Why Care About Debt-to-GDP? (nber.org)
- Reference: 0180553763
- News link: https://slashdot.org/story/26/01/09/1459249/why-care-about-debt-to-gdp
- Source link: https://www.nber.org/papers/w34629
> We construct an international panel data set comprising three distinct yet plausible measures of government indebtedness: the debt-to-GDP, the interest-to-GDP, and the debt-to-equity ratios. Our analysis reveals that these measures yield differing conclusions about recent trends in government indebtedness. While the debt-to-GDP ratio has reached historically high levels, the other two indicators show either no clear trend or a declining pattern over recent decades. We argue for the development of stronger theoretical foundations for the measures employed in the literature, suggesting that, without such grounding, assertions about debt (un)sustainability may be premature.
[1] https://www.nber.org/papers/w34629
Who obviously DOES NOT care about debt? (Score:4, Informative)
Donald Jenius Trump!
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However no expanse shall be spared when it comes to hassling everyone who isn't MAGA.
Anytime you want to pay off the national debt (Score:2, Insightful)
You can take back the 80 trillion dollars we have given to .1% since the 1960s. We can just take it back.
If that's too much for you then you could implement Medicare for all which according to the Congressional budget office would save half a trillion dollars a year and plow those savings into the national debt. Focused on the debt we are overseas and eliminate the Trump tax cuts for the extremely wealthy, keeping the tax cuts that you yourself got, and again the debt gets paid off.
But as usual ther
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"If Donald Trump doesn't get a third term then we're going to have a democrat in the White House and deficits will matter again as will the debt..."
A real optimist, huh? It's cute that you think there will be "terms" in the future. Donald Trump will not leave office, he will be forcibly removed or will die in office, there is no matter of a "third term", they are feeling that out but just canceling elections is easier to achieve.
Trump was not eligible to run in 2024, he participated in an insurrection and
The jubilee, would it be worth it? (Score:1)
Historically, the Jubilee was used in the Roman Empire to wipe out all debt.
Suppose the US government had one and then passed a constitutional amendment to balance the budget and prohibit deficit spending. Sure, the bond holders would be left with nothing, (Including all retirees who invested in government bonds), and a very deep economic depression (along with more deaths of people with severe health conditions) would occur as entitlements such as social security, medicare, and medicaid and military spendi
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You need to consider the currencies. The Romans had metals based hard currencies. Try doing this with a fiat currency like the USD and you'll be toting wheelbarrow loads of cash to the grocery store. Look at what is happening in Iran right now with loss of confidence in the currency, 56% inflation in a month.
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> So what is better, living with the debt burden while managing it, or wiping the slate clean and pressing the reset switch?
i don't think increasing defense budget by 50% could be considered "debt management", and that would be the icing on the cake. also, you can't really live on debt indefinitely if one third of your bonds are held outside and are shrinking and uncertainty makes finding creditors progressively harder and interest rates higher. all of which would seem to point to the latter, a reset, and particularly in the form of war, which would inevitably be global. two birds one stone if it works out. a total clusterfuck i
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Given that a lot of US debt is held by other countries, a deep depression could well be followed by an invasion. A drastic reduction in standard of living is a sure thing. While it's "bond holders" that would be "left with nothing", a large portion of those bond holders is the Chinese government.
intrest-to-GDP? (Score:2)
Sorry can't get behind using interest in a measure of indebtedness because its already the mix implicitly.
More debt generally should be more GDP in almost all cases, other then perhaps paying tribute to another nation or something, and more debt is generally always going to mean more interest unless people are lending for free. So the two are really coupled in exactly the same way the more traditional measure debt-to-GDP are.
but...
Interest is affected by the demand for government debt which is of course tie
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Instead of interest on its own, how about the percentage of your tax take that's required to pay that interest?
If that percentage gets too high, then people just see you taking loads of tax off them, but "nothing" happening in return - which means pitchforks and lynching. If the percentage is too low, then you're perhaps missing an opportunity to invest in some infrastructure that would get your tax take higher and ultimately result in a *lower* percentage, even though your national debt was actually higher
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Not a bad plan but we could get the same impact just showing tax pays what portion of federal revenue was used to pay interest on debt. I guess that is not entirely accurate as there are federal revenues that we don't nominally consider taxes, but that is pretty small portion.
It might not matter much either as its all fungible. It looks for FY2025 (ended in October) about 19 cents of every federal dollar went to interest. So you could reasonably claim that 19% of everyone individual liability goes to inte
Re: Sorry I thought I was on Slashdot. (Score:3)
Economics less political than question of what text editor you prefer.
Re: Sorry I thought I was on Slashdot. (Score:2)
Hate to feed the trolls, but the tagline was always "news for nerds, stuff that matters." This was never a purely tech site.
Increasing debt levels are bad but.. (Score:1)
Debt is fine, just a way to cover/fund your investments till your returns catch up, but an ever increasing debt level trend is bad. By any yardstick or ratio you use.
Unless you are investing in significantly better or more profitable stuff continuously year on year - which is improbable when dealing with government or big businesses.
Obviously it is not possible to have any absolute number for good or bad, only the trend
But historically, governments have usually solved it by taking over assets of other coun
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> The only reason why the US is able to keep pulling this off with increasing debt is that people believe in the dollar.
People [1]MUST [congress.gov] believe. It's the law.
We simply can't have some random child point out that the emperor is in fact [2]naked [brainyquote.com].
[1] https://constitution.congress.gov/browse/essay/amdt14-S4-1/ALDE_00000849/
[2] https://www.brainyquote.com/quotes/warren_buffett_383933
two ways at looking at red ink (Score:2)
YOU, AN INDIVIDUAL CITIZEN: broke, stupid, irresponsible, immoral, bound for debtor's prison
THE NATIONAL GOVERNMENT: savvy, growth-minded, admirable, trustworthy, gotta spend money to make money
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Yes, actually. Me an individual economic actor cannot create currency, I cannot tax to destroy currency or raise revenue. I have to work on timelines of quarters, government can work on timelines of decades.
The finances of a sovereign nation with currency control are nothing like what an individual or business has to manage. This is why "run the government like a business" is somewhat incoherent. It's a good soundbite but that's all it is.
currency minipulation (Score:2)
One of the beauties of inflation is that is it lowers the debt. Double inflation and you 1/2 the debt.
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The system will balance it self out. If you don't charge taxes for government spending, it will end up as debt and then they can use inflation to devalue everything else to 'tax' money for the spending. The nice thing about it is you also tax everyone who holds a dollar, including billionares and those outside of your country who hold dollars.
Just balance the budget. (Score:3, Insightful)
Then you don't have to worry about this shit.
Re:Just balance the budget. (Score:5, Insightful)
I respect the fiscal conservatives who advocate for that. Unfortunately they keep losing the argument in our "Greed is Good!" congress. Trump is NOT a fiscal conservative!
Re: Just balance the budget. (Score:2)
These people are all about balancing the budget until they get in charge, then it's just more spending on what THEY want. Same story with states rights / local authority.
Re:Just balance the budget. (Score:5, Insightful)
What happens when interest expense exceeds 50% of tax collections? The U.S. government's interest expense consumes a significant chunk of its revenue, recently reaching around 19% of all federal revenue in FY 2025, with projections suggesting it could rise to 27% by 2035. Maybe we can support all of that debt, but we won't have any more government spending programs.
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Its politically suicide The voting public wants goverment services and welfare , while also not paying for it. I hate everyone who "blames" the goverment for this, when the people vote for people like Trump who keeps promising to raise spending and cut taxes The goverment racking up debt is just doing what the voting public want, the voting public wants pensions, medical coverage for old people, a strong military , school funding, ect. They also want low taxes. If someone ran on the promise to raise taxe
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Total government spending federal, state, local in total is around $10T with $7T of that being federal spending. There are 133 million households in the USA. Now divide. That works out to $75,000 per household per year in government spending. The US median household income is $83,000.
Does anyone really think we need more government spending? Maybe the problem is that the existing spending is not being effectively utilized.
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That's why taxes are progressive and not flat.
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> There are 133 million households in the USA. Now divide. That works out to $75,000 per household per year in government spending. The US median household income is $83,000.
You are comparing mean (simple average) spending with median income. Mean income is higher than median income due to income inequality.
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"That works out to $75,000 per household per year in government spending. "
No it doesn't. Households do not carry the entire burden of government spending, the government has many sources of revenue other than taxation of private citizens.
Your child may have received a dollar from the tooth fairy last year, but that doesn't mean that there is $10T in government spending per tooth per year. The math may work but it doesn't say what you want it to.
"Does anyone really think we need more government spending?"
Re: Just balance the budget. (Score:2)
Unlimited corporate and billionaire money going to re-election funds is a significant factor as well. The ultra wealthy can avoid paying any taxes at all by borrowing money against their stock holdings until they die; the loan is then settled without much taxation on the heirs.
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That is a "loophole" I have heard proposals of law changes to close, if you want to take out a loan with stock holding as the collateral you should be taxed as if you were cashing out that stock.
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no, it isn't political suicide. when the GOP does not have the white house, they scream about 'FISCAL SPENDING" and BALANCED BUDGET. When ever they have the white house, they always deficit spend more than the democrats by giving away money to the rich with tax cuts. If it were political suicide, the GOP wouldn't have won the white house since Reagan's tax cuts to the rich required 11 tax increases on the middle class in his 8 years.
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"The goverment racking up debt is just doing what the voting public want..."
That's false. Republicans run up the debt so they can look good while in power, then campaign against the debt when they aren't. It's called "two Santas" and it a primary foundation of their strategy. Generally speaking, Republicans raise debt by lowering revenues, not through increased spending, although they like military spending.
"the voting public wants pensions, medical coverage for old people, a strong military , school fun