$50,000,000,000,000 federal debt by the time Biden (or Harris) leaves office?

Discussion in 'Political Discussions' started by SpoonyNix, May 11, 2021.

  1. SpoonyNix

    SpoonyNix Active Member

    It's at roughly $28T now. Debt to GDP is around 125%.

    20-year treasury = 2.20% on 03/10/21.

    Federal debt would have to increase by 78% over just four years to hit $50T. I was going to bring up the possibility back in January, but thought "nah, that's pushing it". But I was just looking at some spreadsheets I created and by my calculations fed debt increased in '08-'11 by 11.3%, 18.8%, 13.9%, and 9%. So, perhaps $50T isn't such a stretch.

    Nothing particularly significant about $50T, it's just a big milestone. Just like 100% debt-to-GDP was a milestone. Perhaps it's apples to oranges, but Japan has 225% debt-to-GDP.

    What do you think?
  2. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    Maybe. The U.S. Debt Clock projection shows $50T in four years: https://www.usdebtclock.org/current-rates.html

    One thing is for sure, though: now that they're out of power, Congressional Republicans will resume pretending to care about this.
    Dustin likes this.
  3. SpoonyNix

    SpoonyNix Active Member

    Cool! I didn't know the site had a time machine feature :D

    So, you think fed-level Republicans will give SERIOUS pushback on spending proposals? I largely assumed they wouldn't. I don't know a whole lot about the two-party dynamics anymore (not since pre-2000 really).... thought there wasn't all that much of a difference between the two. Are you a fan of the Democratic Party?
  4. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    ROFL, of course not.

    ROFL, of course not.
  5. nosborne48

    nosborne48 Well-Known Member

    No one seems to know what will happen in the face of this gigantic increase in the national debt. Historically, and I mean even in very recent history, we would have seen inflation and higher interest rates. I remember the '70s folks. It CAN happen here and in U.S dollars. But no. Interest rates drag along the bottom, even going negative in real terms, and the Fed is struggling to meet its inflation goal of about 2%. Deflation seems to be the greater threat.
  6. nosborne48

    nosborne48 Well-Known Member

    Meanwhile, the Fed has not the slightest difficulty peddling its paper at scary low interest rates. As of today, the prime rate is 3.25% , the lowest since 2008. I remember in my childhood that passbook savings accounts paid 4% and had done so for so long that Peanuts even referenced it. Ten year Treasuries return 1.62% as of today. That's not a sign of incipient inflation folks.
  7. nosborne48

    nosborne48 Well-Known Member

    I remember howling in protest when Dick Cheney said, "Deficits don't matter." Come to find out, maybe (?) they don't after all? I have a very hard time wrapping my head around that idea.
  8. nosborne48

    nosborne48 Well-Known Member

    For contrast, in December 1980 the prime rate hit an all-time high of 21.5%. I remember those days all too well. Mortgages at 36% and kept there only by usury laws, since repealed. Serious inflation is a terrifying thing. Inflation hit 13% at the end of Carter's single term. You saw your savings disappear along with your purchasing power and it all seemed to have no end. Even my very conservative father started talking about a currency re-issue. It was bad and it looked like getting worse.

    Then Paul Volcker came along.

    But at least the monetary situation was understandable in those days. I'm completely confused by what's happening now and I'm in pretty good company it seems.
  9. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    My understanding is that a lot of those dollars are being soaked up by the stock market, the real estate market, and foreign countries whose currencies are weaker than the U.S. dollar, and that the pandemic has suppressed demand. But that strikes me as being a sugar high, not real growth.

    At the same time, I've been in the libertarian movement for nearly thirty years and have heard about the imminent collapse of the dollar that whole time, so while I can't imagine the money machine can go brrrrr forever without a significant correction in purchasing power, I'm also wary of short term predictions.

    And if that sounds like a fancy-pants way of saying that I'm completely confused too, then so be it. ;)
  10. nosborne48

    nosborne48 Well-Known Member

    Well, I'm in no position to throw any rocks at anybody with an opinion on the subject.
  11. nosborne48

    nosborne48 Well-Known Member

    I read an article that suggests that the reason we're not seeing inflation is that the velocity of money has slowed down. I think that's in accord with Steve Foerster's opinion. Does that mean that the current situation may turn unstable at any time? There's no sign of it.
    SteveFoerster likes this.
  12. SpoonyNix

    SpoonyNix Active Member

    Yup. These are fascinating times.

    Using numbers from the site above:
    On this day in 1980, interest on debt was $48.8B. Over federal debt of $884.4B = 5.518%
    Currently, interest on debt is ~$398.9B. Over federal debt of $28,296.9B = 1.041%

    Looks like usdebtclock's projection of $50T in 2026 assumes a debt service of less than 1%. That's, uh, pretty interesting.

    Interesting that you (nosborne48) brought up your father's talk of currency re-issue back in the day. I've read several books and dozens of articles from U.S. financial authors from the 70's. Doom and gloom stuff. Surprisingly, (to me) currency re-issue doesn't come up much. I think about Argentina in more recent times, and its chopping 0's from purchasing power. That's what I am expecting here in the U.S.
    SteveFoerster likes this.
  13. SpoonyNix

    SpoonyNix Active Member

    Yeah, hard to make heads or tails of this one.

    I think one could make a good argument that tech and energy availability are a big factor in keeping prices down. Being the major reserve currency also helps. How important are JIT inventory systems in keeping consumer prices lower? And other tech efficiencies?

    GDP growth is quite low, official price inflation is pretty low (I don't think US BLS CPI is the best, but eventhe numbers I consider better aren't so bad), government-stated unemployment numbers remain low.

    Federal debt very high, interest rates are low, trade gap is pretty high, money supply is rididulously high, real estate is high, P/E ratios in the major U.S. exchanges are very high.

    Just an odd mix.
    Last edited: May 17, 2021
    SteveFoerster likes this.
  14. nosborne48

    nosborne48 Well-Known Member

    In the face of low growth, is raising the corporation income tax rate a good idea? I don't know. If things are stable it might be better to leave them alone?
  15. SpoonyNix

    SpoonyNix Active Member

    Is raising corporate taxes a good idea? No, probably not. Depends on what your desired outcomes and objectives are.

    If you want to actually increase tax revenue or help people, it's an exceedingly lame and ineffective way to do it. If you are doing it because you think it's a good PR move, yeah, seems effective. If you change the code in a way that actually benefits your donors and supporters, but that point doesn't come out to the general public, well, that's worked pretty good SO far.

    Look, you gotta win points doing something, right? You are NOT going to win votes by cutting spending.
  16. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    I realize this is politically infeasible, but I've always thought that was a redundant tax to begin with. It's not like corporations are really the ones ultimately paying it, shareholders and employees are. It would be much more efficient to eliminate it entirely and make up any revenue shortfall through the top personal income bracket or capital gains tax. Doubly so in that the convoluted tax code artificially picks winners and losers.
  17. cacoleman1983

    cacoleman1983 Active Member

    Well debt is money and money is debt. Someone has to be rich in order for someone else to be poor and vice versa. The problem is not debt or money, the problem is rather or not it is being allocated to beneficial things for the collective.
  18. SpoonyNix

    SpoonyNix Active Member

    We agree


    cacoleman1983 likes this.
  19. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    I thought I'd throw this chart in here since I ran across it and it's on topic.

  20. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    Heh, that's what "collective" brings to mind for me, too. It's amazing how many bad ideas could be precluded by remembering that the ultimate unit of action and consequence is the individual.

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