DescentBB

Government debt threatens to send U.S. economy into death spiral, CBO warns


Rising federal debt threatens to choke economic growth within a decade, beginning a death spiral that will sap revenue from government programs even as demands grow, forcing the government to borrow even more, Congress‘ budget watchdog said in a frightening report Tuesday.

Budget cuts or tax increases now would help avert that scary scenario, leaving the economy far stronger than it otherwise would be, the Congressional Budget Office said in the starkest warning yet by the independent agency that putting off tough decisions will only make things worse.

The report — the first major one under new CBO Director Keith Hall — also takes aim at some traditional liberal arguments, finding that government investment yields only half the return on investment compared with the private sector and that money transfers to the poor act as “implicit taxes,” keeping them out of the labor force and depressing the economy further.

“The long-term outlook for the federal budget has worsened dramatically over the past several years,” the CBO said in its dire report, blaming large deficits that piled up under President Obama’s stimulus and more fundamental changes to the economy that have caused Americans to leave the workforce in favor of government support.

http://www.washingtontimes.com/news/201 ... z3dKUydjOb

from the report summary itself, not the Washington Times' hysterical cherry picking:
"If current law remained generally unchanged in the future, federal debt held by the public would decline slightly relative to GDP over the next few years, CBO projects. After that, however, growing budget deficits—caused mainly by the aging of the population and rising health care costs—would push debt back to, and then above, its current high level. The deficit would grow from less than 3 percent of GDP this year to more than 6 percent in 2040. At that point, 25 years from now, federal debt held by the public would exceed 100 percent of GDP."


how can one address this? Raise taxes back to historically sustainable levels(see 1950-1970). At no point does the report suggest anything of the sort that the Was Times suggests, in reality. It does not blame the Obama administration for deficit increases. It does not suggest that monetary transfer programs are a bad thing to be avoided. It does not forsee an actual crisis point for at least 25 years out. Government is NOT supposed to run profits, and it has long proven, in some instances(such as health insurance) to be FAR more efficient at delivery of services. Would you like me to link the entire report? I can go back and get that for you, CUDA, and you can read it for yourself. Relying on partisan hacks to digest it for you is not going to do much past reinforcing your own opinions.

here's the link, it was an interesting read:
https://www.cbo.gov/sites/default/files ... utlook.pdf

note, that the Times focused on Chapter 6, which was merely a theoretical discussion of the effects of different types of Federal programs. Note, too, that they failed to discuss the nuance in the points they chose to cherry-pick. Futher, note that they avoided altogether the prominent space given in Chapter 6 to the massive benefits of spending on education, infrastructure, child care, and basic research, all items that 'conservatives' rail against.

another point to be gleaned from the report is the whole chapter devoted to the absolute difficulty of making projections and predictions over the long term. All in all, it was a pretty positive report in the near term, with a range of suggestions for legislative agendas down the road. Some of those suggestions would appeal to conservatives(restraint on monetary benefits to working age persons, which we actually limit at present), many would be seen as 'liberal' ideas(spending on infrastructure, etc, as noted above).
The true take home message from that report, in an HONEST summary, is as follows:
1. current deficit/debt situation is good, and has been improving for a few years.
2. long term projections suggest a need to rethink the focus of some programs
3. some government spending is counterproductive, other types are very productive
4. much of our long-term planning has to acknowledge the change in age demographics of the population
5. predictions about ALL this stuff are really difficult.


Now, ponder how the Washington Times got from this to their take, and you have a perfect example of biased journalism planting bogus ideas that could lead the nation to utter disaster, all for the sake of ideological agendas.

Oh slick, will you please stop reading things and join in the hysteria? You're such a killjoy with your facts and crap.

It is projected that when our debt reaches 24 trillion we will become Greece. Nice to talk about deficits but as long as you have them the debt keeps increasing.

vision wrote:Oh slick, will you please stop reading things and join in the hysteria? You're such a killjoy with you facts and crap.

oops, sorry!

woodchip wrote:It is projected that when our debt reaches 24 trillion we will become Greece. Nice to talk about deficits but as long as you have them the debt keeps increasing.

If we become Greece, do we get those neat beach resorts and stuff? Who made this projection, because that sure wasn't in the CBO report?

callmeslick wrote:

woodchip wrote:It is projected that when our debt reaches 24 trillion we will become Greece. Nice to talk about deficits but as long as you have them the debt keeps increasing.

If we become Greece, do we get those neat beach resorts and stuff? Who made this projection, because that sure wasn't in the CBO report?

You might want to read up on GDP and Debt ratios:

http://www.marketoracle.co.uk/Article41858.html

vision wrote:Oh slick, will you please stop reading things and join in the hysteria? You're such a killjoy with you facts and crap.

If I posted that you'd be asking for links and citations. Biased?

woody, I was replying to a given article, and provided links to the document the article purported to discuss. Trust me, I have every bit as much understanding of government debt, how it works, how it can be managed, etc, and don't need your fluff pieces from the UK.

vision wrote:Oh slick, will you please stop reading things and join in the hysteria? You're such a killjoy with you facts and crap.

thanks for contributing absolutely NOTHING to the discussion. I'm glad you took Lothar's words to heart. this is a Viable topic, maybe you should consider actually engaging. Slick's "facts" as you wish to call them, are open for interpretation, there are economists on both sides that disagree with each other.

CUDA, the only facts I cited are those in the publication from the CBO, by way of contrasting with the garbled, ideological message that came through the Washington Times filters. All of what you just wrote about the topic in general I agree with. My only point within this thread is that the Washington Times sure isn't the place to look for 'facts' of any kind. Never was, since Sun Yun Moon founded that paper, frankly.

not my point. re-read what I wrote

I think I got your point and was sort of verifying it, I thought. Now, lord knows we've beating the debt/deficit subject to death on here. Is there anything new to add, because the Wash Times sure didn't?

It looks like Greece will go first. What then? It looks like the U.S. will soon reach WWII debt levels in about 15 years. If we elect a president who wants to go to war with ISIS, it will blow up the debt far greater than current projections.



US federal debt held by the public as a percentage of GDP, from 1790 to 2013, projected to 2038.

https://en.wikipedia.org/wiki/National_ ... ted_States

CUDA wrote:...this is a Viable topic...

What, you mean raising hysteria even amidst the facts slick pointed out? How is that viable? Maybe you just want to talk more about how Obama is such a terrible guy who ruined the country (which there is also no evidence for)?

LOL "Death Spiral"... Give me a break.

TC, that same uncertainty around both war and global economics is why they spent an entire chapter on how shaky predictions are.

vision wrote:Oh slick, will you please stop reading things and join in the hysteria? You're such a killjoy with you facts and crap...

CUDA wrote:thanks for contributing absolutely NOTHING to the discussion. I'm glad you took Lothar's words to heart. this is a Viable topic, maybe you should consider actually engaging...

vision wrote:What, you mean raising hysteria even amidst the facts slick pointed out? How is that viable? Maybe you just want to talk more about how Obama... LOL "Death Spiral"... Give me a break...

Guys, this stuff is pointless.

Rather than the sarcasm and LOLs, you guys would do better by simply posting something straightforward about the details of your disagreement.

The debt as I see it…

The biggest problem is this:

One side screams about it, but doesn’t want to do what it takes to lower it, the other side is in total denial that there is any problem in the first place.

You first have to agree that something is a problem, that is step one, then you can move onto step two…how to solve it.

Someone once asked me to provide “tangible” evidence that the public debt is harmful, well that is a hard press, how do you provide evidence that there could have been 3% growth instead of 2%? But I do believe the tangible evidence is there if you want to see it…

Example:

The inability to do major works projects, just go to Florida and ask the people waiting for the Everglades restoration project to be funded, if there is “tangible” evidence.

Of course if you ask some people how to solve the funding problems caused by the public debt, they will say something like…borrow…this is just about the time I start banging my head against the wall, yea major logic fail.

So one side offers the solution to the debt problem in the way of raising taxes, and I say ok…I’m on board with the taxes, as soon as the government can prove it can control spending…and what is the response…”you will have to trust them”…no sorry.

The other side thinks we can control debt with spending cuts…no sorry.

The only way to get the debt under control is to raise revenue and control spending.

And before someone (and you know who you are) comes along and starts accusing me of starving the widdle babies, note I said “control” not cut.

One side is intractable on the spending issues, and the other on the revenue side…so here we are…

Spidey wrote:The biggest problem is this:

I would go further and say this problem is symptomatic of the fact US citizens have no representation. There are plenty of wasteful programs that should be abandoned (NSA, TSA, etc...) that our "elected" officials have no intention of eliminating. Instead they will hamper programs that have tangible, positive results while writing themselves larger paychecks with the money they "saved" and ignoring debt.

Here is a fun exercise: Let's find a presidential candidate who can tackle this problem and we will all vote for them. As an independent with no party loyalty this is easy for me!

Well, if you are really concerned about the debt, I doubt if voting for BS*…errr Bernie Sanders is going to do the trick. What we really need is an old fashioned dyed in the wool fiscal conservative, but I think they are extinct.

*Parents can be so cruel.

vision wrote:I would go further and say this problem is symptomatic of the fact US citizens have no representation.

yeah, partly. But, let's be honest, part of the problem is symptomatic of the fact that most Americans(not all, mind you, but most)have very little sense of responsibility. We want what we want, but don't want to pay for it. You can see the result from personal credit card debt all the way up to the way the Federal budget is handled. Add in those wasteful, useless sorts of programs that are cited by Vision and realize that big money is being made by SOMEBODY on every one, and the problem becomes monstrous.

And, for that reason(the scale of the problem), I completely disagree with Spidey's assessment of who we should or should not vote in. If you located an old school strict fiscal conservative, or if you chose Bernie Sanders, your taxes would go up. It is a matter of how much, as Bernie would expand the role of government in human services while cutting defense spending, and pouring money into infrastructure. A fiscal conservative, of course, might do none of those things, most likely, but a true fiscal conservative would raise taxes to balance the budget,which if defense is not cut would be close to Bernies numbers, and if a conflict broke out, raise them again to pay for that. You have a calculus to work through, to figure which approach is most likely to work out best for you, and I'd suggest it isn't at all cut and dried who would come out on top when all factors are calculated.

All that said, the American public will likely not tolerate either of those two options, and we'll likely get a cave-in approach to getting elected, and staying elected that results in less taxation than ought be incurred to pay the bills, so the deficit/debt issue will persist.

callmeslick wrote:But, let's be honest, part of the problem is symptomatic of the fact that most Americans(not all, mind you, but most)have very little sense of responsibility. We want what we want, but don't want to pay for it. You can see the result from personal credit card debt all the way up to the way the Federal budget is handled. Add in those wasteful, useless sorts of programs that are cited by Vision and realize that big money is being made by SOMEBODY on every one, and the problem becomes monstrous.
...
All that said, the American public will likely not tolerate either of those two options, and we'll likely get a cave-in approach to getting elected, and staying elected that results in less taxation than ought be incurred to pay the bills, so the deficit/debt issue will persist.

Hear, hear. If anything it's representation that does too good of a job doing as we do rather than as we say. If we as individuals representing the average american aren't willing to be fiscally responsible, why do we ask and expect the government to do anything different? I'd suggest that while our mouths may say we want less government debt, our votes say that we want to have our cake and eat it too... and our representatives are doing a fine job of representing those votes.

snoopy wrote:why do we ask and expect the government to do anything different?

Because we have the right to, and because public debt affects us all. Not that private debt can’t affect everyone, the problem there is how the system is structured, and that could be changed by making lending institutions responsible for losses, instead of bailing them out, therefore reducing the incentive to make bad loans.

sure, we have the 'right' to, but my point is that 'we' as a whole don't want that, because it would involve personal sacrifice(higher taxes, or reduced services), and since the time of Reagan it's all been about getting what we 'deserve', whether we actually pay for it or not. What Snoopy and I were saying is that no one should expect government to do a damn thing other than what reflects in the populace as a whole. Part of the economic conundrum we face is because every working class person demands affordable luxury goods, and the only way to have them is to allow for slave labor in foreign nations to make them for us. Good for the Waltons, but sort of lousy for the nation as a whole. Our parents and grandparents understood personal responsibility, and thus, the public finances reflected that. It was my hope that the great crash of 2007-2009 would instill that same reality into younger generations, but, alas, no.

callmeslick wrote:What Snoopy and I were saying is that no one should expect government to do a damn thing other than what reflects in the populace as a whole.

Sorry, but that is dead wrong, we should expect the government to do the right thing, not lower itself to the lowest common denominator.

That's like expecting your parents to misbehave because you do...and I could go on and on...

No...sorry...you are wrong.

Spidey wrote:

callmeslick wrote:What Snoopy and I were saying is that no one should expect government to do a damn thing other than what reflects in the populace as a whole.

Sorry, but that is dead wrong, we should expect the government to do the right thing, not lower itself to the lowest common denominator.

except that ours is a system designed to reflect the will of the people, and the people have no stomach for responsibility. Just because you, or I might see the problem, doesn't mean folks vote for the responsible solutions. As I tried to say last night, either the Bernie Sanders approach OR the mythical old-style conservative approach would address the issues, but I don't see either approach being accepted by the electorate.

Spidey wrote:That's like expecting your parents to misbehave because you do...and I could go on and on..

It's like expecting YOU to misbehave because your parents do. Our government learned it by watch us. Our government IS us.

Vander wrote: Our government IS us.

I would beg to differ.

You know what's keeping us propped up right now? Government treasury bonds. Everyone in the world is parking their money is what they think is a safe place with at some return, or at least no losses. When they all decide en masse to pull out their money for some other investment or reason, we're toast.

tunnelcat wrote:You know what's keeping us propped up right now? Government treasury bonds. Everyone in the world is parking their money is what they think is a safe place with at some return, or at least no losses. When they all decide en masse to pull out their money for some other investment or reason, we're toast.

and, when the sun stops shining, we are a bit nippy. Look, there are key structural reasons folks flock to our bonds. They think they are safe because the ARE safe. The only thing that would really stop that reality is the US embarking on ill-thought and destabilizing policies(think Tea Party economics), which we've thus far resisted.

That's comforting. All it would take is the largest of our debt holders, China, to call in their bonds and it would pretty much bankrupt us.

You worry about tea partiers and their crazy ideas, but even most Republicans want to get rid of Obamacare, and if SCOTUS rules against it and we get a Republican president, they'll throw it out in a heartbeat without thought to what's going to happen. That move by itself will add another huge chunk to our already burgeoning deficit (that's not the debt either). So if they get into office in 2016, they're going to have to make big cuts elsewhere to just to get rid of their hated Obamacare AND bring down the deficit itself. What a conundrum.

http://finance.yahoo.com/news/report-hi ... 02033.html

tunnelcat wrote:That's comforting. All it would take is the largest of our debt holders, China, to call in their bonds and it would pretty much bankrupt us.

first off, they are not the largest bondholder out there(unless Japan held a selloff today), and at any rate, they surely don't hold anything like a majority stake(that would be the American public and institutions).
Second, a selloff by China would utterly destroy their economy so to do so would be suicidal.

You worry about tea partiers and their crazy ideas, but even most Republicans want to get rid of Obamacare, and if SCOTUS rules against it and we get a Republican president, they'll throw it out in a heartbeat without thought to what's going to happen. That move by itself will add another huge chunk to our already burgeoning deficit (that's not the debt either). So if they get into office in 2016, they're going to have to make big cuts elsewhere to just to get rid of their hated Obamacare AND bring down the deficit itself. What a conundrum.

http://finance.yahoo.com/news/report-hi ... 02033.html

this part speaks to what I referred to above, about our politicians torpedoing our own financial stability. Failing to pay debt would do so, as well.

speaking of our good friends at the CBO
http://www.politico.com/story/2015/06/o ... 19228.html

callmeslick wrote:first off, they are not the largest bondholder out there(unless Japan held a selloff today), and at any rate, they surely don't hold anything like a majority stake(that would be the American public and institutions).
Second, a selloff by China would utterly destroy their economy so to do so would be suicidal.

All's fair in commerce and war.

callmeslick wrote:

tunnelcat wrote:You worry about tea partiers and their crazy ideas, but even most Republicans want to get rid of Obamacare, and if SCOTUS rules against it and we get a Republican president, they'll throw it out in a heartbeat without thought to what's going to happen. That move by itself will add another huge chunk to our already burgeoning deficit (that's not the debt either). So if they get into office in 2016, they're going to have to make big cuts elsewhere to just to get rid of their hated Obamacare AND bring down the deficit itself. What a conundrum.

http://finance.yahoo.com/news/report-hi ... 02033.html

this part speaks to what I referred to above, about our politicians torpedoing our own financial stability. Failing to pay debt would do so, as well.

Either way, I'm going to be paying way higher premiums next year, since I'm in the individual market. If the Republicans dump Obamacare, I'm out. If it stays law, I'll reluctantly stay in, until I get to Medicare age at least (if that hasn't collapsed or been gutted by then). Since health care costs are still rising unchecked, it's a guarantee that something's going to give.

http://www.oregonlive.com/health/index. ... remiu.html

callmeslick wrote:

tunnelcat wrote:That's comforting. All it would take is the largest of our debt holders, China, to call in their bonds and it would pretty much bankrupt us.

first off, they are not the largest bondholder out there(unless Japan held a selloff today), and at any rate, they surely don't hold anything like a majority stake(that would be the American public and institutions).
Second, a selloff by China would utterly destroy their economy so to do so would be suicidal.

Third of all, bonds have terms on them. They can't "call them in". They can re-sell them on secondary markets (which could potentially destabilize the market, or might simply result in others buying them up at a discount), and they can choose not to buy new bonds, but they can't suddenly demand that the US government pay up on a bunch of bonds that haven't reached maturity.

Lothar wrote:Third of all, bonds have terms on them. They can't "call them in". They can re-sell them on secondary markets (which could potentially destabilize the market, or might simply result in others buying them up at a discount), and they can choose not to buy new bonds, but they can't suddenly demand that the US government pay up on a bunch of bonds that haven't reached maturity.

thanks, Lothar, it's been a while since I pointed that one out, but it bears repeating! You can sell, but on a note that is in demand, there are going to be buyers lined up around the block.

Lothar wrote:

callmeslick wrote:

tunnelcat wrote:That's comforting. All it would take is the largest of our debt holders, China, to call in their bonds and it would pretty much bankrupt us.

first off, they are not the largest bondholder out there(unless Japan held a selloff today), and at any rate, they surely don't hold anything like a majority stake(that would be the American public and institutions).
Second, a selloff by China would utterly destroy their economy so to do so would be suicidal.

Third of all, bonds have terms on them. They can't "call them in". They can re-sell them on secondary markets (which could potentially destabilize the market, or might simply result in others buying them up at a discount), and they can choose not to buy new bonds, but they can't suddenly demand that the US government pay up on a bunch of bonds that haven't reached maturity.

Yeah, you're right. However.....

http://www.caseyresearch.com/articles/c ... ond-market

don't panic, TC......from the same sourcehttp://www.caseyresearch.com/articles/t ... ll-persist

one of their writers is likely correct!