The Government Shutdown Countdown Lowdown MEGATHREAD

[Admiral Yi]

Then it appears we agree.  The US has gross debt of 105% of GDP, and no offsetting assets.

[The Minsky Moment]

Ys you need to work on your if ... then constructions.

[Admiral Yi]

Either the trust fund holdings of US debt can be considered a net asset, and can be offset on gross debt to derive net debt, or it can't.  I thought you agreed that it can't.

[The Minsky Moment]

Either the trust fund holdings of US debt can be considered a net asset, and can be offset on gross debt to derive net debt, or it can't.  I thought you agreed that it can't.

IWhat we agreed is the "the future liability is not debt" and  "neither can you call the trust fund an asset"
So if you are doing the latter, you must also do the former, and thus debt is the 70s not over 100.

[KRonn]

That makes the number bigger.

But even the top 400 Americans, if nationalized, would do significant damage to the debt.

But how much money do we want to take from taxpayers? What would that do to the economy? Yes, we need taxes but we also need changes to spending. It doesn't have to be draconian cuts nor taxes, but they should start with small changes. Pres Obama tried a small amount of that by moving to eliminate some duplication in Fed agencies, but even some of that came up against opposition in Congress. The sequester which was a small cutback caused massive consternation by Congress, and the President, when that amount of money should easily be able to be cut.

A couple years ago Congress and the Administration put a plan out to cut the budget. After much angst they managed to cut about 35 billion, an insignificant amount in a 1.3 trillion dollar budget. And even that they wound up not really cutting.

So much wasted in interest on the debt and wasteful programs. Of course cuts can be made and taxes raised, the tax code changed.

[Sheilbh]

Your link is talking about "federal debt held by the public."  I.e. not including IOUs in teh lock box.

I agree with Joan. We've had the whole trust fund conversation before. They're future liabilities - on current policies - for the government, not a debt.

[Ideologue]

That makes the number bigger.

But even the top 400 Americans, if nationalized, would do significant damage to the debt.

But how much money do we want to take from taxpayers? What would that do to the economy?

Turn it into a power capable of going toe-to-toe with the Russkis in nuclear combat while simultaneously supporting the greatest expansion of material prosperity in the history of Earth?

Higher top rates literally do not matter except in terms of revenue generation.  The incentive for people at the top of the economy is not more money in itself; money is only a token of something else, namely the illusion of control over their environment.  They'll continue to do their jobs, and even if they don't, someone else will with no real difference in quality of output.  No one is more replaceable than a billionaire.

[Admiral Yi]

IWhat we agreed is the "the future liability is not debt" and  "neither can you call the trust fund an asset"
So if you are doing the latter, you must also do the former, and thus debt is the 70s not over 100.

Gross debt is 105.  The only way you can get down to 73 is if there is an asset to offset.  If we agree that the Social Security trust fund is not an asset, there is nothing to offset, and we are left with gross debt of 105.

[Admiral Yi]

I agree with Joan. We've had the whole trust fund conversation before. They're future liabilities - on current policies - for the government, not a debt.

Right.  But the bonds issued by the Treasury and bought by the trust fund are debt.

[Baron von Schtinkenbutt]

IWhat we agreed is the "the future liability is not debt" and  "neither can you call the trust fund an asset"
So if you are doing the latter, you must also do the former, and thus debt is the 70s not over 100.

Gross debt is 105.  The only way you can get down to 73 is if there is an asset to offset.  If we agree that the Social Security trust fund is not an asset, there is nothing to offset, and we are left with gross debt of 105.

Total US debt is $16.7t, with $11.95t as public debt and $4.75t as intragovernment debt.  For accounting purposes, intragovernment debt doesn't count because it does in fact count as an asset for the portion of the government that holds it.

[Admiral Yi]

Total US debt is $16.7t, with $11.95t as public debt and $4.75t as intragovernment debt.  For accounting purposes, intragovernment debt doesn't count because it does in fact count as an asset for the portion of the government that holds it.

The trust fund is legally committed to pay future retiree benefits.  It can not be liquidated to pay off other commitments.  It is not an asset of the US government in any meaningful sense of the word.

[Jacob]

Total US debt is $16.7t, with $11.95t as public debt and $4.75t as intragovernment debt.  For accounting purposes, intragovernment debt doesn't count because it does in fact count as an asset for the portion of the government that holds it.

The trust fund is legally committed to pay future retiree benefits.  It can not be liquidated to pay off other commitments.  It is not an asset of the US government in any meaningful sense of the word.

So if the House of Representatives and the Senate passes a law that says "in 2113 we're going to spend $200t on spaceships and free burgers" and Obama signs it into law, then the the US debt is suddenly $220t?

That doesn't make sense, Yi.

I mean, if I owe $20,000 to the bank that's my debt. My Netflix subscription, my annual contribution to the Red Cross, my monthly grocery budget, and the future tuition fees for my kids are not counted as debt no matter how much I've promised my wife we'll spend that money.

... it sounds like you're inflating the numbers for rhetorical purposes.

[Eddie Teach]

I think Yi's arguing that he's paid those bills in advance.

[Jacob]

I think Yi's arguing that he's paid those bills in advance.

But he hasn't. He's just put some small bills and some pencilled IOUs to himself into labelled envelopes on the mantelpiece.

[Admiral Yi]

... it sounds like you're inflating the numbers for rhetorical purposes.

Or alternatively you're trying to minimize it for rhetorical or other purposes.

It sounds like you're confusing the future liabilities of the trust fund (which I agreed with Joan are not "debt") with the bonds issued by the Treasury and purchased by the trust fund, which are debt.

Imagine the US fiscal position in the absence of a Social Security trust fund.  The US would have total debt of 73% of GDP, and an unfunded future liability of 32% of GDP (let's assume for the sake of argument that the trust fund equals unfunded liability).  The Boomers start to retire, and what do we do?  Act surprised? Raise taxes or cut spending, or run up the deficit, or default. 

In the past when media reported on national debt it was commonplace to report two numbers: debt, and debt plus unfunded liabilities.  At some point they stopped doing so, and it appears to me that they reason they have is because what the lock box did was to formally, legally incorporate unfunded liabilities into the debt.

So in the context of austerity/stimulus spending/etc., etc., we have two choices: we can pretend we have a debt of 73% and go on a spending spree to bring down those last two points of unemployment, then act dismayed and surprised when the deficit soars when Boomers retire, or we say with total debt of 105% of GDP any further deficit spending at this point should be handled very carefully, and not be surprised and dismayed when the Boomers retire.

I'm speculating a bit here (maybe Joan could shed some light), but I would also be very surprised if the Congress and president could pass a law stating that those bonds in the trust fund no longer exist.