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<p>You should be questioning what they are teaching…I wonder how they feel about the national debt…</p>
<p>If the economy grows, the economy can handle higher interest rates.</p>
<p>Inflation makes the existing debt easier to pay, so it depends on where interest rates are.</p>
<p>If the deficit increases at a level less than gdp growth, the country can handle the deficit.</p>
<p>If you look at what happened after ww2 and the great depression, the country had large deficits and a large debt. The following decades, taxes went up, but the economy was strong and we had inflation, and the debt compared to gdp collapsed. This was with rising interest rates. </p>
<p>[interest</a> rates over the last 70 years - Google Search](<a href=“interest rates over the last 70 years - Google Search”>interest rates over the last 70 years - Google Search)</p>
<p>[The</a> Long Story of U.S. Debt, From 1790 to 2011, in 1 Little Chart - Matt Phillips - The Atlantic](<a href=“The Long Story of U.S. Debt, From 1790 to 2011, in 1 Little Chart - The Atlantic”>The Long Story of U.S. Debt, From 1790 to 2011, in 1 Little Chart - The Atlantic)</p>
<p><a href=“http://inflationdata.com/Inflation/Inflation/DecadeInflation.asp[/url]”>http://inflationdata.com/Inflation/Inflation/DecadeInflation.asp</a></p>
<p>Do you folks think that with the demographics in the US, a more mature economy that will grow more slowly (as among other things - boomers will spend less as they retire) and increased foreign competition that growth will be as strong as after ww2 and after the depression?</p>
<p>No, but does growth have to be as strong?</p>
<p>The explanation I got (if I translated it correctly), is that debt doesn’t matter as long as inflation is low. That it is always a balancing act between debt and inflation, that theoretically we could just print (or add zero’s to the computer balances, if that’s what they actually do) to pay off our debt. But then inflation would go crazy because the value of the dollar would decline so greatly. That if inflation starts to go up, then that’s when we really have to start worrying about the debt…ie, if inflation is just around the corner than you need to start paying down the debt. If you can borrow money at next to nothing and invest it in things that bring greater value (because apparently everything has a value assigned to it), than it is worth it. If it cost more to borrow, then you need to stop borrowing.</p>
<p>So it sounds to me like lerkin’s point, based upon this viewpoint, is correct. Depending upon when inflation is going to hit.</p>
<p>It depends…</p>
<p>On the rates…And inflation…</p>
<p>If real interest rates are negative…it is ok to borrow…</p>
<p>A little inflation can make things easier to pay down the debt.</p>
<p>A lot of inflation may be a problem.</p>
<p>" If you can borrow money at next to nothing and invest it in things that bring greater value (because apparently everything has a value assigned
to it), than it is worth it."</p>
<p>And this is what is happening…</p>
<p>We can borrow for next to nothing…</p>
<p>We don’t have this big inflation yet. When the velocity of money increases in society, the government has to print less money or we can have lots of problems.</p>
<p>That is going to be key.</p>
<p>We aren’t there. Your son knows that. That is why he isn’t worried. Yet.</p>
<p>Lerkin’s point is too vague. What is exponential? We aren’t there. Look at the rates. Look at inflation. The federal government’s borrowing costs are very low.</p>
<p>Hopefully the deficit’s growth will never get exponential. The deficit is declining.</p>
<p>We should be running larger deficits when the economy implodes…and the economy imploded. Look at gdp in 2008. </p>
<p>Here is gdp at the end of 2008…it was collapsing…</p>
<p><a href=“http://www.bea.gov/newsreleases/national/gdp/2009/gdp408p.htm[/url]”>http://www.bea.gov/newsreleases/national/gdp/2009/gdp408p.htm</a></p>
<p><a href=“The Long Story of U.S. Debt, From 1790 to 2011, in 1 Little Chart - The Atlantic”>The Long Story of U.S. Debt, From 1790 to 2011, in 1 Little Chart - The Atlantic;
<p>“The great recession was the perfect storm to blow debt-to-GDP ratios skyward. GDP tumbled. That means that even without a spending increase, debt-to-GDP would have jumped sharply. Moreover, government revenues shrank to their lowest level since 1950 – as a percentage of GDP – because business activity declined; that meant that debt levels would have to rise, even without spending increases.*And there were indeed spending increases. For instance, in 2009, outlays increased to more than 25% of GDP, the highest level since World War II…”</p>
<p>Well… I don’t have economics degree even from Podunk University, so I don’t know if the deficit is rising exponentially. </p>
<p>However, from what I read even in the “liberal” media, US has too much deficit and we need to raise revenues to pay for it and/or cut our spending. So, I make a conclusion that the deficit is rising a bit too much and we should control is.</p>
<p>I believe we already went over whether or not there is enough money in US that the government can take away from private citizens, so let’s not rehash that argument. I think we should agree to disagree. </p>
<p>However, I do want to make a point that, from what I’ve read, in order for us to continue borrow at low rates we have to continue kissing China’s behind, which is unbecoming of the greatest nation in world. Once again, I don’t have any degree that remotely deals with economics, so I might be wrong, but that is what I read here and there.</p>
<p>Also, I actually lived through inflation (in another country), and as I already mentioned that was not fun. My parents lost everything (which was proceeds from the sale of my late grandfather’s house that they had in their savings account) seemingly overnight. During my childhood my parents only withdrew a little bit of money once a year from that account (to take us on vacation). These were the money for rainy day and when it started raining the money were not worth the paper they were printed on. Having lived through that I am freaking out about my future and the future of my children, when I read news.</p>
<p>^ good post Lerkin</p>
<p>I can see why reading about all this would be alarming, after your parents experience. The experts say this and that, but most of them sure didn’t predict the last meltdown. That is a good post.</p>
<p>“We aren’t there. Your son knows that. That is why he isn’t worried. Yet.”</p>
<p>But even he has his money in inflation adjusted bonds.
It does not seem wise to wait to start taking care of a potentially massive problem.</p>
<p>Why the big push to raise revenue if there is no need to pay of the debt yet?</p>
<p>^ Well that’s the million dollar question. Personally, I want to see the economy start to roar again and then I don’t think we will need to worry on the deficit. The question is how to get it to roar.</p>
<p>Hey, I did my taxes for real this morning because DH go his last pay stub for 2012 and I am quite pleased - about $500 back from feds and $5,000 back from New Jersey. (Have set his state deductions to maximum allowed and STILL we get a refund in this crazy state.)</p>
<p>Also visited your Tax Foundation site, Busdriver, and it was aligned with what turbo is telling me.</p>
<p>That’s great news, sewhappy. So news is not all as bad as it seems. Unless of course, you were withholding too much by a longshot! Good to know that that tax foundation site was accurate. </p>
<p>But wait, the tax hike doesn’t hit 2012 income, so hopefully next year you will have the same result. I am very impressed you did your taxes on Jan 3rd. I won’t do mine till October, can’t stand to.</p>
<p>Pease isn’t an acronym. Donald Pease was the Congressperson who came up with the idea of limiting itemized deductions.</p>
<p>^ I know. But PEP is. And I love PEAS – as in “You shut up and eat your peas!!”</p>
<p>It just makes me laugh.</p>
<p>Okay, so I plugged my 2012 numbers in terms of income and deductions into the 2012 turbo (obviously) AND into the Tax Foundation site. They came out very, very close. So that tells me that either the PEAS and PEP aren’t so bad or the PEAS and PEP aren’t incorporated into the site calculator.</p>
<p>The payroll tax burden is different story. No way to sweeten that one. It will be felt.</p>
<p>^^Okay, good. For a second I was thinking, oh crap, they made this retroactive!</p>
<p>True, the payroll tax burden is a hit for everyone. I always objected to that tax holiday, because once you lower/get rid of a tax, good luck getting it back. And the reality is, we need to pay for social security.</p>
<p>Why raise revenue now? </p>
<p>Politics, mostly. </p>
<p>We also have a large inequality of wealth and income in this country that hurts the economy and should be addressed.</p>
<p>A little more revenue is ok. If the country taxes the wealthy a little more, a little, and if money gets into the hands of the middle class and lower class, the economy will grow more. There is a multiplier affect. Your son will know what I am talking about.</p>
<p>This fiscal cliff plan isn’t going to do much.</p>
<p>We do need to get more revenues. We are under taxed. So…on that point…the fiscal cliff plan is a step in the right direction. Maybe, 500 billion a year more in revenues would be great, but not all from tax increases.</p>
<p>The government is not done yet with the fiscal issues. There are going to be more tax increases and spending cuts coming.</p>
<p>If we had single payer, we wouldn’t have to cut so much. Long term fiscal issues are because of health care.</p>
<p>Because busdriver11, you are such a fiscal conservative ;), I know you are in favor of getting our tax system more aligned with spending, reduced spending. That means tax increases. And I am sure you want to have a more efficient health care system in the US.</p>
<p>Why is your son in inflation bonds? Did he lock in a return below inflation?</p>
<p>He is in Vanguard Inflation Protected Securities. The description is: </p>
<p>“This fund is designed to protect investors from the eroding effect of inflation by investing in securities that seek to provide a “real” return. The fund invests in bonds that are backed by the full faith and credit of the federal government and whose principal is adjusted quarterly based on inflation”</p>
<p>We have a good percentage of our money in this also, and over the long and short term, it has done pretty good. Even without much inflation.</p>
<p>Wow, Fed just issued minutes - several members would like end of Quantitative Easing by the end of 2013.</p>
<p>Dow has fallen 40 in less than 10 minutes.</p>
<p>10-year Treasuries up 4 basis points in a few minutes to 1.90%.</p>
<p>Any other professionals multitasking and also watching this on their Bloomberg screen?</p>
<p>So we’re raising revenue to address inequality and wealth (those evil rich are taking the shoes off of poor people in the street, I just know it), and pretending it’s to pay down the debt? Or am I putting words in your mouth?</p>
<p>The fiscal cliff bill didn’t have any spending cuts, did it?</p>
<p>Dadinator, now I’m going to have to turn on the tv to watch the crash.</p>