Slow Growth and Debt: The Coming Government Debt Crisis?

http://www.ft.com/cms/s/0/f4630910-0b7a-11df-8232-00144feabdc0.html

by cwan • 16 years ago

13 24 16 years ago

The unfunded future liabilities of the US government are staggering, some $50 Trillion if you assume that Social Security etc. remain the same.

This means either SS will be reduced, or that SS taxes on earnings will be increased, or that the currency will be debased (or some combination of the 3).

antpicnic• 16 years ago

Medicare, not Social Security, is the primary problem. Social Security's problems can be resolved using a similar adjustment like that done in the 80's. Push out the retirement age and there is no problem.

Medicare and healthcare costs are an enormous problem. Expect a combination of tax increases, benefit cuts, and means testing. If Congress finally acts to eliminate waste, the growth in healthcare costs can be slowed.

anamax4• 16 years ago

> If Congress finally acts to eliminate waste, the growth in healthcare costs can be slowed.

What waste is that? Medicare already pays less per procedure than anyone else.

Are you suggesting that Medicare should cut services?

Be careful when citing studies. The goal isn't to minimize the cost per death, it's to minimize the cost of lives saved. The two are different.

mmphosis• 16 years ago

The overwhelming majority of us did not agree to borrow this money with compounded interest payments, therefore I see no reason to pay the money back.

nostrademons• 16 years ago

Easy for you to say, until you realize that every debt is someone else's asset, and if you hold any Treasury bills/bonds, bond funds, or money market accounts/funds, it's probably your asset. Phrased as "should the American public have to pay back the $12T that the government owes?", the answer is "Of course not!" Phrased as "should the American public lose all the money they put in Treasury bonds and money market accounts because they didn't trust the stock market?", the answer is "Of course not!" But those are two sides of the same default...

m0th872• 16 years ago

You did implicitly via the social contract.

anamax4• 16 years ago

> You did implicitly via the social contract.

In every other contract, I'm not bound if the other side doesn't satisfy its obligations. Also, there's a concept of a "meeting of the minds".

The social contract isn't a contract. It's a promise to use force.

_delirium• 16 years ago

Also, I never agreed to the current allocation of land titles, so I see no reason to respect property rights.

patrickgzill2• 16 years ago

You raise an interesting concept - can one generation of Americans vote or permit, via debt financing, to obligate a future generation to pay back the debt incurred? Lysander Spooner, amongst others, wrote about this.

jsz03• 16 years ago

If it was simply an issue of paying back what we owe this could work but we need more credit going forward -- lots more, so we have to keep paying out indefinitely. It's a classic debt cycle.

joe_the_user2• 16 years ago

Why have a "coming crisis" when you can have one right now?

I mean, I doubt the present "recovery" is going to last more than a couple of years. The problem, actually, isn't the government spending money like crazy to get us out of the crisis. The problem is that government is spending the money on ... the same perps who got us into this mess to begin with

Plus I wouldn't trust Ken Rogoff's research papers any further than I could throw them - I've followed him for a short while:

Two interviews: http://www.onpointradio.org/shows/2007/11/wheres-the-economy... http://www.businessinsider.com/henry-blodget-rogoff-the-wors...

In the first, 2007, he touts the US economy to the sky against some skeptic. In the second, he angry denounces all the people who didn't see the mess coming - which includes he himself in the first interview! I kind of agree with Rogoff(II) - the liars should be held up to some sort of standard. Why's he still around?

Vivtek2• 16 years ago

Astounding. Where was this alarmism while the Republicans were spending money in the Middle East like drunken sailors and we were in the last recession?

Oh - sorry. Military spending is always OK. My bad.

cwan2• 16 years ago

Two wrongs don't make a right here, but if there's going to be a coming crisis, it's going to be a bipartisan crisis that both parties are very much responsible for. I think you'd find that most Americans - Democrats, Independents and Republicans are unhappy with how much was spent under Bush, but by the same token, I don't think it's unreasonable to note that the deficit under the Obama administration last year alone was $1.074 trillion dollars while the Bush administrations had an average annual budget deficit of about $104 billion per year.

Let me repeat and rephrase given how stunning it is - the Obama administration's deficit last year alone was greater than all the deficits combined under the Bush Administration including all the war spending. I think it's fair to argue that last year was unusual but deficits are also projected to remain high for the forseeable future and the Obama administration has additional significant spending programs in the years beyond his current proposed modest spending freeze.

EDIT - I erred - I used an average of 104 billion under the Bush administration when it was an average of 104 billion under the 12 years of the Republican controlled budgets which extends into Clinton's last administration. However the data including, I believe, war expenditures can be found here (excel file): http://www.cbo.gov/ftpdocs/108xx/doc10871/Historicaltables20...

jsz03• 16 years ago

I don't understand your numbers in relation to what Wikipedia has to say on the issue. How does your number relate to these? If at all?

http://en.wikipedia.org/wiki/United_States_public_debt

2001 $144.5 billion 1.4%

2002 $409.5 billion 3.9%

2003 $589.0 billion 5.5%

2004 $605.0 billion 5.3%

2005 $523.0 billion 4.3%

2006 $536.5 billion 4.1%

2007 $459.5 billion 3.4%

2008 $1017.0 billion (proj.) 7.4%

I think it's a shame we let Pay As You Go expire in 2002. It seemed to be working pretty well to keep spending under control.

joe_the_user2• 16 years ago

Indeed,

Despite all the ideological noise, one might actually find a tremendous amount of commonality in policy between the administrations.

It's worth noting also that a good portion of the Obama debit has involved making good the implicit guarantees which the Bush administration issued on Fannie etc debt.

I'm not in favor of this but it wasn't cooked up by the democrats out of whole cloth - it merely continued the direction things were already going in.

bwh2• 16 years ago

Our current wars are actually heavily funded through emergency spending bills, which are off-budget and not included in deficit calculations.

Edit: Also, the 2009 deficit of $1.2 trillion was announced on Jan 7, 2009, two weeks before Obama took office. http://money.cnn.com/2009/01/07/news/economy/cbo_2009_budget...

anamax4• 16 years ago

> Astounding. Where was this alarmism while the Republicans were spending money in the Middle East like drunken sailors and we were in the last recession?

It is interesting to see someone use the "Bush did it, so it's okay" defense. (If it wasn't okay when Bush did it, then bring up Bush isn't an argument.)

However, even the snark is wrong because there was alarmism and criticism from the right and left. See for example http://www.youtube.com/watch?v=A9WKimKIyUQ&feature=playe... which, according to http://www.guardian.co.uk/media/2010/jan/24/super-bowl-ads-c... was produced by moveon.org for the 04 superbowl (cbs declined to run it).

What? Moveon.org isn't complaining this time?

Vivtek2• 16 years ago

I don't know about Moveon. But Evan Bayh, my Senator, is suddenly all about the fiscal discipline this year. I never heard from him earlier. So I am really pissed at the selectivity of the fiscal discipline mavens, because I personally would rather have functional health care for my family than be outspending the rest of the world on war.

fnid2• 16 years ago

The people need to stop believing the Democrats and Republicans are on different teams. They are on the same team -- the powerful elite.

Do not hesitate to believe that the wars are good for both parties. Only one congressman voted against the war and he is a republican.

anamax4• 16 years ago

I previously pointed out that people did object to Bush's deficits.

Now I'll show that Obama's deficits are significantly larger.

Bush's worst deficit, less than $500 B was in 08, and that includes the bailout. From 04 to 07 Bush's deficits, including the war, were decreasing.

Obama predicts a 2010 deficit of 1.6T. He claims that it will drop to 1.3T in 2011, but that relies on economic recovery that he's consistently overestimated.

Here's a report on Obama's recent predictions - http://www.reuters.com/article/idUSTRE60U1PZ20100201 .

Here's the historical data (on debt, not deficit). http://www.treasurydirect.gov/govt/reports/pd/histdebt/histd...

And here's an graph which compares Obama's plans and CBO predictions to Bush's "accomplishments". This graph is outdated and actually understates what we've learned since about the Obama deficits.

http://pajamasmedia.com/instapundit/files/2009/04/obamadebt....

sown• 16 years ago

PBS Frontline did a very fascinating documentary on this

http://www.pbs.org/wgbh/pages/frontline/tentrillion/view/

And terrifying, too.

In the long run, not only are we all dead anyways, but I think that the government will come alive and fix this somehow ... they did in the 90s. Sort of.

Slow Growth and Debt: The Coming Government Debt Crisis?

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