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2016 U.S. Presidential Race Megathread Mark 2.
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Suryavarman wrote: »The cost of servicing debt as a proportion of GDP has actually fallen since 2008. The level of debt in nominal terms or as a % of GDP is irrelevant. The only thing that matters is the Government's ability to service the debt. The US Federal Government is better able to service the debt now than it has been able to in decades.
Yes, because of near zero interest rates, not something that has been done before.
Nobody really knows the long term repercussions of this as we are in uncharted territory. Fiscal conservatives have given up stating the obvious that current interest rates is unsustainable long term and that the economy needs long needed reform, rather then just spending like a crack addict to paper over the cracks and make the S&P 500 look good.
It is annoying that even here people are still so partisan. When Bush had huge deficits, progressive organisations like moveon.org made big noises about it. Republican groups stayed silent. Then when Obama came to power spent about $7 Trillion, the likes of moveon.org stayed silent while Republican groups made noises. Both sides like to spend money when in power and blame the other when not in power.
But its impossible to have a reasoned debate about this, even here, as people see someone pointing a hole in their argument as an attack on their 'party' and respond with the usual tit for tat stupidity we see in the US media. Just look at the response from Brian? to me when I just point out a rather obvious flaw in his initial statement, which he latter admitted. "But Bush.... But Reagan...." :rolleyes:
So, yea Bush spent lots of money, so did Obama. I point the finger at both and hold their parties and mostly their supporters responsible. Someone should be able to point at Obama's policies and criticise them without being told they are closet GOP supporters.0 -
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Yes, because of near zero interest rates, not something that has been done before.
Nobody really knows the long term repercussions of this as we are in uncharted territory. Fiscal conservatives have given up stating the obvious that current interest rates is unsustainable long term and that the economy needs long needed reform, rather then just spending like a crack addict to paper over the cracks and make the S&P 500 look good.
It is annoying that even here people are still so partisan. When Bush had huge deficits, progressive organisations like moveon.org made big noises about it. Republican groups stayed silent. Then when Obama came to power spent about $7 Trillion, the likes of moveon.org stayed silent while Republican groups made noises. Both sides like to spend money when in power and blame the other when not in power.
But its impossible to have a reasoned debate about this, even here, as people see someone pointing a hole in their argument as an attack on their 'party' and respond with the usual tit for tat stupidity we see in the US media. Just look at the response from Brian? to me when I just point out a rather obvious flaw in his initial statement, which he latter admitted. "But Bush.... But Reagan...." :rolleyes:
So, yea Bush spent lots of money, so did Obama. I point the finger at both and hold their parties and mostly their supporters responsible. Someone should be able to point at Obama's policies and criticise them without being told they are closet GOP supporters.
From 2004 to 2008 the debt was becoming more expensive to service. Whereas it has continuously fallen since 2011 and is cheaper to service relative to GDP than it has been at any time since 1973. So it is reasonable for someone to criticise Bush for his deficit but not criticise Obama.
And although there is still a deficit, nominal GDP is increasing faster than the debt. This means that debt as a % of GDP is beginning to fall. This in turn means that when interest rates begin to rise the Federal Government should be able to cope with those increasing rates.
In the short term both the debt, deficit and interest payments are completely irrelevant. What matters is the fiscal situation in the long-term i.e. 2040+. Current long-term projections are terrible, although they are nowhere near as bad as they are in European countries. To improve those projections serious entitlement reform needs to be implemented, sadly neither Clinton nor Trump are proposing such reforms. Likewise Obama hasn't made any serious proposals to tackle these issues and even heavily criticised Paul Ryan's moderate proposals. For that Obama does deserve to be criticised.
For Obama's short term policies such as Obamacare and the stimulus he deserves a huge amount of credit. Obamacare has led to reduced healthcare inflation and less people without health insurance. The stimulus, combined with the aggressive monetary policies of the Fed, has resulted in America having the strongest recovery of any Western nation following the financial crisis. To criticise Obama for the increase in the debt over the last eight years is ridiculous when that debt was accumulated to successfully avert a second Great Depression.0 -
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Suryavarman wrote: »From 2004 to 2008 the debt was becoming more expensive to service. Whereas it has continuously fallen since 2011 and is cheaper to service relative to GDP than it has been at any time since 1973. So it is reasonable for someone to criticise Bush for his deficit but not criticise Obama.
Well of course the primary reason for this is that rates were at 0% for a record extended period of time. It is cheap to service debt when there is hardly any interest on it. Interest rates cannot get lower and they can only go one way. I think we both agree with that.Suryavarman wrote: »And although there is still a deficit, nominal GDP is increasing faster than the debt. This means that debt as a % of GDP is beginning to fall. This in turn means that when interest rates begin to rise the Federal Government should be able to cope with those increasing rates.
Not sure what graphs you are looking at but all the projections from the White House & CBO going forward is that it is going to rise quite substantially. I also noted that your graphs ended in 2016 and 2015 respectively. Do you care to share projections a few years from now
Interest payment on the debt was $200 Billion in 2014 and is projected using White House & CBO figures to be close to $800 Billion within 8 years.
That is a lot of coping the US taxpayer will have to do in the next number of years.Suryavarman wrote: »To criticise Obama for the increase in the debt over the last eight years is ridiculous when that debt was accumulated to successfully avert a second Great Depression.
Well that is a chicken and egg scenario. Some people will say that Obama had to spend $7Trillion to stave off a Depression, others will say that it just papered off the cracks as much of it was wasted. Very little reform actually occurred and there was no real investment in the US to upgrade its infrastructure to modern standards. I just think he took the easy option and it will come back to haunt the US. History will judge in time and I do not think it will be as kind as some think.0 -
Manic Moran wrote: »Given that this month's epi-pen saga has demonstrated just how much Obamacare has actually led to US healthcare being more affordable (i.e., basically nothing at all), I'm not convinced it has helped much in the reduction of relative spending on healthcare.
Inflation slowing down doesn't mean that there aren't spikes in the price of one particular good. Although healthcare inflation might still be high, it is still slower than the US is used to. Admittedly this seems to be due to general price inflation being lower as you pointed out. The most important thing is that number of uninsured has been declining rapidly which was Obamacare's main goal anyway.
The US may have had the strongest recovery, but did it also have the furthest to recover?
No.What worries me a bit about the current ultra-low interest rates is that it doesn't seem that the Fed has kept anything in reserve. We've been on a recovery track for a while, but what's left in the magazine if there's some reverse? I'd almost feel better if they decided to go up a quarter.
There's no reason to increase interest rates at the moment. Inflation is still anemic and nowhere near target. If the economy dips into recession again the Fed can try negative nominal rates or even a helicopter drop. There is still fuel left in the tank, unconventional though it might be.0 -
Well of course the primary reason for this is that rates were at 0% for a record extended period of time. It is cheap to service debt when there is hardly any interest on it. Interest rates cannot get lower and they can only go one way. I think we both agree with that.
Interest can go lower. They are lower in a number of countries, there's no reason to think they can't go lower in the US too.Not sure what graphs you are looking at but all the projections from the White House & CBO going forward is that it is going to rise quite substantially. I also noted that your graphs ended in 2016 and 2015 respectively. Do you care to share projections a few years from now
That is a lot of coping the US taxpayer will have to do in the next number of years.
You could have saved yourself the effort of digging up all those graphs by reading the note on the very first graph which states that interest payments will amount to 2.6% of GDP over the time period. That might seem high but it's lower than it was from the early 80s until the late 90s and it is lower than it has been in Ireland the last few years. It's completely manageable for a country that collects as low a percentage of GDP in taxation as the US.Well that is a chicken and egg scenario. Some people will say that Obama had to spend $7Trillion to stave off a Depression, others will say that it just papered off the cracks as much of it was wasted. Very little reform actually occurred and there was no real investment in the US to upgrade its infrastructure to modern standards. I just think he took the easy option and it will come back to haunt the US. History will judge in time and I do not think it will be as kind as some think.
There is no real need for reform in the US at the federal level apart from entitlement spending. It isn't like Europe where labour markets are in dire need of reform. As such there was no real papering over of cracks. Fiscal and monetary stimulus was what was needed.
The stimulus should have been bigger with a greater emphasis on infrastructure spending but just because it wasn't doesn't mean that it was wasted.0 -
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Suryavarman wrote: »Interest can go lower. They are lower in a number of countries, there's no reason to think they can't go lower in the US too.
Yes, negative interests long term is a sure healthy sign of an economy.
If that is the basis of your argument in regards American macro economics then I am not sure you advancing your position all that well.
Zero interest rates is unsustainable, never mind experiment with negative interest rates. If we have reached that level of parlance its a much more broken system then I though initially.Suryavarman wrote: »You could have saved yourself the effort of digging up all those graphs by reading the note on the very first graph which states that interest payments will amount to 2.6% of GDP over the time period. That might seem high but it's lower than it was from the early 80s until the late 90s and it is lower than it has been in Ireland the last few years. It's completely manageable for a country that collects as low a percentage of GDP in taxation as the US.
That assumes that half the decade has near 0% interest rates... Again, serving debt will be cheap with interest rates like that.
Interest payments in 2014 was around $200 billion
They are projected to be $800 billion in 2022.
That is a four fold increase. I do not think the economy is going to grow by that amount
Interest payment in terms of overall GDP in 2026 will break the previous record. And to add fuel to the mix debt to GDP will be about double from that recorded date.
Medium term views are even more dire.Suryavarman wrote: »There is no real need for reform in the US at the federal level apart from entitlement spending. It isn't like Europe where labour markets are in dire need of reform. As such there was no real papering over of cracks. Fiscal and monetary stimulus was what was needed.
That is kinda saying when a house is engulfed in flames that the house is sound apart from the fire burning it down.Suryavarman wrote: »The stimulus should have been bigger with a greater emphasis on infrastructure spending but just because it wasn't doesn't mean that it was wasted.
So what did $7 Trillion buy?0 -
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