Why are Federal Deficits Bad?

Discussion in 'Budget & Taxes' started by Vilhelmo, Dec 24, 2013.

  1. Vilhelmo

    Vilhelmo New Member

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    Why do people assert that Federal deficits are, by their very nature, bad?
    Why are surpluses held to be good?
     
  2. Frank650

    Frank650 New Member

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    They divert resources from the private sector into the politically controlled public sector. This dampens growth and leads to vast inefficiencies/distortions in the economy as only the market is capable of price discovery.
     
  3. Vilhelmo

    Vilhelmo New Member

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    You are assuming that resources are fully employed & the economy is operating at full capacity utilization.
    Full capacity utilization is the exception, with most economies operating well below their potential.
    When the economy is operating below full capacity, Federal deficit spending employs idle resources & adds to growth.
    Only in the special case of full capacity utilization does your assertion hold true.
    In the vast majority of cases, it does not.

    The term "price discovery" refers to the process by which the price of an asset is determined in the market.
    Price setting without markets is by definition not "price discovery".

    Are you trying to say that prices can only be set by markets?
    If so, this is patently false.
    There are many examples of money prices without markets.
     
  4. smevins

    smevins New Member

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    It depends. If we actually had a plan to pay bonds as they come due, it wouldn't be an issue. If we are exponentially running up deficits and paying just interest on the bonds, 100% refinancing the principle when they come due, then debt-service eats up an increasing amount of our tax revenue, which leaves people 30 years from now with less money to spend as they are paying for our wasted money today. Likewise, if we ran actual surpluses, we could invest that extra money in the debt of other nations and reduce our tax burden or increase our spending depending which way we wanted to go because we would be taking in cash from other countries. For some nations like China, the latter is an ideal situation because the more diversified their foreign assets are (as in backed by different currencies) the more stable their emerging currency will be over time.
     
  5. Vilhelmo

    Vilhelmo New Member

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    As US Federal bonds are payable in USD, of which the US government is the monopoly issuer, the US government is ALWAYS able to make payment.
     
    Woolley and (deleted member) like this.
  6. smevins

    smevins New Member

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    Which deflates the purchasing power of a dollar. There are people who absurdly believe that the US can print up 16 trillion dollar bills and pay off the debt at any point with zero economic consequences. That is simply not possible without dire consequences to the capital markets and the price of foreign goods.
     
  7. Vilhelmo

    Vilhelmo New Member

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    I only said that it was always able to pay.
    Inflation is indeed a possibility.

    No one believes this, I certainly don't.
    Stating that the US is always able to pay makes no claim as to the possible economic consequences that may result from actually making payment.
     
  8. AdvancedFundamentalist

    AdvancedFundamentalist New Member

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    Markets aren't capable of anything other than reaction. They can't make a decision, they can't send a letter.

    - - - Updated - - -

    Exactly.
     
  9. smevins

    smevins New Member

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    The US has defaulted on its debt twice so the "always able to pay" really is misleading.
     
  10. AdvancedFundamentalist

    AdvancedFundamentalist New Member

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    What year was that?
     
  11. Riot

    Riot New Member

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  12. Riot

    Riot New Member

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  13. Riot

    Riot New Member

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    This is why I vote Democrat. The lady knows that raising debt is a bad thing. Paise Obama. Your lord and savior.
     
  14. smevins

    smevins New Member

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    The US defaulted on its revolutionary war debt and defaulted on part of its WWI bond debt.
     
  15. Vilhelmo

    Vilhelmo New Member

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    I said the US cannot involuntarily default on debts payable in USD (which all US debts are currently payable solely in).
    It can voluntarily default on them.
     
  16. Vilhelmo

    Vilhelmo New Member

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    The WWI Liberty bonds it defaulted on were redeemable in gold.
    My claim referred explicitly to debts payable only in USD.
    The US can involuntarily default on debts payable in gold
     
  17. taxrentonly

    taxrentonly Banned

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    why is being in debt as an individual bad or good?
     
  18. dnsmith

    dnsmith New Member

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    Debt increases overhead by the amount of interest paid, both as an individual and as a country. Are you aware that our interest payments as a country will soon surpass defense spending?
     
  19. vbrandon

    vbrandon New Member

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    One day, we'll look back and laugh at how seriously we take 'The Economy'.

    First, what is debt and what is the economy? Debt is a package of promises. Debt is entirely conceptual and the contracts are worth less than their weight in ink and paper if the creditor can not physically claim collateral in the event of default. Think about that. The economy is a network of resource flow. Debt acts as a conceptual regulator to move resources against their natural course; generally to enhance resource density in an area.

    Why is federal debt a joke? What's the collateral on our debt anyway? It's nothing. As far as I know, US government is not permitted to leverage private property unless notice of eminent domain is given. People talk of this 'debt hanging over the country.' Total farse. I really wish people were taught to separate the systemic consequences of conceptual regulation versus adaptation to actual resource scarcity. If the federal government defaults, China does not get to claim tax revenue from Silicon value or sequester resource production. If the federal government defaults, everyone goes "boo hoo" and the economy is quickly rearranged to act as if the pitfall never occurred. This is actually a consequence of the 'true' economy, the demand-driven physical resource trade that governments leverage to create the 'big bad' economy everyone is so afraid of. Default of conceptual regulation will cause a massive arrangement of leveraging. That just means foreign investment patterns will change. 'Big bad' economy gets a booboo and the poor little America isn't allowed to play for a while. That lasts as until the world begins to starve.

    What makes America a powerhouse is its security, not its economy alone. If our roles on the international landscape were to be shut down completely, dear lord we wouldn't get tuna for a while. We'd be eating vegetables, beef, and a whole lot of corn sugar for about ten years until sustainable farms cropped up around the nation to meet the massive demand created by cutting us off from external markets. Why can we do this? We have the land and a conservation program that will hopefully prevent over development from ever truly ruining our ability to meet food security requirements as occurred in much of Europe, and is currently underway in South America and Sub-Saharan Africa. We stop getting oil? Who cares. We don't need it. We BUILT the alternative energies market. We can be energy secure too.

    An economist will pull crap out for hours about how the dollar-as-reserve positions us in the world economy. That is a completely conceptual statement, when the only physical evidence of our superiority is in our greater capacity to secure food and reproductive security. Fact of the matter is, we're the safest place to have a baby and feed half the damn world. We could look out and say, "Hey world! This is America! This last century has been a blast. We've tried a lot of things and think we want to try some different ones. We'll be entering a twenty year isolationist period, removing our military forces from around the world to defend our borders as we undergo the most ambitious round of nation-building humanity has ever seen...again. Take care. See you in a while." And they'd be screwed. And we'd probably learn a lot.

    So, debt doesn't matter unless leaders think it does. Debt is a conceptual agreement to alter natural resource flows in a demand-driven economy. Sometimes, those regulations (debts), cause resources to pool inefficiently. We know that. No system is perfect. So, there's no reason not to abandon debt as a leverage option just for hoo's and hah's in grand social experiment. The average person could care less as they deal primarily with their local physical economy. The world doesn't end when we can't ship cellphones in two days. People don't drop dead in the streets because Amazon UK doesn't ship to America anymore. At least, they don't drop dead in America. In China, in India, in Malaysia, In England, Millions die.

    Think about that.
     
  20. taxrentonly

    taxrentonly Banned

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    a government should not be able to print money
    the constitution didn't setup the illegal fed
    fed is a huge slap in face of america and its succes
    remember we are way wya better off than germany or japan
    not even close
    usa should be copied
    we are no 1 by far and away
    yet moron commies wana copy comy failures
    more you restriction production in name of fairness more everyone has shorages and is poor
    its that simple

    in fact

    the government should not even be able to pay anything until it has already collected the cash in taxes

    then the pain of tax is felt not hidden

    and people vote against it
     
  21. happy fun dude

    happy fun dude New Member

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    Of course they are bad. They are stealing from our one future, our own grandchildren.

    A budget is like a diet..It's useless unless you stick with it.. Unless you need it, why even bother making a budget?

    Here's a better question.

    Your president and your federal reserve and many among your congress have said, only just last year, that they HAD to raise the debt ceiling by hundreds of billions or a trillion, so they could spend in one night, (they already incurred that obligation) and if they didn't, the economy would come crashing to a halt! So they did. But they would say that though, in order to steal. So is it true? Because they said the same thing would happen if they didn't give at least that much cash away to corporations. So it could just be more ways to steal on behalf of corporations. So whether true or not, is the fact that your own leaders are telling you this really not what is the bad thing is here?
     
  22. OldRetiredGuy

    OldRetiredGuy New Member Past Donor

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    Federal deficits means federal debt, which means interest payments. Right now the national debt is what, 17.3 trillion and the interest is what, 2.5%? What's gonna happen when the debt hits $25 trillion in 10-12 years and the interest rates rise up to the historical norm of 5% or so? We're talking a trillion bucks a year just in interest payments, maybe more. Money we could be using for better things. Or our kids and grandkids could.
     
  23. Vilhelmo

    Vilhelmo New Member

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    How do Federal deficits "steal" from our own future/grandchildren? What exactly is being stolen & how?

    It's also a concept you have yet to grasp.
    Running a deficit is NOT breaking your budget.
    A government budget is "a government document presenting the government's proposed revenues and spending for a financial year."
    A budget deficit occurs when government's budgeted expenditures exceed the budgeted revenue.
     
  24. Vilhelmo

    Vilhelmo New Member

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    First, Federal deficits do NOT necessitate the issuance of interest bearing debt. The issuance of interest bearing debt is a voluntary policy choice for any Monetarily Sovereign Nation.
    Second, the Fed sets the interest rate by fiat.
    Third, Government debt is the Private Sector's assets (what we own) & the interest payments are the Private Sector's income.

    A Federal deficit ADDS net financial assets to the Private Sector. A deficit ADDS to non-government savings.
    A Federal surplus SUBTRACTS net financial assets from the Private Sector. A surplus SUBTRACTS from non-government savings.
    Public Sector + Private Sector + Foreign Sector = 0

    Federal deficits CREATE money!
     
  25. happy fun dude

    happy fun dude New Member

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    If expenditures exceed revenue then it requires borrowing. This means that by definition you pay the price in the future, plus interest. We pay for expenditures in the past, just like our future generations will have lots of their tax money not going towards their own good, but towards interest payments on money that previous governments spent that they didn't have.

    Why make the document?
     

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