Re: Budget Deficits Lead to lower or higher GDP?

From: William F Hummel (wfhummel_at_comcast.net)
Date: 10/20/04 

Date: Wed, 20 Oct 2004 16:09:01 GMT

On 19 Oct 2004 18:42:41 -0700, kikivan6@yahoo.com (Kiki Van) wrote:

>William F Hummel <wfhummel@comcast.net> wrote in message news:<h0ean01q7n0h9g5khsjac36qrhqckimm3n@4ax.com>...

>> Rubbish. The government can always pay interest due on the debt.
>> Furthermore the debt/GDP ratio is bounded as long as the GDP growth
>> rate on average is positive. As already proven, if the deficit grows
>> at the same rate as the GDP, the debt/GDP ratio will not exceed
>> (deficit/GDP) / (GDP growth rate).
>
> The following study by USA Today definitely sided with Igor. You
>have terribly underestimated the problem of deficit.
>(www.usatoday.com/news/nation/2004-10-03-debt-cover_x.htm)
>
There is nothing in the newspaper column by those two writers that
relates to what I said above. There may be large deficits ahead, but
the numbers are mostly guesswork now. We can't even predict the
deficit four years ahead. Recall that budget surpluses were predicted
as far as the eye could see back in 2000.

In any case, the so-called analysis is an amateurish job, which you
would expect in a USA Today newspaper column. It claims:
"The $53 trillion is what federal, state and local governments need
immediately —stashed away, earning interest, beyond the $3 trillion in
taxes collected last year — to repay debts and honor future benefits
promised under Medicare, Social Security and government pensions. And
like an unpaid credit card balance accumulating interest, the problem
grows by more than $1 trillion every year that action to pay down the
debt is delayed."

Where does the figure $53 trillion dollars come from? It doesn't say.
Where do you suppose the governments are going to stash away $53
trillion dollars? That's "lock box" nonsense.

Social security is a pay-as-you-go program, using tax revenues today
to pay benefits today, and borrowing if necessary to cover any
shortage. The fact is that tax revenues are projected to exceed
benefit payments until about 2018. The excess revenues will be spent
by the government for other purposes until then because there is no
way to "stash" the funds.

 

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