Economics Thread

nsacpi said:
The interest expense numbers look quite different when normalized to GDP. They were higher in the 1980s and 1990s.
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I agree with the premise because in business you can hold more debt resulting in more interest expense while reducing your leverage.

The only way out of our mess is expansion/innovation and before that happens debt figures will grow. You learn a bunch when you work for PE and leverage being one of the biggest areas that is focused on.

The risk however you run into is a downturn which spikes your leverage so thankfully we have Trump in office and not more of the same leftist policies that were sending us to a spiral of death.
 
Fast growth helps but I think some belt tightening will also turn out to be necessary. Doesn't happen by magic.
 
nsacpi said:
Fast growth helps but I think some belt tightening will also turn out to be necessary. Doesn't happen by magic.
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There comes a critical mass point where belt tightening only helps at the margins. But you can't stop potential cap ex because you are worries about aggregate numbers and not leverage.
 
Our leverage is based on non existing dollars that have to be created to pay it back. Since the US will refuse to default, they simply print the balance shortfall and both inflation and interest get worse. Inflation getting worse means higher rates which means interest burden gets higher. Which means money needs to be printed. This is a death spiral

It's not the same as Trump taking a loan from jp Morgan, where if he fails the bank takes the hit
 
sturg33 said:
Our leverage is based on non existing dollars that have to be created to pay it back. Since the US will refuse to default, they simply print the balance shortfall and both inflation and interest get worse. Inflation getting worse means higher rates which means interest burden gets higher. Which means money needs to be printed. This is a death spiral

It's not the same as Trump taking a loan from jp Morgan, where if he fails the bank takes the hit
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Leverage is net debt divided by a performance figure.

The performance figure is productivity of the US economy. GDP is the defacto substitute for 'EBITDA' in this calculation. Yes, GDP is based on 'dollar' units so I can see where you are going with this but ultimately its based on the US economy and how you can project future leverage.

Productivity spikes reduce leverage significantly.
 
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thethe said:
Leverage is net debt divided by a performance figure.

The performance figure is productivity of the US economy. GDP is the defacto substitute for 'EBITDA' in this calculation. Yes, GDP is based on 'dollar' units so I can see where you are going with this but ultimately its based on the US economy and how you can project future leverage.

Productivity spikes reduce leverage significantly.
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When is the last time the GDP growth outpace the increase in debt? We are borrowing more and getting less of a return. meanwhile 1/4 of our budget goes to interest and bc congress doesn't have the will to cut spending or radically raise taxes, the only answer is to create the payments out of thin air.

This is not in the same ballpark as a business using debt to finance growth. As a business cannot print the money to pay the debt payments
 
The debt to GDP ratio declined steadily from the end of WWII to 1980. Then it rose on Reagan's tax cuts and defense buildup. It fell during the Clinton years (which included two years of budget surpluses after he raised taxes). But has been going up since Bush's tax cuts and war on terror.
 
nsacpi said:
The debt to GDP ratio declined steadily from the end of WWII to 1980. Then it rose on Reagan's tax cuts and defense buildup. It fell during the Clinton years (which included two years of budget surpluses after he raised taxes). But has been going up since Bush's tax cuts and war on terror.
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Everything changed in 2008
 
nsacpi said:
The debt to GDP ratio declined steadily from the end of WWII to 1980. Then it rose on Reagan's tax cuts and defense buildup. It fell during the Clinton years (which included two years of budget surpluses after he raised taxes). But has been going up since Bush's tax cuts and war on terror.
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Reagan's tax revenue didn't decrease. Defense spending was the cause of more debt.

Clinton raised some taxes but overall he cut big time

"The Taxpayer Relief Act reduced some federal taxes. The 28% rate for capital gains was lowered to 20%. The 15% rate was lowered to 10%."

The cut on capital gains boomed the economy. We had a "surplus" because congress cut spending.

Once again the liberal narrative you follow bites you in the ass.

I keep hoping you will learn but you don't.
 
Garmel said:
Reagan's tax revenue didn't decrease. Defense spending was the cause of more debt.

Clinton raised some taxes but overall he cut big time

"The Taxpayer Relief Act reduced some federal taxes. The 28% rate for capital gains was lowered to 20%. The 15% rate was lowered to 10%."

The cut on capital gains boomed the economy. We had a "surplus" because congress cut spending.

Once again the liberal narrative you follow bites you in the ass.

I keep hoping you will learn but you don't.
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It is true tax revenues keep going up after tax cuts. This happens due to the economy growing. The Reagan, Bush and Trump tax cuts all blew big holes in federal finances. Revenues were much lower than would have been the case without those tax cuts. This is a factual thang. To argue otherwise is to substitute ideology and wishful thinking for factual analysis.
 
nsacpi said:
It is true tax revenues keep going up after tax cuts. This happens due to the economy growing. The Reagan, Bush and Trump tax cuts all blew big holes in federal finances. Revenues were much lower than would have been the case without those tax cuts. This is a factual thang. To argue otherwise is to substitute ideology and wishful thinking for factual analysis.
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Why is ever reducing spending part of the equation when talking deficits?

The government has complete control over how much they spend. The variable they control should be the main driver of deficits
 
nsacpi said:
It is true tax revenues keep going up after tax cuts. This happens due to the economy growing. The Reagan, Bush and Trump tax cuts all blew big holes in federal finances. Revenues were much lower than would have been the case without those tax cuts. This is a factual thang. To argue otherwise is to substitute ideology and wishful thinking for factual analysis.
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You can look at a tax revenue graph by year and see nothing that stands out. Where is the missiing revenue or slowed down revenue? Believe what you want to believe but you're wrong.

Tax cuts even under dems cause economic booms as well.
 
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Garmel said:
You can look at a tax revenue graph by year and see nothing that stands out. Where is the missiing revenue or slowed down revenue? Believe what you want to believe but you're wrong.

Tax cuts even under dems cause economic booms as well.
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Yes you can look at those graphs. They show large revenue growth before Trumps tax cut and a tiny increase the year the tax cut went into effect
 
nsacpi said:
Yes you can look at those graphs. They show large revenue growth before Trumps tax cut and a tiny increase the year the tax cut went into effect
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If revenues went up by a penny that is a great outcome.

Americans keep more of their money and governemnt doesn't lose funding. What is the issue?
 
Corporate income taxes

2014 +47 billion
2015 +23 billion
2016 -44 billion
2017 -3 billion
2018 -92 billion

Overall federal tax revenues as a share of GDP:

2014 17.3%
2015 17.9
2016 17.5
2017 17.1
2018 16.3
 
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Garmel said:
Tax revenue pretty much stalled in 2015 which predates Trump and lasted until 2020.

It boomed in 2021 which was still his economy.

https://www.statista.com/statistics/200405/receipts-of-the-us-government-since-fiscal-year-2000/
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Tangentially related to this post, I found a separate figure linked to the one you shared: https://www.statista.com/statistics...holds-that-pay-no-income-tax-by-income-level/

While I was previously aware of this statistic roughly, it would be political malpractice for the Dems to not respond to literally every fair tax, tariff or elimination of the IRS discussion without reminding Americans on this number. I agree with Sturg that there would be some handout or credit in return, but there’s essentially no amount of handouts that you can give to low income earners to not have the result end up shifting the tax burden toward the lower/middle class.
 
Why do we want the Federal government, the most inefficient organization running today, to make more of our money?
 
And also- why would we give more money to entities that can't account for the money they spent or have balanced a budget in 5 years?
 
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