The Biden Presidency

Phat writes: Keep in mind that the deficit is the shortfall amount in one budget year. The DEBT is the sum total of all deficits. The amounts are all off of the charts. This bill wont get paid due to the fact that every American owes close to $100,000 were it shared equally. One can only kick a can down a road while there is even a road.

The average American's mortgage debt is around $215,000. Your calculated equivalency of total US government debt as $100,000 per American is less than half that. Please explain why this is cause for concern.

--Percy

Edited by Percy, : Add question about why the sudden increase in concern about inflation.

Edited by Percy, : Restore original since Phat already replied.

Because unlike our mortgage, the principal on this debt keeps growing...lately to the tune of over a trillion dollars a year. The principal is growing faster than even the possible payments could be.

Soon, every bit of the tax dollars collected will have to go towards paying just the interest. There is no 35 year or 50 year plan to pay the debt off.

I am no economist, but to me this means that eventually the government will have to admit default.

The US Dollar itself may well be the next bubble.

Edited by Phat, : No reason given.

Let me attempt a different reply to your Message 75:

Phat writes: Keep in mind that the deficit is the shortfall amount in one budget year. The DEBT is the sum total of all deficits. The amounts are all off of the charts. This bill wont get paid due to the fact that every American owes close to $100,000 were it shared equally. One can only kick a can down a road while there is even a road.

It's actually less than that, around $82,000, but rendering the national debt as a per person amount isn't meaningful. You should compare it to GDP. The national debt is $27 trillion, GDP is $21 trillion, so the national debt is only 1.3 times national earnings. Given that people can get mortgages that are 2, 3, 4 and sometimes even 5 times their annual earnings, why do you think a national debt of only 1.3 times annual national earnings is off the charts?

Also, the national debt is constantly cycled through bonds ranging up the 30 years maturity and is never actually paid off. A bond's rating is a measure of the amount of risk, the likelihood of the bond issuer to make good on the bond. The rating of bonds of the United States is AAA, the highest possible.

If your alarm at our national debt were justified, if it were beginning to exceed bond rating agencies estimation of our ability to repay, then US bond ratings would begin dropping below AAA. This is not happening because the bond rating agencies do not agree with your opinion that the national debt is alarmingly high and beyond our ability to repay.

Why has inflation suddenly become a cause for concern for you now that Trump has left office and Biden has been on the job only four weeks? You never used the word inflation (or inflationary, etc.) even once in the entire The Trump Presidency thread. Here's a graph of recent deficits. After the 2008 financial crisis wound down, federal deficits decreased every year but one until the Trump presidency when they increased every single year:

The timing of your sudden inflationary concerns coincide with the change in administration, not with any actual change in America's ability to pay its debts.

Moving on to your current message:

Because unlike our mortgage, the principal on this debt keeps growing...lately to the tune of over a trillion dollars a year.

The principle on the national debt has been growing most years for a long, long time. What matters isn't the absolute magnitude of the debt but the debt as a percent of GDP, since GDP is a measure of our ability to repay. Here's a graph of the national debt (the red portion) since 1900. We're at historically high levels, approaching where we were shortly after WWII, but we grew out of it. What makes you think we won't begin growing out of it again as the economy recovers?

The principal is growing faster than even the possible payments could be.

I refer you back again to the bond rating agencies. If our debt were truly growing beyond our ability to repay, why are our bonds still rated AAA?

Soon, every bit of the tax dollars collected will have to go towards paying just the interest.

Recently only 8.7% of federal outlays were for interest on the national debt, so what makes you say this?

There is no 35 year or 50 year plan to pay the debt off.

Why do you think it important to pay off the debt?

I am no economist,...

You don't need to be an economist to discuss this topic, but you know little enough to be easily manipulated by misinformation.

...but to me this means that eventually the government will have to admit default.

Don't you think default would be preceded over a number of years by gradually declining bond ratings?

The US Dollar itself may well be the next bubble.

Currencies float against one another. The dollar has been up against the Euro, the Canadian dollar and the Japanese yen. Where do you see evidence of this bubble?

--Percy

I refer you back again to the bond rating agencies. If our debt were truly growing beyond our ability to repay, why are our bonds still rated AAA?

Refer to the rating agency scene in The Big Short (The Big Short (2015) - FrontPoint Partners confronts Morgan Stanley Risk Assessors and S&P)

So basically, the rating agencies are in business to make money. And if they don't give their customers the rating that they want, then that customer will just go down the street to another agency to get the desired rating. That is one reason why those CDOs filled with sub-prime "dog sh*t" mortgage bonds could get repackaged and become "diversified" and so be given A, AA, even AAA ratings.

So one reason why we keep our AAA rating is because we need to. If our rating were to drop, then that would be disastrous.

That came out during the 2013 nonsensical "debate" by the know-less-than-nothing Tea Party Republican idiots over the debt ceiling. The problem was that those idiots had no clue what the debt ceiling even is, so they wanted to vote against it. The problem with that is that the debt ceiling is not for incurring more debt, but rather to enable us to make payments on our existing debt. So that means that voting against raising the debt ceiling is voting for us to default on paying our debt. And that stated refusal to even try to pay on our debt would have lowered the rating on our bonds, making our debt far more expensive and driving the country towards financial ruin.

All I'm saying here is that the rating on a bond is not as objective as it's supposed to be, so this is slightly more than a quibble. There can be and often are other factors which could make or keep a bond's rating artificially high. Though even then, they can keep that up for only so long.

 
Phat does suffer from a common problem of not understanding how things work. Few members of the general public do and the demagogues and sleazy defense lawyers (eg, Trump's defense team in this latest impeachment trial) make full use of that general ignorance.

Of course, it really doesn't help when those demagogues (eg, the Trump Administration, the GOP) also doesn't understand how anything works.

 
BTW and a slight tangential shift, I only learned about the practice of redlining a couple years ago. I have been aware of discriminatory housing policies for most of my life (I'm 69), just not the actual tactics used.

Part of redlining fell on the companies selling the mortgages to minorities. Instead of selling them proper mortgages, they would steer their customers to the sub-prime "dog sh*t" loans that ended up in those CDOs behind the 2008 housing market crash.

Because unlike our mortgage, the principal on this debt keeps growing...lately to the tune of over a trillion dollars a year.

Gee, that's an interesting amount. Sounds so very familiar. Just where did I hear that one before? Hmm?

Oh yeah! The Great GOP Tax Scam of 2017! The one that gave massive tax cuts to the very rich, thus blowing a one trillion dollar per year hole in the deficit!

And immediately both Mitch McConnell and Paul Ryan went into a big panic over how much the deficit had just grown (while of course avoiding any reference to what was causing that huge increase) and how they would have to make massive cuts to both Social Security and Medicare to fight that deficit. Even though neither program has any effect on the deficit.

And trusting Percy's reporting of your posting history, why is it that you are only now complaining about that trillion-dollar deficit and didn't do so when the GOP originally pulled their scam over three years ago?

Would that be because it's only now that your right-wing handlers are themselves complaining about it? So that they can blame it on the new Biden Administration instead of on the f*cking Republicans who actually created it?

OBTW, the taxes of us working stiffs (even though I'm a retired working stiff) are going to go up this year. Because of the Great GOP Tax Scam of 2017! The rich got massive tax cuts which are permanent, whereas we working stiffs only got some measly table scraps as small tax cuts. But ours were only temporary and deliberately set to expire this year! That way, if Trump had won the election, then he could "save us with another tax cut" which would have blown yet another trillion-dollar hole in the deficit. And if he didn't win (which he didn't), then the GOP could blame their carefully crafted tax increase on the Democrats.

That's part of a GOP tactic called "Good Santa, Bad Santa". A Republican administration will spend so freely that it makes drunken sailors look like misers, thus leaving the economy in a shambles. The incoming Democratic administration is then left to clean up the Republicans' massive mess and restore the economy, but in the process they have to practice fiscal responsibility and cannot do the good things for the country that they want to do. Add to that that in a Republican administration they will spend freely without any funding to back it up (eg, Dubya starting two wars without any funding) and drive up the deficit without any mention of that deficit, but then when they're out of power suddenly they are screaming from the rooftops about the deficit. When they are out of power, then the deficit is the most important thing there could possibly be, but then when they are in power then it's suddenly "what's a deficit?".

 
You need to learn and think in terms of how things actually work. Forming false analogies leaves with just that: falsehoods and false ideas.

I should warn you that I took a class in accounting half a century ago, hence some of my terminology and concepts.

The national debt is not like a mortgage in that it's not a single loan taken out for a single item of capital (eg, equipment, vehicles, real estate). If you try to treat the national debt as a single loan, then that is a false analogy that will only deceive you.

Rather, it's a way of conducting business, a very common way. Mind you, we are starting to engage in another common false analogy (ie, that a successful businessman would be ideal to run the government) in that you cannot run the government like a business even though some of the skills would be transferable ¹.

Having to reach back half a century to do this from memory (so some detailed terminology may be a bit wonky), every accounting entity (eg, a business) has four basic kinds of accounts: assets (what you own; eg, cash, capital, accounts receivable), liabilities (what you owe; eg, loans, accounts payable), revenues (sources of income; eg, pay, interest revenue, sales, appreciation of your capital items), and expenses (non-capital things you have to pay for and sundry losses; food, non-capital purchases, utility bills, rent, taxes, interest expenses, depreciation of your capital items). The interplay of changes to your assets and liabilities are tracked through transactions between them and your revenues and expenses. Using the T account system, those transactions are represented by debiting one or more accounts while crediting one or more other accounts by an equal amount -- that's why your accounts must always balance.

There are additional concepts. When you compare assets with liabilities, you come up with a figure called equity (ie, E = A - L). That is your net worth. When you compare revenues with expenses, then you come up with a figure called net revenue (ie, NR = R - E). If your expenses are greater than your revenues (ie, your net revenue is negative), then you are running a deficit.

Another important concept is that of liquidity, which is basically how much of your assets are readily available to spend. That's usually seen as cash, though liquid assets can take other forms which I'm not very familiar with. For example, you could have half a million dollars of equity in real estate (if you own a home, minus the principal on the the mortgage you could be in that same situation), but you cannot spend any of that half-mill until you either sell that property or use it as collateral for a loan. Keep that in mind.

 
BTW, your checking account and all your banking statements work on that same system. And for decades I used T accounts manually for our household finances until I discovered Quicken circa 1990, which did the same thing but also saved my sanity. My then-wife had me balance her checking account every month. She made all her purchases with checks and then with her ATM card. She had bad habits of not logging all purchases in her check register (the missing checks were easy to track down, but the ATM transactions ... ) and she would make frequent arithmetic errors in calculating her running balance. I would literally spend 4 or 5 full evenings every month struggling with her bank statement trying to get her checkbook to balance (which also involved real-time chained calculations with a calculator). Then I discovered Quicken. After the initial non-trivial task of entering past transactions into the accounts, every week I would enter her check book transactions of that week. Then when her bank account arrived, it would only take me about half an hour to balance it. One of the best things that had happened to me.

 
Now back to the topic. A business (nor a government) does not operate like paying off a single loan, but rather that is just one specific task. So how does a business operate?

A business is an on-going concern. That means that it is not only continually in operation, but also that it must remain continually in operation. Thus it's a complex interplay between many factors, principal among which are accounts payable, accounts receivable, expenses, revenues, liquidity, and timing. Of which timing is the most crucial. And the primary reason why so many viable businesses went under in the 2008 crisis because of the big banks who were "too big to fail".

OK, picture yourself as the CFO (Chief Financial Officer of a company, the "money man"). Your company manufactures a product. Its salesmen sell that product to customers who place orders, receive shipments, receive bills for those shipments, and eventually pay those bills (hopefully) -- those outstanding bills are called "accounts receivable". Your manufacturing department in the meantime order parts to fill those orders and receives bills from its suppliers which you need to pay -- those outstanding bills that you have not paid yet are called "accounts payable." In addition, you have rent and utilities to pay for, as well as payroll -- the big bragging right of a former CEO running for public office is "making payroll", whereas it was his CFO who actually accomplished that. That is a helluva lot of juggling the CFO has to do, all of it time-critical -- eg, as a junior enlisted all our bills were due at the end of the month which is when I got paid, so not only was almost all of my pay allocated to bills, but I also had to time the mailing of those payments just right, so I literally lived through that kind of experience.

One of the topics in my accounting class was short-term business loans. Making payroll requires total liquidity (AKA "cash"). Accounts receivable are not liquid. You literally could have millions of dollars in accounts receivable and still come not be able to make $10,000 in payroll. For that you need short-term business loans which most banks give out fairly freely provided you have the proper collateral. So, you have a lot of assets tied up in accounts receivable but you need cash right now to be able to pay more immediate expenses including making payroll. You take your books to the bank to demonstrate to them your assets and negotiate a short-term loan for a couple months or so. And even though you pay that one off, you're back in there in another month or two to make the same deal. Even though you have a successful business going there, you still need to use a series of short-term loans to continue to operate, basically keeping you continually in debt.

Now think of this regarding the need to minimize liquidity. I made Chief Petty Officer in a Navy Reserve warehousing unit and attended a Navy warehousing class with a fellow Chief and our unit's XO, a Supply Officer (AKA "SUPPO", AKA "Pork Chop"). Our XO worked for Toyota and we had many discussions of Toyota's "just in time" manufacturing and inventory strategy -- this also has a bearing on why there was such a toilet paper shortage at the outbreak of this COVID outbreak a year ago ². Creating and maintaining an inventory costs money. Building a car requires a lot of parts. The longer you have to store those parts as inventory, the more it costs you. Therefore, ideally you would store those parts for as short a time as possible. Hence, "just in time" inventory control, such that you would schedule the arrival of the parts for a car to be just before they were needed to be installed. A running joke among us when we would go out to dinner would be to pre-stage the sugars for his coffee so that they would arrive "just in time" for consumption.

The point for liquidity is that while you need a certain amount of liquidity to meet your immediate business needs, maintaining that kind of liquidity can be very expensive. Such that the interest that you would need to pay for a short-term loan to give you that kind of liquidity would end up being less expensive than maintaining that degree of liquidity all on your own.

Therefore, keeping yourself in a perpetual state of indebtedness could be the best business decision. And if you have bought into the false analogy that the best way to run a business is the best way to run a government, then just what are you complaining about?

 
A single individual wants to rid himself of all debt. I know that and I have achieved that (for so many decades, my greatest fear was to retire with an outstanding mortgage, but I avoided that). I cannot avoid assuming that you are of similar mind to me, ignoring your own individual financial situation (which I am not inquiring about). My one sister keeps congratulating me on my genius financial decisions, while in reality I just stumbled upon it by maximizing my 401(k) contributions (didn't need the money at the time) and pushing hard to pay off my mortgage before retirement (that aforementioned fear of mine).

But a business needs to use indebtedness and assets, etc, as an instrument for engaging in business.

Liquidity is a liability (in the non-accountant sense). If too much of your assets are liquid, then you are dead in the water as a business. Therefore when you require liquidity, then you best acquire that liquidity through business loans, based on the collateral you have in your non-liquid assets, including your accounts receivable.

 
Unfortunately, that very common business practice led to the ruin of many viable businesses in 2008 when the banks that were too big to fail and had gotten bailed out then refused to issue the standard short-term business loans to small businesses. Causing them to go under.

 
 

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FOOTNOTE 1:
Here's another false analogy which demonstrates why the "running the government like a business" false analogy is so wrong. This one is "dancing is just like Aikido."

Aikido is a new Japanese martial art form from the 1920's and 1930's which was based largely on the movements of kendo (The Way of the Sword). It means "The Way of Harmonizing the Life Force" (Ki, which is basically "The Force").

The school that I had followed mainly emphasized "Ki development". All the techniques involved blending our motion with the motion of the attacker. If you ever tried to use physical strength, then you would fail. There were a number of basic principles, such as always moving from your center, keeping your weight to the underside, extending your mind, etc.

A few decades later when I started to learn salsa, while learning the footwork and turns, moving from my center and extending my mind came naturally. Turning the lady, especially the inside turns, also came naturally (ie, don't try to move her directly, but rather move her hand between the two of you, which leads her arm, which leads her shoulder, which leads her body all without you having to force anything.

At the end of that very first dance class, all the ladies were raving about my strong and smooth lead, while in reality all I did was apply my Aikido training.

However, in Aikido all movement is from the center. The strategy of defense is to blend with the attacker and become one with him, but with YOUR center being the center around which both of you moved. So basically your goal was to keep the attacker off balance throughout.

In dancing, that is not the goal. You want both of you to be balanced and centered an in control of your own selves.

Therefore, while a knowledge of Aikido can help you to learn to partner dance, trying to apply all that you learned from Aikido would prove disastrous.

 

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FOOTNOTE 2:
The toilet paper shortage explained.

Initially, it was panic. But that only exposed a basic supply issue.

At a Navy Supply Corps UADPS school (Uniform Automated Data Processing System formerly used to run the US Navy's supply system), we were schooled (among other things) on low-water levels as well as lead time. When you need a part, it will take a certain amount of time for it to arrive -- that is the lead time. In order to avoid unavailability of that part because of lead time, the system used usage rates of that part to determine at which point in the inventory it would run out of that part -- that is that part's "low water mark". The system was set up to determine that low-water mark for every single part it carried in order to ensure that we would never run out of those parts.

Let's face it, capitalism rules. Even Karl Marx freely admitted that capitalism is extremely successful, though so successful that in his mind it would destroy itself (watch "Genius of the Modern World" on Netflix). To cut exposition short (believe me, you would thank me for that), toilet paper is very problematic. It is very bulky, so keeping a lot of it in inventory is very expensive. But it is also very cheap and therefore not worth that kind of investment in keeping it in inventory. IOW, toilet paper is something that you want to be able to move very quickly (absolutely no puns intended there).

But there's a second wrinkle. There are two entirely different and separate toilet paper markets, neither of which is able to cross over to take advantage of this pandemic situation.

We have a residential TP market, the people buying commercially available product to use at home. More plies, plusher. Now being used at a much greater rate since everybody's been stuck at home. Even without the panic buying and desire to produce pet obstacle courses with all that hoarded TP, the increases demand for residential TP is to be expected. As a result, we experienced shortages in that market.

We also have a commercial TP market. That single-ply stuff you find in all public and business restrooms. But during the pandemic, demand for this TP diminished vastly, resulting in a surplus of such TP -- I have seen recommendations that one connect with janitorial services in order to score some TP.

An additional wrinkle to this entire story is that those two TP markets are truly separate from each other. The mills that produce commercial TP cannot produce residential TP, nor can the mills that produce residential TP produce commercial TP.

 
Humorous aside: I started college half a century ago as a German major. I was informed of a German TV TP commercial which I had not personally seen. It showed you two peaches. The first peach they rubbed with sandpaper. The second they rubbed with their product. Your choice.

BTW, the sandpaper choice was not too far off from reality. I'm sure that I had encountered some of that when I was in Germany.

There is a strong concerted campaign out to get this guy. They're throwing everything at him all at once.

I don't know anything of the efficacy of the accusations. I hear the usual political firebombs of sex and influence.

Whether true or not is not the point. Any one of these hits could take down a political career, but these many? So quick?

In addition to the reputation-killer nature of the accusations the timing of these revelations gets sinister.

They want this guy crushed.

Who'd he piss off?

AZPaul3 writes: There is a strong concerted campaign out to get this guy. They're throwing everything at him all at once.

That could be. Or not.

It could also be the case that women were too afraid to come forward with abuse allegations until the COVID scandal knocked Cuomo off his perch. It's also a lot harder for the 1st women to come forward than the 2nd or 5th. There's a reason it's called the Me Too movement, and why these allegations snowball.

Of course, Cuomo deserves the assumption of innocence just like anyone else, but we also know human nature and how these things play out in the general public.

Who'd he piss off?

My guess would be someone in the NY health department who got pissed about the nursing home COVID death coverup.

Edited by Taq, : No reason given.

That makes sense. Closer to home.

After his near resurrection at CPAC I was sinisterly conspiring a Trump connection.

Of course. The Democrats are ideologically pure. While the Republicans have no ideology.

Ethnic identity and customs.

I'm not in the second half of binging through the last season of "The Sopranos". In that hand-me-down Italian culture that they live in, what do they keep doing? Even and especially the men? They kiss each other.

Back before the actual divorce, the familia went on a two-week tour of Mexico to visit family and to see the sites.

At the end of those two weeks completely immersed in Mexican culture, a couple from church got married and I kissed the bride on the cheek completely in compliance with the norms that I had just been living for the previous two weeks. Was I appropriate or not?

I kissed the bride on the cheek completely in compliance with the norms that I had just been living for the previous two weeks. Was I appropriate or not?

That's not up to me or to you. Only the person you so brutally assaulted ... er pecked on the cheek ... can answer that.

The Biden administration has in effect put a gag order on the Border Patrol: Border agents feel they are under "gag order" from Biden administration. I hope the news media puts in extra effort to find out precisely what's going on.

The big question is, "Why did the Biden administration do this?" We already know that Biden's less malevolent and less restrictive border policies are causing a surge at the border that we're not prepared to deal with, and we know that conditions are worsening for those trying to enter the country either illegally or as asylum seekers.

So given what we already know, why is the Biden administration trying to restrict the flow of information? Biden's good intentions are causing the suffering to be transferred from Mexican soil to American, but (it appears to me) we're working hard to fix it. Biden just recently directing FEMA to become involved. Currently it's a mess down there, but unlike the Trump administration's demonization of immigrants as justification for inhumane treatment, the Biden administration believes that most of those trying to cross our borders are good people who deserve to be treated decently, and the administration is (I hope) working hard to improve the situation.

So why the Border Patrol gag order?

--Percy

First, it's no where near the mess as popularly reported.

Second, the surge is only the inevitable result of four years of intentional mismanagement and the utter stupidity of the Three Stooges in Austin.

The limit on BP/ICE/HS reporting is really a reasonable position, particularly since those folk have actually been the biggest creator of the problems.

The needs right now are for health care, clothing, communication and legal representation. Instead of having the BP/ICE/HS do medical testing on those who illegally cross what is happening is they are being accumulated and then dumped without prior warning at a local bus station. BP/ICE/HS have refused to do testing for anything, TB, Covid or any of the other endemic threats. They have refused to coordinated with private social services or to only cooperate when the cameras are running.

The issue is that the Three Stooges as well as much of the management at BP/ICE/HS are not willing to treat the situation as an opportunity but rather only as a Law Enforcement issue. Instead of sending medical supplies and testing supplies and support staff they are sending police. Instead of working to set up a cooperative Governmental/NGO operation they are maintaining separate roles.

It's time to tone down the rhetoric and actually look at how to solve problems rather than create them.

Edited by jar, : appalin spallin

Good lord, what I’m hearing. People want to flood the border areas with humanitarian aid. They want us to take these people and give them baths and meals and medical care. Tent cities with running water and sewage systems, legal aid and education stations. Heaven forbid a sponsored taco night with a mariachi band.

Who’s gonna pay for it all?

Wait.

This is America. We have billions to throw around especially if you’re a well-connected business so paying doesn’t create any burden. That’s what FEMA is for.

Ok, so why shouldn’t we do these things?

Oh, yah. That’s it. They’re brown people.

This IS America. Trump and Co. may be gone but the hate in the society remains.

Right now it’s emanating from the border patrol and its entrenched bureaucracy.

Edited by AZPaul3, : No reason given.

AZPaul3 writes: This is America. We have billions to throw around especially if you’re a well-connected business so paying doesn’t create any burden. That’s what FEMA is for.

Not to mention the fact that all the baths, meals, medical care, tents, running water and sewage systems, legal aid and education will stimulate the economy.

You just invented a new republican business opportunity.

Now it's win-win.