patrick.net

SoCal Renter says

And so on. Forever

Well no. Because of the concept of compound interest (exponential growth), we would soon get to where the interest on the debt was greater than the defense budget. But obviously at some point way before then the full faith and credit of the US treasury would be gone.

It's a real problem, and the Keynesian idea that others have mentioned here is correct. That is the idea that the government lives within their means or even at surplus when the economy is booming, and engages in deficit spending in recessions. Although in practice it's overly simplistic and doesn't work. We spend too much when times are good, and our system does not have ways of forcing financial restraint. Further complicated by corruption and recent trends toward globalization and our need to somehow compete with rapidly growing developing economies who have labor costs we can not compete with.

People want to blame the Fed. By the way, do research on any part of that animation patrick posted today to see how accurate it is. That is, if you have too much time on your hands. People actually believe that stuff ?

marcus says

Well no. Because of the concept of compound interest (exponential growth), we would soon get to where the interest on the debt was greater than the defense budget. But obviously at some point way before then the full faith and credit of the US treasury would be gone.

Here we go again, doomsday in some obscure near-distant future. Not going to happen. No one can even provide an estimated date of this "collapse" in US faith and credit. Compound interest growing exponentially and overtaking all other spending will not happen.

charles1050 says

In response to Clarence 13X. I see no economic value of 15 million illegal aliens when there are 22 million unemployed Americans who could be doing the same work. Grossly overweight Americans need to cut their own grass, clean their own houses and pick their own fruit. In addition, the sale of illegal drugs that are grown south of the border is a very serious problem that costs the Federal government $$$$ to control.

Yep, I guess there really is no way to balance the budget without raising taxes.

There must be more cuts we could make to the military budget though; we spend so much more than anyone else. How about put a permanent cap on military spending such that it could never be more than the combined totals of the military budgets of the next three countries (that would be China + UK + France = 234b). That would get us a lot of the way there...of course we would no longer be able to unilaterally invade other countries but that's fine with me. We'd still be able to defend ourselves against any conceivable attack.

SoCal Renter says

marcus says

Well no. Because of the concept of compound interest (exponential growth), we would soon get to where the interest on the debt was greater than the defense budget. But obviously at some point way before then the full faith and credit of the US treasury would be gone.

Here we go again, doomsday in some obscure near-distant future. Not going to happen. No one can even provide an estimated date of this “collapse” in US faith and credit. Compound interest growing exponentially and overtaking all other spending will not happen.

That is correct. The markets will stop lending first.

PersainCAT says

bdrasin says

Yep, I guess there really is no way to balance the budget without raising taxes.

you COULD cut
$898B - Health care (medicare, medicaid)

$788B - Pensions (Social Security, government employee pensions, etc.)

Heh, ok, I guess if you keep SS/Medicare taxes but don't actually pay bennies, but that takes us deep into fantasy land. If you eliminated the programs you'd lose the tax revenue (which currently is more than they pay out).

I don't see how you can consider military spending an investment in the future. I see it as the opposite: it makes the future worse.

PersainCAT says

seriously though if u look at what jobs are lost cutting social security/pension u only hurt the old, they have great political clout but i doubt their loss of income would be as traumatic to the economy as say cutting defense

That is a pretty reality-challenged assertion to make.

The old are largely highly dependent on their health benefits and pensions. Cutting their social security is literally stealing their savings since everyone has had to put ~10% of their incomes into the program since 1984 and 6-7% since 1971.

Social security has built up a $2.6T fund of excess FICA contributions, not paying that back as benefits would be the greatest theft in history.

The old are also dependent on their health care. Not many people on medicare can afford current health care prices, so medicare is both improving the health of the elderly and also supporting health service incomes (and profits).

You pull the $900B/yr spending from health care and the US health system would utterly collapse.

i bet it would just slow/stop growth in that sector.

I don't think you understand that well how economies operate.

People who don't have money to buy something do not buy it. Producers can lower the prices if they have a producer surplus (and health providers certainly do) but this lower price results in lower profits, with secondary effects therefrom -- like less money health providers spend back into the economy via their consumption.

So that $900B/yr in health care expenditures has a much greater footprint in our economy than just the millions of health industry jobs supported by it.

Defense, too, supports millions of jobs, both within the DOD, its private contractors, and the communities servicemen, contractors, and private employees spend their money into.

Cutting any expenditure is going to be very very painful to any local economy thereby affected.

i see the DoD more of a jobs program then anything here

yes, it is, but the problem is that the DOD's output is not real-world wealth (something that satisfies human needs and wants) nor is much of it even wealth-preserving (like health care, which restores health to people).

Just having a "jobs program" does not give one a stable economy. We could be paying people to dig holes in the ground but that in the end is not sustainable either. What we need is an economy that can pay its way in the world -- producing the wealth that we trade for the wealth that we consume -- and our $500B/yr trade deficit is indicative that we do not have such a thing now.