Thread: Death and Taxes

With the current income tax season upon us, I thought y'all might be interested in this website:

http://www.thebudgetgraph.com/site/i...&products_id=1

It's a poster that graphically represents where all of our money is going. You can zoom in and browse around, from Medicare expenses all the way to the funding for the next-gen SSN. The lower-right has a summary graph that shows us just how big our deficit is and how much we spend paying interest on our national debt (gulp).

Is the 66% going to national security too much? not enough? How large a percentage of our budget can we tolerate being deficit?

'Rabbit

Originally Posted by AttackRabbit

How large a percentage of our budget can we tolerate being deficit?

That is a question I have pondered but it breaks my brain. I can't get my head around what the effects of deficit spending are when we and other countries print money for free. As far as I can tell the monetary supply becomes more of a pure flow problem than a closed system problem. There is no question that a budget surplus is good for a household ... but necessary for our government? I'm clueless on that one.

Any economists here on TTP?

Ultimately you see it in the value of the dollar, inflation, and interest rates.

If you think of it as simple supply and demand for the money supply (a simplification, but it should do) deficit spending essentially increases the money supply to cover whatever the government spends. This reduces the value of each dollar. This is essentially the same thing as inflation- each of your dollars buys less of anything from food and shelter to fuel for your vehicle.

It flows through to interest rates because lenders have to charge a rate that covers their real required return in addition to the expected inflation. So now your car load costs more, your mortgage, student loans, etc.

So, the rampant philosophy of deficit spending really is a big deal, with wide-ranging impacts. In my opinion at it's current level the deficit is very detrimental to the economy. The counterpoint here is that *some* level of deficit spending is O.K. That is the level at which the resultant inflation is less than the additional economic growth that results form that spending. (Exactly where that level *is* is the subject of numerous bar-room brawls and knife-fights when economists gather.)

So in general, investment in some things- technology development, for example, may be less damaging/more helpful than investment in, say, rocks. Also, spending that stays in the U.S. has a stimulating effect on the U.S. economy, while U.S. government spending over-seas does not have the same benefits to the U.S. economy.

Here's a vid of Soros and Schwarzman offering viewpoints on the US economy. It's interesting to see their different perspectives. To me it looks like Soros has a more philosophical perspective and Stephenson has a more opportunistic perspective. It seems like Soros realizes he is old enough to be done playing and is trying to share his knowledge. In the other corner is Schwarzman who is still in the game. Of course the six million dollar question is what is the game? We know the answer. 42.

http://www.youtube.com/watch?v=AvXv9GhfH4k

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