America's debt-to-GDP ratio isn't as bad as its citizens'
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  America's debt-to-GDP ratio isn't as bad as its citizens'
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Author Topic: America's debt-to-GDP ratio isn't as bad as its citizens'  (Read 2497 times)
Indy Texas
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« on: January 15, 2013, 07:19:31 PM »

In terms of how much we spend as a country relative to national income, we still aren't as bad as individual households are.

US Debt-to-GDP Ratio: 67.7%
http://www.theatlantic.com/business/archive/2012/11/the-long-story-of-us-debt-from-1790-to-2011-in-1-little-chart/265185/

The Average American's Debt-to-GDP Ratio: 112.8%
http://www.dailyfinance.com/2012/07/02/do-you-have-more-debt-than-the-average-american/

Think of your annual income as your own personal GDP. The average American salary in 2010 was $41,673.83. The average American debt load was roughly $47,000.

So much for wanting Congress to balance its budget like "everyday Americans" do.
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shua
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« Reply #1 on: January 15, 2013, 11:04:51 PM »

If you include entitlement and trust fund obligations, that number is just above 100%.
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DC Al Fine
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« Reply #2 on: January 16, 2013, 08:04:18 AM »

The individual debt to GDP is a bit ingenious. If I make $50 000 per year and take a $100 000 mortgage I have a 200% debt/GDP ratio. I could still have a surplus and appear to have horrible debt.

The American government on the other hand is more like the guy making $50 000, has $50 000 on the mortgage and keeps spending $55 000 per year, year in and year out.
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memphis
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« Reply #3 on: January 16, 2013, 12:07:57 PM »

If you include entitlement and trust fund obligations, that number is just above 100%.
The trust funds are equally credits and liabilities that cancel each other out.
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Indy Texas
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« Reply #4 on: January 16, 2013, 05:24:40 PM »

The individual debt to GDP is a bit ingenious. If I make $50 000 per year and take a $100 000 mortgage I have a 200% debt/GDP ratio. I could still have a surplus and appear to have horrible debt.

The American government on the other hand is more like the guy making $50 000, has $50 000 on the mortgage and keeps spending $55 000 per year, year in and year out.

You're confusing deficit and debt. The $5,000 extra you spend in a year is the annual deficit you are running. That contributes to your total debt, which would include a mortgage, car notes, credit card debt, etc.

My point is that the idea that private households spend no more than they take in and that government should do the same is ludicrous. When you take out a mortgage to buy a house, you have just spent more than you are taking in. When you finance a new car, you are spending more than you are taking in. When you take out a student loan, you are spending more than you are taking in.
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shua
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« Reply #5 on: January 16, 2013, 08:10:38 PM »

If you include entitlement and trust fund obligations, that number is just above 100%.
The trust funds are equally credits and liabilities that cancel each other out.

What do you mean?  The Highway Trust Fund runs deficits all the time and has to be bailed out by the general fund.  But that's nothing compared to the Social Security Trust Fund, which has already committed to spending trillions of dollars more over the next few decades than it can be expected to bring in.
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DC Al Fine
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« Reply #6 on: January 17, 2013, 10:59:32 AM »

The individual debt to GDP is a bit ingenious. If I make $50 000 per year and take a $100 000 mortgage I have a 200% debt/GDP ratio. I could still have a surplus and appear to have horrible debt.

The American government on the other hand is more like the guy making $50 000, has $50 000 on the mortgage and keeps spending $55 000 per year, year in and year out.

You're confusing deficit and debt. The $5,000 extra you spend in a year is the annual deficit you are running. That contributes to your total debt, which would include a mortgage, car notes, credit card debt, etc.

My point is that the idea that private households spend no more than they take in and that government should do the same is ludicrous. When you take out a mortgage to buy a house, you have just spent more than you are taking in. When you finance a new car, you are spending more than you are taking in. When you take out a student loan, you are spending more than you are taking in.

Sure, but the difference is that in personal spending, the debt is usually for a capital expenditure (School, car, house etc) which in theory should be paid off eventually. This can be quite sound financially, even though the numbers look good. What the federal government debt is closer to taking out a loan to pay the light bill.
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Indy Texas
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« Reply #7 on: January 17, 2013, 11:40:19 PM »

The individual debt to GDP is a bit ingenious. If I make $50 000 per year and take a $100 000 mortgage I have a 200% debt/GDP ratio. I could still have a surplus and appear to have horrible debt.

The American government on the other hand is more like the guy making $50 000, has $50 000 on the mortgage and keeps spending $55 000 per year, year in and year out.

You're confusing deficit and debt. The $5,000 extra you spend in a year is the annual deficit you are running. That contributes to your total debt, which would include a mortgage, car notes, credit card debt, etc.

My point is that the idea that private households spend no more than they take in and that government should do the same is ludicrous. When you take out a mortgage to buy a house, you have just spent more than you are taking in. When you finance a new car, you are spending more than you are taking in. When you take out a student loan, you are spending more than you are taking in.

Sure, but the difference is that in personal spending, the debt is usually for a capital expenditure (School, car, house etc) which in theory should be paid off eventually. This can be quite sound financially, even though the numbers look good. What the federal government debt is closer to taking out a loan to pay the light bill.

Any loan should in theory be paid off eventually. And there are plenty of people in this country who do the equivalent of taking out a loan to pay the light bill every day.

Private debt creates economic problems just as much as public debt does. And the difference is that unlike the federal government, private citizens would generally have a hard time getting people all over the world to loan them money for nearly zero interest.
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memphis
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« Reply #8 on: January 18, 2013, 02:07:11 AM »

If you include entitlement and trust fund obligations, that number is just above 100%.
The trust funds are equally credits and liabilities that cancel each other out.

What do you mean? 
What I mean is that the SS trust fund is money the federal government owes itself. I wouldn't count that as debt. If your point is that SS has demographic issues going forward (and it does), that's a different issue than what debt we already have on the books right now.
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krazen1211
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« Reply #9 on: January 19, 2013, 11:42:20 AM »

Of course, in the united states, that money isn't used on capital expense but rather to provide lavish welfare schemes to the chosen unproductives.
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opebo
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« Reply #10 on: January 19, 2013, 01:22:18 PM »

Of course, in the united states, that money isn't used on capital expense but rather to provide lavish welfare schemes to the chosen unproductives.

Dude they just had their taxes increased to 39% or whatever, give them a break.

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krazen1211
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« Reply #11 on: January 19, 2013, 03:35:04 PM »

Of course, in the united states, that money isn't used on capital expense but rather to provide lavish welfare schemes to the chosen unproductives.

Dude they just had their taxes increased to 39% or whatever, give them a break.



Well, yes, someone has to pay those hundreds of billions of dollars for the Democrats food stamp and Medicaid programs for the unproductives. Right now of course that's hundreds of billions of dollars tacked on the deficit.
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Just Passion Through
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« Reply #12 on: January 19, 2013, 03:43:05 PM »

Of course, in the united states, that money isn't used on capital expense but rather to provide lavish welfare schemes to the chosen unproductives.

Dude they just had their taxes increased to 39% or whatever, give them a break.



Well, yes, someone has to pay those hundreds of billions of dollars for the Democrats food stamp and Medicaid programs for the unproductives. Right now of course that's hundreds of billions of dollars tacked on the deficit.

Since when are we paying AIG in food stamps?
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Stranger in a strange land
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« Reply #13 on: January 19, 2013, 04:32:36 PM »

Of course, in the united states, that money isn't used on capital expense but rather to provide lavish welfare schemes to the chosen unproductives.

Dude they just had their taxes increased to 39% or whatever, give them a break.



Well, yes, someone has to pay those hundreds of billions of dollars for the Democrats food stamp and Medicaid programs for the unproductives. Right now of course that's hundreds of billions of dollars tacked on the deficit.

Since when are we paying AIG in food stamps?

And since when are we paying Boeing, Lockheed Martin, and Raytheon in Food Stamps?

Not to mention how my heart absolutely ACHES for that poor single mother making 260K who just had her taxes increased by 1.5% of her salary Roll Eyes
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Simfan34
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« Reply #14 on: January 19, 2013, 05:20:35 PM »

Of course, in the united states, that money isn't used on capital expense but rather to provide lavish welfare schemes to the chosen unproductives.

Dude they just had their taxes increased to 39% or whatever, give them a break.



I don't see what a bunch of middle class people have to do with anything, opebo.
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strangeland
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« Reply #15 on: January 19, 2013, 05:24:32 PM »

Of course, in the united states, that money isn't used on capital expense but rather to provide lavish welfare schemes to the chosen unproductives.

Dude they just had their taxes increased to 39% or whatever, give them a break.



I don't see what a bunch of middle class people have to do with anything, opebo.
How exactly is a single person making 230K middle class?
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opebo
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« Reply #16 on: January 20, 2013, 04:47:43 PM »

No one there is middle class, Simfan's just trolling.
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Gustaf
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« Reply #17 on: January 20, 2013, 05:30:23 PM »

Argh. There is so much nonsense about debt going around.

Most households are in debt everywhere and they should be. Most people buy houses at some point and then go into debt. There is nothing wrong with it and it's not a problem.

A studio apartment in Stockholm would cost about 1 million SEK. The average wage is something like 300 000 SEK/year. So, here you would likely take on something like 300% of your annual income in debt if you get an apartment. I'm sure the numbers must be somewhat similar in the US.

Also, debt which you can pay off and which is backed by assets is not much of a problem. Sweden, for example, has a gross debt of something like 30 or 40% of GDP last time I checked, but our net debt is 0 or even negative, IIRC. The situation is worse for countries that have nothing to back up their debt with.

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Simfan34
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« Reply #18 on: January 20, 2013, 06:10:58 PM »

http://www.corcoran.com/nyc/PressMention/Display/2605
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Oak Hills
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« Reply #19 on: January 20, 2013, 09:26:05 PM »


Again, what does this have to do with middle-class people?
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Beet
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« Reply #20 on: January 20, 2013, 09:32:34 PM »

debt which you can pay off and which is backed by assets is not much of a problem. Sweden, for example, has a gross debt of something like 30 or 40% of GDP last time I checked, but our net debt is 0 or even negative, IIRC. The situation is worse for countries that have nothing to back up their debt with.

Right, thats why the private sector has a nominally positive net asset value while the public sector has a massively negative one. The public sector technically has very few assets. But the main asset of government (ability to tax going forward, ability to change laws, etc) is not really considered in these calculations.
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jaichind
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« Reply #21 on: January 21, 2013, 05:18:23 PM »
« Edited: January 21, 2013, 05:36:55 PM by jaichind »

I live in Greater NYC region.  I reject the arugment that $483K a year means living well.  It takes well more then that after one takes into account of high cost of living, saving for retirement and massive housing costs.  If said household managed to buy a condo back in the 1990s then I would agree that $483K would be living well.  So many of my friends in households above $500K in NYC are really streached trying to buy a condo /co-op for the right size and in a good school district.  What they have to go through to be in a good school district and the interviews they have to go through just for reasonable nusury school is a sad testiment how bad the system has become in NYC.  I live in the NYC suburbs which is better but still the cost of good housing in good school district is massive.  I guess this link is saying $483K after taxes so not all my friends would meet that threshold but many of them including myself are in that catagory (above $483K after taxes) and none of us would say we are "living well."   All of them, including myself, realize we make a lot compared to many in the country and we are all grateful for that, but living well or affluent we are not.

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jaichind
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« Reply #22 on: January 21, 2013, 05:20:24 PM »

Actually the US federal government has massive amount of assets (mostly property) which if sold can easily pay off its debts. 


Right, thats why the private sector has a nominally positive net asset value while the public sector has a massively negative one. The public sector technically has very few assets. But the main asset of government (ability to tax going forward, ability to change laws, etc) is not really considered in these calculations.
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All Along The Watchtower
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« Reply #23 on: January 23, 2013, 09:33:11 PM »

I live in Greater NYC region.  I reject the arugment that $483K a year means living well.  It takes well more then that after one takes into account of high cost of living, saving for retirement and massive housing costs.  If said household managed to buy a condo back in the 1990s then I would agree that $483K would be living well.  So many of my friends in households above $500K in NYC are really streached trying to buy a condo /co-op for the right size and in a good school district.  What they have to go through to be in a good school district and the interviews they have to go through just for reasonable nusury school is a sad testiment how bad the system has become in NYC.  I live in the NYC suburbs which is better but still the cost of good housing in good school district is massive.  I guess this link is saying $483K after taxes so not all my friends would meet that threshold but many of them including myself are in that catagory (above $483K after taxes) and none of us would say we are "living well."   All of them, including myself, realize we make a lot compared to many in the country and we are all grateful for that, but living well or affluent we are not.


lol
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