real crisis is in the extremely high unemployment. The waste and inefficiency of letting all this productive capacity go idle and of letting skills atrophy (due to long-term unemployment) is terrible, yet somehow nobody seems to talk about it.

In any case, if you want to read more about what all this debt stuff is (or isn't) really about, economist Bill Mitchell has commented again today on the situation in the US. For the larger picture, you may be interested in searching for Modern Monetary Theory if you are serious about wanting to understand things better.

when they throw around numbers like "$800 billion in government spending cuts by 2025!" (or whatever cut and year), are they talking about reducing the annual spending of the government by $800 billion a year (gradually more and more reductions, until in 2025 our annual savings will be $800 billion), or are they talking about the total value of the reductions from here to 2025 (gradually reduce the spending more and more, until by 2025 our total savings over the past 14 years will be $800 billion)?[/quote]
They are talking about the latter. It is a silly game that politicians play in order to be able to throw around larger numbers.

It's even more silly because doing these kinds of projections for 14 years out is totally irresponsible. First of all, those future budgets will be decided on by politicians in the future, so any changes made right now could easily be reversed a few years down the line. Second, even if the politics of it isn't going to change for 14 years, forecasts at that timescale are simply too unreliable. Think about it: in 1990, who would have predicted the explosion of the web? The dot-com boom, then bubble, then burst? Who even in 2006 has predicted the global financial crisis?

It's all smoke and mirrors, and the journalists spreading this type of nonsense should really be held accountable.

An additional point, 2010 is not by any stretch of the imagination a standard year for national finances. The impact of the recession is lingering, which has devastated tax receipts. At the same time, the government is spending more than usual on things like unemployment insurance for the same reasons. These deficits are not especially usual, though we have been running uncommonly large deficits for the past decade or so (obviously, the frame of reference you use will determine what constitutes "normal").

Second, while national debt and annual deficits matter, they don't matter in the ways that people often think. The government does not operate as like a business, for example. They do not have "losses", like Prefect explained. The national debt is a part of America by design. The idea was to keep people invested in the success and stability of the US government.

Deficits are generally not ideal because they require future expenditure to pay off of the debt, and as they increase the debt the can affect the willingness of others to lend to the country to fuel those deficits. But that doesn't mean that deficits are inherently bad; rather, they are essentially an investment. The operative concern is the return you get. Right now, the US has no shortage of lenders willing to lend to us for 10 years at less than 3%. For two years, it's below 0.5%. It's not hard to get ahead at those rates, and since the US is dealing with liquidity issues, it would be easy to put that money to work in the hopes of spurring demand or accelerating individuals deleveraging. Compare that with the deficits that paid for (or properly, didn't really pay for) the wars in Iraq and Afghanistan (and now Libya), or the Bush tax cuts. Whether or not you agree with the policies, we aren't getting a good return on those deficits.

We are absolutely not in a debt crisis, because there is exactly zero chance of the debts coming due faster than we can get them covered, and as the economy recovers we will only be more able to reverse the trend of running deficits.

Finally, I would argue that looking at the deficit in terms of dollars is not the best way to think about it. First, the numbers are enough to dazzle just about everybody even if that dazzlement isn't totally justified. Yes, the numbers are big, but so is the US economy. Additionally, there's no particular reason that dollars-per-year is any more useful than, say, years' worth of GDP, even if evaluated at given percentages. The dollar figure itself is not incredibly meaningful, for the reasons that you described in the first post among others.

Overall, I have to say that it is very weird to watch all this debt hysteria going around in the US and elsewhere, considering that there really is no debt crisis at all. It's all just a political trick to be able to savage the few social safety nets that still exist.

Note that there is a real economic crisis, but it is entirely unrelated. The real crisis is in the extremely high unemployment. The waste and inefficiency of letting all this productive capacity go idle and of letting skills atrophy (due to long-term unemployment) is terrible, yet somehow nobody seems to talk about it.

I would be hysteric if I were a government employee. I am not though...

If anything this will just make the US as a whole more pissed at politicians in general, which I view as good. Hopefully we'll get a strong push to get some new congressmen/senators and a president who's looking to mix stuff up in the political machine.

Right now we need political reform more than anything, shortly followed by education and tax reform.

I would be hysteric if I were a government employee. I am not though...

If anything this will just make the US as a whole more pissed at politicians in general, which I view as good. Hopefully we'll get a strong push to get some new congressmen/senators and a president who's looking to mix stuff up in the political machine.

Right now we need political reform more than anything, shortly followed by education and tax reform.

Never going to happen. The debt is going to double, triple, etc and there is nothing anyone is going to do about it. They try and they will get voted out on their asses, have their name dragged through the mud and destroyed and the like. And even if we confiscated all the money from those "evil" rich American parasites, the money would be gone in a month. The system is doomed. Doomed.

This is what happens when you have a police state world cop government that treats everyone like a child and tells them they can have everything for free.

The only thing anyone can do is sit back and prepare for the crash and reboot...Its going to be a hoot! (We all know progressives never let a good crisis go to waste(weimar trap))

The only thing anyone can do is sit back and prepare for the crash and reboot...Its going to be a hoot! (We all know progressives never let a good crisis go to waste(weimar trap))

That is a very weird thing to write. First of all, it does seem like progressives are letting the crisis go to waste. The policies that are being implemented in response to the crisis are incredible anti-progressive.

Second, the current situation has nothing to do with Weimar. Hyperinflations are mostly a political phenomenon, not an economic one:

http://pragcap.com/h...tary-phenomenon

[/quote]

You simply won't find examples of hyperinflation outside failed states or states that are not monetarily sovereign.

(Note that some of the causes listed in the quote could be debated. For example, in the case of Weimar which I have looked at more closely, I would not say that regime change played a role. Weimar was relatively stable, pre-economic-troubles, and I would say that the hyperinflation was caused by a combination of foreign denominated debt and a collapse of supply capacity due to the military occupation of the Rhine-Ruhr region. In any case, it's clear that also in this case, hyperinflation is a political phenomenon.)

Never going to happen. The debt is going to double, triple, etc and there is nothing anyone is going to do about it. They try and they will get voted out on their asses, have their name dragged through the mud and destroyed and the like. And even if we confiscated all the money from those "evil" rich American parasites, the money would be gone in a month. The system is doomed. Doomed.

This is what happens when you have a police state world cop government that treats everyone like a child and tells them they can have everything for free.

The only thing anyone can do is sit back and prepare for the crash and reboot...Its going to be a hoot! (We all know progressives never let a good crisis go to waste(weimar trap))

Why the hyperbole? That's part of the problem right now -- there's so much hysteria going around, on all sides of the issue. We don't live in a police state. You know you're not in a police state when you're not terrified to describe your government as a police state in a public forum.

Why the hyperbole? That's part of the problem right now -- there's so much hysteria going around, on all sides of the issue. We don't live in a police state.

My country has less than 5 percent of the world's population. But it has almost a quarter of the world's prisoners. That's not a police state?

My government can track me(gps), tap my phones, read my email. etc, all without a warrants and on a whim. It can destroy my good name on a whim. It can shutdown my business on a whim. My government can take my property on a whim. It can molest my wife and kids at the airport on a whim. Hell, it could shot me dead in a drone attack on a whim. There isn't one area where my rights mean anything anymore. Life, Liberty and the pursuit of Happiness don't exist for anyone but the connected.

Hyperbole? When my government acts like my warden/master....I got to call it like I see it.

You know you're not in a police state when you're not terrified to describe your government as a police state in a public forum.

I know I'm living in a police state when my government can do whatever it wants by simply labeling me a potential terrorist, potential drug dealer, etc. Guilty before proven innocent.
Jose Guerena RIP