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How to balance the budget in 3 steps

JohnfrmClevelan said:
(sigh)

Treasury issues bonds. Private sector buys bonds. Government spends the proceeds right back into the economy. PRIVATE SECTOR ENDS UP WITH EXACTLY THE SAME NUMBER OF DOLLARS AS IS HAD BEFORE THE SALE OF BONDS, plus bonds, plus aggregate demand, plus knock-on spending. Simple accounting. You forgot about that money flowing right back into the economy.

Not only are all dollars returned to the private sector, they are also now in the hands of people who spend all or almost all of their income, instead of the erstwhile bond buyers who would have saved much or all of that money.

GDP increases by $1 trillion.
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How much benefit does this country get from foreign ownership of U.S. Debt?

500 billion dollars in US interest payments and to you that is a good thing? Isn't there better use of that 500 billion that giving it to bond holders?
 
Conservative said:
How much benefit does this country get from foreign ownership of U.S. Debt?

500 billion dollars in US interest payments and to you that is a good thing? Isn't there better use of that 500 billion that giving it to bond holders?
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I'd answer your questions more often if I had any confidence in your ability to understand my answers. I'm pretty confident that this stuff is way over your head.
 
JohnfrmClevelan said:
(sigh)

Treasury issues bonds. Private sector buys bonds. Government spends the proceeds right back into the economy. PRIVATE SECTOR ENDS UP WITH EXACTLY THE SAME NUMBER OF DOLLARS AS IS HAD BEFORE THE SALE OF BONDS, plus bonds, plus aggregate demand, plus knock-on spending. Simple accounting. You forgot about that money flowing right back into the economy.

Not only are all dollars returned to the private sector, they are also now in the hands of people who spend all or almost all of their income, instead of the erstwhile bond buyers who would have saved much or all of that money.

GDP increases by $1 trillion.
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He just isn't bright enough to have any clue about economics. I don't think I could have explained it any clearer. How is it if the private sector takes their money and buys bonds with it that they have the same money they had before? The money the government got from the sale of the bonds EXACTLY equals the money the private sector no longer has. So it is a wash. NO INCREASE IN GDP. Good Lord man!!!! Yes the same money the private sector would have spent is now spent by the government. Comprendo?
 
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JohnfrmClevelan said:
More voodoo economics.

EVEN IF you were correct, and you are not correct, any money that the government taxes away would be greater than any loss of consumption, because the government doesn't save any of those tax receipts, whereas taxpayers would have saved a portion of that money.

But that was just to point out yet another flaw in your reasoning. C doesn't decrease with deficit spending, because the government is creating and spending brand new assets (bonds).
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Even money saved in the bank is spent. Just spent by someone else. No increase in GDP. No free lunch. TANSTAAFL!
 
JohnfrmClevelan said:
I'd answer your questions more often if I had any confidence in your ability to understand my answers. I'm pretty confident that this stuff is way over your head.
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I am pretty confident that you are a legend in your own mind and I can only hope that in my remaining years that I become half as smart AS YOU THINK YOU ARE!

Only in the liberal world is deficit funding to bond holders better than taking that money and putting it directly into the pocket of actual U.S. taxpayers or in funding things like SS and Medicare increases.
 
LibDave said:
He just isn't bright enough to have any clue about economics. I don't think I could have explained it any clearer. How is it if the private sector takes there money and buys bonds with it that they have the same money they had before?
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Because the government spends it right back! I mean, immediately.

If I borrow $10 from you and hold it, sure, $10 lost to the economy. But if I borrow $10 from you and spend it, then what has the economy lost? I spent it instead of you. The economy doesn't care who spends.

This isn't difficult stuff.
 
LibDave said:
Even money saved in the bank is spent. Just spent by someone else. No increase in GDP. No free lunch. TANSTAAFL!
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NO IT ISN'T. You don't understand banking. You are still working on your elementary school explanation of how banks work.

You also misinterpret what "free lunch" means.
 
LibDave said:
Even money saved in the bank is spent. Just spent by someone else. No increase in GDP. No free lunch. TANSTAAFL!
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Jesus H. Christ. If banks lend out pre-existing money, then how does the money supply grow?
 
JohnfrmClevelan said:
Because the government spends it right back! I mean, immediately.

If I borrow $10 from you and hold it, sure, $10 lost to the economy. But if I borrow $10 from you and spend it, then what has the economy lost? I spent it instead of you. The economy doesn't care who spends.

This isn't difficult stuff.
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So if I give you $10 that I was going to spend on lunch and you go out and spend it on eating your lunch how can you possibly be so clueless as to not understand there has been no increase in the economy. Same money spent. You are claiming an INCREASE in GDP. I'm just clearly pointing out (IT COULDN"T BE ANY CLEARER) it is merely a break even proposition as far as the economy is concerned. Not a free lunch. The restaurant owner and the economy are same as before only you ate my lunch instead of me. You have been claiming this is an increase to the economy. I've correctly pointed out it is a wash.
 
LibDave said:
So if I give you $10 that I was going to spend on lunch and you go out and spend it on eating your lunch how can you possibly be so clueless as to not understand there has been no increase in the economy. Same money spent. You are claiming an INCREASE in GDP. I'm just clearly pointing out (IT COULDN"T BE ANY CLEARER) it is merely a break even proposition as far as the economy is concerned. Not a free lunch. The restaurant owner and the economy are same as before only you ate my lunch instead of me. You have been claiming this is an increase to the economy. I've correctly pointed out it is a wash.
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No, you weren't going to spend your $10 on lunch, you were going to save it. Otherwise, you wouldn't have lent it to me IN A VOLUNTARY TRANSACTION.

People that buy bonds for the 2% or so return aren't doing so because the monster return is stopping them from buying a new TV. They buy bonds because they want to sit on their dollars, not spend them.

You really need to think of things in a macro sense, especially when we are talking about macroeconomics.
 
JohnfrmClevelan said:
No, you weren't going to spend your $10 on lunch, you were going to save it. Otherwise, you wouldn't have lent it to me IN A VOLUNTARY TRANSACTION.

People that buy bonds for the 2% or so return aren't doing so because the monster return is stopping them from buying a new TV. They buy bonds because they want to sit on their dollars, not spend them.

You really need to think of things in a macro sense, especially when we are talking about macroeconomics.
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I never said any such thing about saving it (not that it matters). I just wasn't all that hungry and you seemed like you would rather eat lunch today. So I lent you the money. Same as when the government borrows it from me when I buy treasuries. I decided rather than buy a car this year I would instead lend it to the government and with a little extra for interest and inflation I think next years model will be better. So I'll get one next year. NO INCREASE IN GDP! TANSTAAFL!

Now economics really isn't all that complicated. You seem like a nice and very passionate guy. But with all due respect, I've spent quite a bit of effort trying to teach you a very simple aspect of economics. I have a bachelors in business, a masters in Economics and Mathematics, and a doctorate in Electrical Engineering and I make $140/hour. I will have to ask you to pay for some classes to satiate your passion I don't have any more time to donate to you.
 
LibDave said:
I never said any such thing about saving it (not that it matters). I just wasn't all that hungry and you seemed like you would rather eat lunch today. So I lent you the money. Same as when the government borrows it from me when I buy treasuries. I decided rather than buy a car this year I would instead lend it to the government and with a little extra for interest and inflation I think next years model will be better. So I'll get one next year. NO INCREASE IN GDP! TANSTAAFL!
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At any one time, there are lots of people who wish to save dollars and not spend them. There is always a market for bonds. Even if there wasn't, the Fed could (and has) stepped in to buy them. The people that buy bonds are people who weren't going to spend their dollars. Putting yourself into the example in place of a whole, diversified population and claiming that they were all planning on spending all of their money displays a real inability to think in abstract terms.

LibDave said:
Now economics really isn't all that complicated. You seem like a nice and very passionate guy. But with all due respect, I've spent quite a bit of effort trying to teach you a very simple aspect of economics. I have a bachelors in business, a masters in Economics and Mathematics, and a doctorate in Electrical Engineering and I make $140/hour. I will have to ask you to pay for some classes to satiate your passion I don't have any more time to donate to you.
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Why does it always come down to a pi$$ing contest with you guys? I'm an attorney. I charge $175/hour. And I don't really care what your degrees are in, you don't understand banking, and you don't understand macroeconomics. How you were awarded a degree in economics is a mystery to me, but I'm aware that there are schools that still adhere to outdated schools of economic thought. But at least you should be able to understand other arguments better than you have demonstrated here.
 
JohnfrmClevelan said:
At any one time, there are lots of people who wish to save dollars and not spend them. There is always a market for bonds. Even if there wasn't, the Fed could (and has) stepped in to buy them. The people that buy bonds are people who weren't going to spend their dollars. Putting yourself into the example in place of a whole, diversified population and claiming that they were all planning on spending all of their money displays a real inability to think in abstract terms.



Why does it always come down to a pi$$ing contest with you guys? I'm an attorney. I charge $175/hour. And I don't really care what your degrees are in, you don't understand banking, and you don't understand macroeconomics. How you were awarded a degree in economics is a mystery to me, but I'm aware that there are schools that still adhere to outdated schools of economic thought. But at least you should be able to understand other arguments better than you have demonstrated here.
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It would seem that logic, common sense and inter personal relationships escaped you in your education and all that money you make has skewed your opinion from reality. You are truly a legend in your own mind totally oblivious to human nature, incentive, and what common people actually do.
 
I remain adamant, the Federal budget cannot/will not EVER become balanced unless the people who pay taxes retake control of the spending from a central source.
THAT, can/could ONLY be accomplished by repealing BOTH the 16th and 17th amendments as the 1st step, after which MANY needed changes could begin to be accomplished in a much more reasoned and rational way, primarily much nearer their sources.
 
As Reagan said------------------------it is not we are not taxed enough, we spend too much.
 
Logical1 said:
As Reagan said------------------------it is not we are not taxed enough, we spend too much.
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Yep, and federal deficit spending went up during his terms.

President Reagan increased the debt by 186 percent. Reaganomics added $1.86 trillion. Reagan's brand of supply-side economics didn't grow the economy enough to offset the lost revenue from its tax cuts. That was partly because Reagan increased the defense budget by 35 percent.
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https://www.thebalance.com/us-debt-by-president-by-dollar-and-percent-3306296
 
LibDave said:
So if I give you $10 that I was going to spend on lunch and you go out and spend it on eating your lunch how can you possibly be so clueless as to not understand there has been no increase in the economy. Same money spent. You are claiming an INCREASE in GDP. I'm just clearly pointing out (IT COULDN"T BE ANY CLEARER) it is merely a break even proposition as far as the economy is concerned. Not a free lunch. The restaurant owner and the economy are same as before only you ate my lunch instead of me. You have been claiming this is an increase to the economy. I've correctly pointed out it is a wash.
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I doubt that many federal income tax (FIT) payers are skipping lunch due to their immense FIT burden. That being the case (and it is) then there are two $10 lunches prepared and served instead of one. The foolish economic policy would be to borrow the $10 to offer those additional "free" federal lunches while allowing current potential taxpayers to push the costs of federally funded consumption onto future generations.
 
ttwtt78640 said:
I doubt that many federal income tax (FIT) payers are skipping lunch due to their immense FIT burden. That being the case (and it is) then there are two $10 lunches prepared and served instead of one. The foolish economic policy would be to borrow the $10 to offer those additional "free" federal lunches while allowing current potential taxpayers to push the costs of federally funded consumption onto future generations.
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The costs don't get pushed onto future generations, though. If you follow the dollars (and bonds), this becomes clear.

The government issues bonds, for which there is a demand. The government buys something - a lunch that would otherwise not have been produced or consumed, say - and somebody has earned that money.

People always want to save some of their income. Bonds allow them to do this, while the government uses their dollars to buy stuff. The pile of savings always grows. There is nothing for future generations to "pay back." Plus, increased economic activity in the present doesn't mean less economic activity in the future, it means more economic activity in the future. If you look at the economy as a whole, instead of one guy buying a bond, you can see that one man's debt is actually an increase in income for the economy as a whole.
 
JohnfrmClevelan said:
The costs don't get pushed onto future generations, though. If you follow the dollars (and bonds), this becomes clear.

The government issues bonds, for which there is a demand. The government buys something - a lunch that would otherwise not have been produced or consumed, say - and somebody has earned that money.

People always want to save some of their income. Bonds allow them to do this, while the government uses their dollars to buy stuff. The pile of savings always grows. There is nothing for future generations to "pay back." Plus, increased economic activity in the present doesn't mean less economic activity in the future, it means more economic activity in the future. If you look at the economy as a whole, instead of one guy buying a bond, you can see that one man's debt is actually an increase in income for the economy as a whole.
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A wonderful system so long as the debt (bond?) holders never decide to stop lending and the interest expense on that debt is managable.
 
ttwtt78640 said:
A wonderful system so long as the debt (bond?) holders never decide to stop lending and the interest expense on that debt is managable.
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You don't even need outside bond-buyers. The Fed could buy them all up, while people held their savings in banks. And if that is true (and it is), then bond issuance isn't necessary, either. Straight dollar creation would work just fine.

The key is that the dollar is worth something, so it is worth holding, in one form or another. As long as the economy produces stuff to buy, the dollar will be worth holding.
 
JohnfrmClevelan said:
You don't even need outside bond-buyers. The Fed could buy them all up, while people held their savings in banks. And if that is true (and it is), then bond issuance isn't necessary, either. Straight dollar creation would work just fine.

The key is that the dollar is worth something, so it is worth holding, in one form or another. As long as the economy produces stuff to buy, the dollar will be worth holding.
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Still waiting for how the country benefits from foreign countries buying our debt? over 500 billion in debt service in the budget is money that could be better used elsewhere or reduced taxes further. More consumer spendable income more GDP Growth
 
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