$13 Trillion of Debt…Nothing to Show For It

Friday, August 27, AD 2010

Recently a Senator made the following statement:

“We have managed to acquire $13 trillion of debt on our balance sheet” and, “in my view we have nothing to show for it.”

What right wing Republican made that statement?  Well actually it was Democrat Senator Michael Bennet of Colorado.

Of course Bennet’s rhetoric is completely belied by his drunken sailor voting record when it comes to spending.  However his statement is still interesting for two reasons:

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7 Responses to $13 Trillion of Debt…Nothing to Show For It

  • One economist after another says that public expenditure is an inefficient means of manipulating aggregate demand unless you have slack in the economy a good deal more severe than we have seen or says that the characteristics of the economy have changed in the last 70 years and it no longer has the practical effect it once did. The economic numbers produced by the Bureau of Economic Analysis and the Bureau of Labor Statistics indicate the stabilization of production levels last year occurred too quickly after the stimulus was enacted to be attributable to it. Japan went up to its eyeballs in debt over a period of 13 years to no discernable effect. Yet, not too many weeks ago, I see Joseph Stiglitz on television saying the stimulus was ‘not big enough’. You begin to wonder if there is not some hidden agenda there.

  • One other thing, Treasury issues held by the public are approaching $9 tn. The bulk of the remainder are held by the Social Security Administration as parking places for payroll tax revenue. The Federal Reserve holds about $0.9 tn.

  • Point of Information,

    The $4 trillion held by SS and Medicare trust funds is not sitting in a vault or in an FDIC-insured checking account. It’s US, nonmarket debt paper. It may as well be Confederate dollars.

    Once SS/Medicare tax receipts (cash paid by you) fall below the benefits cash pay-outs, the guvmint will need to tax you to repay to SS/Medicare the UST debt paper and they pay benefits.

    Plus, the guvimnt will need to tax somebody to just pay the interest on the other $9 trillion.

    Whence the fit hits the shan.

    PS: The $.9 trillion held by FRB – they printed that money. It’s called monetization of the debt.

    PPS: Does the debt figure include $1.6 trillion FNM/FRE directly owe and $6 trillion they indirectly guaranty?

  • The debt figure would not include loan guarantees, no. The federal government’s liabilities with regard to Fannie Mae and Freddie Mac are not the face value of the outstanding mortgage-backed securities but the future losses due to defaults.

    The Federal Reserve always maintains a stack of U.S. Treasury securities with which to trade. While I think this stack has increased some in the last two years, the large run up in the Federal Reserve’s balance sheet has been from the purchase of Fannie Mae and Freddie Mac debt. It made sense to increase the size of the monetary base given the increase in demand for real balances, which is why prices have been fairly stable in the last two years, rather than declining at a 9% rate, which is what they did during the period running from 1929 to 1933.

  • Will Rogers said, “It ain’t what you don’t know that gets you into trouble, it’s what you know that ain’t so.”

  • Point of clarification,

    “The $4 trillion held by SS and Medicare trust funds is not sitting in a vault or in an FDIC-insured checking account.”

    That’s true, as far as it goes.
    – If it were sitting in a vault, that’d be deflationary, which would be bad.
    – If it were sitting in a checking or savings account, that would suggest it was being invested somewhere and generating a positive return. I wouldn’t have a problem with this, but I think a lot of folks would get the willies if the Federal Government held $4T in stocks and corp bonds as a matter of course.

    Obviously, the Federal Government spends its FICA and Medicare tax receipts pretty much the moment it receives them. The non-marketable bonds are an IOU.

    If the Federal Government does its job well, its efforts (which cost money to perform) will continue to create an environment in which the private economy grows, which eventually provides the taxes to honor those IOUs without increasing the individual tax burden.

    If the Federal Government does a bad job, they’ll honor the IOUs via higher taxes and additional deficit spending.

Political Miscellania 6/24/10

Thursday, June 24, AD 2010

A roundup of recent political news.

1.  Nikki Haley, see the above video, crushed her opponent in the runoff 65-35.  She survived bizzare accusations of infidelity, attacks on whether she is a Christian, her parents are Sikh immigrants, and outright racism.  She is only 38 years old, her youth being something she has in common with the new generation of conservatives running and winning this year.  She has a 20 point lead on her opponent in the general election and is the odds on favorite to win in the fall and be the next governor of South Carolina.

2.  Tim Scott handily won his runoff against Paul Thurmond for the Republican nomination for Congress from South Carolina 1.  This is a heavily Republican district, so Mr. Scott, who many consider to be the most conservative member of the South Carolina legislature, will now almost certainly be the first black Republican congressman from South Carolina since Reconstruction.

3.  The bad news for the Democrats for November just will not stop.  Gallup released a poll this week which shows a huge enthusiasm gap in favor of the GOP.

The current average is based on four measures of this enthusiasm question since February, including the recent June 11-13 USA Today/Gallup poll. In that poll, 53% of Republicans said they were more enthusiastic than usual about voting and 39% were less enthusiastic, while 35% of Democrats said they were more enthusiastic about voting and 56% were less enthusiastic.

Republicans’ net score of +14 more enthusiastic in the latest poll compared with the Democrats’ net score of -21 represents the largest relative party advantage Gallup has measured in a single midterm election-year poll. More generally, Republicans have shown a decided relative advantage in enthusiasm throughout 2010, averaging a net score of +28, compared with Democrats’ net score of 0.

(Gallup instituted a separate enthusiasm question in March on its Daily tracking survey, which asks voters to say how enthusiastic they are about voting this year as opposed to comparing their current enthusiasm to their enthusiasm in prior elections. This new enthusiasm question lacks a historical trend but has also shown a consistent Republican advantage throughout the year.)

The 28 percentage-point party difference in net scores on the “more enthusiastic than usual” question in 2010 is the highest Gallup has measured in a midterm election year, with 1994’s 17-point Republican advantage the only other midterm election-year gap coming close. (See the table at the end of the article for full data by party.)

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One Response to Political Miscellania 6/24/10

  • Re: Patty Murray’s challengers… Akers is solid, but he just doesn’t have much of a following among folks here in WA. He’s a businessman from Bellingham, who intends to streamline or LEAN out the bureaucracy.

    Rossi is (in my mind) a Johnny-come-lately to the race, and is the supposed establishment choice. He has name recognition, but he has yet to win a statewide race. In my time here, he’s the guy that lost to Christine Gregoire (governor) twice.

    Clint Didier is the man who has won my support. He’s a former tight end for the Redskins, and even caught a TD pass in the Superbowl. He’s a farmer, and a football coach back in Easter WA. By no means is he a polished politician, he admits quite frankly that he is not a polished politician.

    The Washington State Republican Party recently held their convention. Terra Mork, a local activist and pro-life conservative gives her take on the convention here and here. Additionally, Michelle at “Life of the Party”, another local local activist and pro-life conservative gives her endorsement to Didier as well.

    Anecdotally, the signs you see around town for Senate candidates are primarily for Didier. I have not seen one for Rossi. I’ve only seen one for Akers and one for Murray. WA is typically a blue state, but the enthusiasm seems to be falling mostly behind Didier, as Terra’s report of the straw poll seems to indicate. It should be interesting to see how the top two primary plays out to see who really will be on the ballot in the general.