Wait, you mean we’re expected to pay all that money back?
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Kazinski says:
There must be some mistake, I thought it was only our children that had to repay it.
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November 23, 2009, 2:18 amD.O. says:
How on earth we can repay it? Make more stuff and sell it to China? Then, bring it on! Or maybe they will directly invest in the American industry? Bring it on! Otherwise it will be just writing numbers from one column into another. Phooey!
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November 23, 2009, 2:38 amDavid Welker says:
I think this graphic from the NY Times article is really fascinating.
As it shows, the debt spiked up after Ronald Reagan took office and continued to rise through the term of George H.W Bush, fell during the Clinton administration, and then started increasing again after George W. Bush took office.
Is that “starve the beast” in action?
It would probably be quite beneficial if, after the economy recovers, Democrats and Republicans agree to take action to get the deficit under control. That is in theory. It is hard for me to see how Democrats can trust Republicans to drop the “starve the beast” strategy. It seems awfully foolish for Democrats to sacrifice their agenda for deficit reduction, only to have Republicans a few years later squander those savings on more tax cuts.
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November 23, 2009, 3:01 amMike says:
We can start with a Goldman Sachs tax. 90% income tax on all income over $1,000,000 made in the financial services industry.
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November 23, 2009, 3:21 amGuy says:
What if we just carpet bomb our creditors? I mean, we’re in debt because we spend so much money on the military, so isn’t it about time we see a tangible return on that investment? The problem fixes itself!
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November 23, 2009, 3:41 amD.O. says:
Guy, it would be equivalent to carpet-bombing our malls. Have you done Christmas shopping already? Uh-oh.
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November 23, 2009, 4:09 amGuy says:
Well, maybe we could carpet bomb everyone except our creditors, then maybe they’d be willing to give us better interest rates? Or we could carpet bomb Christmas, so we don’t have to worry about being able to spend for it? Carpet bomb Wall Street? I refuse to believe there exists a problem that can’t be solved by carpet bombing, otherwise how can we justify our deficit spending?
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November 23, 2009, 4:23 amBrett Bellmore says:
That somewhat mis-characterizes the graph, which actually shows the debt increasing during the Clinton administration, until his party lost control of Congress in ’94.
If you wanted to argue that divided government, with the legislative party locked in an impeachment battle with the Executive, at the same time as a stock market bubble, is an effective way to reduce deficits, I might agree. It’s difficult to arrange, though, and those bubbles tend to pop.
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November 23, 2009, 6:08 amBrett Bellmore says:
I would also point out that the graph, improperly in my opinion, is displaying a ratio of debt to GDP, which causes exaggerated swings due to economic fluctuations. During boom times it makes the debt look like it’s being paid back, even though it’s still accumulating, during recessions it looks as though the debt is skyrocketing, though it might be going up no faster than before. Makes it look like Clinton had considerably paid back the debt, when in reality he barely dipped into the black ink at all. And it lets the Obama administration’s projected debt look fairly minor, based not on the huge spending, but instead on the wildly optimistic projected growth rates.
I’d characterize this as a version of “lying with statistics”.
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November 23, 2009, 6:16 amTamerlane says:
I would add to what Brett Belmore says that much of the federal government’s debt and annual deficit are due to unfunded Social Security and Medicare obligations. Underfunding Social Security was LBJ’s great contribution to federal financing. Medicare debt could mostly be blamed on Democrats until George Bush II added the prescription “doughnut”.
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November 23, 2009, 8:05 amveteran says:
Mike says:
We can start with a Goldman Sachs tax. 90% income tax on all income over $1,000,000 made in the financial services industry.
I concur.
I saw where Goldman says they are doing Gods work.
18 months of this first PLAGUE, I’m not looking forward to the next 6, one of them is likely to be, very bad.
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November 23, 2009, 8:18 amegd says:
But I thought that Social Security and Medicare are both government programs that work. The people in power keep saying that these programs are widely successful, and haven’t harmed our national economy at all.
You’re not suggesting that the politicians are lying to us, are you?
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November 23, 2009, 8:19 amCornellian says:
I wish we had a political party in Washington that was genuinely concerned about the federal government’s debt.
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November 23, 2009, 9:16 amCornellian says:
But I thought that Social Security and Medicare are both government programs that work. The people in power keep saying that these programs are widely successful, and haven’t harmed our national economy at all.
You’re not suggesting that the politicians are lying to us, are you?
They’re both extremely popular programs, which in a politician’s mind is synonymous with programs that work. Heck, the Republicans even ran ads in Florida recently portraying themselves as champions of medicare, even as they rail against “socialized medicine.”
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November 23, 2009, 9:19 amProf. S. says:
SNL’s opening did a much more entertaining version of this for their opening last week.
“I like to be kissed when someone is doing sex to me!”
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November 23, 2009, 9:48 ambyomtov says:
Brad DeLong’s take on the article:
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November 23, 2009, 10:05 amMark Field says:
Dean Baker’s comment on this article:
“In Just a Decade the U.S. Interest Burden Could Be as High as It Was in 1992!!!!!!!
That might not sound scary to most people, but this was the punch line of a front page NYT news story that included all sorts of unsupported assertions about the crisis posed by the government debt.
The fourth paragraph asserts that:
“Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.”
No, this is wrong. There is no evidence presented in this article that the rise in interest rates will place the U.S. government in a situation where it will be unable to pay its bills and no one cited in this article makes such a claim.
The article is also completely unbalanced in not presenting the views of any economist who could put the deficit/debt issue in perspective for readers.”
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November 23, 2009, 10:13 amMahan Atma says:
??
You do understand that Social Security currently runs a huge surplus, right? There are unfunded liabilities for sure, but those won’t hit for years out, and do not affect the annual deficit.
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November 23, 2009, 10:55 amMahan Atma says:
I’ll know Republicans are serious about the deficit when they start talking about cutting spending for the military and the invasion of other countries.
Until then, I’ll always know that “cutting spending” really means “eliminating programs I don’t like.”
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November 23, 2009, 10:57 amLarryA says:
They aren’t actually lying. It’s like the guy that jumped off the ten-story building. As he passed the forth floor he said, “So far, so good.”
And I’ll know the Democrats are serious about the deficit when they start talking about...
Sorry, there’s just no way to finish that without giggling.
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November 23, 2009, 11:17 amzippypinhead says:
I’ve been having a recurring nightmare that one of these days China will win WWIII in a Federal Bankruptcy Court, without ever having to fire a shot...
Unless, of course, we get “lucky” and let inflation devalue our debt to the point it becomes manageable — ignoring the collateral damage to domestic retirement savings, the loss of the dollar as the world reserve currency, etc.
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November 23, 2009, 11:31 ambyomtov says:
And I’ll know the Democrats are serious about the deficit when they start talking about...
Sorry, there’s just no way to finish that without giggling.
When you get through giggling you might check out Clinton’s tax increases, and the GOP claims that they would be utterly ruinous.
You might giggle some more, but at different people.
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November 23, 2009, 11:35 amMark Field says:
Just to add to byomtov’s comment, you apparently missed the large budget surpluses — you know, the money that actually is the opposite of and reduces the deficit — under Clinton.
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November 23, 2009, 12:03 pmEH says:
Prof S. has it. The NYT was scooped by SNL.
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November 23, 2009, 12:25 pmegd says:
I’ll propose a deal: Democrats get to put Clinton back in the White House, and Republicans get control of the Senate and House.
Besides, isn’t spending controlled by Congress? When did “Clinton’s budget surplus” take effect?
And on a related note, the “surplus” wasn’t really a surplus, it was accomplished by accounting tricks.
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November 23, 2009, 12:34 pmFedya says:
I remember pointing out to people back in the budget battle of 1995 that we should just take Jimmy Carter’s 1980 budget (a time when there was a Democratic President and substantial Democratic majorities in both houses of Congress, of course), and simply adjust it for the rate of inflation and the growth of the population. The result would have been something like $250 billion less than the figures the parties were throwing around in ’95.
The idea that we’re somehow not taking in enough in revenues is ridiculous, if you ask me.
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November 23, 2009, 12:54 pmMark Field says:
I might even take that deal if you undo every single thing Bush did and didn’t do in his presidency. Give back the tax cuts, the wars, the spending on wars, the torture, the housing bubble, everything.
The key moment was the approval of the 1993 tax increase. Under a Democratic Congress.
And since when do presidents NOT get credit or blame for spending? They aren’t just sitting there passively — they give the budget to Congress, and they have veto power. How many veto fights did Reagan lose? W? Shall we call the 80s the era of the “Congressional Democratic Revolution” instead of the (fatuous) “Reagan Revolution”?
Which Republican presidents can’t seem to learn. It’s called “living within your means”.
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November 23, 2009, 1:14 pmOren says:
Which is to say that non-FICA taxes are too low to account for non-FICA-related spending while FICA taxes are higher that FRS. When the trend reverses, we will have both a deficit in FRS and a deficit in NFRS.
Now, quick, someone make a joke about a lockbox.
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November 23, 2009, 1:15 pmPete Freans says:
What about the impending crisis of Social Security when our baby boomers retire?
Meh, best not to think about it....
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November 23, 2009, 1:35 pmShelbyC says:
That is that which is seen. That which isn’t seen is what the level of spending growth would have been under a Democratic congress.
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November 23, 2009, 1:54 pmPerseus says:
As a percentage of GDP, military spending–an actual article 1 spending item–isn’t at historically high levels (post-WW II), unlike spending on entitlements. So I’ll know when Democrats (and Republicans) are serious about the federal budget deficit when they address the solvency of the entitlements we already have rather than trying to outdo President Bush in adding even more of them.
The key moment was the approval of the 1983 tax increase to keep Social Security solvent for a while longer.
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November 23, 2009, 2:37 pmJames T. Carrington says:
I say we Nuke The Moon
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November 23, 2009, 3:03 pmAllan Walstad says:
Ah, the incesssant bickering between the Republicrats and the Demopublicans. Yawn. The R’s want limited government until they get power–then they spend. The D’s want an end to wars unitl they get power–then they send out more troops. All the while, the federal monster grows.
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November 23, 2009, 3:06 pmAllan Walstad says:
Ya suppose gold at $1165 is going to turn out to be a huge bargain?
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November 23, 2009, 3:07 pmDangerMouse says:
There will be no cut in spending, because politicians gain no accolates by cutting programs. Spending empowers politicians because it induces a feeling of control, and all of them are Type-A personalities. So there will be no cut in spending.
There will also be no tax increases, at least enough to solve the spending problem. Taxes can be raised to some degree, but not enough to solve the problem without cutting spending also. And since there’ll be no spending cuts, any tax increase won’t matter. Additionally, tax increases will do more harm than good, even if they increase revenue, because any increased revenue will only fuel more spending.
So there will be a default. When something can’t continue forever, it won’t.
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November 23, 2009, 3:39 pmCountDuckula says:
DangerMouse, your profundity knows no limits.
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November 23, 2009, 3:58 pmRon says:
All this sudden angst about the deficit sure is weird.
Where have people been for the past decade ?
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November 23, 2009, 4:01 pmSandy MacHoots says:
Wow, a current debt of $40,000 for every man, woman, and child in the U.S. Which means $160,000 for each family of four. And when you realize that only half of us pay significant taxes . . . .
It’s like we’re each buying a nice house in the suburbs that somebody else will live in.
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November 23, 2009, 6:48 pmRicardo says:
Then you can change it to a moving average. Debt/GDP is a very important economic indicator because it is a measure of capacity to pay back the debt. The key is actually not to necessarily freeze or decrease the level of nominal debt — it is to ensure the growth rate of nominal debt is less than the growth rate of nominal GDP.
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November 23, 2009, 9:08 pmLeo Marvin says:
$40,000 buys a nice house in the suburbs?
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November 23, 2009, 9:40 pmSandy MacHoots says:
In some places. Especially with the raging success of the stimulus bill.
But seriously, family of 4 = 4 x 40K = $160K.
Figure that half the people don’t pay taxes, so it’s $320K. Which most places buys a pretty nice house.
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November 23, 2009, 10:28 pmCJColucci says:
I’d be curious to know how many posters and commenters own a chunk of the federal debt, either directly or through mutual funds. If they do, do they count it as an asset when they tote up their personal wealth?
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November 23, 2009, 10:42 pmAllan Walstad says:
CJ, if you’re still looking for responses, I guess about half my modest retirement fund is in TIAA, which I suppose includes a lot of fed debt. I count it as an asset in the same way as the other stuff, stocks, which can go up or down. If Obama can somehow avoid destroying the entire economy, I suspect the stocks are the stronger side of the equation, because when the coming inflation hits it should push up stock prices comparably, so I stay even there at least. On the other hand, when a cornered monster lashes out, who knows what will be slashed? I’m growing a survival garden. ;-)
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November 24, 2009, 2:09 pmJ. Aldridge says:
It’s only money. No big deal to liberals.
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November 25, 2009, 6:31 pm