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The following comes from Wikipedia, so you can feel free to ignore it right now, but it would be nice if you presented other sources in that case.

I have made comments in several comment threads that I don't think we should be engaged in a policy of permanent federal deficits. While I am opposed to a Balanced Budget Amendment, as I think the flexibility to have situational deficits is good, I am equally opposed to an unbounded federal debt under the theory that "The Federal Budget is not like your personal budget." It is not like my personal budget, as I cannot print my own money, but it's also not the case that being able to do so somehow repeals the basic rules of mathematics.

Continued after the Orange Squiggle of Power

Here is the summary information from Wikipedia:

The United States has had a public debt since its founding in 1791. Debts incurred during the American Revolutionary War and under the Articles of Confederation amounted to $75,463,476.52 on January 1, 1791. From 1796 to 1811 there were 14 budget surpluses and 2 deficits. There was a sharp increase in the debt as a result of the War of 1812. In the 20 years following that war, there were 18 surpluses and the US paid off 99.97% of its then debt.[citation needed]

Another sharp increase in the debt occurred as a result of the Civil War. The debt was just $65 million in 1860, but passed $1 billion in 1863 and reached $2.7 billion by the end of the war. During the following 47 years, there were 36 surpluses and 11 deficits. During this period 55% of the national debt was paid off.

The next period of major increase in the national debt took place during World War I, reaching $25.5 billion at its conclusion. It was followed by 11 consecutive surpluses and saw the debt reduced by 36%.

Since WWII we have never had a surplus (with the possible exception of a brief period during Clinton's presidency, depending on whose numbers you believe), and the total debt outstanding has increased at a literally exponential rate, which is not sustainable.

The only two solutions I can see to paying down most of the debt (thus freeing up interest payment funds for useful social programs) is to either repudiate the debt (highly unlikely, despite what S&P says) or inflate the currency such that the nominal debt is affordable. The ability to inflate your way out of it is what makes the federal deficit different from your personal budget, but not unlike declaring personal bankruptcy you are going to find people less willing to lend you more money after either event.

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Comment Preferences

  •  Not sure how to edit my own diary (0+ / 0-)

    so I'll just point out that the part of the diary that comes from Wikipedia is the historical debt level numbers, not the rest of the material, for which I take responsibility.

  •  You forgot an option. (4+ / 0-)
    "The only two solutions I can see to paying down most of the debt...is to either repudiate the debt...or inflate the currency..."

    There's another way. We can raise taxes on the wealthy. We can tax capital gains as ordinary income. And we can cut corporate welfare.

    This will enable us to pay off the debt with ease.

  •  debt and deficit are not the same thing (7+ / 0-)

    You seem to be confusing debt and deficits. The US ran a surplus during the Clinton years, but we most certainly still had a debt.

    Do you have a home or car mortgage? If so you have a debt. Are you behind on the mortgage payments? If so you have a deficit.

    The US government (or any government) is not like an individual. An individual goes through school, becomes an adult, has his prime earning years, and then he retires and eventually dies. It obviously makes sense for an individual to incur a debt in order to further his earnings, and to finish paying off those debts before he retires. However Uncle Sam is not a person. Uncle Sam is a creature that lives forever. As such there is no particular reason that Uncle Sam has to pay off all his debts at any given point in time. As long as the debt is not growing faster than the revenue- there is no problem.

  •  Don't confuse "deficits" with "debt" (5+ / 0-)

    Permanent deficits are not good, as they put threaten to put the nation into an unsustainable level of debt.

    But debt is not a bad thing in and of itself, as long as it is kept at a sustainable level. In fact, many economists (most notably Krugman) point out that without some debt, there would be no treasury bills to invest in.

    I vote we run Rick Scott out of Florida on a high-speed rail.

    by ObamOcala on Mon Nov 28, 2011 at 04:56:19 PM PST

    •  debt is a normal part of doing business (2+ / 0-)
      Recommended by:
      ManhattanMan, Odysseus

      McDonalds = 18 billion in debt
      Apple = 40 billion in debt
      Microsoft = 48 billion in debt
      Comcast = 74 billion in debt
      Goldman Sachs = 833 billion in debt

      A quantity of debt doesn't mean anything in and of itself for an entity's health, it only has a meaning in relation to the entity's assets.

    •  I'm pretty sure I understand the difference (0+ / 0-)

      My whole point in writing this diary is to distinguish between the fact that while we might in fact be in debt forever, we cannot be in deficit forever.

      Note that when the interest on the debt gets to the point that it matches the GDP of the country no amount of taxation is going to allow you to ever pay it down; you are forced to borrow money just to pay the interest, and that only works as long as somebody is willing (or forced) to loan you the money.

      So, while I agree that we need to look at either or both of cutting spending and raising revenues, stating that it's OK to just keep running annual deficits forever is just not sound in my opinion.

  •  The Deficit is uncomfortably large, but... (3+ / 0-)
    Recommended by:
    kyril, FrostyKotex, ManhattanMan

    ...as soon as a GOP POTUS is elected, we'll be assured that "Deficits don't matter."

    As ManhattanMan suggests, we have the means to get the debt under control. We need to increase the deficit in the short term. How long is short term? The next 4-6 years or until U3 is under 6%, whichever comes first. The rest of the world (via our current cost of borrowing) seems to believe "we're good for it," and if we spend it on the right things (Infrastructure, Basic Science, stabilizing employment of state and local governments, etc.) it will be "good debt." The fact that we took on a great deal of "bad debt" (two Military Occupations kept off the official budget, but money still spent, tax cuts for the wealthiest of our citizens, etc.) shouldn't deter us from rejecting the Austerity that all the Very Serious People insist upon.

    Occupy Wall Street AND K Street!!!!

    by Egalitare on Mon Nov 28, 2011 at 04:56:45 PM PST

    •  Widespread job creation drives U3 down (1+ / 0-)
      Recommended by:
      Odysseus

      When employers have to compete with each other we get wage growth.

      This means more FICA, making SS good way longer than were told. Maybe even thru 2085.

      Alex, I'll take jobs stimulus for 1.5 trillion

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Mon Nov 28, 2011 at 07:48:45 PM PST

      [ Parent ]

    •  Disagree about needing to increase the deficit (0+ / 0-)

      Even if you are 100% convinced that federal spending is the best way to create new jobs, that does NOT mean that you have to increase the deficit to accomplish that.

      All budgets (and economics in general) are a set of decisions about priorities. If we think that creating new jobs is important then we need to grow a spine and cut spending in other areas to make that possible (or raise taxes to pay for said spending).

      For example, a huge portion of the costs of our various wars is the price of petroleum to enable all our Shiny Weapons to keep working. Since we are net importers of oil, much of that spending does little or nothing to create jobs in the US. Hence, if we stopped burning foreign oil on foreign soil, we'd spend fewer dollars without having any negative impact on domestic spending/job stimulus.

      The fact that we refuse to make such decisions and instead just say "We need to run deficits during an economic downturn" without asking what LEVEL of deficits are sensible is just madness.

  •  Stop Electing Republicans. By the Time Reagan (1+ / 0-)
    Recommended by:
    FrostyKotex

    left office, most the debt of our entire history was added by him. Bush The Lesser did the same general thing.

    Take those 2 out of the equation and there is no important problem.

    That of course means returning to protecting the people by properly taxing the upper incomes, and protecting the national economy from being pillaged by the global economy by managing our trade with tariffs.

    Nothing that hasn't been proven for years on end by the Democratic Party.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Mon Nov 28, 2011 at 05:11:31 PM PST

    •  No argument here (0+ / 0-)

      However, unless you are going to produce a time machine to allow us to go back to the end of the Carter administration and do it differently, we have to deal with the situation we're in now. The size of the annual interest on the debt (at historically low interest rates) is no longer a trivial line-item in the budget, and unless we do something to bring that down we will have less real wealth available for future investment. To the extent that this interest is being paid to foreign holders, we are shipping our national wealth overseas and getting exactly nothing in return - not even plastic crap to stock the shelves at Wal-Mart with.

  •  Distinguish between nominal and real. (0+ / 0-)
    I have made comments in several comment threads that I don't think we should be engaged in a policy of permanent federal deficits.

    For small deficits, particularly ones smaller than the GDP growth rate or the inflation rate, you have no point.  Small deficits can be run forever with no problems whatsoever.

    For large deficits over multiple years, you have a point, but don't overdo it.

    -7.75 -4.67

    "Freedom's just another word for nothing left to lose."

    There are no Christians in foxholes.

    by Odysseus on Mon Nov 28, 2011 at 09:59:54 PM PST

  •  The 14th Amendment (0+ / 0-)

    makes it unconstitutional to refuse to repay legitimate federal debt.  Inflation based reduction of debt reduces wealth overall about as badly as repayment does.  Short version: the best course of action in the long run is repayment.

    There are practical upper limits on how much debt to build up.  Simply put, the interest payments become intolerably large and interest rates go up with the reduced prospects of eventual repayment.  In times of war these are of necessity ignored for the time being.  In peacetime the practical upper limit on top level (i.e. federal) government debt before things get dicey and dysfunctional is about 1-1.5 annual national GDP equivalents.

    Federal debt has usually reflected the cost of wars.  The post-WW2 federal debt resembled the overall American cost of WW2.  We more or less paid for the wars of the Cold War- Korea, Vietnam- within a few years of them and at the end of the Cold War had a debt level equivalent to the costs of the nuclear weapons arm of the U.S. military during its whole existence to that time.

    I suspect that in rough terms the current federal debt growth reflects either (a) the small but long wars the U.S. military has been involved in in West Asia, or (b) the 'war' of sorts with China.  I believe (b) more likely.  The American economic and political elites faced a choice in 1990-92 after the collapse of the USSR, which was what to do about China.  One option was to carry on the Cold War with it, which was neither desirable nor really possible given the American psychological exhaustion and neglected state of American domestic affairs after 40+ years of it.  The other was to help China become competent and sufficiently wealthy, which was only going to happen if it developed a large export economy, which in turn implied a lot of American manufacturing getting outsourced/relocated to there.  The elites chose or quietly conformed to the latter- the first option was more or less incompatible with American social reality.  The second was already happening in a limited fashion and was very much preferred by China and U.S. allies like Japan.

    We lost about 7% of our domestic economy in the form of manufacturing between 1990 and 2010 to overseas, mostly China.  That's about the proportion of the American labor force that is now out of work above and beyond the 3% baseline.  And about the proportion of GDP lacking and which is made up for by federal borrowing.

    It's more complicated than that, of course.  We have a messy and embittered central argument in Washington about social democratization of the country, stymying the founding and rebuilding of new companies and manufacturing as an economic sector.  This is bolstered by  profits from vulture capitalism- the consuming of inefficient or obsolete economic entities- remaining high.  Suggesting that there's still a bunch to consume.  

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