Hi All,
Figured I'd ask these questions on here as many of you look at these areas of the economy daily:
- With the exception of COVID, why are we in so much debt? Wouldn't it make sense for our government to focus on clearing some of this debt before even considering initiatives such as universal healthcare and free tuition? I understand that perhaps having some debt may be beneficial as with businesses that borrow to expand, but it just seems that our debt keeps growing astronomically. I could be missing many things here so feel free to educate.
- Taking Question 1 a bit further, what about the debt that students are taking on? Student debt is around 1.3 trillion, meaning that a majority of young professionals are operating in the negative for at least the first decade of their careers. Do these spending restraints have an on the future of our economy? Especially if it isn't addressed sooner rather than later?
- How accurate is our economic data? Unemployment claims are consistently being filed; businesses cannot thrive like they did pre-COVID (with your typical exceptions...cough cough...tech). I don't pay attention to the markets as a way to gauge reality because well, you already know.
Note: Some of the examples I mentioned above are just examples, these questions have nothing to do with politics.
Looking forward to everyone's input.
print moneyz to produce gr0wth and jobs and then if that does't work, print other moneyz
How familiar are you with MMT?
Just learning about it now...I guess it makes sense, but then why sell bonds to other countries like Japan and China? I'm still learning about this stuff so pardon my ignorance.
MMT is a joke of a theory pushed by power hungry politicians to expand the size of the government to infinity.
1) MMT relies on the assumption that your currency is the reserve currency. Good luck if you're not the US. And how long can the US dollar maintain its reserve currency status?
2) It will completely fuck up the rest of the world. More money you print, more the dollar would depreciate in FX markets. This will mean all the investment will pour in to the US and not the rest of the world. Imagine how pissed off everyone is going to be.
2) MMT supporters want the Congress to be responsible for the amount of money printed (incidentally, biggest supporters of MMT are in Congress). This falls right back into the pitfalls of Keynesian fiscal stimulus - controlling the economy through fiscal policy is too difficult to get right and too difficult to dial (how much money, how often are too difficult of questions for anyone to figure out). Even worse, the political system acts as hindrance to getting it right: Politicians are going to fight over and waste so much time - ie Covid stimulus negotiation - that they'll never get the timing right.
Why pay it back if you can always borrow more? Until you can’t...
Short answer is, the US government has almost always been running on a large deficit except during the Clinton era for nearly a 100 years.
Here's the long explanation: The US, since FDR, has always been in the habit of expanding the size of the government. The US gocernment spends about 30-40% of the GDP and if you add direct control, it controls about 40-50% of the GDP each year. That is a ridiculously high amount, perhaps the highest, in any developed economies. But you can only tax so much, tmso the government ends up borrowing a whole a lot of money.
So far, this behavior has been fine because the US economy is strong but it's not sustainable.
As for healthcare, you're technically right. The US is in this catch22 where we can't spend more on Healthcare and education without jeopardizing the fiscal health of the country.
Tbh, rather than clearing the debt, better solution would be to cut spending on unnecessary stuff we're doing (ie. War budgets, million different federal agencies that exists for no good reason, possibly Social Secuirty but to that one's a little controversial, etc...) and divert some of that to healthcare and education. Economists speculate that this way, we'd have a strong social safety net all the while the US government can actually run on a surplus and keep our taxes are low.
Generally speaking, higher the spending (by the people), bigger the markets. Bigger the markets, bigger the economy. So yes, student debt is seriously restricting the total amount of spending that could be reached.
But on the other side, you'd have to think about what other economic components are tied to these debts. Who gets hurt if you pardon this debt and what impacts does it have?
I don't know who collects these data and how. But my guess is that there are lots of good economic professional organizations who does so reliably. But there are also lots of partisan "think-tanks" who'll engage in data manipulation and cherry picking.
Another issue is that even if the source is reliable, it's only as good as it can get. Constraints arise from 1) difficulty of data collection, 2) limits of data analysis techniques, and 3) limits of the metrics themselves.
To elaborate, 1) if you are collecting census data, you're hoping thatbpeople respond and they do so truthfully. They might not respond or just lie. 2) Statistical techniques have their limits. That's why researchers in statistics and ML get paid top dollars to come up with better methods. 3) Metrics aren't perfect. Before global trade became prevalent, sizes if the economies were tracked by Gross National Product (GNP). But once global traders became very active, it became very obsolete and we now use Gross Domestic Product (GDP). Nowadays, people are coming with new metrics to capture equality as well, which the GDP doesn't capture at all.
I appreciate all your responses and perspective. Definitely gives me a better understanding of certain things. Milton would be proud. What you mentioned about MMT on your 3rd point makes complete sense and I agree that it’ll probably lead to more harm than good – especially in today’s climate. I like your idea for alternatives to clearing debt as well. Logical choices to decrease or cut funding on areas that don’t truly need it. They like to use the phrase “job creation” to justify some of these valueless jobs. I watched part of a documentary regarding China’s education system and their student debt. Apparently, it’s non-existent compared to the US. But of course, there are other angles to evaluate there. Lastly, I’m glad my intuition didn’t fail me when it comes to data, because it is a tricky situation. I’ve considered as a rule of thumb to average data from 5-10 sources as consider it the most accurate, though 10 might be a bit much, and not sure if there would be enough sources to report on specific economic trends.
Glad to be of help.
Yeah it's an unfortunate downside of any Keynesian fiscal approaches. It's always hindered by the inefficiencies of the political system.
Oh absolutely. I hate that none of the political sides give me a clear cut solution. Many Republicans want to cut deficit no matter what and they often want to cut healthcare and education. All the while many Democrats want to publicly fund education and healthcare but they also want to defend lots of inefficient government organizations and interventions. All that money is ending up at the wrong pockets IMO (ppl getting paid 80K + life time benefits for literally waiting at a train station all day instead of paying 2 years worth of college tuition for someone who can't afford it!). It's messed up.
I'll share some thoughts.
Generally, the "truth" is likely to be somewhere in the middle so averaging the data is certainly better than just blindly trusting a single source.
But if you have the time, research into what data sources are actually credible. Read into how the data is collected. Often times, these information may not publicly be available, which is just crazy to me (maybe someone is trying to hide something or no one bothered because its not required?).
If you still want to average the data, still carefully judge how much you trust each source and weight them accordingly.
I wouldn’t necessarily advocate for eliminating social security, but rather how it’s funded in the “trust fund.” I read an interesting article recent and a congressional testimonial about it, let me see if I can find it. But basically it was calling for the funds going in to be invested in actual assets, similar to what pension funds do, rather than the special purpose Treasuries they’re required to “invest” in.
Yeah it's a bit more complicated than what people think I heard.
But honestly, what I don't understand it why should bunch of young people be forced to pay money to bunch of old people, who on average already have more wealth and are no longer economically active?
Why can't they just privatize it and regulate the prices? Pensions can run so much better when privatized.
I'll answer number 2.
The biggest issue with student debt is it's harder to run away from. You cannot file bankruptcy from it, it lives with you forever until you've paid it. Since the cost of education has only gone up in the last decade or so, kids are borrowing more and more banking on the fact that they'll start a new job immediately after college. However, the reality is that wage growth has been low and inflation has been low, so its not an ideal combo for the best possible labor market considering what school actually ended up costing. So earning less over the course of your career hurts your ability to form other milestones in your life. For example, marriage rates have slowed down in the last ten years. People are getting married at later ages and more likely because their looking for partners with better financial stability. Another issue that can come from this is having kids. Fertility becomes a bigger issue for women as they get older. If couples are unable to get pregnant or have more than one kid, we'll see slowed population growth. It's important to have steady growth of population to better support economic growth and the older population. Japan is experiencing this issue right now, too many old people but not enough of a young population to keep the country going.
As for what to do that's a good question. Forgiving the debt by the government could be an option, but could that mean more crowded universities because there's less cost in attending school for a degree? At who's expense though? Or do we keep student lending around and reanalyze how we lend out to a 17/18 year old with no credit history who is likely to graduate with a degree different from what he/she originally applied for?
Awesome analysis there. Connected all the dots and illustrated the larger impact of the student debt issue. I was thinking of forgiving some portion of the current debt for each student. Some type of reduction. At the same time, improving the system in terms of tuition and curriculum. Let's say you wanted to only focus on your business major, 2 years of specialized courses in that area would 1) perhaps keep students more engaged 2) reduce overall tuition costs. Of course, that would only apply to certain fields. If you're pursuing something medical-related, you better have had extensive education and training before performing open-heart surgery on someone. However, for business majors, I don't think it's necessary. This is me just spitballing though, there are probably things I don't know that could impact other areas. All I know is that we've gotten to the point where students are putting liens on their future salaries through private loans (saw it in an article, there's more to it), which are apparently cheaper but seems odd to me. Perhaps it's no different than student loans though. As someone mentioned above, perhaps a better allocation of funds would help. Education is a value generator in my opinion. A more educated society has many benefits. Removing barriers will encourage that. Better to invest there than war budgets, etc.
Another factor I actually just thought about was graduation rates and overall preparedness for college. Educational standards in the public system are different in each state. I'm in California and the minimum requirements to graduate high school are very minimal and the requirements to get admitted to attend a state university aren't much more. I do think standards have been lowered quite a bit to get a higher, or keep a steady graduation rate from high school. However, weaker threshold standards only leads kids to being less prepared for college coursework. Too many kids are congesting the system and raising the cost of attendance by retaking basic math and writing skills that should have been mastered by the end of high school. Or we see lots switching to easier majors, but not focusing on getting internships and experience.
I think this lack of experience coming out of school doesn't pair well with the market as many employers won't train, or spend as little as possible. Looking at the broader job market, outside of finance, you can't just easily switch to another industry or line of work without having some applicable experience. So just continually deal with being less qualified for roles until someone takes a chance on you and invests. However, student loans don't wait, so many continue to pay the minimum I think or at a slower rate than they could be. There's just not a good number of factors in the job market that make it easy for young people to progress in building wealth.
As for medicine, I'm not sure what makes the costs over there so high. There's no getting around it since it is a licensed profession and all that education is required for it to practice. Hospitals do have some loan forgiveness programs though if you've worked for them for several years, but healthcare is mostly private so landing a job with one of these hospitals that could help pay, might be like winning the lottery.
I'll also add the marketplace for refinancing student debt has grown quite a bit since the great recession. SoFi, Lending Club, and propser are all a few in the peer-to-peer lending marketplace profiting on this substantially. However, their line of business has slowed initially at the start of the pandemic where I heard of layoffs so, the personal loan marketplace may have shrunken but could now be picking up to help this game of "hot potato" with student debt going.
Bro we’re only levered like 1x rn. Absolute child’s play. Call me when we’re absolutely juiced to the gills like ‘07 Lehman and then I’ll worry
To answer #1.....about half the country thinks we should not pay the debt. According to the Left, we have an infinite amount to borrow as we'll always be the reserve currency of the world. We can add as much social programs as we want. We can regulate as much as we want and we'll never run out of money and our economy will always be competitive. At worst, we can cut the military budget and this will pay for everything. The golden goose will always lay more eggs.
This sounds simplistic and stupid but it really is the underlining thought behind almost the entire left wing philosophy
What I don't get is that the Left understands the same problem when it comes to global warming. You can't keep polluting non-stop and expect the environment to be ok in the long run. However, when it comes to economics, they believe that you can spend like crazy and regulate everything and that there will never be a reckoning day when the dominos all fall down.
Further, you have a problem that the Right recognizes the problem but continues to spend anyways as the nature of politics is doling out cash to the masses. The Left doesn't even recognize the debt as an issue (unless Trump is spending of course) and hence, here we are.
Not only does the Right continue to spend (record-setting deficits under Trump who promised to erase the national debt in 2015) but the GOP regularly reduces the revenue side of the equation via tax cuts, with no corresponding reduction to spending. There is no fiscal responsibly party in Washington.
Doing my best to remain neutral here, but I do agree with your points. I think some left-wing extremist views can and will definitely hurt us if we don't approach things realistically, especially in terms of economics. I think there is an opportunity to move funds around to address the immediate needs and then adjust accordingly.
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