Economists! Comments and Opinion on Greek Debt Article

[Admiral Valdemar]

Ober, you should see the state of the UK's finances before thinking we're coming better off anti-Euro at least. It's not helped us by simply having the same corrupt system, but with sterling, not the European single currency. The big issue here for the elections is the economy, and no one party has managed to tackle the deficit, even with some truly nasty cuts and tax rises planned. People are finding it hard to deal as it is now, and they're now expecting less welfare but costing more. That doesn't endear people to the idea there's a recovery at all, and our employment and spending figures show as much.

[Big Phil]

What, you don't like being called on your incessant predictions of doom? Then shut your fucking yapper.

Regardless, I asked you a question, which you conveniently ignored in favor of whining about name calling. Do us all a favor and answer the question

And I answered it, as did Terwyn. Happy? Not that anything I'd say would sway you of the notion that things are just peachy anyway, something you have a knack for.

Here's an idea: why not go and read up on the subject yourself. If I can do it, I'm sure someone of your ability could attempt it.

You didn't explain diddly, you just said it was impossible and would destroy the economy. Last time I checked, saying something is true, vaguely referencing economists, and telling me to do my own research is considered really shitty debating. It's along the lines of bible thumpers using "READ THE BIBLE!!!" as an argument.

Frankly, I think you've gotten lazy. You throw out vague allusions and assertions, don't back them up, and throw a tantrum and insults when you're asked to explain yourself. If you're not capable of supporting your arguments by yourself, don't make them, and red herrings like "Sanchez thinks things are peachy!" don't make you look any smarter.

[Admiral Valdemar]

You didn't explain diddly, you just said it was impossible and would destroy the economy. Last time I checked, saying something is true, vaguely referencing economists, and telling me to do my own research is considered really shitty debating. It's along the lines of bible thumpers using "READ THE BIBLE!!!" as an argument.

Frankly, I think you've gotten lazy. You throw out vague allusions and assertions, don't back them up, and throw a tantrum and insults when you're asked to explain yourself. If you're not capable of supporting your arguments by yourself, don't make them, and red herrings like "Sanchez thinks things are peachy!" don't make you look any smarter.

Because the people can't fucking afford it, shit for brains. I'm tired of having to repeat myself on all these points I've brought up in prior threads YOU'VE participated in.





Interest costs alone are astronomical, causing a vicious circle of increasing taking out of loans to pay for just the basics, there are millions living hand to mouth, living off the paycheque they get and blowing it all on servicing debt they cannot possibly hope to pay off. The housing problems haven't subsided either, with the ARM resets on the horizon, anyone expecting to recoup losses in this market is in for another round of Find the Bottom. Have you even seen how many states are in debt up to their eyeballs?

- Unless the US, the UK, France, Japan (currently AA rated) and even Germany change course quite radically and sooner rather than later towards a sustained higher degree of fiscal tightening, there may not be a single AAA-rate sovereign left 5 years from now.

- For the US, with a structural primary deficit in 2009 of 7.3 percent of GDP, the arithmetic of solvency indicates the need for at least 7.3 percent of GDP worth of permanent fiscal tightening (not counting the long-term fiscal tightening required to accommodate future age-related public spending ambitions). For the UK, with a structural primary deficit in 2009 of 6.8 percent of GDP, the required permanent fiscal tightening (beyond what is achieved automatically by a cyclical recovery) would be at least 6.8 percent of GDP. In neither country are policy makers debating how to achieve anything like these degrees of fiscal tightening. In the US, beyond the expiration of part of the Bush tax cuts, no additional fiscal tightening has been planned. With the policy makers in denial, the fiscal situation is likely to deteriorate further, with the result that the magnitude of the permanent fiscal tightening that is required, when the markets eventually demand an immediate fiscal adjustment, will keep on rising.

- The US is, in our view, a more polarized and divided society today than at any time since World War II, including the Vietnam war era. Its government institutions are so encumbered by checks and balances that decisive prompt action is only possible during times of national emergencies – times, that is, that are widely recognized across the political spectrum as national emergencies. We don’t believe that the fiscal threat is as yet perceived as a likely candidate for a national emergency. Things will have to get worse, say through the country being put on negative outlook for its sovereign credit rating, or indeed losing its triple-A sovereign credit rating, before a fiscal burden sharing agreement is likely to be achieved. The way things are now, the Republicans will veto all tax increases and the Democrats all public spending cuts.

- As regards motive, a significant share of the US nominally denominated debt is held abroad. Between 55% and 70% of total US currency stock (around $928 bn in circulation at the end of 2009) is estimated to be held abroad. As this is non-interest-bearing, it is eroded by both unanticipated and anticipated inflation. In addition, about 51.4 percent of US Treasuries are held abroad – $3.6 trillion out of $7.0 trillion held outside the Fed and excluding Intragovernmental Holdings - at end of December 2009. Motive is strengthened by a longer maturity or duration of the nominally denominated debt. Here the situation is currently less inviting for the US than it was in 1946, the all-time peak of the US public debt to GDP ratio, as the average maturity of the US Treasury debt is only half of what it was in 1946, falling to around 4 years by the end of 2009. Unanticipated inflation also affects the real burden of servicing private domestic-currency denominated debt: it redistributes resources from private creditors who hold domestic currency denominated private debt to the issuers of that debt. Such intra-private sector redistribution of wealth is not politically neutral (nor is it likely to be devoid of macroeconomic effects). With much US mortgage debt still at fixed rates for long maturities, unanticipated inflation would redistribute wealth towards households owing mortgage debt and away from banks and other mortgage lenders. In the current political climate, this might not be unwelcome to many would-be voters and their representatives.

- There is, we believe, a greater chance of the Fed being cajoled or pushed into inflationary monetisation of public sector debt and deficits than the other leading central banks. For this to happen, it would be necessary that the current majorities on the Board and the FOMC, which would not go along with an inflationary solution to the US public debt problem, be replaced, or for the mandate of the Fed to be changed. In practice this would require either a strongly populist majority in both houses of the Congress and a strongly populist president in the White House, or a sufficiently large populist majority in the Congress to override a presidential veto. Either configuration looks currently unlikely but not impossible – a low-probability event but not a tail event, although were it to occur, it is likely to be at least 3 to 5 years in the future.

- We argued earlier that none of the major industrial countries was likely to choose an inflationary solution to its public debt problems, but that of the US, the Euro Area and the UK, the US was least unlikely to pursue such a course of action. The country also has form as regards using inflation to amortize the real value of the public debt, as is apparent from Figure 10, taken from Reinhart and Rogoff (2009b). It shows that, historically (since 1790), the US has exhibited a tendency to respond to high public debt burdens with high inflation.

- An inflationary solution to the problem of an excessive public debt is all but impossible in the Euro Area and unlikely in all advanced industrial nations. It is least unlikely for the US.

On top of that, add food and energy inflation which will be kicking up a notch again now with the markets somehow happy to rally on news of potential bailouts for Greece, not even confirmed ones. A lot of the GDP "growth" we've been seeing is nothing more than playing with numbers, not actually creating any real growth. Wages have been stagnant for falling for years, with personal costs going up and mainly down to cheap credit or investing in the markets and property. It's not just the guy on the street doing this either, but whole national governments. With China overheating and long due a crash (their markets are 20% down from peak and their real estate industry is showing ominous signs of slowdown), we may not even need the Eurozone to get into crisis. It could come from Asia, again.

[Guardsman Bass]

It sounds to me like France and Germany are willing to fuck Greece in order to save their own banks by imposing draconian conditions that make the payback of loans effectively impossible,

Not impossible, but difficult. It's not just to "save their own banks" either, although that's a plus - the bailout of Greece is enormously unpopular in Germany, and Merkel has to make sure that the Greeks don't get out of the problem with the appearance of having gotten off easy via German money.

It's still probably better for Greece than if they were to dump the Euro and default. Their interest rates would shoot sky-high.

[Broomstick]

This is instructive, actually, because it sheds light on the economic elephant in the room. That is, there's one nation for whom it is likely physically impossible for them to pay back their debts. And that is the United States, whose total public debt is something like 83% of the country's entire GDP, and that value will only increase.

Right now, the global economy is powered by everybody pretending that the United States is financially solvent. The more nations that go up to the plate to take their beatings, the harder it's going to be for the global economy to ignore the fact that it runs off of American IOUs. And that is a thought not calculated to let anyone sleep well at night.

This is untrue. The United States has the means and ability to pay back it's debts it just lacks the political will to let it happen.

No, it doesn't. Are you trying for a Village Idiot title or are you really THAT naive?

Tell me, are your 200K a year parents willing to live on 20k a year after the draconian taxes required to pay down the US debt? And even that strong a measure won't guarantee success since, after crippling the spending power of the population, the economy will come to a screeching halt.

[Admiral Valdemar]

It's even more interesting when you look at the NY Times "Web of Debt" for Europe:



I hear they outsourced their financial industry to the Marx Bros. after Laurel and Hardy came up too sensible.

[Murazor]

*shrugs*

In the end, an international scale reset of the financial system is gonna be required, particularly if either Spain or Italy crack. How long until the button is punched and exactly how this will be done, I can't even fathom, but that a reset will come is something I don't doubt for a moment.

Greece's condition is barely manageable. If Italy or the Iberian economies crack, we enter Total Party Kill territory.

Also, random factoid about the Spanish banking industry that maybe hasn't been mentioned much abroad. When the Central European Bank opened ultra low interest credit lines for banks in trouble, our national banks (which had passed largely unscathed through the first wave of the international financial crisis) decided to draw money from there and use it to purchase Spanish public debt to make their books look better than they actually is.

Bottom line: Their assets are now intimately linked to the Spanish government, which is in debt up to its eyebrows, and their little game with the low interest credit lines goes away as soon as the interest rates go up... which won't take long now that Germany and France seem to be recovering somewhat.

[Admiral Valdemar]

A debt jubilee has been a talking point for many people over the last two years. How it would come about is beyond my imagination too, but I think Buiter's report is a good indicator that it will take some pretty heavy problems emerging again soon to change our direction. The MSM and government are still lying to us about the extent of these problems, focusing on the nebulous ideal of growth forever and ever, solving all ills. When you just quote a GDP figure and say "There, everything's fine. Get shopping and shut up moaning", then you feel maybe you're getting dragged into the same problem all over again.

[Narkis]

For an idea of how deeply dysfunctional Greece is as a society, consider that taxi drivers actually protested a measure that would require them to issue receipts - i.e. report their fucking income to the government. Only in fucking Greece could you have fuckwits protesting having to declare their income for tax purposes.

That's the least of it. The government made a change a few months ago so that some tax breaks would require a certain amount of receipts to be had. This resulted in about a 30% increase in the VAT collected, iirc. Before that, there was no way in hell that a doctor or a gas station, for example, would give you a receipt. And, of course, it was a heavily opposed measure as well. And don't get me started on the taxi drivers. Their number is strictly restricted by the government according to some arcane rules agreed to with their guild, just so they don't face any undue competition. Licenses are very rare and expensive, with most of the fee going to the guild, of course. And any time a government hinted at abolishing the licenses, the response was swift, decisive and vehement. The taxi drivers are some of the best in maintaining their privileges.

Greece has so many damn problems, from a broken tax collecting system, to endemic corruption, I'm beginning to wonder if its' the Indonesia of Europe.

Hey, it's not that bad. Our tax system isn't that much worse than that of other first world countries. In theory. It's the corruption that's much worse. Almost everything works as a parasite to the public sector, and most people's dream is to work there so that they'll enjoy all the benefits: Few working hours, good salary, long vacations, swift retirement, inability to get fired, and most importantly, the ability to screw with anyone that wants something done, waste their time and demand whatever you want from them. Without consequences. Now, not everyone is bad. But the few good apples are lost in the rotten sea of the bad ones. Everyone dreads the time they have to interact with any public service.

The thing that drives me crazy is that many of these twits are under the delusion that Greece's money has been 'stolen' somehow by German central bankers and assorted Greek fat cats or similar stupid sounding nonsense, and if these unnamed villains are locked up somehow this magical stolen money which they think is the cause of their problems will come back to the Greek coffers.

No, it couldn't possibly be the result of a ridiculously structured society where pensions are absurdly inflated, people retire at ridiculously low ages, tax evasion is endemic, and everyone's in fucking debt!

Well, scapegoats have always been popular. But a sizable portion of what's missing has really been stolen by "assorted Greek fat cats". Unfortunately that category encompasses far more Greeks than people think. I haven't met a single adult who wouldn't steal from the public, given the chance. And even more unfortunately, that includes our politicians who're supposed to take us out of this mess. And they've rigged the public sector so that abundant chances exist for stealing from it.

As someone who was strongly pro-EU and pro-euro for all his adult life, I have to admit that the past two years have made me reconsider my position. I used to cringe at Brits and Swedes being so eurosceptic. Now it seems to me that they made the right decision by retaining their national currencies. Alas, Finland can't leave the Economic and Monetary Union all that easily.

It saddens me that the rest of Europe has to pay heavily for the backwards and corrupt system that is Greek public sector. When I heard for the first time about how the Greek public sector works (or rather, doesn't) from my friend's Greek girlfriend - a defence ministry worker, who just has to pretend that she works - I thought it was because her father happens to be a senior official in the same said ministry. Unfortunately, her case isn't apparently a single incident.

If the problems spread to Spain, Portugal and Italy, I think we can say goodbye to EMU and European financial recovery for a long time. Looking at how things are in my current adopted country of Spain, I wouldn't be surprised if this happens. Thank God I don't have to be here when shit hits the fan. I'm not meant to live in a Mediterranean country.

Yeah, I can back your friend's girlfriend story. Law-abiding, hard-working government workers are a tiny minority. Not that private employees are much better. But at least they have their boss to fear. Government workers are guaranteed to remain in "service" until they retire. Which isn't that long.

It sounds to me like France and Germany are willing to fuck Greece in order to save their own banks by imposing draconian conditions that make the payback of loans effectively impossible,

Not impossible, but difficult. It's not just to "save their own banks" either, although that's a plus - the bailout of Greece is enormously unpopular in Germany, and Merkel has to make sure that the Greeks don't get out of the problem with the appearance of having gotten off easy via German money.

It's still probably better for Greece than if they were to dump the Euro and default. Their interest rates would shoot sky-high.

I can guarantee that had these measures not been demanded, we'd be back to our old practices two years after we got in the clear, tops. And this time this'd be even worse, since we'd be safe in the assumption that our German and French friends would save us again when (not if) we'd implode again.

[Admiral Valdemar]

Narkis, you're on the ground there, so how are the protests and the general bailout plan being covered? Is the media casting a sympathetic light on the public, or are they siding with government in cutting down on tax evasion? From what I have read, the people will not obey these measures when brought in anyway, assuming that the bailout goes to plan and the Greek government keeps its word. If I had been playing the system that well, I sure would be miffed if a load of foreigners said they'd save us and then own us because of it. It's hard to take away something people have been so used to, and I guess Greeks have a better union setup than even the French when it comes to leaning on government.

We're facing similar problems in the UK, with commentators in some papers saying we'll be the next Greece if we don't accept austerity measures (actually, the BoE and IMF have stated as such too). Everyone is up in arms over these proposals, though, given cutting the NHS or taxing more on fuel will cause a lot of hardship. It's a political minefield, and all three parties here are trying to appease as many as they can, while still talking about cuts and taxes to combat the deficit.

[Guardsman Bass]

Greece's condition is barely manageable. If Italy or the Iberian economies crack, we enter Total Party Kill territory.

Spain falling into the same problem as Greece . . . that would just be a nightmare. It was hard enough getting the coalition together to do the bailout of Greece in exchange for austerity measures, but I can't see any scenario in which the rest of the EU gets the money together to bail out Spain. They'd have to go to the IMF, which in turn would have to go to the US, the Chinese, and anyone else available and beg/borrow a shit-ton of money.

[Admiral Valdemar]

They may just let Spain burn. Like Lehman was left. Ironically, not saving Lehman for a few billion because of cost, meant far more hardship later on. The loss of Lehman was touted as a reason for the TARP, so if they want to play that card again, they can let a relatively small nation collapse and go and ask for more money because, uh, we need to build a fort out of notes.

[cosmicalstorm]

I'm at a point in my life when I could move to almost any country and begin work. Which country will be the least affected if worst comes to worst? (Greece, Spain, Ireland et al failing)
I am considering Norway due to their proximity and good economy.

[Oberleutnant]

Ober, you should see the state of the UK's finances before thinking we're coming better off anti-Euro at least. It's not helped us by simply having the same corrupt system, but with sterling, not the European single currency. The big issue here for the elections is the economy, and no one party has managed to tackle the deficit, even with some truly nasty cuts and tax rises planned. People are finding it hard to deal as it is now, and they're now expecting less welfare but costing more. That doesn't endear people to the idea there's a recovery at all, and our employment and spending figures show as much.

Yes, you're right in that sense. Level of public debt in UK isn't much better than in Greece, if I remember correctly?

The last decade leading up to this point has been pretty bad there. Loss of manufacturing and increased public spending due to quangos and devolution (ie. regionalism instead of a powerful central government, leading only to more complicated layers of bureaucracy) is a bad combination. Or maybe I'm reading too much The Times and The Economist? However, at least you still have control over your fiscal policy. Eurozone currently has 16 member states, some better off, others in their death thores, and as we've recently seen it's hard to keep everything in line in such a diverse bunch. To me, it looks like we either need more integration or dissolution of the euro. Status quo is probably impossible to mantain.


@ Narkis
Thanks for the anecdotes. Although situation is very grim, at least we can hope that if Greece and rest of Europe can pull themselves out of this mess - and that is a big if - they end up making the changes that had to be done sooner or later.

I myself have already suggested to my wife that we should brush up our Swedish skills and consider relocating to any of the Scandinavian countries in case our home economy continues to still plummet after our Spanish adventure ends.

[Murazor]

They may just let Spain burn. Like Lehman was left. Ironically, not saving Lehman for a few billion because of cost, meant far more hardship later on. The loss of Lehman was touted as a reason for the TARP, so if they want to play that card again, they can let a relatively small nation collapse and go and ask for more money because, uh, we need to build a fort out of notes.

If they let Spain burn, then the UE may as well bend over and kiss its collective ass goodbye, because it'd send a message to the rest of the Mediterraneans and the East Europeans telling them that France and Germany will accept anything if it means that they can bail their individual economies out of the fire for the time being.

And that's without even touching the ramification for South America, which would be... intense.

[Narkis]

Narkis, you're on the ground there, so how are the protests and the general bailout plan being covered? Is the media casting a sympathetic light on the public, or are they siding with government in cutting down on tax evasion? From what I have read, the people will not obey these measures when brought in anyway, assuming that the bailout goes to plan and the Greek government keeps its word. If I had been playing the system that well, I sure would be miffed if a load of foreigners said they'd save us and then own us because of it. It's hard to take away something people have been so used to, and I guess Greeks have a better union setup than even the French when it comes to leaning on government.

We're facing similar problems in the UK, with commentators in some papers saying we'll be the next Greece if we don't accept austerity measures (actually, the BoE and IMF have stated as such too). Everyone is up in arms over these proposals, though, given cutting the NHS or taxing more on fuel will cause a lot of hardship. It's a political minefield, and all three parties here are trying to appease as many as they can, while still talking about cuts and taxes to combat the deficit.

The media are mostly supportive of the protestors and deriding the government for its perceived slights and broken promises. And that's very rare. Usually public opinion and the media are neatly divided among party lines: About a third of the people, newspapers etc support the ruling party, no matter what. That amount of support for the protests (close to 90% if some polls are to be believed) is unprecedented. Strikes and demonstrations have been programmed for the rest of the week by just about every union, and they're threatening to continue until the government caves in. Now, strikes and protests are very common occurrences here, and the track record so far is Government: close to zero - Unions: a couple hundreds. I hope the might of the EU and the IMF will be enough to prop up the government's resolve, and the people calm down eventually. But so far this is being presented like a second German occupation of Greece, this time using bankers instead of the Wermacht. There's a lot of anger to go around.

@ Narkis
Thanks for the anecdotes. Although situation is very grim, at least we can hope that if Greece and rest of Europe can pull themselves out of this mess - and that is a big if - they end up making the changes that had to be done sooner or later

That's a big if indeed. Hopefully this is the wake up call that's been sorely needed, but I wouldn't bet on it.

[Alphawolf55]

This is instructive, actually, because it sheds light on the economic elephant in the room. That is, there's one nation for whom it is likely physically impossible for them to pay back their debts. And that is the United States, whose total public debt is something like 83% of the country's entire GDP, and that value will only increase.

Right now, the global economy is powered by everybody pretending that the United States is financially solvent. The more nations that go up to the plate to take their beatings, the harder it's going to be for the global economy to ignore the fact that it runs off of American IOUs. And that is a thought not calculated to let anyone sleep well at night.

This is untrue. The United States has the means and ability to pay back it's debts it just lacks the political will to let it happen.

No, it doesn't. Are you trying for a Village Idiot title or are you really THAT naive?

Tell me, are your 200K a year parents willing to live on 20k a year after the draconian taxes required to pay down the US debt? And even that strong a measure won't guarantee success since, after crippling the spending power of the population, the economy will come to a screeching halt.

Prove that it would take that kind of tax level or shut the hell up.

[Broomstick]

The national debt is currently about 13 trillion. (per national debt clock)

It is increasing by 4.17 billion per day (per national debt clock)

IF your measures actually freed up 2 trillions per year it would still take about 6-7 years to pay it all off under the best case scenario.

However, your austerity measure would plunge millions out of work. Just the food stamp program alone would balloon, and it's already costing $35 billion a year (per USDA figures) A substantial number of those people would lose their homes, thereby increasing the housing meltdown. As a result, government costs would skyrocket (unless you want to let people just fucking starve) at the very time when tax revenues plunge due to so many people losing their incomes, and so many properties losing their owners.

After that, the only way to maintain that 2 trillion a year payoff is to INCREASE TAXES EVEN FURTHER.

As for your brilliant idea to cut costs by going to single-payer health care (and make no mistake, I was in favor of single-payer before it was fashionable, all the way back to 1980, if not earlier) once we switch over to single payer costs will initially RISE not fall because you have to play catch up with all the neglected health needs of the formally uninsured. Long term you'll see some savings, but not initially.

The problem is not only that you lack real world experience, you also suck at seeing the connections between things.

Consumption tax? How about I just stop consuming shit, hmm? I have thousands of books, a music collection I started in the early 1970's, art, clothing... really there's not much shit I do, in fact, need to buy. Hell, I even grow a significant portion of my own food! If meat gets too expensive I'll start hunting and fishing. My vehicles could last another 10-15 years with some TLC. If people just stop buying shit your consumption tax just won't have anything to collect.

So run along, child, the grown ups are having a discussion.

[Admiral Valdemar]

What we have here is a very good example of the problem with complex systems which lack redundancy or the ability of any one entity to fully comprehend to control the sum total of parts within said system. A globalised economy is one aspect of this, whereby seemingly small measures can have large impacts down the line, as with chaos theory, that may bring about even bigger repercussions. This is why it's silly to assume you can deal with something like the loss of cheap credit, or cheap oil, by just introducing the idea that we can replace those variables with some alternative. It's never that easy, and often there aren't any alternatives anyway. We could deal with a lot of situations were the capital there, but it isn't. Alternative energy would be a doddle, except, even when the capital is there to sustain it, you may find yourself subject to unforeseen consequences.

For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.

[ShadowDragon8685]

Broomstick, your 'discussion' amounts to little more than a nihilistic circle-jerk (circle-schlick?) with Valdemar about how doomed we all are. I'm not hearing any soloutions or suggestions or even "why aren't they doing this" gripes from you, just a lot of nihilistic doomsaying without coming outright and saying that we're heading straight for the end of civilization-as-we-know-it.

So, which is it? Are we doomed, the end times are nigh, start cracking open thy neighbor's skull for the precious bodily fluids within; or is there a way out that you see which is and or is not being implemented, and that the guy with the fortitude to stone up and suggest the absolutely unthinkable - cutting costs, raising taxes - doesn't see?

Or are we doomed no matter what we do, mmmm?

[Admiral Valdemar]

Cramdown and have a debt jubilee. Watch the globalised economy go into a funny fit of hysterics.

That's the only way. There is no Plan B (from outer space). You can't service all this debt, so it needs to be eradicated. A lot of people will be very unhappy about that.

If you think the obstruction of austerity measures to aid the paying back of debt in Greece are bad, imagine extending that to various other nations in trouble that have not known such things. America would be a laugh riot. You had guys with GUNS in city hall meetings arguing about healthcare reform. I'd hate to see how they'd react to the harsh measures required here to keep things ship shape.

[Big Phil]

The national debt is currently about 13 trillion. (per national debt clock)

It is increasing by 4.17 billion per day (per national debt clock)

IF your measures actually freed up 2 trillions per year it would still take about 6-7 years to pay it all off under the best case scenario.

However, your austerity measure would plunge millions out of work. Just the food stamp program alone would balloon, and it's already costing $35 billion a year (per USDA figures) A substantial number of those people would lose their homes, thereby increasing the housing meltdown. As a result, government costs would skyrocket (unless you want to let people just fucking starve) at the very time when tax revenues plunge due to so many people losing their incomes, and so many properties losing their owners.

After that, the only way to maintain that 2 trillion a year payoff is to INCREASE TAXES EVEN FURTHER.

As for your brilliant idea to cut costs by going to single-payer health care (and make no mistake, I was in favor of single-payer before it was fashionable, all the way back to 1980, if not earlier) once we switch over to single payer costs will initially RISE not fall because you have to play catch up with all the neglected health needs of the formally uninsured. Long term you'll see some savings, but not initially.

The problem is not only that you lack real world experience, you also suck at seeing the connections between things.

Consumption tax? How about I just stop consuming shit, hmm? I have thousands of books, a music collection I started in the early 1970's, art, clothing... really there's not much shit I do, in fact, need to buy. Hell, I even grow a significant portion of my own food! If meat gets too expensive I'll start hunting and fishing. My vehicles could last another 10-15 years with some TLC. If people just stop buying shit your consumption tax just won't have anything to collect.

So run along, child, the grown ups are having a discussion.

The thing is, the United States has so damned many tax shelters and loopholes and whatnot that we could easily increase our tax rates without significantly affecting the economy. If we simply increased our tax rates to European levels and provided the same level of service in exchange (perhaps it's a pipe dream, but it's my pipe dream dammit!), while at the same time reducing spending on insane, useless shit (I'm talking both federal and state/local), we could get back to running budget surpluses and pay off the debt in 30 years or so. Of course, that would require a long-term plan that both Democrats and Republicans would stick to - so it's unlikely to happen, but it is financially possible, even if the political will simply isn't there.

[aerius]

Tell me, are your 200K a year parents willing to live on 20k a year after the draconian taxes required to pay down the US debt? And even that strong a measure won't guarantee success since, after crippling the spending power of the population, the economy will come to a screeching halt.

Prove that it would take that kind of tax level or shut the hell up.

Let's see what the GAO has to say about your tax income & deficit problem.
http://www.gao.gov/new.items/d10468sp.pdf (see pages 5-7)

It's not going to be a 90% haircut, but it could whack your income in half. This assumes you don't have a bond market dislocation which blows the average interest costs on the debt into the double digits in which case all best are off, and you might get an outright default and end up like Iceland.

Solutions? A government which knows how to balance books (maybe you can hire Paul Martin, he's not doing much these days) and/or a cramdown, selective default, and debt jubilee. Depends on how long you want to keep playing games and dragging things out. The longer it goes the worse the choices become.

[GrandMasterTerwynn]

No, it doesn't. Are you trying for a Village Idiot title or are you really THAT naive?

Tell me, are your 200K a year parents willing to live on 20k a year after the draconian taxes required to pay down the US debt? And even that strong a measure won't guarantee success since, after crippling the spending power of the population, the economy will come to a screeching halt.

Prove that it would take that kind of tax level or shut the hell up.

The US Treasury spent some $383 billion in FY2009 just servicing interest on its debts. The government has five percent of its budget allocated to servicing its debt. In ten years, the CBO forecasts the national debt will equal 100% of the nation's GDP. In twenty or thirty years, the combined costs of servicing that debt and making our mandatory payouts to Social Security and Medicare/Medicaid will exceed government revenues. Even if we assumed that Social Security, Medicare and Medicaid growth remained perfectly flat and all else continued per-normal, servicing the debt will exceed government revenues in fifty years. (All from that bane of academic research, Wiki.)

Eliminating all military spending would succeed in only cutting the growth of the debt to a mere $300 billion a year. Only the economic deflation resulting from the collapse of the military-industrial complex (remember all those people whose high-tech jobs we outsourced to India? Wipe out the defense industry and we'll have to find domestic jobs for former MI complex employees. Which means paying them the same as we would for a high-tech professional in India. Can we say economic contraction? Yes? Good.) would wipe out all the savings and then some.

Assuming the debt grows by a trillion dollars a year (which actually understates the most recent CBO estimates,) you would have to increase government revenues by a trillion dollars just to match that. Government takes in $2.2 trillion in revenue now. Of which, about $1 trillion is income tax. American households have about $5.8 trillion in income. So to prevent further growth of the national debt while taking into account the growth of the government and its obligations, tax revenues must go up to $3.2 trilllion. Of which, $1.45 trillion would be on the American people. That is an average tax increase of some 45%. So a family pulling in $200,000 who pays 28% of its income in taxes every year would now have to pay 40.7% of its income in taxes.

Sure, the family pulling in $200,000 a year could probably afford a $17,100 hit. The average American household pulling in $50,000 per year, however, would see their taxes increase from 15% to 21.8%, for a loss of $3400 per year or $283 per month. If they were up to their eyeballs in debt, this may force them to choose between making utility payments and paying the month's groceries.

Remember that just prevents the national debt from growing further. To actually pay it off in, say, ten years, you would have to increase government revenues by a further $1.29 trillion per year, to bring total revenues up to $4.49 trillion. Of which, the American taxpayer would be on-foot for $2.04 trillion of this. A family pulling in $200,000 would now have to pay 57% of their income in taxes. The average American family making $50,000 would have to pay 30.6% of their income in taxes . . . $7800 more per year (or $650 more per month.) Better hope they're not carrying a lot of debt.

All of this, of course, ignores the effect of pulling an additional two trillion dollars out of the American economy. This would trigger massive economic contraction, as businesses cut wages and workers to preserve themselves against increases in payroll taxes and decreases in income as consumer spending craters. Federal government would have to cut spending to keep up, placing more burdens on the states, who would raise taxes and float debt of their own, which would pull more money out of the economy and cause consumer spending to crater even harder. Consumers would try to shift this into debt vehicles, but credit cards and home equity (which will also crater, as housing demand will go into free-fall and take housing prices with it,) will only get you so far.

All of that does little to address the nation's $108 trillion in unfunded Social Security, Medicare, and Medicaid liabilities. Remember my "A .44 Magnum, a single bullet, and a pine box" idea? Yeah.

And all of the above is wildly optimistic. It assumes a perfectly static economy, predictable debt growth, and that the bond market will not go into hysterics and drive up the costs of paying interest on the debt into low Earth orbit.

"Why not cut federal spending?" you say? Well, yes, you'll have to do that; but, services the federal government provides will end up being foisted on the states, who will have to find ways to raise the needed revenue, driving up their own debts. To the average American, it's going to be a non-consensual anal gangbang. The only thing that changes are the identities of the gangbangers.

So, yes, as others have said; the United States cannot possibly pay off all its debts. Not without austerity measures that make the proposed Greek ones look like paradise. The US is going to face a tough choice regarding its debt. Cram down the debts and make banks and governments around the world take a bath, sending the global economy into hysterics. Or default on our debts, turning a merely unpleasant bath of boiling oil into one of molten metal, sending the global economy to the undertaker.

[Broomstick]

Broomstick, your 'discussion' amounts to little more than a nihilistic circle-jerk (circle-schlick?) with Valdemar about how doomed we all are. I'm not hearing any soloutions or suggestions or even "why aren't they doing this" gripes from you, just a lot of nihilistic doomsaying without coming outright and saying that we're heading straight for the end of civilization-as-we-know-it.

So, which is it? Are we doomed, the end times are nigh, start cracking open thy neighbor's skull for the precious bodily fluids within; or is there a way out that you see which is and or is not being implemented, and that the guy with the fortitude to stone up and suggest the absolutely unthinkable - cutting costs, raising taxes - doesn't see?

Or are we doomed no matter what we do, mmmm?

We aren't doomed.

We ARE, collectively, a bunch of dumb, greedy fucks at times. This does complicate things.

The world is bankrupt. You don't get out of bankruptcy by attempting to re-finance and re-re-finance the debt. You get out of bankruptcy by pulling the plug and starting over. This is usually painful, but it's like lancing a boil - your in pain, the treatment will hurt like a motherfucker, but once it's done the poison drains away and you start getting better.

The longer we wait to do this, the worse it will be.

We have have moderate pain now or truly epic pain later. It's our collective choice. I expect most of us will be the usual sort of dumb fuck and vote for "later", even if it's not in our best interests.