Budget

Debt Becomes Us

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Hope you're stocking up on canned goods.

It's Monday morning. Time for another reminder about the coming budgepocalypse!

How big and bad is the U.S. debt, and how big and bad is it likely to become over the next decade? The President's budget expects it to reach 77 percent of GDP by 2020, which is far above the generally-accepted healthy threshold of 60 percent of GDP. This is the best-case scenario, which, given Washington's history of bloated budgeting, means you can safely ignore it. The CBO, on the other hand, projects that publicly held debt will equal 90 percent of GDP by 2020. And according to economists Carmen Reinhart and Ken Rogoff—whose recent history of fiscal crises, This Time Is Different, is among the most thorough and influential takes on how economies weigh themselves down with debt—it's at that 90 percent point when things get really scary. Growth slows, and the economy becomes more likely to suffer shocks. Federal interest payments climb ever higher. And as that happens, the country becomes more and more likely to lose its triple-A credit rating—which is sort of like being put on economic probation (in other words, really bad news).

But what if we hit the 90 percent threshold even faster? The CBO's headline figure only total up publicly-held debt. But if you look at the government's gross debt, the timeline for the budgepocalypse is even shorter. In fact, we may already be there: The CBO expects gross central government debt to hit 94 percent this year. And it's expected to keep growing, too. This morning, Bloomberg is reporting that total debt could could hit 100 percent of GDP by 2012, according to IMF figures. Maybe we all get some sort of award when we finally owe more than we produce in a year? Or maybe we just keep shrugging our shoulders and scratching our heads and setting up bipartisan commissions to make it look like we're doing something.

In other news, according to the Wall Street Journal, some folks in Washington aren't quite sure whether to keep borrowing money in order to fund more stimulus programs or start cutting spending. But for the Obama administration, it's not that tough a decision: "The priority remains stimulating economic growth through continued spending." Fiscal responsibility!

NEXT: Reason Morning Links: New Gitmo Allegations, Terrorism Arrests in New Jersey, Madoff Finds His Niche

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  1. Junkie economy. Withdrawal’s gonna suck when the dope man will no longer give us credit.

    1. We can always sell our daughters to the Chinese!

      1. Do the Chinese like BBWs?

        1. LOL!!

          FTW!

      2. There are certainly a lot of foreign investors in US Debt. Not necessarily a bad thing unless they want their money back….lol

        http://www.topdatacharts.com/F…..-investors

    2. The CBO, on the other hand, projects that publicly held debt will equal 90 percent of GDP by 2020.

      The federal government is not competent to project out ten years like this. These numbers are not real.

      We know things suck now. What we don’t know is what will happen in November, which could drastically change things, or not.

      1. Actually the government is competent enough to project ten years out.

        As a citizen you just have to take their number, predict for inflation even accounting for the rule changes the government may use to subtract some figures that sort of fuck up all its numbers, then multiply it by 1.5.

      2. What we don’t know is what will happen in November, which could drastically change things, or not.

        Right.

        I am sure that a Republican controlled Congress will be a model of fiscal responsibility.

        The same day that Christopher Hitchens converts to Mormonism.

    3. Michael: My credit good enough to buy you out?
      Obama: Buy me out?
      [Biden laughs nervously]
      Michael: The States, the military. The Corleone Family wants to buy you out.
      Obama: The Corleone Family wants to buy me out? No, I buy you out, you don’t buy me out.
      Michael: Your country loses money, maybe we can do better.
      Obama: You think I’m skimmin off the top, Mike?
      Michael: [Michael shakes his head] You’re unlucky.

  2. I don’t know bout the rest of yas, but I ain’t eatin no baby kabob.

  3. The more you spend, the more you save!

    1. A can of coke didn’t use to cost $500 dollars…

      1. Just wait till I hit the market!

      2. But it has electrolytes!

        1. obscure reference, hilarious. good sir, you have my approval

  4. Serious question, is there anything one can do to reasonably hedge against this?

    1. Buy gold? Stock up on ammo? Learn to be a stone-cold badass motherfucker? One of those.

      1. If you buy a bunch of gold, you’ll just be a better target for the stone-cold badass motherfuckers with ammo.

      2. How about being a charming gent? Much call for them post-apocalypse?

        1. Yup. And don’t lose to much weight. Us bastard like our meat well-marbled.

        2. Your charm won’t help you; nor will your debonair wit; nor the jaunty cut of your fine clothes. Your best bet is to stock up on perfume and become a tranny hooker, I’m sorry to say.

          1. Well at least semen is a good source of protein and amino acids I suppose.

            Rather grim these apocalypses!

          2. Have you been thinking about that option for a long time?

            1. It depends. How soft are your hands?

              1. Not gonna happen.

            2. What im wondering AlmightyJB is if you give the AlmightyBJ. that certainly could be a useful skill when the budgetpocalypse hits.

              1. You guys are creeping me out. I’m all about the ladies.

          3. You can run, but you can’t hide!

    2. stage 1: Gold
      stage 2: crisis garden + well
      stage 3: guns & ammo
      stage 4: bibles
      ……
      I’m hoping we don’t get past #2….

      1. stage 4: bibles. If you need toilet paper, why not buy the real thing?

        1. You haven’t got a prayer…

        2. You haven’t got a prayer…

    3. Well, a self-contained compound in the middle of nowhere would be optimal, except that the Feds will accuse you of deviant Christianism and raid you.

      1. Isolated compounds are targets, not safe havens.

        1. But I have an honorable compromise.

          Just walk away.

          Give me the pump.
          The oil, the gasoline, and the whole compound, and I’ll spare your lives.
          Just walk away. I will give you safe passage in the Wasteland.
          Just walk away and there will be an end to the horror.

          I await your answer.

        2. That depends on how well defended they are, and how isolated (e.g., how many people outside of those who will live there) know you’ve been stocking up?

    4. Something non-perishable people will be willing to barter for when currency is worthless. Booze, Salt, M&M’s, etc.

      1. I’ve read that the best weight-to-value ratio is probably antibiotics and painkillers. I wonder what’s available OTC in Mexico.

        1. Don’t bother with the anti-biotics! You’ll need the painkillers when you get a nasty staph infection and need to lose a limb. If the toxins and fever don’t kill you first, that is.

        2. As long as you can keep them effective. They are perishable items which is the only reason I didn’t have them at the top of my list. Definitely good option for the first year or so though.

      2. I knew my Twinkie stash would come in handy one day.

      3. So it turns out my “irrational” obsession with buying copious amounts of exotic gourmet salts might benefit me after all. I might even turn a profit.

    5. http://online.wsj.com/article/…..stpop_read

      Try this for starters,@ end of the article

  5. Hey, it’s only money!

  6. Maybe we all get some sort of award when we finally owe more than we produce in a year?

    Like Debtor’s prison?

  7. My favorite part about The Road is that they filmed it in Western PA so that it wouldn’t take much CGI to make it look depressing.

    1. There used to be pools of oil floating on their drinking water.

    2. Some shots were also post Katrina New Orleans, hardly any CGT or green-screen needed.

      1. CGT = CGI

        1. Capital gains tax and computer-generated imagery. Two things that piss me off.

    3. They would have filmed it in Cleveland if they wanted a CGI-free uncontrollable projectile vomiting scene.

      1. Even your jokes are shitty. Shut the fuck up, Tulpa.

        1. Struck a nerve. Hopefully closer to the gag reflex than the G-spot.

  8. At least we’ll see get to see Obama sacked and replaced by a Weimar Republican.

  9. Hasn’t the US forgiven billions in debt during the past 6 decades? Maybe someone will return the favor?

    1. The Chinese may be nuts, but they aren’t stupid.

  10. Paging Docteur Guillotine….

  11. The good news is that massive inflation will wipe out your mortgage and debt, The bad news is the incentives are for us to borrow even more now.

  12. Why does Reason question what the vanguard does? Their so much smarter then the rest of us. Don’t you trust them? Is it because you’re racist like the tea partiers? That’s it isn’t it.

  13. NJ’s Christie has shown promise.

  14. Federal debt to GDP isn’t a particularly useful metric.

    The debt part is only what the federal government officially owes in the form of treasury securities (on balance sheet debt) which is partly owed to itself (i.e. intragovernmental holdings). Whereas, the GDP part represents the entire economy, both private and public sectors.

    It’s an apples and orangutans comparison.

    If you care about the financial status of the federal government specifically, then you should look at its actual obligations (on-balance sheet debt, plus off-balance sheet obligations, netted for intragovernmental holdings), and you should compare that to total federal government revenue.

    If you care about the status of the entire US economy, then in addition to the federal debt figure, you should also add state and municipal debt, as well as corporate and household debt, since all of these entities are captured in the GDP measure.

    In both cases, it’s much worse than the simplistic federal debt to GDP figure suggests.

    1. I would just like to point out that my rather modest gold futures contracts have appreciated an average of 20% this morning.

      Before you pop the champagne, that means that, due to my impeccable market timing, they are now modestly in the black. For the first time.

      1. I was confused because gold is only up 1.65% this morning. I missed the word futures.

        So, nevermind.

    2. I would just like to point out that my rather modest gold futures contracts have appreciated an average of 20% this morning.

      Before you pop the champagne, that means that, due to my impeccable market timing, they are now modestly in the black. For the first time.

    3. Federal debt to GDP isn’t a particularly useful metric.

      It’s useful as a touchstone for foreign investors who are evaluating the potential of the economy to repay the debt vs. the printing press.

      1. In which case, as pointed out, they should be included state, municiple, corporate and household debt too. The economy will have to pay them all back. Its much easier to pay off the federal debt if the household debt is low, for example.

    4. “In both cases, it’s much worse than the simplistic federal debt to GDP figure suggests.”

      Thanks for the ray, sunshine.

  15. Even in socialist western Europe, the final curtain is now preparing to come down on all of the failed and discredited theories of Keynesian economics as we speak, and poor old stagehand Paul “Alfred E.” Krugman is running onto the stage screaming for the klieg lights to be kept on just a little longer as everyone files out of the theater.

    1. It’s kinda funny since, like the free market, no one ever honestly tries Keynesian economics anyway — they use it to justify the part that politicians like (spend more in downturns) but forget about the flip side (cut spending during booms).

  16. One thing to keep in mind. No matter how bad it gets here, we’ll still be better off than the majority of the earth’s population. The U.S. infrastructure and human capital (to my mind the most important things in an economy) are the best in the world.

    1. One can certainly hope.

  17. “…far above the generally-accepted healthy threshold of 60 percent of GDP.”

    Generally accepted by whom, exactly? I sure as hell don’t consider 60% even remotely acceptable.

  18. The U.S. infrastructure and human capital (to my mind the most important things in an economy) are the best in the world.

    I wouldn’t be so sure about infrastructure. Our IT infrastructure is definitely a generation behind, and our physical infrastructure is creaking under decades of deferred maintenance.

    1. And our human capital leaves something to be desired as well.

      1. We scored between Norway and Switzerland?

        How is this bad?

  19. Would this be a bad time to point out that I am now looking at a nice little high-altitude coffee farm in Panama? Could be certified organic, on a paved road, and has better internet connectivity than I have at my house in Texas?

    1. Only if you don’t plan on letting any of us crash there for a while. I’ll pick some beans for my room and board.

    2. the greener grass, idiot!

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