How important is a balanced budget?

[sear]

There's obvious benefit to deficit spending.

"What's pernicious about deficits for conservatives is this. It makes big government cheap. What we're doing, we're turning to the country, the "conservative" administration turns to the country and says: We're going to give you a dollar's worth of government, we're going to charge you seventy five cents for it. And we're going to let your kids pay the other quarter." George Will Nov 30, 2003

The problem is, those bills eventually come due.

We've out-spent our revenues so much, we owe nearly $10 $Trillion $Dollars!.

U.S. NATIONAL DEBT CLOCK

The Outstanding Public Debt as of 12 Jun 2008 at 01:18:15 PM GMT is:

$ 9 , 4 1 4 , 1 5 1 , 0 1 2 , 6 2 9 . 9 9

The estimated population of the United States is 304,161,336

so each citizen's share of this debt is $30,951.18.

http://www.brillig.com/debt_clock/

At what point is our debt simply too big? At what point are we obliged to pay this debt down?

The U.S. has perhaps the largest military budget of any nation on Earth. (if there's a nation with a larger military budget than ours, I can't think of it)

Yet last time I checked, we pay more on the INTEREST on our national debt, than we budget for the U.S. military.

So what?

So if our U.S. federal debt were paid off, it would be like getting our military for free.

Where should we draw the line on our debt? $10 $T?

$20 $T?

"When your outgo exceeds your income, the upshot becomes your downfall." Paul Harvey

[questionmark]

At what point is our debt simply too big? At what point are we obliged to pay this debt down?

It was too big four years ago... and I fail to see how it is going to be paid back without raising taxes.

[sear]

"It was too big four years ago... " qm

"... $3 $Trillion $dollars in new debt. And the one thing you can say about George Bush and this economy is, we'll be forever in your debt." Rahm Emanuel (D-IL)

[Dusty Digital]

There's obvious benefit to deficit spending.

The problem is, those bills eventually come due.

We've out-spent our revenues so much, we owe nearly $10 $Trillion $Dollars!.

At what point is our debt simply too big? At what point are we obliged to pay this debt down?

The U.S. has perhaps the largest military budget of any nation on Earth. (if there's a nation with a larger military budget than ours, I can't think of it)

Yet last time I checked, we pay more on the INTEREST on our national debt, than we budget for the U.S. military.

So what?

So if our U.S. federal debt were paid off, it would be like getting our military for free.

Where should we draw the line on our debt? $10 $T?

$20 $T?

"When your outgo exceeds your income, the upshot becomes your downfall." Paul Harvey

While the U.S. debt is astronomical in absolute terms, it's also illuminating to observe it's relation to the size of the economy:

(perhaps a less politically colored graph here.)

What this shows is that while the absolute value of U.S. debt is huge, it's far less exeptional when put in perspective with the steady economic growth of recent years.

Of course there's still the matter of where the debt is coming from, and what it is being used for. Many countries have run long deficits to make investments (Norway in the 70's to invest into oil fields for example). The current U.S. deficit spending begs the question: Where's it going. Someone might naturally view Bush's adventures in the ME as investments into the future. We'll see whether it paid off in a few decades.

Of course there's also the intragenerational view that my kids are probably going to be better off than me, so they'll be better equipped to deal with the debt (also often used in the climate change discussion). Of course this view relies on blind faith in economic growth.

This is just my uncomfortable gut feeling, but aside from the wars the U.S. wages, I'm not sure if the debt is being used for anything with long term benefits. I get the feeling that it's more of a cultural thing. The consumerist lifestyle, materialism, and a sense of self-entitlement cause people to value instant gratification disproportionately strongly. Yet the U.S. is still viewed as the most competitive country in the world. Constant innovation and highly developed business infrastructure and culture mean that the U.S. is probably able to bounce back even from longer-term deficit spending.

[Atheist God]

There's obvious benefit to deficit spending.

The problem is, those bills eventually come due.

We've out-spent our revenues so much, we owe nearly $10 $Trillion $Dollars!.

There are reasons why bills that encourage such spending pass, the reasons are of course corruption, lobbying, political system flaws, and a whole laundry list of reasons.

At what point is our debt simply too big? At what point are we obliged to pay this debt down?

Nations being run responsibly shouldn't have debt to other nations unless the loan was absolutely necessary. Also the US has always been obliged to pay it's debts yet doesn't, like it can't afford to keep running cold war economics anymore and major reforms need to take place.

The U.S. has perhaps the largest military budget of any nation on Earth. (if there's a nation with a larger military budget than ours, I can't think of it)

Yet last time I checked, we pay more on the INTEREST on our national debt, than we budget for the U.S. military.

So what?

So if our U.S. federal debt were paid off, it would be like getting our military for free.

The US does have the largest military budget in the world. Also the minimum payment is $284,302,932,427, the US military budget is $489,200,000,000 so no the military does not spend less or anywhere near the minimum payment the have a budget of almost double what the minimum payment is.

One thing also not tabulated in this figure is the wars in Iraq and Afghanistan.

Where should we draw the line on our debt? $10 $T?

$20 $T?

The situation is already out of control and it is almost impossibly difficult to make the changes needed in time to curb the effects of the mounting debt.

[Lt_Ripley]

It was too big four years ago... and I fail to see how it is going to be paid back without raising taxes.

there is no way without raising taxes. it's impossible. Dems are going to be forced into doing so by the ineptitude of Bushco and the republican't congress than ran 6 years without oversite. so remember cons --- no belly aching when the bill comes due.

on the military budget -

for this year so far not including Iraq or Afghanistan - 494.4 billion (1,2)

1. Figures do not include expenses for the Iraq and Afghanistan wars.

2. Figures based on requested defense budget or projections, not actual spending.

]http://www.infoplease.com/ipa/A0904490.html

The US military budget is almost as much as the rest of the world's.

*

The US military budget is more than 8 times larger than the Chinese budget, the second largest spender.

*

The US military budget is more than 29 times as large as the combined spending of the seven “rogue” states (Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria) who spent $14.4 billion.

*

It is more than the combined spending of the next twenty three nations.

*

The United States and its close allies account for some two thirds to three-quarters of all military spending, depending on who you count as close allies (typically NATO countries, Australia, Canada, Israel, Japan and South Korea)

*

The seven potential “enemies,” Russia, and China together spend $116.2 billion, 27.6% of the U.S. military budget.

http://www.georgiapeace.org/USmilitary%20Budget.htm

Edited June 12, 2008 by Lt_Ripley

[sear]

"The US does have the largest military budget in the world. Also the minimum payment is $284,302,932,427, the US military budget is $489,200,000,000 so no the military does not spend less or anywhere near the minimum payment the have a budget of almost double what the minimum payment is." AG

I've re-read this several times, and can't quite make sense of it.

One of the things I can't sort out here is the difference between what Congress BUDGETS for military spending, and the additional "off budget" war spending.

I'm trying to figure out if the figures listed here combine both.

I checked, and found this:

http://www.whitehouse.gov/omb/budget/fy2007/defense.html

It list's the U.S. military budget at just over half a $Trillion.

The following site says:

http://www.federalbudget.com/

"In Fiscal Year 2006, the U. S. Government spent $406 Billion of your money on interest payments* to the holders of the National Debt."

Could that anecdote be from the previous millennium?

In any case AG, thanks for the correction. It looks like we budget about 20% more for

"One thing also not tabulated in this figure is the wars in Iraq and Afghanistan." AG

I know.

I tried to distinguish what Congress budgets for general military spending yearly, and "off budget" of these Wars.

I Googled to try to find one chart that lists, for the past decade or so:

U.S. military budget

U.S. total military spending (budget plus war funding)

U.S. federal debt interest

I struck out.

[sear]

PS

"there is no way without raising taxes. it's impossible." Lt

Cut spending.

[questionmark]

PS

Cut spending.

Good, then tell us where, here is the spending:

[Lt_Ripley]

PS

Cut spending.

from what ?? SS and leave people homeless and broke ?

how about health care that we do provide ?

If Bush hadn't of left IOU's in SS to begin with ................

how about we stop corporate welfare ! and no bid contracts that fraud as well.

stop paying farmers ( most of whom are not small farmers but corporate) not to grow crops !

how about we cut into the DOD ? seeing how we out spend the world.

still wouldn't be enough. only a fool goes to war and doesn't raise taxes. only a fool lays that burden on future generations.

[danielost]

Democrats want to raise spending and raise taxes.

Republicans want to raise spending and cut taxes.

No one wants to cut spending as deminstrated in the post above mine.

[sear]

qm & Lt,

I'm cyber-new here.

Please allow me to introduce myself.

I'm an absolute lunatic fringe political conservative. I'm not an anarchist. But I'm an extreme radical libertarian.

I advocate for absolute minimalist government.

"from what ?? SS and leave people homeless and broke ?" Lt

The "what" may not be as critical as the "how".

I'd end virtually all U.S. federal entitlement programs, except for U.S. military veterans benefits; which are actually more like employment compensation than "benefits".

Pro sports franchises attend to the medical bills of their team players.

The government is obliged to do the same for those that place limb and life at risk in U.S. military combat. We owe our countrymen in arms that. And they're not getting it.

But Social Security, Medicaid, Medicare, and all the rest of that? Get rid of it.

HOW?

That's key.

We can't just pull the rug out from under those that have contributed all their lives to these programs, and now have a right to expect the benefits they're entitled to.

BUT:

These programs are pyramid schemes. They depend upon a population / revenue base that grows faster than or apace with the beneficiary base.

And our population simply can't do that forever.

So I'd advocate that we offer buy-outs to those already in these programs; and close down these programs to those young citizens now entering the workforce that would otherwise become entitled to them. And since government regulates the insurance industry, allow private industry to make competitive offerings of substitute private sector programs for any that want.

I'd also fiddle with the U.S. military budget a little. I don't think we need the F-22 right now.

And for the rest, to balance the budget and start paying off the debt, I'd look into selling off U.S. assets, such as the Presidio of Monterey.

Such military bases as that are among the most valuable real-estate in the country.

I'm NOT saying dump it at fire-sale prices.

Instead I'm advocating that if we sold it for every penny it's worth, in an up market, we could lower our deficit and debt significantly.

"how about health care that we do provide ?" Lt

Lt:

There was world class health care before the U.S. was founded.

And there will be world class health care after the U.S. is gone.

The notion that if not for the U.S. government there wouldn't be, is a senseless, factually false delusion. It's simply not true.

And any interpretation that the Founders intended us to go down this dark, socialist road is simply not born out by what they said, what they wrote, or what they did.

If they'd wanted us to have Social Security, Medicaid, and Medicare, why didn't they impose it on us in 1791 (the same year they ratified the Bill of Rights)?

"The ultimate result of shielding men from the effects of [their own] folly is to fill the world with fools." Herbert Spencer

[Guardsman Bass]

Debt in of itself isn't a major problem for governments unless it becomes truly extreme in comparison to GDP. However, it does have two effects, direct and indirect.

The direct effect is that you have to pay for the maintenance and interest on your debt, which in the United States 2007 Budget amounted to 8.2% of expenditures (or around $270 billion). That's not really a problem for the United States (yet), but it can be a horrific problem if you are a small country and don't want to utterly destroy your country's ability to borrow money in the future (and most governments do have the borrow money at certain times, unless they happen to be oil states - and even then, countries like Mexico can get into ballooning debt).

The indirect effect is that it can erode confidence in the economic soundness and capabilities of your government, raising long-term interest rates in the bond markets and discouraging foreign investment.

These programs are pyramid schemes. They depend upon a population / revenue base that grows faster than or apace with the beneficiary base.

And our population simply can't do that forever.

That's only the case if you maintain the current age limit. Raise the age limit to 70, or 75 (which is much more reasonable considering how much living standards have grown along with medical technology), and you've solved the problem (particularly since the United States has a more or less stable birth rate, plus immigration to replenish the youth demographics). Raise the Social Security level of income that is taxed (up to $120,000, for example), and you've solved the problem.

And any interpretation that the Founders intended us to go down this dark, socialist road is simply not born out by what they said, what they wrote, or what they did.

If they'd wanted us to have Social Security, Medicaid, and Medicare, why didn't they impose it on us in 1791 (the same year they ratified the Bill of Rights)?

The Founders were 18th century elites that had no way of seeing how society would progress, or even whether certain aspects of what they tried would work out or not. They knew this, too, which is why they left large areas on the specifics vague, to be filled in by the legislature, and set up a process by which the Constitution itself could be amended. Claiming that we shouldn't have the above simply because it isn't mentioned specifically in the Constitution is disingenuous, to say the least.

[sear]

"Debt in of itself isn't a major problem for governments" GB

Excellent point GB!!

The U.S. federal debt isn't a problem for government at all. Not even a little bit.

Instead, it's a problem for citizens.

And actually, it's not even a problem for all of them. As long as it's "us" that's ripping off "them", it works out great for "us".

But it's not clear to me what the ethical justification is about why "they" should pay "our" taxes.

"I'm not indifferent as to whether we finance government by borrowing or by taxes. Borrowing is an involuntary transfer from future workers to present voters." Cato Institute Chairman William A. Niskanen

Thus, Bush calls them "tax cuts".

They never were.

Instead what they are is a reduction in the tax rates prevailing now, so that future tax payers will have to pay not only their own way, but pay part of our way too.

Do that with a gun, and it's called stealing.

Do it with the tax code, and it's called "deficit spending".

"That's only the case if you maintain the current age limit." GB

Or the key benefits parameters of these dangerous schemes.

They could simply declare the age of eligibility 150, declare the maximum benefit one penny per decade to eligible recipients, and declare the program solvent for perpetuity.

But my perspective is substantially more humanitarian than that.

These schemes should never have been started. The sooner we do away with them, the better.

[Dusty Digital]

These programs are pyramid schemes. They depend upon a population / revenue base that grows faster than or apace with the beneficiary base.

And our population simply can't do that forever.

Yes it can. Through productivity growth and economic expansion the revenue base can indeed grow faster than the beneficiary base. There's no "law" that this can't happen. The key is to keep the growth of the former higher than the growth of the latter.

Lt:

There was world class health care before the U.S. was founded.

And there will be world class health care after the U.S. is gone.

The notion that if not for the U.S. government there wouldn't be, is a senseless, factually false delusion. It's simply not true.

I'm not sure I agree with this. Which world class healthcare are you referring to (that existed before the U.S.)? Sure there have always been doctors, but you seem to be saying that healthcare did "the greatest good for the greatest amount of people" even before there was an element of socialization to it. At worst this is false, at best it is just an opinion, since there is no way to actually verify it.

[Homer]

I think balancing the budget should be a priority. The first step in reducing the national debt is to balance the budget. I think repealing some(not all) of the Bush tax cuts, as well as major cuts in spending are in order.

The balanced budgets of the Clinton years were first realized in the Bush sr. administration. Breaking a campaign promise not to raise taxes, Bush, with his democratic congress raised taxes, and rightfully so. This was part of the reason the recession ended before Bush left office, and Clinton inherited a growing economy. Then Clinton, with a republican congress(remember ‘contract with America’?) cut spending. This completed the process of balancing the budget and enabled the Clinton administration to actually reduce the principle on the national debt.

Without balancing the budget, the debt grows. As the deficit/debt grows, it increases the rate of inflation. One of the key ingredients of checking inflation is to raise interest rates. With higher interest rates, it means spending more just to pay the interest on the debt. It can’t be emphasized enough to balance the budget. Even if you don’t pay down the debt, as the economy grows and the debt doesn’t increase because of a balanced budget…things will look a lot better.

[sear]

"Yes it can." DD

There's a reason naturally fermented wine seldom has much more than 12% ethanol by volume.

"There's no "law" that this can't happen." DD

No human law, but laws of physics.

"you seem to be saying that healthcare did "the greatest good for the greatest amount of people" even before there was an element of socialization to it. At worst this is false, at best it is just an opinion, since there is no way to actually verify it." DD

No.

There is no utilitarian argument intrinsic to my position. My observation is objective, observational.

world-class (wûrld´klàs´) adjective

1. Ranking among the foremost in the world; of an international standard of excellence; of the highest order: a world-class figure skater.

Excerpted from The American Heritage® Dictionary of the English Language, Third Edition © 1996 by Houghton Mifflin Company. Electronic version licensed from INSO Corporation; further reproduction and distribution in accordance with the Copyright Law of the United States. All rights reserved.

"Words mean things." Rush Limbaugh

[Guardsman Bass]

No human law, but laws of physics.

Not exactly. The reasons why there will eventually be a problem with funding Social Security and Medicare are

1)People are living longer - When the original age limit was set, it was either less than or equal to the age at which you qualified for Social Security and Medicare (mostly in the case of the former).

2)The number of workers that support each receiver of the above has declined - down to something like 2-3 workers per retiree, from over 10 in the 1930s.

Neither of these is inevitable. The former could be addressed by raising the retirement limit to a higher age as fitting with heightened life expectancy - say, to 70-75 years instead of the current 65. The latter could be solved by any one of two ways:

1)Importing more workers, a la immigration, like what the US and the EU are doing, or;

2)Increase the productivity and working period of existing workers, supplemented with automation, like what the Japanese are trying to do.

I didn't include "raise the birth rate", since that tends to be extremely tricky; the birth rate has a lot to do with women's educational level and access to birth control. Not to mention that we don't really want more population growth at this time.

As for Medicare, the easiest way to solve that would be to put a massive effort into targeting common preventable diseases among the elderly that raise costs (along with research targeting Alzheimer's Disease and the like), as well as reforming the Prescription Drug Law. The latter is absolutely ridiculous, since the government can't bargain for lower drug prices the way the VA and Canada does.

[questionmark]

Not exactly. The reasons why there will eventually be a problem with funding Social Security and Medicare are

1)People are living longer - When the original age limit was set, it was either less than or equal to the age at which you qualified for Social Security and Medicare (mostly in the case of the former).

2)The number of workers that support each receiver of the above has declined - down to something like 2-3 workers per retiree, from over 10 in the 1930s.

Neither of these is inevitable. The former could be addressed by raising the retirement limit to a higher age as fitting with heightened life expectancy - say, to 70-75 years instead of the current 65. The latter could be solved by any one of two ways:

1)Importing more workers, a la immigration, like what the US and the EU are doing, or;

2)Increase the productivity and working period of existing workers, supplemented with automation, like what the Japanese are trying to do.

I didn't include "raise the birth rate", since that tends to be extremely tricky; the birth rate has a lot to do with women's educational level and access to birth control. Not to mention that we don't really want more population growth at this time.

As for Medicare, the easiest way to solve that would be to put a massive effort into targeting common preventable diseases among the elderly that raise costs (along with research targeting Alzheimer's Disease and the like), as well as reforming the Prescription Drug Law. The latter is absolutely ridiculous, since the government can't bargain for lower drug prices the way the VA and Canada does.

Aha, one who gets it....

But at the end it is going to be a combination of all of the above.

[Dusty Digital]

There's a reason naturally fermented wine seldom has much more than 12% ethanol by volume.

No human law, but laws of physics.

GB already answered why this isn't true. There certainly is no physichal law why the beneficiary growth must be higher than revenue growth.

No.

There is no utilitarian argument intrinsic to my position. My observation is objective, observational.

"Words mean things." Rush Limbaugh

True, I attributed the utilitarian argument to your statement, I apologise for that. I took it to mean what I did because as a mere objective observation it doesn't really say anything. Sure there was world class health care. So what?

[sear]

"There certainly is no physichal law why the beneficiary growth must be higher than revenue growth." DD

DD,

I posted:

"our population simply can't do that forever." sear

Your reply was:

"Yes it can." DD

We can agree to disagree.

But it's my understanding that the reason naturally fermented wine seldom exceeds ~12% ethanol by volume is because ethanol is the waste that yeast excretes, as it eats the sugar in the grape juice. When the ethanol concentration reaches ~12%, it kills the yeast. No known creature can live in its own waste, if the concentration of that waste becomes high enough. For yeast fermenting wine, "high enough" is ~12%.

Earth can only support a limited human population. It probably couldn't for example support a human population of 900 quintillion.

Why not?

Because:

a) they probably wouldn't fit.

there's probably not enough arable land to support that many.

Now I'm not asserting I know what the limit is. But I stand by my statement, there is a limit. Earth's human population cannot continue to grow (exponentially) for perpetuity. It's called a "population explosion", and sooner or later, something (famine, plague, flood, whatever) would interrupt that population growth.

And I referred to these ideas as "laws of physics" because human food largely depends upon solar energy to feed the photosynthesizers (plants) which we eat either directly (as food), or indirectly (by feeding it to animals, and then eating the animals). So even for emaciated human vegetarians, there's a minimum amount of square footage of arable land on Earth necessary to grow the food necessary to support each human. Once the human population exceeds that threshold, starvation results.

That's not because Congress says so. It's basic, inescapable scientific fact.

[Dusty Digital]

We can agree to disagree.

Sure. We're talking about two different things though. I wholeheartedly agree that population growth has its limits and that population growth is not a sustainable way to keep the "pyramid scheme" running.

Notice that I've constantly talked about revenue, not population growth. What I believe is that through productivity growth (and hence economic growth, since productivity growth is the only sustainable source of economic growth), a smaller and smaller amount of labor can sustain a larger and larger group of "beneficiaries". By productivity growth I mean progress in technologies, business models, medicine, and all those things that constitute a "standard of living". The problem is of course that something like "productivity growth" can be encouraged by governments, but it can never be controlled. Yet I feel my point still stands.

[sear]

Certainly productivity growth can help the economy in general.

But in that regard, the revenues for these entitlement programs aren't directly affected by productivity improvements; and paradoxically, can be harmed* by them.

If a factory worker earns $100.oo / week, and pays $5.oo / week to Social Security, and builds 100 factory units per week; if his productivity increases to 110 units per week, but his salary and SS deduction remain the same, the productivity improvement will have no affect on revenue to the "Social Security Trust Fund".

Now if the market can absorb that factory's productivity increase, then at least there's no change to the Social Security revenue in this case.

But if the factory serves an inelastic market, then increased productivity can result in layoffs.

If the factory can produce the same amount of product with 10% fewer workers, then that productivity improvement may actually reduce that factory's Social Security contribution by that same 10% worker reduction.

Anyway:

I don't think productivity growth historically keeps pace with the dwindling ratio of contributors to recipients for these entitlement programs.

But realistically, U.S. courts have already ruled that the Social Security benefits a citizen is entitled to are whatever Congress says they are.

Contrast that with an IRA, or 401k.

Some seem to think the fact that Social Security is a government program, it's somehow better than $money in the bank. I couldn't possibly disagree more.

[questionmark]

Some seem to think the fact that Social Security is a government program, it's somehow better than $money in the bank. I couldn't possibly disagree more.

Especially considering that banks can go bankrupt and cease to exist taking your 401k with it. The government can go bankrupt but does not cease to exist... which just makes your old age savings a little more secure.

[sear]

"banks can go bankrupt and cease to exist taking your 401k with it." qm

FDIC / FSLIC government guarantees cover the first $100K.

If that's a concern, diversify. Divide a $half $million $dollar IRA among 10 different banks. That way, they can gain interest, and still be well within the insured limit.

But I don't think (for example) Berkshire Hathaway is such a bad investment.