Is the budget actually balanced?

Discussion in 'Budget & Taxes' started by sunnyside, Jul 30, 2015.

  1. Iriemon

    Iriemon Well-Known Member Past Donor

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    Except that debt it owes to itself backs real benefits to be paid to retiring baby boomers.
     
  2. Ndividual

    Ndividual Well-Known Member

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    While 'your' chart does clearly show the ratio of debt to GDP for consecutive years beginning with 1945, go back to 1900 or better yet even earlier and examine the debt to GDP ratio accounting for the cause and effect resulting in the increase/decrease on the ratio if you really want clarity.

    In FY2014 $430,812,121,372.05 interest was paid on a debt which totalled $17,824,071,380,733.82 at the end of FY2014. The debt interest amounted to 2.4170242% and considering that debt payments at the beginning of FY2014 were being paid on a lesser amount of debt, that number is slightly lower han the actual interest rate. If our currency devalues at a rate very close to the debt interest rate or above, debt is made to appear acceptable especially that of government. Currently, based on the debt interest rate mentioned above our currency needs to devalue greater than 2.3599828% or the debt plus interest remains relatively constant in value.

    Questions:

    1. How much revenue was produced each year at the 94% tax rate?

    2. What austerity spending constraints are you talking about, those in Greece?

    3. Which FY are you claiming to have a surplus?
    ....... Debt.........Deficit
    FY1993 $4.411488T
    FY1994 $4.692749T $281.26B
    FY1995 $4.973982T $281.23B
    FY1996 $5.224810T $250.83B
    FY1997 $5.413146T $188.34B
    FY1998 $5.526193T $113.05B
    FY1999 $5.656270T $130.08B
    FY2000 $5.674178T $17.91B
    FY2001 $5.807463T $133.29B

    4. With the Federal government now spending nearly $1,000 per month per man woman and child, it's not spending enough?

    I'm hoping to see some people elected who will recognize the fact that we are taxed more than enough already, and impose some drastic Federal spending cuts which will eventually result in making the letter "P" in "GDP" mean "Product" once again.

    While our politicians may be bought by ideologues with special interests, they are democratically elected by voters who too are voting based on their interests, which most often if not always bear a cost to working taxpayers who earn enough to actually pay taxes.
     
  3. Iriemon

    Iriemon Well-Known Member Past Donor

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    Why?

    In FY2014 $430,812,121,372.05 interest was paid on a debt which totalled $17,824,071,380,733.82 at the end of FY2014. The debt interest amounted to 2.4170242% and considering that debt payments at the beginning of FY2014 were being paid on a lesser amount of debt, that number is slightly lower han the actual interest rate. If our currency devalues at a rate very close to the debt interest rate or above, debt is made to appear acceptable especially that of government. Currently, based on the debt interest rate mentioned above our currency needs to devalue greater than 2.3599828% or the debt plus interest remains relatively constant in value. [/quote]

    What about interest earned?

    1940 6.5
    1941 8.7
    1942 14.6
    1943 24.0
    1944 43.7
    1945 45.2
    1946 39.3
    1947 38.5
    1948 41.6
    1949 39.4
    1950 39.4
    1951 51.6
    1952 66.2
    1953 69.6
    1954 69.7
    1955 65.5
    1956 74.6
    1957 80.0
    1958 79.6
    1959 79.2
    1960 92.5
    1961 94.4
    1962 99.7
    1963 106.6
    1964 112.6
    1965 116.8
    1966 130.8
    1967 148.8
    1968 153.0
    1969 186.9
    1970 192.8
    1971 187.1
    1972 207.3
    1973 230.8
    1974 263.2
    1975 279.1
    1976 298.1
    1977 355.6
    1978 399.6
    1979 463.3
    1980 517.1
    1981 599.3

    U.S.
    FY2000


    [​IMG]

    The Fed Govt is spending less relative to GDP than every year Reagan and Bush1 were in office.

    I don't have a problem with trimming spending relative to GDP, but not the austerity measures we've been forced into while the economy was trying to recover from the worst recession in 80 years.

    That's for sharing your opinion. Tax revenues are better since the 2013 tax increase, but still much lower than the late 1999s/2000 when we had surplus budgets. And with all the additional debt we've run up, we need to increase revenues, not decrease them.

    All working people pay taxes.
     
  4. Ndividual

    Ndividual Well-Known Member

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    Why not?

    What interest earned?


    I believe you are showing the total revenue collected at all tax rates; how much was collected at the highest tax rate alone?


    Then what U.S. austerity spending restraints are you referring to?

    FY1998 $5.526193T $113.05B
    FY1999 $5.656270T $130.08B
    FY2000 $5.674178T $17.91B
    FY2001 $5.807463T $133.29B


    It looks like it's about the same.


    Again you've mentioned those elusive austerity measures, please elaborate.


    Federal, State and local tax revenues for the year 2000 were 3,675.6B, or about $13,000 per man woman and child.
    Federal, State and local tax revenues for the year 2014 were 5,823.1B, or about $18,000 per man woman and child.
    In 2000 about 67.0% of those age 16 years or greater were employed, while in 2014 that had dropped to about 62.7%


    You might even say that all consumers pay taxes, but many people who have income tax deducted from their pay checks receive a refund equal to, and in some case more than the taxes deducted. And the taxes paid by those who have no income, but receive total or partial support from government programs is paid by the working tax payers who do not get a full refund of their income taxes.
     
  5. Iriemon

    Iriemon Well-Known Member Past Donor

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    Not a persuasive basis for doing more research.

    The billions of dollars the US Govt earns on interest. You're looking at gross, not net. The gross interest expense was $430 billion but the net was $229 billion, a couple hundred billion less.

    I don't know, how much?


    Austerity:

    Obama
    Federal Spending increase, 2009-2014: -0.53%
    Total government employment, 2009-2014: -540,000

    Not Austerity:

    Reagan
    Federal Spending increase, 1981-1986: +46.0%.
    Total government employment, 1981-1986: +879,000

    Not Austerity:

    Bush
    Federal Spending increase, 2001-2006: +42.5%
    Total government employment, 2001-2006: +840,000

    source data
    Expenditures: http://cbo.gov/sites/default/files/cbofiles/attachments/45249-2014-04-HistoricalBudgetData.xlsx
    Employment: http://www.bls.gov/webapps/legacy/cesbtab1.htm

    See the difference?

    Those are debt figures. I didn't say anything about the debt. I said there was a surplus budget.

    Percentage points on the budget make a big difference. Just one percentage point equates to about $180 billion in today's budget.

    See above. We had had unprecedented actual and relative cuts to spending over the past five years, at least since WWII, and certainly in periods were the economy was trying to recover from an economic recession.

    You are erroneously trying to compare budget numbers over time without accounting for population growth, inflation, or GDP growth.

    Depends on whether they live in a state with a sales tax. Whether they receive Govt income support doeesn't change the fact they pay taxes.
     
  6. unrealist42

    unrealist42 New Member

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    Since WW2 government revenues averaged a little less than 18% of GDP and expenditures a little more than 19%. In the 2000s revenue declined to around 16% of GDP while expenditures rose to above 20% by 2010. In 2015 revenues are expected at about 16% of GDP and expenditures at less than 19%%. In other words, government expenditures are moving to their historical norm while revenues are not.

    This does not indicate a spending problem.
     
  7. veritatem

    veritatem Newly Registered

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    Even if the debt to GDP ratio is falling it is still preferable for the nominal debt to also be falling mainly because high levels of inflation do not last.
    In fact, while past inflation rates have been around 3% the current inflation rate is not. The actual inflation rate right now is about 1/2% to the debt/GDP is actually increasing anyway.
     
  8. Iriemon

    Iriemon Well-Known Member Past Donor

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    The spending problem is that we've slashed spending relative to GDP over the past few years and eliminated over 1/2 a million government jobs -- austerity while the country was trying to recover from the worst recession in 80 years.

    All part of the plan.
     
  9. Ndividual

    Ndividual Well-Known Member

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    The budget will be balanced when there is no unpaid debt remaining and spending is less than or equal to the revenue being provided the government each year to fund the budget items fully.
    Even David Copperfield would find it impossible to show the U.S. Federal budget being balanced, and we would all be much better off if we quit looking at politicians as magicians who can solve all problems with the passing of bills into laws.
     
  10. Iriemon

    Iriemon Well-Known Member Past Donor

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    The amount of debt has nothing to do with whether the budget it balanced.

    Addressing the deficits and ultimately debt is absolutely a political problem that can be solved by passing laws.
     
  11. Ndividual

    Ndividual Well-Known Member

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    The debt owed by our government results in a budget line called debt interest, so it is very much a factor in balancing the budget. The OP of this thread appears to not understand that only by devaluing our currency at a rate greater than the debt interest rate would result in benefiting from continually borrowing, paying only interest and allowing the debt to grow.

    Using the debt interest rate of about 2.4% for FY2013 for example and assuming that rate to prevail going forward, with our currency devaluing at the same rate each year, say the government borrows $1,000,000,000,000. The interest due the next year at that rate would be $24,000,000,000. Factoring in the currency devaluation at the same rate the interest payment would have a value of only $23,437,500,000. So you could claim the government is saving by paying the interest with less valued dollars. The principal owed would still be $1,000,000,000,000 and you could also say the debt owed is now worth less in current dollars as well, actually only worth $976,562,500,000. If you add the interest paid $23,437,500,000 to the current value of the principal owed $976,562,500,000 it amounts to $1,000,000,000,000. So as long as the interest rate and currency devaluation are equal you have what amounts to an interest free loan. If the debt interest rate exceeds the currency devaluation rate the debt begins to have a cost, and the only fix for that would be for the Fed to let the currency devalue at a rate higher than the debt interest rate.
     
  12. maat

    maat Well-Known Member Past Donor

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    Laws being balanced budget amendments? Or laws that confiscate more private sector wealth for redistribution?
     
  13. Iriemon

    Iriemon Well-Known Member Past Donor

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    False dichotomy. Raising taxes and trimming spending.
     
  14. Iriemon

    Iriemon Well-Known Member Past Donor

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    Every spending or revenue item affects the deficit. The amount of interest is an expenditure affecting the budget, the amount of debt does not.

    What does this have to do with a balanced budget?
     
  15. Ndividual

    Ndividual Well-Known Member

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    The amount of debt affects the amount of interest. Zero debt eliminates the need of an interest payment.

    Multiply each of the numbers I showed by 18 to see how our current debt affects our current budget, and note that the interest rate is currently very low. When the interest rate begins to rise will that not have an effect on balancing the budget?

    Based on the reasoning you seem to be applying, why should government tax us at all? It could just borrow what it needs to operate each year, including the interest due on the debt previously accumulated.
     
  16. Iriemon

    Iriemon Well-Known Member Past Donor

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    I just said: The amount of interest is an expenditure affecting the budget, the amount of debt does not.

    You're arguing something different. I never denied that debt interest is a budget item and affects the deficit.

    What I took issue with was your statement: "The budget will be balanced when there is no unpaid debt remaining ...."

    It is absolutely not true that you have to pay off the entire debt to balance the budget.

    There are limits to the amount that can be borrowed and interest would get too high.
     
  17. Ndividual

    Ndividual Well-Known Member

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    I have simply been pointing out that the debt is what creates a need for an interest expenditure in the budget.

    Paying off the entire debt would eliminate an interest expenditure completely, and reducing the debt would reduce the interest expenditure in the budget. Growing the debt perpetually does not help to balance the budget, but only increases the need for government to increase taxes on a diminishing percentage of our society, those who are net tax payers, which only aids in creating a demand for greater government control and responsibility in providing for the needs of a rapidly growing percentage of our society, those who are dependent on government providing some/all of their needs.


    Yes, I agree. And it would help if we look at and take into account the effect on the non-working poor needing total support by the government, the working poor needing some help by the government, the middle class income earners trying to save for their retirement years, the wealthy and governments, local, State, and Federal. TIPS were created in 1997 which are in my opinion the only sensible way to invest in government debt. Too bad individual savings accounts aren't handled the same way.

    The Fed is only preventing hyper-inflation from occurring, spreading it over generations who are made complacent by government programs which only increase the number of citizens who are dependent on government, and therefore demand more of/from the government.

    Numerous times I have suggested repealing the 16th and 17th amendments as a first step in getting control over Federal government spending. That along with a balanced budget amendment to our Constitution would return control to the people and the States over the Federal government as States, the majority of which are being subsidized by Federal spending would then be held responsible for funding the Federal government by taxing their own citizens and/or borrowing to provide their share. Neither the States nor their citizens put up with the Federal government spending wastefully when none of the money sent to the Federal government was being returned with interest back to the States.
     
  18. Iriemon

    Iriemon Well-Known Member Past Donor

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    A growing debt creates growing net interest (though it may not be growing relative to GDP).

    But that doesn't mean that you can't have a balanced budget unless you pay off the debt. That is simply wrong.

    Many people are confused about the difference between a deficit and the debt.
     
  19. Ndividual

    Ndividual Well-Known Member

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    That is correct, "A growing debt creates growing net interest", but are you implying GDP growth to be justification for increasing our debt?

    That too is correct, and if you go back and read what I had wrote earlier you might see that I did not say "you can't have a balanced budget unless you pay off the debt."

    There may be some, but probably very few.

    To restate the answer to the OP question, No, the budget is not actually balanced. And I might add that it will require getting Federal spending under control to do so, and the GDP should be looked at for what it really is, spending.
     
  20. Iriemon

    Iriemon Well-Known Member Past Donor

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    No. I am saying that if the deficit is smaller than GDP growth, the debt shrinks relative to the size of the economy, even with a deficit.

    Federal spending has been cut faster than any time since WWII, and spending proportionate to GDP is lower than every single year Reagan and Bush1 were in office.

    If we collect the same amount of tax revenue proportionally as in 2000, the deficit would be virtually wiped out.
     
  21. Ndividual

    Ndividual Well-Known Member

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    It is an undeniable fact that the above is true when applied to comparing ANY two numbers.

    Has been cut?

    The same would be true, and even more so, if government was spending the same proportion of the GDP as in 2000.
     
  22. dairyair

    dairyair Well-Known Member

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    If you're unable to put things into proportions and ratios, then you have no business talking about it. Educate oneself, don't listen to the RW hacks on tv and radio. They only want to incite emotions.
     
  23. wgabrie

    wgabrie Well-Known Member Donor

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    Excuse me but as long as we're running a deficit that's money we have to pay back in the future above what we owe. Even if the interest rates are near zero we're still paying something extra.

    We have to eliminate the deficit to get a surplus.

    Sure we can pay as we go, and that's a good strategy assuming the Federal Budget creates more economic activity that produces taxes that, in turn, pays for everything.

    But we're just assuming that's the case.
     
  24. Iriemon

    Iriemon Well-Known Member Past Donor

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    Yes, several times.

    That is true.
     
  25. dairyair

    dairyair Well-Known Member

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    There is no point in discussing this with you any further.
    You don't understand simple math and ratios.
    The gov't has been operating that way almost since it's creation.
     

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