Quote:
Originally Posted by chad3
You spoke of sending Bill Clinton back in time. But if we sent Carter, Clinton, or Obama back in time they would not create huge deficits (because they are against multi-trillion dollar tax cuts for the rich.)
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Look, FDR created huge deficits while drastically increasing tax rates. The tax rates under Clinton were significantly lower than they were from the 1940's till the 1980's. But tax revenue even as a percentage of GDP was higher under Clinton.
Deficits are caused by spending money, not by lowering taxes.
I promise you, if you sent any president back to 1940, they would have had sky-high budget deficits. Just like FDR. I mean, you can't go much higher than 94%?
And secondly, there were no multi-trillion dollar tax cuts. Saying something like that is stupid. If the Bush tax cuts reduced tax revenue even two trillion(I assume multi is at least two). Then there wouldn't have been any tax revenue at all(total tax revenue was less than $2 trillion in 2001).
Saying something like "multi-trillion dollar tax cuts", refers to a cumulative effect. But talking about a tax cut in a cumulative way is stupid. Because any tax cut over an infinite amount of time would produce an infinite amount of "tax cuts".
I mean, based on that logic, every single tax cut single 1945(when the rate was 94%)was a "multi-trillion dollar tax cut for the rich".
Obviously that is a stupid way of looking at things. And most people who aren't morons would realize what a terrible idea that would be. Which includes pretty much every Democrat since WWII, except maybe Obama.
Quote:
Originally Posted by chad3
Then you say deficits and debt don't matter. But if that was true we could all get huge bank loans, max out our credit cards, write bad checks, and then stop working and sit back and relax (but the real world does not work that way.)
Chad.
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As others have explained in this thread. Sovereign debt works differently than private debt. Especially if you have a Fiat currency and you control your central bank's monetary policy.
In your example, you are having to take out an actual loan from someone else, and with a theoretical limit to how much you can borrow. On the other hand, the US government can take out a loan basically from itself, with no limit whatsoever.
Theoretically, the US treasury could borrow infinite amounts of money from the Federal Reserve at 0% interest. There is nothing that prevents them from doing that. And the checks would all clear the bank.
This is effectively what the Federal Reserve has done on a small scale with their policy of "Quantitative-easing".
What quantitative easing is, is basically when the US treasury wants to sell some bonds to finance the government, but can't find enough investors to buy the bonds at a low enough interest rate. The Federal Reserve swoops in and "buys" up all the treasuries, and just holds onto them. And when the US government "pays" the interest on the bond. It is just paying the Federal Reserve. And the interest on the bond that the US Treasury pays to the Federal Reserve just gets refunded back to the US treasury(which is what happens to all excess revenue from "Federal Reserve loan profits").
The only reason why we don't either just inflate our way out of debt, or just default on the debt. Is because it would hurt the economy, and the dollar exchange rate. And we would no longer be the world's reserve currency. Plus, too many hedge funds and other investors hold US treasuries and other municipal bonds. That kind of inflation would make a lot of people mad.
But I could care less. I would laugh my behind off if the US government just defaulted on all its debt, or just inflated the crap out of it. My assets are mostly protected inflation.