patrick.net

We will be lucky to have any year with a surplus until 2024-2027 time frame, after that .... game is over ....

How many years surpluses we would need to pay off the debt in total ....

Not a workable number

Just takes some monetary doubling

https://research.stlouisfed.org/fred2/series/MABMM301USM189S

and things will be great again.

We didn't really pay down our ginormous WW2 debt either, but inflation took care of it for us in the 1970s.

Bellingham Bill says

WW2 debt

This isn't WWII debt one time spending... this is 50 years of major mandatory payouts to an older aging population that isn't going away like a one time spending war event...

It's impossible, trust me, I have tried to have any model that would work and it all comes back negative, badly too

It is what it is...

Good point BB on the money doubling. Inflation is a tried and true method of screwing investors and reestablishing fiscal solvency in the face of the government being wholly owned by the owners.

On the plus side: real estate owners will see fantastic appreciation when the inflation hits the fan. And inevitable wage inflation should help the terminally indebted.

Logan Mohtashami says

have run every single model possible, it's impossible to pay off the debt,

Since so much of it is mandatory, any recession from now on will just expand the total debt profile since so much of is mandatory

Try a model with higher GDP growth and lower interest rates on gov bonds. Is there a model that is constraining these, or an assumption?

Your plot doesn't seem consistent with Bellingham bills Fred plot, unless entitlements are more than 90 % of the spending.

Logan Mohtashami says

.. this is 50 years of major mandatory payouts to an older aging population that isn't going away like a one time spending war event

50 years? Are there going to be that many boomers living to 100? I don't think so.

YesYNot says

GDP growth

YesYNot says

100?

#1 I am using a model of growth than no one actually believes, not even myself that U.S. can achieve a 3% solid GDP Model for 40 plus years starting now

Out of all the data and math models

This is not only the easiest to calculate, it's so one sided because of the mandatory nature of things that it's mathematically irrelevant, there is no model out there that can pay out the entire U.S. debt off.

Not only that, every single recession we have from now out just makes the debt bigger and bigger because of the mandatory variable of the equation. I am not even counting any expansionary or much needed direct spending

The only chance for a yearly surplus is from 2016-2019, it gets harder to get a yearly surplus and just the net interest payments alone will be a trillion $ a year in 10 years

It's a

limf (x) = Sky
x-a

on debt

the notion that America can pay off all it's debt off with a back drop of no yearly surplus for 50 years.

I mean come on guys, there is easy math and then their is very easy math.

You would need to pull off 27 years of yearly surplus to even create a model of debt pay down with net growth at higher taxes on the middle call well north of 61% effective to even breath the conversation out .

So, not only is it impossible, just the notion of it, of paying down all the debt is actually funny. It's almost a joke model, how crazy due we need to get to do something that makes no sense economically

It is what it is

Have you run a model with money printing and 70s style inflation for 5-10 years?

Logan Mohtashami says

We have 100 Trillion Dollars in Financial assets in America

We are going to be fine here... Worry about Europe instead of the U.S.

I agree with its geopolitical and demographic advantage, but the financial assets vs the debt are not a reason to be bullish. Those assets were suddenly worth not much in 2008 and they can as easily leave the US as they are entering it (even the hard-to-move houses are mostly overvalued just because of the land). The US is currently a great insurance for wealthy people around the world, but that can change. But at least I can use your unbridled optimism next time the bailouts come along to advocate against them again. Not that it will help. Why did we need those bailouts then in the first place if those 100 trillion assets were just peachy sloshing around in 2008? We heard that some here said the world was going to end! ;)

tatupu70 says

Have you run a model with money printing and 70s style inflation for 5-10 years?

Everything you can imagine ....

The real crux of it and it's the issue of the world

Old mature economies are getting older and their mandatory payouts are exploding ... We haven't even hit the growth stage yet, we are still in it's infancy

Come 2024-2057, that's when the debt actually really grows, the debt payouts to government revenue models now weren't that bad, hence why the deficit is falling the last few years, but by 2019, it's starting its baby step. We couldn't get a surplus now .... it's not going to get easier past 2024....

We are going to get better demand growth in a few years with better demographics, but ... it pales to comparisons to the mandatory payouts that will happen

It's hard to come out with a 200 Million dollar yearly surplus let alone a 21 Trillion dollar surplus over time to pay the debt off ...

Older economies can't grow as fast as they used to + they're getting older = higher government payouts..

Nature is winning this game as she won really from the population boom of the 1920's

One of the major points I always stress is that a lot models don't have any recessions from now to 2060 ... and even with that there is no way to pay the debt down or any surplus years even

Any recessions now with a lack of revenue.... just grows the total debt much higher those years,

I wish I come up with something that could even give a 0.01% chance of the debt getting paid off, that would mean massive growth... But It's not realistic

Demographics economics are the real deal this century for older mature western economies...

I'm not suggesting paying it down. I'm suggesting inflating it away.

tatupu70 says

I'm suggesting inflating it away.

We might get better inflationary factors when our young Americans come into play in the next decade.... But, we aren't in any economic mode to create inflationary factors

Even the thesis of a infrastructure repair bill in itself shows the glaring issue. We just need to fix stuff, the build out thesis for a growing population labor force just isn't big anymore, we have already gone through that mega phase already.

Logan Mohtashami says

We might get better inflationary factors when our young Americans come into play in the next decade.... But, we aren't in any economic mode to create inflationary factors

That's even better then. If you don't think we'll create inflation, just print the deficit and be done with it.

tatupu70 says

just print the deficit and be done with it.

That is the game plan, we will have deficits always and they will grow bigger and bigger....

The bigger risk would be trying to pay the debt down, that would actually create economic damage...

It's one thing if the bond market went against you but highly unlikely in America, we have the biggest economy, biggest military and the reserve currency, we own it,

Speaking of Bonds.

"One hundred years of data says this is important. Only three times in the last 100 years have corporate bond yields declined going into a recession (1925, 1945, 2001). Twice, after rising into a recession, they have remained stable and declined only after the recession was over (1920, 1974). In the remaining 12 times, corporate bond yields peaked at some point during the recession and began to decline in its latter stages."

http://community.xe.com/blog/xe-market-analysis/importance-decline-corporate-bond-yields

Yes, there will be a contested convention. And it will be ugly.

. this is 50 years of major mandatory payouts to an older aging population that isn't going away like a one time spending war event.

payouts to the boomers is going to be one helluva stimulus program this decade and next.

These trillions aren't disappearing into a black hole, they're going right into the health sector and whatever else seniors spend the money on.

real (2015 dollars) gov't social benefits per working-age person

you think that's a headwind, I think it's a tailwind wrt the labor market and economic growth

this is up 50% since 2000 and is going up 50% from here

Fed printed $1.8T to buy stupid mortgages 2010-2014.

They can print $1.8T to pay off the UST in the SSTF as they are needed to be cashed out.

Bellingham Bill says

Fed printed $1.8T to buy stupid mortgages 2010-2014.

They can print $1.8T to pay off the UST in the SSTF as they are needed to be cashed out.

Are you serious here or are you joking?

We haven't even started the debt dance yet....

There is no mathematical way to pay the debt off any time this century ....

We will be luck to have any yearly surplus in the next 50 years let a lone have an extra 30 trillion dollars plus in revenue after expense

This isn't a tricky Algo model, here..... this is as simple as it gets

3 - 5 = -2

Nothing is going to change that, we will never reform entitlements nor will we raise taxes in any meaningful way... It is what it is ...

Logan Mohtashami says

Bellingham Bill says

Fed printed $1.8T to buy stupid mortgages 2010-2014.

They can print $1.8T to pay off the UST in the SSTF as they are needed to be cashed out.

Are you serious here or are you joking?

You're both right. The Fed did waste money on MBS and in general putting all kinds of bad debt on its balance sheet, but that will never change as there is no will to overcome this cronyism. In the light of this blunt corruption on the open it is clear that they don't care and will keep printing and accumulating federal debt, pretending that it "won't matter" and everyone just passes on the hot potato hoping it won't happen under their watch. But it will matter. Taking responsibility and not fucking over future generations is so out of the question because politicians only care about being re-elected and lining their own pockets and nobody wants to be the on explaining to their constituents on their watch that the piper will eventually have to be paid. Math simply is and doesn't care.

Logan Mohtashami says

Are you serious here or are you joking?

serious. We need to cash out around $1.8T of the $2.8T in the SSTF over 10-15 years.

$200B/yr is not a big deal if the Fed prints, but the 1% and their corporations will cry bloody murder if we raise taxes any more on them, despite:

And 1994 showed we can't raise taxes on the masses any more.

Gee, how to square this circle.

Bellingham Bill says

Gee, how to square this circle.

The debt is going to grow and as long as it doesn't create bad inflation, we will be fine. :-)

meh

That inflation will be coming back as the demand goes up.

Logan Mohtashami says

There is no mathematical way to pay the debt off any time this century ....

But consider this. Debt is a credit card, if you are in a hole it's never easy to pay it off. But we just got to do it. Liberals think that we can just inflate it away, but that won't work, because that'll inflate the debt just as bad, and we'll be back to square 1. The only way out is to do the hard thing, tighten the belt and spend less than you make. Simple solution there, just hard to do without discipline.

Well after Paul Ryan's speech right now, he is off the data line

Logan Mohtashami says

Bellingham Bill says

Gee, how to square this circle.

The debt is going to grow and as long as it doesn't create bad inflation, we will be fine. :-)

Maybe your career is fine until then and you will have enough funds to retire, but when SS funds run out in the 2030s if no radical cuts are implemented most people won't be "fine". The harm done to the economy by making necessary cuts now is a piece of cake (even 2008 was a piece of cake) compared to the cuts (30%) and tax hikes suddenly necessary when SS becomes insolvent. Can't stump basic math, it just is. How'd you fix it..

mell says

SS funds run out in the 2030s

Don't worry about this, they will simply borrower to cover the cost like everything else the government does :-)

Logan Mohtashami says

mell says

SS funds run out in the 2030s

Don't worry about this, they will simply borrower to cover the cost like everything else the government does :-)

But they won't get out of the trap of having to service the debt, even with a globally favorable (low) rate environment for interest they barely make a blip in reducing the deficit and keep growing the principal. Eventually the currency will become worthless if they keep borrowing/printing and they have to start selling hard assets - which is what they are already doing by converting whole coastal cities into foreign owner dominated territory. I don't count on seeing much of the SS money and so do many others, that's why you see them chasing yield in the market casino(s).

If the Brits can survive ... we easily can!

mell says

but when SS funds run out in the 2030s

The SSTF is supposed to run out then-- it was built up by boomer FICA over-contributions ~1984-2014 and needs to be cashed out for these peoples' retirements preferably starting around now (boomers were age 20 to 38 in 1984 and are age 52-70 now) and running for the next 20-odd years.

Demographically SS is fine and as long as the SSTF can in fact be run down to its statutory minimum of 1 year's outgo, currently $900B:

https://research.stlouisfed.org/fred2/series/W823RC1

I think going forward our population and wage base can support its payouts indefinitely. And if not, we can just raise the FICA rate.

6.2% didn't come down from Mt Sinai.

mell says

Eventually the currency will become worthless if they keep borrowing/printing and they have to start selling hard assets

I do agree that

http://www.bea.gov/newsreleases/international/intinv/intinvnewsrelease.htm

is rather troubling. $7.5T in the hole, though at least we've hit a bottoming here.

Bellingham Bill says

We didn't really pay down our ginormous WW2 debt either, but inflation took care of it for us in the 1970s.

Problem is, this time because of globalization (which was inevitable), it's hard to see that real wages will rise along with everything else, not that they did in the 70s, but it may be worse this time.

Logan Mohtashami says

If the Brits can survive ... we easily can!

Citing a high debt-to gdp-ratio during (almost) medieval and war times is not a really sound data point. The majority of countries with high debt-to-gdp in this (mostly) global peace era have significant problems. And even though they are not in the top-7 most indebted nations today Britain is certainly not the best place to live unless you're fairly wealthy.

Bellingham Bill says

I do agree that

http://www.bea.gov/newsreleases/international/intinv/intinvnewsrelease.htm

is rather troubling. $7.5T in the hole, though at least we've hit a bottoming here.

We have been selling our most popular hard assets (purposefully without the usual scrutiny for large transactions) to them, doesn't feel like a solid game plan though..

http://www.nytimes.com/2016/04/13/world/americas/canada-vancouver-chinese-immigrant-wealth.html?smid=tw-share&_r=0

FortWayne says

Liberals think that we can just inflate it away, but that won't work, because that'll inflate the debt just as bad, and we'll be back to square 1.

Idiot. THe debt gets paid off with dollars that are worth less than the ones that were borrowed. Interest rates will go up on debt that is rolled over, but all the debt that is getting rolled over these days in to 10 and 30 year notes and bonds is at micro interest rates.

I would go on. But why don't you take a finance course or something. THe government can borrow seemingly infinite dollars for 10 years at 1.8% and for 30 years (yes 30 years !) at about 2.6% .

No wonder were running big deficits.

mell says

The majority of countries with high debt-to-gdp in this (mostly) global piece era have significant problems.

Last thing I am worried about in America is a debt blow up, honestly, list of issues to be concern about, but America having a debt blow up shouldn't be one of them