BK>>BK>>BK>> When the deficit hits zero the debt starts
retiring. The
BK>>BK>>BK>> latest budget figures I got from the Bush
administration say
BK>>BK>>BK>> it went into surplus during Clinton's last few years.

BK>>BK>> JB> Yet the debt went up.  You can't explain it.  Also a

BK>>BK>> Nope. Some kinda govt accounting. The debt was even expected to
BK>>BK>> be paid off within a relatively few years, can't recall how
BK>>BK>> many, maybe 15.

BK>> JB> You're delusional.  Of course one could argue that if we
BK>> JB> finance the debt on 15 year government notes and we make
BK>> JB> the payments we could retire the debt in 15 years.  The

BK>> Which is how it happens.

 JB> Except not all government debt can be financed through 15
 JB> year notes. That is the point.

 I believe the govt stopped doing 30 year notes some years back.
 No matter anyway, the time frame may change, but the principle
 remains.

BK>> JB> problem with that fallacy is that during those 15 years,
BK>> JB> the government would rack up more debt.

BK>> Not if the defict was truly below zero. Or rather the balance
BK>> was above zero, a surplus.

 JB> Deficit and debt are completely separate things.  This is
 JB> what you keep missing.  I can be in debt and have plenty of
 JB> money to pay my debts (i.e. debt servicing), then I can
 JB> still rack up more debt, also service that debt and still
 JB> obtain positive cashflow.  And yet the debt would rise.

 If you are wracking up debt, you are either experiencing
 negative cash flow, spending more than you take in, or you are
 stashing away the income from the sale of the debt instruments
 somewhere. If the govt is doing that, please let me know.

 JB> Simple debt management.  People do it all of the time when
 JB> the refinance their homes.

 Which is not how the feds run up the debt. They don't refinance
 the federal property, of if they do please give me a cite on
 that.

BK>> However, I never believed the deficit would stay at zero anyway.
BK>> I am just reporting what the budget figures, and the press,
BK>> reported. I am the one who posted some economist's statement
BK>> that balanced budgets are always followed by recessions. Even if
BK>> they tried to keep it balanced, they would have a recession that
BK>> would ruin their plans. Plus borrowing is the normal way of
BK>> financing capital improvements. It's very difficult to run
BK>> construction projects out of current accounts.

BK>> So I did not believe a balanced budget was a practical reality
BK>> in the long run, but I do see they had one, more or less, for a
BK>> short time.

 JB> Balancing the budget is the easy part, just spend less.

 Which is also the route to a failed system when you cut back too
 much.

 Notice, pretty much all the improved economy under Reagan and
 Bush II, and job growth, can be related to govt spending. As
 spending goes up, so does the economy.

 JB> Bringing down the debt is much harder because of ongoing
 JB> liabilities (i.e. expenses) along coupled with debt
 JB> servicing and racking up new debt.

 Since debt service is part of the budget, and all the rest is
 figured in, that's not really that much of a problem.

BK>> I don't believe we would reach zero debt, but I did believe they
BK>> could reduce the debt significantly.

 JB> Not until the democrats have no say in this.  Not going to
 JB> happen.  They are drunk with money power.

 Uh... take another look... Even hard core right wing think tanks
 were talking about the republicans spending like drunken
 sailors. And Clinton really did reduce the size of government.
 Bush and Reagan increased it.

BK>>BK>> JB> deficit hitting zero or going positive is current account
BK>>BK>> JB> balance cashflow and doesn't mean debt is being retired.

BK>>BK>> Yeah, it does. See below.

BK>>BK>> JB> You can have cash in your pocket and chose not to pay off
BK>>BK>> JB> debt.

BK>>BK>> The federal budget includes debt service. So, when the deficit
BK>>BK>> disappears, the debt service pays off the debt. When the bonds
BK>>BK>> mature, and are due they get paid. If the longest term is 15
BK>>BK>> years, then after 15 years they would all be paid off.

 JB> It includes debt servcing on the current year, nothing
 JB> more.  I can easily push off debt liability to out years
 JB> and still have a positive budget.  The Clinton did just
 JB> this, yet you refuse to admit it.

 Show it and I will. BTW, that is exactly what Bush did. His tax
 cuts aren't even all in effect yet.

BK>> JB> Right.  See above.  I already predicted this nonsense.

BK>> It's not nonsense, it's common sense, *IF* they maintain the
BK>> balanced budget.

 JB> And don't incur more long term delayed liabilities and
 JB> debt.  This is where Social Security bankrupts the country.

 Ah... no. Social security has it's own tax base. And it would
 only take shifting 2% of the GDP to social security, from the
 30% typically in total tax portion, to make social security
 solvent as far as the Bush administration forsees.

 JB>  We are getting the money now and spending it, while the
 JB>  liabilities pile up.  At some point they will need to be
 JB>  paid, along with the debt interest and current year
 JB>  liabilities.  This is the triple play that bankrupts us in
 JB>  the 2020s unless we continue to grow the economy and

 Which "grow the economy" requires bringing industry back to the
 US, and low unemployment and higher wages.

 JB>  reduce long term liabilities via private accounts.

 Ah, that way lies disaster. Private accounts are unstable and
 unreliable. Retirement is one thing you have to have reliable.
 The whole drive for private accounts is due to the fact that a
 shift to private accounts would shift billions, perhaps
 trillians, into the equity markets. When the money comes out, it
 will pull it down just as fast. You cannot move those currently
 near retirement into the market, they would not have enough time
 to gain anything. Which means trillions in liabilities being
 paid out of tax revenue, which would have to continue, all the
 while the young workers must pay into private accounts. I don't
 see that working.

BK>>BK>> OTOH, there is one possible explanation that hadn't occured to
BK>>BK>> me before. Social security surpluses are invested in T-Bills, by
BK>>BK>> law. So, no matter how low the deficit gets, the Federal govt
BK>>BK>> will still have to issue T-Bills, which contribute to the debt.
BK>>BK>> Now the income from those T-Bills could be used to pay off other
BK>>BK>> T-Bills, which would be a net zero difference. However, during
BK>>BK>> the transition I expect the total debt might continue to
BK>>BK>> increase even if only because no one has delt with a continuning
BK>>BK>> balanced budget before. And it turns out, not now either. So no
BK>>BK>> one knew what to do or how to do it.

BK>> JB> No, you didn't know.  You're getting warmer.  Remember that
BK>> JB> debt equals unpaid liabilities.  I can have positive
BK>> JB> cashflow but still increase my debt.  So can the government.

BK>> Not when debt service is calculated into the budget. If you are
BK>> increasing your debt you do not have positive cash flow, though
BK>> it may look that way if you see it as different accounts.

 JB> Current year debt servicing only.  I'll keep saying this
 JB> till you get it.  And we can chose only to service the debt
 JB> and not retire any of the noninterest portion.  It's all in

 We could, but that's not how it's done. And with T-bill maturing
 in 15 years, it's up to the investors, not the govt, whether the
 debt gets paid off.

 JB> how we choose to finance it.  I could balance the budget
 JB> for the next 5 years just by bringing back the long bond,
 JB> yet debt will go up.

 What would you do with the money from the long bond? If you use
 it for current account payments, that's not a balanced budget.

BK>>BK>>BK>>BK>> find govt accounting interesting,
in that Bush's budget
BK>>BK>>BK>>BK>> figures show the deficit wiped out
under Clinton, yet
BK>>BK>>BK>>BK>> the debt increasing.

BK>>BK>>BK>> JB> Those weren't Bush's budget figures
but don't let that
BK>>BK>>BK>>stop

BK>>BK>>BK>> It was from Bush's 2007 budget, in the
budget history files.

BK>>BK>> JB> They were the same under the Clinton.  Nobody played with

BK>>BK>> Yes, they were. And they are there under Bush. I use Bush's
BK>>BK>> figures because they are the most recent, and because if you
BK>>BK>> call them dishonest I don't mind calling Bush dishonest. I feel
BK>>BK>> no need to defend Bush, so I win either way.

BK>> JB> Of course you do.  You hate Bush and don't understand what
BK>> JB> you are saying.

BK>> I hate loathe and dispise Bush, which he well deserves
BK>> considering the damage he's done this country. However, the
BK>> facts are the same. It's his budget, his budget history, and the
BK>> numbers show a budget surplus. That may be hard for you to
BK>> admit, but it's true.

 JB> Right.  I agree how you hate Bush.  It clouds your entire
 JB> vision.

 Let's see, I accept Bush's numbers, and you call that clouding
 my vision. Ok, believing anything from Bush might be due to
 clouded vision.

 JB> Bush put this country back on the right financial
 JB> track (except for vetoing Congressional spending) and the

 Increased debt? Increased debt load? Tax cuts weighted so much
 to the rich even the American Enterprise institute is publishing
 articles saying so?

 JB> Dems are determined to destroy it.  The entire world is
 JB> benefiting from the current economic conditions.

 They are? How many poor people are becomming middle class?
 Poverty has increased in this country. There are more uninsured.
 More people who need jobs, inspite of the allegedly low
 unemployment figures. More debt. More foreclosures. And a stock
 market that didn't even start to really recover until the last
 year or so. Oil prices that the right doesn't even try to say
 are low when adjusted for inflation.

 JB> The world has never seen times this good.

 The rich have never seen times this good.

 JB> If the Dems have their way
 JB> it will all be wiped out in less than 5 years.  The entire

 I certainly hope so.

 JB> world will suffer.  I have ecomonic charts of the entire
 JB> world economies of leading and developing third world

 Give a link to them.

 JB> countries.  It is scary how they have all risen together
 JB> since 2000.

 Economies may rise, but the people are not benefiting very much
 from that.

 JB> It has never happened before.  It can continue
 JB> unless governments get in and screw with it.  That will
 JB> happen. It is only a matter of when.

 Some of Bush's biggest tax cuts are yet to go into effect. If
 the world economy is doing so good under current policies, those
 remaining tax cuts are unnecessary. Why risk upsetting things?

 ...

BK>> And I see another downturn, good possibility of a recession, on
BK>> the horizon. Just talking to a heating contractor yesterday, he
BK>> says his new construction work is down about 60%. The papers
BK>> report new construction down, while permit issues are up.
BK>> Incomes down. Etc. That new construction figure lags the fed
BK>> funds rate by quite a bit, so it's an indicator that things are
BK>> not going well. Unless the Fed opens the spigot, and fairly
BK>> soon, things could get a lot worse.

 JB> Construction will be down due to excess inventory.

 Excess inventory means what there is isn't selling/renting.

 JB> Remodeling is on the upswing.  Wages are up.  What spigot

 Where do you show wages up? Give a soure I can check.

 JB> do you want the Fed to open ?  The liquidity spigot is too
 JB> wide open right now.  There is more money out there than
 JB> folks know how to spend.

 I believe you are about a year behind. And what money is out
 there that people don't know how to spend is debt money.
 Borrowed money.

 JB> Any more and we will see serious
 JB> inflation.

 Inflation may be unavoidable. Stagflation may be our future
 under Bushonomics.

 JB> Any recession that comes will be solely due to
 JB> tax policy by the Dems.  Count on it.

 Tax policy seldom, if ever, causes recession. It will be
 interest rates.

 JB> The Dems are wanting
 JB> to kill the stock market, yet it is what is lining the
 JB> government coffers right now.

 The stock market was comatose under Bush for 5 years. During the
 80s the stock market went up and up, while corporate cash flow
 was down and corporate profits were down. All that time poverty
 grew. The stock market is a poor indicator of prosperity. It
 can, however, be a good indicator of problems.

 JB> Not unlike a Democrat to
 JB> kill the goose laying the golden eggs.

 Funny that you are citing tax revenue as a basis for judging the
 success of the market.

 Cut govt spending and watch the economy stumble. Watch the
 market stumble. Only Bush won't do it. He hasn't for 6 1/2
 years, he won't now. As long as republicans get their share.

BOB KLAHN bob.klahn{at}sev.org   http://home.toltbbs.com/bobklahn

... Ambition is a poor excuse for not having sense enough to be lazy.
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