re: Regarding the National Debt, Where is the Point of No Return?

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When the Federal Reserve loses control of interest rates.

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My guess is that happens around the time when the interest on the debt closes in, matches or passes the tax revenue coming in. Just doing some quick-n-dirty math:

FY 2013 Interest paid: ~$415B
FY 2013 Revenues: ~$2.7T

National Debt for 2013 was about 16T (very rough number), so to raise that enough for the Interest to equal $2.7T, that would put the debt around ~$90T.

Now this does not take into account credit ratings getting lowered, dips in Revenues due to rising Unemployment/Underemployment, accrued interest, etc. My guess is that with all of those other things (as well as things I am forgetting or just plain don't know to figure in) it's probably somewhere closer to ~$50T. If spending keeps pace as it has since FY 2000, then that means we should hit a water-shed sometime around FY2025 or so (trying to take everything I can think of into account).

This, of course, doesn't take into account what could happen from the ACA's implementation or future legislation.

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Regarding the National Debt, Where is the Point of No Return?

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About 4 years ago.

Not Obama's election, but the "stimulus package" was the first nail in the coffin.

It is rapidly escalating beyond what is realistic to recover from.

We're paying over $200 billion in interest payments per year.....w/ rates near ZERO. We are fricked when interest rates climb back to just historical norms on this incomprehensible debt.

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our debt payments aren't even close to approaching tax revenues

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Because we have interest rates near zero. When interest rates go up just historical norms (and I think they are going to go a lot higher than that), those interest payments are going to skyrocket. I disagree w/ Bard that interest payments need to take up 100% of tax revenues in order to wreak havoc. I think it will start way before then.

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The debt isn't "incomprehensible" -- it's historically HIGH, sure, but so is our GDP. This is just an indication that we're a really productive state

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Doesn't GDP include a lot of government spending? And don't you agree that government spending doesn't help actual growth, but hurts it?

I completely agree w/ your assertion that all kinds of cuts need to be made. But, I also agree w/ Sleeping Tiger about us already passing the point of no return. There's no way the cuts that are necessary will ever be made. There's no political will for it.

Fair enough about the alarmism.

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Regarding the National Debt, Where is the Point of No Return?

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The point where service of our national debt is disabling

The first answer is when China stops buying T-bills, and the second one is when the dollar is no longer considered the fiat currency in financial trading around the world. We are very close to both of these coming to fruition.

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Oh, we definitely got growth from the spending, but it was a probably low multiplier factor since much of it was just spent on stupid shite. Some stimulus spending, such as infrastructure, gives you a good multiplier since it helps business. Others such as art shows gives a shitty multiplier since it generates no additional economic activity. The stimulus bill had a lot of art shows and very little infrastructure. But I don't think any economist would argue that we got a short term bump, although they may argue over how much. I do agree its not sustainable, and the problem is not keynsian policies but instead how they are implemented. We are seeing the effect of non stop use, i.e. bridge to nowhere, generating very little growth.

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All true, Hawk; but only in a relative sense. It seems that the only *real* growth has been the Stock Market. And though the Brokers/Banks have cashed in, as I understand it, the whole system of Retirement funding - both Private and State - rest on the relative value and returns in that Stock Market. If that Market goes...the whole thing tumbles down. There are tons of people in this economy that spend and create a vibrant economy, because the have EXPENDABLE INCOME, based on the assurance of their Retirement Accounts.

Keynesian stimulus was well designed to "prime the pump" which delivered the economic water; it can never be the 'water' itself. True economic value is a measure of the PRODUCTIVITY of the populous. And herein is the REAL story.

Economics is the mechanism by which value/money is exchanged between people. Exchanged according to an individual's relative economic worth, in their ability to serve the goods and services market. Obama/Progressives find such a 'value judgment' on individuals (and the "economic inequality" affect)...abhorrent. And practically unsustainable. They thereby desire to "fundamentally change"/redefine the very concept of *value*, so that it no longer is related to the productivity of particular individuals/groups. When Pelosi says that "people can be free to follow their dreams", and still retain the basics of life as a Government guarantee...and Obama pushes all manner of Government Subsidies to accomplish economic equality...they both do so not in accordance with the old model of determined and REAL value...but on a new - and more moral - "sustainable economy" model.

Bottom line. There IS NO "point of no return"...because there IS NO DESIRE to return to the old model of 'value'. Therein is the explanation of the seemingly incongruent mindset of the Progressive methodology to just totally IGNORE the exponentially increasing debt. The old model must be crashed...to usher in the new model, of the State being the arbiter of value and dissemination of goods and services...as opposed to that of individual merit.

Now at what specific moment the whole system collapses and the dogfight to establish the new one begins...nobody can know and it don't matter. Unless one is planning to survive and prosper beyond it. Either the State will assume even greater power, to implement it's (Egalitarian) model...or the power dissipates back to local communities/individuals, and the Darwinian model of survival and prosperity based on individual merit is reaffirmed. And if Katrina is any example, this collapse will be waaayyy beyond the ability of the State of manage. Think Harry Reid and Nancy Pelosi and Barack Obama...behind the wheel. I'd feel better with Curly, Larry and Moe up there.

I know it's too long. Oh well. I think it is what's happening.

Good luck.

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We need to do something now, I don't think it's even a serious question as to whether we should do something about it or not.

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i agree with this statement. Since the stimiulus, weve been cutting into the size of the annual deficit each year, which is progress, but the point being we're still accumulating debt annually isnt good.

another but... we were so far in the red back in 2008/2009, a complete slash of government spending to get us back in black annually would have been economically irresponsible and surely would have led to worsening recession conditions.

So, as along as the annual deficit continues to get cut, which leads to a point where we're eventually running an annual surplus each year to begin paying down our debt, i can support the gradual approach. Its taken us decades to get in this poistion. There's no reason to think we can or should get out of it overnight.

entitlement reform will have to enter in to this conversation at some point or progress will stall.

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quote:If we got in this mess in 11 years then we can definitely get far enough out of it in 11 more to be okay. Disagree with this. You can rack up debt way faster than you can (usually) pay it off.

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Absolutely, BJ.

Both the Clinton economy (dotcom) and the Bush (debt through Fannie/Freddie, defict, etc.) were based on unrealistic economic BUBBLES. There will be no more fake economic bubbles which can sustain traditional recovery economic levels. There is a new norm.

Re "increased productivity as a result of tech innovation"...very true...but also can be as detrimental to a traditional economic health (loss of jobs) as it can be supportive.

We are in unexplored terrain. Blazing a new trail. National population unity on grand Principles is the ticket to prosperity. It'll take somebody the very OPPOSITE of Obama, to even begin to accomplish that.



ps...forgot to factor in the price of ENERGY. Don't forget...gas was a 1.85 when Bush was in. That is big on a consumption-based economy.