
We’ll Be $1Trillion in the Red in 2020. No Big Deal - jkuria
https://www.wsj.com/articles/well-be-1-trillion-in-the-red-in-2020-no-big-deal-11581612733
======
mindvirus
The national debt is weird and complicated.

About half of the national debt is to the federal government, the federal
reserve or state and local governments. In other words - the US government is
primarily in debt to itself - in a currency that it can print! The government
could wipe out half the debt overnight by just forgiving the loans it made to
itself. And it could pay off the rest by printing money - which would lead to
inflation, but how much really?

~~~
stephen_g
"Printing money" is a bit of a loaded term and has little applicability to how
central banks actually work.

The Fed could basically convert the bonds into dollars in an account with the
treasury - which is completely asset neutral. The bondholders before had
extremely liquid bonds which are basically cash-equivalent. Now they have
cash. Basically moving from one column in a spreadsheet to another, and
suddenly the debt is gone. Yes, there's still a liability, but only in the
same way that deposits in a bank are liabilities to them.

Would it create inflation? No, why would it? Inflation happens when money is
spent (which happened back when the bond was issued, because it was probably
issued in the same amount of Government deficit spending), and since the
transaction is asset-neutral, it wouldn't necessarily change any of the bond-
holder's spending patterns.

Of course, the thing at the end of the day is that people have bought those
bonds because they want a safe interest-bearing instrument. The central bank
or Government of a monetarily sovereign country doesn't really need to issue
them to deficit spend, it's more that there's a lot of demand for them to
exist...

~~~
sfj
> Would it create inflation? No, why would it?

This depends if people are forward looking or not. Bonds have terms, an
account in the Treasury does not, which means it has no real meaning at all
(It has no effect on anything so who cares if it ever gets paid back?). So,
this is just obfuscation of money printing.

When a government starts money printing, their money doesn't look so good
anymore.

------
H8crilA
Never forget about the main US "export product" that in a large part finances
this growing monster - financial securities. All the foreigners want the
S&P500 (growth!) and Treasuries (positive yield!).

[https://fred.stlouisfed.org/series/IIPUSNETIQ](https://fred.stlouisfed.org/series/IIPUSNETIQ)

The cumulative "exports" stand at around -$11T, 50% of GDP.

~~~
throwaway3157
Could you elaborate? I don't understand the link you posted. What is the U.S.
Net International Investment Position (IIPUSNETIQ)

~~~
H8crilA
[https://en.m.wikipedia.org/wiki/Net_international_investment...](https://en.m.wikipedia.org/wiki/Net_international_investment_position)

~~~
H8crilA
In short: US-owned foreign securities minus foreing-owned US securities.

------
dreamcompiler
This is not about the national debt. That's been measured in the $trillions
for many years. This is about the deficit, which is the short-term delta
between tax revenues and government expenditures. (The debt is basically the
time integral of the deficit). For the deficit to be over $1 trillion really
is a _big deal_ , and it's not good news.

------
marricks
It’s fun how people only seem to talk or care about the national debt when
it’s an election year. Almost as if it’s all a ploy to convince voters big
projects that help them can’t be paid for.

But sure enough the other 3 years of the cycle will be spent raising the
defense budget and cutting taxes mostly for businesses and the 1%. Hmmm....

~~~
briandear
I am not in the 1% and I had a substantially reduced tax bill from the tax
cuts. The perception that they only benefit the 1% is propaganda. It’s also
patently false.

~~~
notadoc
My tax bill went up, as did many other people I know. I assume a large number
of people in high tax states had a higher bill due to SALT changes amongst
others.

> The perception that they only benefit the 1% is propaganda. It’s also
> patently false.

The primary benefit went to the ultra wealthy, not surprising given lobbying.
You can write off the cost of a private jet, for example.

[https://www.economist.com/leaders/2019/03/07/private-jets-
re...](https://www.economist.com/leaders/2019/03/07/private-jets-receive-
ludicrous-tax-breaks-that-hurt-the-environment)

[https://www.businessinsider.com/private-jet-trump-tax-
bill-d...](https://www.businessinsider.com/private-jet-trump-tax-bill-
deduction-for-richest-people-2018-3)

But what did you save? $500?

------
perardi
Wish there was an anchor link to the most relevant chart, but:

[https://www.cbo.gov/publication/55342](https://www.cbo.gov/publication/55342)

I worry about the debt, too, in some fairly abstract way, but I don't know
what realistically gets cut. Social Security? Good luck, because old people
vote. Medicare? Good luck, old people vote. Defense spending? Good luck, you
better believe that defense contractors vote, in perfect synchronized-by-
lobbyists lockstep.

~~~
sandoooo
The problem is that defunding Medicare / SocialSec on a large scale is
effectively defaulting on government's debt obligations and has the same
effects as defaulting on treasuries. Defense will probably go first, since
it's technically discretionary spending, but it won't be anywhere near enough
because SS and Medicare balloons fast and will put the squeeze on all other
government spends.

Eventually something will give. No idea which part though.

~~~
mcny
Why can’t we do the obvious:

1\. increase income tax rates on everyone

2\. Remove ceiling on payroll. Or call it a tax as well.

3\. Slightly lower the floor for estate tax and close loopholes (like buying
an insurance to inherit...) and slightly increase estate tax rates (I think
60% estate tax of the estate value over a limit of about $5M is fair).

4\. Higher Medicare and social security tax rates to pay for Medicare for all.

I hate how people treat this as an unsolvable problem: the solution is
obvious: increase taxes and cut expenses where we can. It isn’t that hard.

~~~
sandoooo
1\. You're proposing a linear increase in taxes to solve the problem of
exponential growth of entitlements. Eventually you'll run out of GDP.

2\. Doctors don't come out of assembly lines. Professionally trained medical
staff is the biggest component of the Medicare blowout, and there is no easy
way to increase supply in the short term. Dumping a lot of dollars into the
Medicare system just drives up costs for everybody while shifting the limited
supply of medical care around. From the perspective of the tax-paying middle-
class, they'll be paying more into the system AND get worse medical care.
That's the real political non-starter.

------
jariel
Someone below mentioned interest rates which is a fundamental thing and cannot
be overlooked.

We are in a 'weird new normal' of low-interest rates for a variety of reasons,
partly artificially induced.

But if you put your finance hat on and contemplate for a moment what that
means ... well it means debt and a lot of it and rationally so.

If super low-interest rates become normative, our thinking has to change quite
fundamentally because it's rational to lever up quite dramatically. We may
have to reconsider entirely how the national balance sheet works.

------
eanzenberg
Given cheap interest rates, constant inflation, increased regulation and cost
to produce, it makes sense to borrow from the future to build now.

~~~
sailfast
I would prefer to stay somewhat solvent so that we can use actual money to
stave off the inevitable crisis in the 2-20 years. We know these are coming,
we know we need reserves of capital to fight them. Going into debt now (except
maybe in initial expenditure that will realize gains in efficiency in the out-
years) is folly.

------
neonate
[https://archive.md/gSTD9](https://archive.md/gSTD9)

------
readhn
well the music is going to stop playing sooner than later. 11 years since this
bull market started...the clock is ticking. History tells us this wont go on
forever.

The only question is how deep we will "correct" and will it develop into
something bigger than a simple correction. At these levels even a 20%
correction will drop SnP >600points. Interestingly a 50% correction will drop
us right on top of the 2000-2006 market tops which would still be considered
bullish long term, if it holds.

~~~
sandoooo
I'm suspicious of statements like this because there never seems to be any
money placed where all the talk is. There were lots of people saying the same
thing a couple of years back, too. They seem to still be around and haven't
lost their shirts.

Are you buying long term puts on the SnP? Is anybody?

~~~
Vomzor
I believe the new virus will trigger a recession. The global supply chain is
broken, most people just don’t realize it yet. China’s economy has crashed. A
couple more weeks of quarantine and a lot of small businesses will fold. This
will have a cascading effect. The debt situation in China is bad. Banks will
collapse when lots of people and businesses default on loans, a lot of
factories will never restart. Meanwhile factories outside China will shutdown
because a lack of supplies. Some car factories already have.

I will sell most of my stock this week.

~~~
naveen99
a virus that kills < 1-2 % of the population (likely mostly elderly) isn’t
going to hurt the economy long term. Remember preventive medicine is actually
more costly than letting people die sooner, even for non viral killers like
cancer and heart disease.

------
melling
Don’t we pay a small fortune in interest every year on our national deficit?

Interest rates are historically low. Wait until they go to 6 or 7%.

~~~
arcticbull
You know the fed can print money to pay off that debt right? That's the
difference between you being personally $1T in the hole every year and the
government. That's also why nobody really cares. At this point it's easier to
do that than to find $1T in annual cuts the folks in office can agree on. Not
that it's a good thing, of course.

~~~
throw_m239339
> You know the fed can print money to pay off that debt right?

No they can't, and they won't, unless you want the fed to crash the dollar and
make it worthless. The money supply is a very tricky thing in that you want
enough liquidity so that the market continues working, but too much money
supply would make the dollar as worthless as seashells.

~~~
ohithereyou
The fed expanded its balance sheet from less than $1 trillion in 2008 to over
$4 trillion in 2016, practically dumping $3 trillion into the economy for all
intents and purposes. What was the effect of that on crashing the
dollar/making it worthless[0]?

[0] [https://www.cnbc.com/2017/11/24/the-fed-launched-qe-nine-
yea...](https://www.cnbc.com/2017/11/24/the-fed-launched-qe-nine-years-ago--
these-four-charts-show-its-impact.html)

~~~
snowwrestler
There was extraordinary demand for liquidity during and following the
financial crisis. Because the Fed was expanding its balance sheet to meet
market demand, it did not crash the value of the dollar.

------
AmericanChopper
Anytime somebody talks in absolute numbers they’re more often than not trying
to be deceptive. Absolutely numbers don’t mean anything at all in relation to
nation debt, the only way to meaningfully quantify it is as a % of GDP (or
interest charged as a % of government revenue). The article would give you the
impressions that government debt is spiralling out of control, but really the
debt/GDP is pretty stable.

------
alexfromapex
I wish I could get away with infinite debt

~~~
RcouF1uZ4gsC
It is simple, just print your own money and have it be the reserve currency of
the world.

Once you do that, you can get away with near infinite debt like the US
Government.

~~~
astrodust
With all that money you also need to buy the stupidly largest army in the
world so if anyone has a problem with your debt you can solve that problem
militarily.

~~~
briandear
The US military is not the largest army in the world, China is, followed by
India.

The US isn’t even in the top 15 by percentage of government spending. Not even
in the top 15 as a percentage of GDP.

~~~
astrodust
Most countries have, at most, one or two aircraft carriers, maybe four little
ones if they're really ambitious like France or Japan. These are the pinnacle
of power projection and are extraordinarily expensive to build, own and
operate.

The United States has eleven of the largest carriers in the world and a bunch
more that are smaller that are _still_ bigger than what other countries
consider a carrier.

That's an example of how disproportionate it is in terms of overall size. Not
manpower, not GDP percentage, just size.

Where other countries have one or two of something the United States has at
least ten. This goes for planes, tanks, cruisers, helicopters, missiles,
pretty much whatever, they've got _more_.

~~~
Bendingo
> other countries have one or two of something the United States has at least
> ten. This goes for planes, tanks, cruisers, helicopters, missiles, pretty
> much whatever

This is correct except for tanks [0], where Russia has about 3 times more than
US. This is not unexpected, given that no-one is going to invade US by land,
and that Russia has been repeatedly invaded by land.

[0] [https://www.nationmaster.com/country-
info/stats/Military/Arm...](https://www.nationmaster.com/country-
info/stats/Military/Army/Main-battle-tanks)?

------
stOneskull
just don't pay it. what are the bankers going to do?

~~~
kamaal
For starters, not give you money again, and make it a point nobody else does
either.

Once this kind of a situation arises, a lot of trust is gone from the system.
Eventually the spill over spreads to the larger parts of your economy.

------
epicgiga
Don't worry, we'll just "grow our way out of it".

But seriously, buy gold.

------
8bitsrule
Deeper and deeper in debt ... what a surprise. Makes you wonder who collects
the interest. And ... maybe the chickens won't come home to roost.

