It really does come down to cash flow. Are these assets that can be sold and help pay down the debt?

As to interest as a % of GDP in the 1980's I presume this is because interest rates were much higher than? Do you accept that we have some risk now that interest rates will go up for the U.S.? Isn't this part of the equation for Greece and Italy right now? In any case, I think there is something we can use from this:

20. Sell unnecessary government assets.

20. Actually, that should come with a caveat that assets should be sold at the right time and price. A mass sell-off now would be likely to result in much lower prices. Also, the recognition that an asset may not be 'necessary' but could also be appreciating in value is important. Perhaps a much better asset management programme, with a trend toward divestment is a better way to put it.

Mind you, sale-and-lease-back arrangements can lead to higher revenue costs, so the definition of 'necessary' may need some work too.

Re 20, agreed, with the proviso that the government is notoriously bad at timing the market.

Just some random thoughts on the debt overhang. There are a few liabilities that we do not include in the calculation. The US Gov't is effectively on the hook for FNMA and Freddie Mac loans. There are something like $7 trillion of those out there. I have no idea what % is underwater. If the US Gov't was a bank, it would have to make a provision for these on its books and show it as a liability. (In my earlier days I calculated such provisions for banks.)

We also have to consider the social security and medicare/medicaid promises as well as pension promises. You can make the case that some shouldn't be considered as debt because they can be easily stopped; however many of them are firm commitments that will be in place come hell or high water, which is starting to sound like a good expression for these times, especially with Danivon's former description of some perceived existential threats that are out there.

In the private sector, you would have to account for these debts by booking an expense and showing a liability on your books. In fact, the SEC would be all over you if you did not. But in government accounting, you do not have to book these future expenses (and that is all about politics and not about accounting fundamentals). How much of that $100 to $200 Trillion of future liability should be counted? My mom is still collecting on my step dad's military pension. That and a million other federal payments are realistically untouchable and should be counted as debt, but are not.

http://www.latimes.com/business/la-fi-d ... 35.graphic

http://www.npr.org/2011/07/29/138827114 ... -the-world

Ray, the US debt situation is in no way unique.
There are other countries experiences in dealing with it to compare that can provide guidance on what can happen.

Those countries that reacted by implementing austerity when the economy wsa in recession exacerbated the problem. Those that attacked the deficits, grew out of them.

danivon wrote:Steve, interest on the debt is currently lower (as a proportion of GDP or of Federal Spending) than it was in the 1980s

So...

Why should I do the research?

It would be refreshing if you would try and not be a donkey--so there was that motivation. Naturally, that didn't motivate you at all. You have no idea if our assets outweigh our debts and obligations, but you assert it as the absolute truth. As Ray has posted, when one considers unfunded liabilities and unmentionable liabilities (Fannie and Freddie were not supposed to be federally-guaranteed, but now apparently are. No one knows how deep that well is.), it is very difficult to know where the balance sheet is.

It's you guys that assert there is a big problem with debt. Either you are ignoring assets, or making assumptions about them.

For the careful reader (that would not be you), I actually said there is a problem with the interest on the debt. I've bolded that so that, perhaps, even the less discerning from across the pond can grasp it. Get it? The debt is not the same as the interest on the debt. Please let me know if that's not simple enough.

Here's a liberal source disputing my assertion (as made by Mitch Daniels) earlier this year:

Projected security spending rises from $815 billion in 2010 to $914 billion in 2021. (It dips slightly along the way, reflecting savings from planned troop reductions in Iraq and Afghanistan.)

Meanwhile the budget has net interest payments rising fourfold, from $196 billion last year to a stunning $844 billion by 2021. As two budget analysts we interviewed confirmed, interest payments will grow explosively over the next decade but do not exceed security spending in any given year -- much less "in a few years."

Of course, that was all in the rosey budget the Administration served up that was defeated 97-0 in the Senate. In the real world, it may not take more than ten years:

It's bigger than Wal-Mart, employs more people than the United States Post Office, and far outspends all its competitors.

It's the US Department of Defense. Next year, though, budget cutters in Congress and the White House will probably begin cutting it down to size in order to slash America's outsize budget deficit.

There are related reasons: The US war effort in Iraq is winding down; President Obama may start pulling out of Afghanistan; NATO allies are moving to slash their military outlays. Most of all, budget cutters can't afford to ignore an area as vast as defense.

The need for serious deficit reduction and a loss of political support for high defense spending make cuts inevitable, says Gordon Adams, a defense expert at American University.

If budget deficits aren't seriously tackled, US spending on interest on the national debt will exceed its defense budget by fiscal 2018, says Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments. He predicts large defense cuts within three years.

I say "in the real world" because the defense budget is on the chopping block. It is clear that Obama plans to reduce the deficit primarily by reducing defense expenditures. Meanwhile, the interest on the debt is going to continue to increase. Let's split the difference and say in 9 years we're spending as much for defense as for interest.

You don't think that's a problem? Assets have nothing to do with it--unless the President is planning on selling California to China (something I would not oppose, if the price was right )

(actually, I suspect it's land that is the most valuable asset)

So, what would you sell?

Let me just amplify one thing: it is absurd to pay as much in interest as we do for defense OR to even come close. When our interest payments are that high, we owe too much money. That is true whether we can "afford" it or not. For example, if interest on my credit cards is running equal to my house payment, I am running up too much credit card debt. I need a house. I may need some of the stuff I charged. I may be able to afford the credit card payments. However, anyone who looked at my situation would say I'm over-leveraged if my interest payments are equal to such an essential part of my budget as my house. Similarly, the notion that national defense can or should be on par with interest payments on the debt is absurd.

Period.

Steve, at no point did I assert that assets exceeded debt. I have asked those of you who see debt as such a big problem (existential, even) if they have accounted for the other side of the capital balance equation.

Your response suggests that your answer is 'no'. No need to add attacks and falsehoods to that.

What I am trying to get you to consider is exactly what the current position is, because if you are not thinking about all of it, perhaps your initial assumptions are incorrect. Ray Jay can grasp these things and respond appropriately. I disagree with him, but he's not being a jerk about it.

danivon wrote:Steve, at no point did I assert that assets exceeded debt. I have asked those of you who see debt as such a big problem (existential, even) if they have accounted for the other side of the capital balance equation.

You are trying to finesse this. Isn't the obvious implication of your question that our assets outweigh our liabilities? If not, what was the point of posting it? If so, isn't the obligation on you? If not, why not?

Also, how is asserting anything about our assets appropriate to a comment I made about interest on the debt? The only way it's appropriate is if we are selling assets to pay down the debt, thus reducing interest payments. You did not suggest this or provide an example of what you would sell.

In other words, you made an utterly weightless argument, then got upset because I pointed out it was hot air.

Your response suggests that your answer is 'no'. No need to add attacks and falsehoods to that.

You've shifted the debate away from the point I made and now seem to be demanding someone else do your calculations. I didn't lie and the only attacks I made were because of the changing of the playing field YOU seek.

What I am trying to get you to consider is exactly what the current position is, because if you are not thinking about all of it, perhaps your initial assumptions are incorrect. Ray Jay can grasp these things and respond appropriately. I disagree with him, but he's not being a jerk about it.

The current position is that our interest payments are going to quadruple. Whether or not we have assets is immaterial--unless you are proposing said assets be sold. That is the only way your discussion touches on my point. Otherwise, it is another discussion entirely.

That you cannot grasp my point is your problem. That you cannot respond appropriately is your problem. That you are, for a change, not being an absolute jerk is, I must admit, refreshing.

However, it does not change a simple fact: interest payments are based on debt. Assets don't impact interest payments unless they are sold and the proceeds applied to the debt. Since you are not (apparently) asserting we have sufficient assets to exceed our debt + unfunded liabilities (just throwing it out there and seeing if someone else will pick it up and run with it), and you are not (apparently) suggesting we sell anything, what is your point?

If we have an infinite amount of assets and either can't or won't sell them, and the interest on our debt exceeds what we spend on many necessities of government, how can it be that we don't have a debt problem?

rickyp wrote:http://www.latimes.com/business/la-fi-debt.eps-20110811,0,7419135.graphic

http://www.npr.org/2011/07/29/138827114 ... -the-world

Ray, the US debt situation is in no way unique.
There are other countries experiences in dealing with it to compare that can provide guidance on what can happen.

Those countries that reacted by implementing austerity when the economy wsa in recession exacerbated the problem. Those that attacked the deficits, grew out of them.

Ricky, note the asterisk in your first graph.

I think you are right that the U.S. is not unique. There really is a global crisis going on now. That being said, note that the graphs do not factor in future liabilities (medicare, medicaid, ss, pensions) or contingent liabilities (FNMA). It would be helpful to see that built into the comparisons. You've noted maybe one or two times that the U.S. pays more per capital for health services than these other countries. Based on our inability to fix that over these last 20 years, I'm not ready to assume that away.

ray

It would be helpful to see that built into the comparisons

I don't know about all the others, but if you compare the NPR article and the graph uyou'll see the combined "liabilities" in Canada. 84% versus only govenrment debt.

However, Tte liabilities for Medicare and SS aren't unfunded liabilities, as much as Gov. Perry would have everyone think. But they do require adjustments to funding structure if they are going to survive at current payment levels past 2030... (Thats what Bush's first Secretary of the Treasurey wanted to do with any surpluses in 2001...that and pay down the operating debt to 0)

Be that as it may, I think the problem in the US comes down to an inability to act. period. Almost any action would be better than constant gridlock. From the NPR article

Canada's lesson for the U.S.: When faced with a debt problem, act promptly and decisively to confront it.
[Timely government action, of course, may be easier in a country with a parliamentary system like Canada's. Because the prime minister also serves as the leader of the ruling party, there is no divided government such as exists currently in Washington.
"The downside of a parliamentary system is you can get a lot of bad policy quickly," says Henderson, "[but] the upside is, you can get a lot of good policy quickly

The unique problem for the US is that the debt has becoime a political football at a time when the economy is tanking. I don't think there are many successful examples of governments attacking debt when they are also in recession. Indeed the examples are that austerity in a time of recession merely exacerbates the recession. (Spain)
With divided govenrment you end up being able to do nothing...Maybe thats not as bad as cutting to the bone and setting the economic recvoery back as a result, but it isn't positive.
I expect Obamas jobs package will go nowhere in the Hosue, and that the next election will be fought over that intransigence. No matter who the republican nominee is, if the House doesn't respond to an effort to create jobs, but counters with cuts cuts cuts, ... there may be a reversal in the house .

rickyp wrote:However, Tte liabilities for Medicare and SS aren't unfunded liabilities, as much as Gov. Perry would have everyone think. But they do require adjustments to funding structure if they are going to survive at current payment levels past 2030...

That's a bit unclear. If they are not "unfunded liabilities," then why do "adjustments" need to be made to their "funding structure?" What are those "adjustments" exactly?

I expect Obamas jobs package will go nowhere in the Hosue, and that the next election will be fought over that intransigence. No matter who the republican nominee is, if the House doesn't respond to an effort to create jobs, but counters with cuts cuts cuts, ... there may be a reversal in the house .

I'm going to start a threat on tonight's speech. However, a question: do you think running on the House's intransigence is a winning strategy?

a threat or a thread?

Medicare just needs an adjustment to its funding structure just like ...

Lehman Brothers just needs an adjustment to its balance sheet

the titanic just needs an adjustment to its navigation equipment.

I'm sure someone else can do better.

Ray Jay wrote:a threat or a thread?

Hmm, I was wondering why the Secret Service was at my front door.

Medicare just needs an adjustment to its funding structure just like ...

Lehman Brothers just needs an adjustment to its balance sheet

the titanic just needs an adjustment to its navigation equipment.

I'm sure someone else can do better.

. . . Ron Paul needs an adjustment on the Constitutional-mandate of the Gold standard.

. . . Hillary Clinton needs an adjustment to Cheney's endorsement of her for President.

. . . the Maginot line needs an adjustment in its supporting troops.

. . . George Custer needs an adjustment in his battle plan for Little Bighorn.

. . . Massachusetts needs an adjustment in its Democrat/Republican state legislator ratio.

Doctor Fate wrote:You are trying to finesse this. Isn't the obvious implication of your question that our assets outweigh our liabilities?

Ah, I see the problem here. The thing is, this is your inference. My question was asked in good faith.

If not, what was the point of posting it?

Well, because:
1) It appeared that you and others had not considered it
2) It may have some bearing on the matter at hand, ie: what the problem is and what ways there are to solve it
3) I don't know the answer and wondered if anyone else had any information

If so, isn't the obligation on you? If not, why not?

Generally, it is not considered the case that if someone asks a question that they are obliged to answer it.

You are by all means free to avoid the question, that is your prerogative.

Also, how is asserting anything about our assets appropriate to a comment I made about interest on the debt? The only way it's appropriate is if we are selling assets to pay down the debt, thus reducing interest payments. You did not suggest this or provide an example of what you would sell.

I have, as you may note had you read it, replied to Ray Jay's proposal to the effect that I agree in part, and with caveats, that an asset management programme that had a direction toward divestment would be a good idea. In laymans terms, that means I would agree that sale of assets may help. I don't know (hence my question) what assets there are, and so I have not suggested any.

But there are, of course, some alternatives to sale of an asset that may actually be relevant if you wish to address debt, interest and/or deficit problems:

1) Lease the asset. It may be that renting an asset could bring in more income than the sale of it would reduce interest payments by. This is why people who own a house they do not need to live in will rent it out rather than sell it. The same principle could apply to Federal Assets
2) Part-sell the asset. Rather than sell a chunk of land wholesale, you could sell the access rights, or mineral rights, or alternatively retain those and sell the land without them. Alternatively, rather than sell a wholely owned subsidiary company, you could sell shares in it and retain a portion that means retaining an interest (or even control if 50%+1 is retained).
3) Use the asset as collateral on a loan. A secured loan will often be cheaper in terms of interest than an unsecured loan. Surely this principle can apply to government borrowing as much as to any other kind.
4) Sell an option to buy the asset at a later date. For example, say that there is a Federal building that will need replacing at some point, and that replacement will be elsewhere (to provide continiuity of service, for example). A contracted option could be sold which means that when the replacement is ready, the government will sell to the option-holder. This way, a portion of the value is released even though the asset is being used. It's possible to build in a clause that enables a buy-back of the option if the government discovers that there is a better alternative than to sell at that point (such as to use for the replacement of a different Federal building, I don't know?).
5) Retain the asset on the basis that it's value will appreciate.
6) A combination of some of the above. Potentially 1, 2, 3, 4 and 5 all together.

In other words, you made an utterly weightless argument, then got upset because I pointed out it was hot air.

No, I made the argument that assets were likely to be missing from your analysis, and asked if that were the case and if you were able to tell us what assets there are. I am not upset, I'm highly amused at your obfuscation and desire to avoid the question. It's as if you don't want to admit that you hadn't thought of assets as anything other than 'stuff to sell'.

You've shifted the debate away from the point I made and now seem to be demanding someone else do your calculations. I didn't lie and the only attacks I made were because of the changing of the playing field YOU seek.

Again, I don't see why I should answer a question that I have asked. It was not rhetorical, it was not loaded, it was a question. It was a serious question and I'm afraid it was based upon my training and experience in looking at budgets wherein there are always four basic components: income; expenditure; assets; liabilities.

However, I need to correct you, because you did indeed lie. I never asserted that assets were greater than debts and/or liabilities. I didn't even say that if they were there'd be no issue. I was saying that in order to have a full picture, you should consider assets as part of the balance sheet. But you wrote:

Doctor Fate in post 138 wrote:You have no idea if our assets outweigh our debts and obligations, but you assert it as the absolute truth.

I repeat, I did not assert any such thing, and so you did lie.

The current position is that our interest payments are going to quadruple.

What is this assertion based on? Over what period will this happen? Is it measured in 2011 dollars, absolute dollars, %GDP or %Spending? How is a future projection part of the current position?

Whether or not we have assets is immaterial--unless you are proposing said assets be sold. That is the only way your discussion touches on my point. Otherwise, it is another discussion entirely.

As I have laid out, I believe that there are various ways other than sale in which an asset may be used. Besides which, I am asking about the base assumption that you are making when determining that there is a great need to deal with debt through the measures that you (and others) suggest. It may be that if you follow the question yourself, you find many assets that could be sold (or leased, or part-sold, or pre-sold, or used as collateral, or protected for future use). Don't let me stop you from looking at all the options, Doc.

However, it does not change a simple fact: interest payments are based on debt. Assets don't impact interest payments unless they are sold and the proceeds applied to the debt. Since you are not (apparently) asserting we have sufficient assets to exceed our debt + unfunded liabilities (just throwing it out there and seeing if someone else will pick it up and run with it), and you are not (apparently) suggesting we sell anything, what is your point?

I'll go through it again quickly and, hopefully, in simple enough terms for you:
1) I don't know what the value of US assets are, or what kind of assets they are. I was asking if you knew, or had considered them.
2) I have not ruled out selling assets.
3) I have also provided alternatives to sale that may be employed to use an asset to deal with revenue or capital issues.

If we have an infinite amount of assets and either can't or won't sell them, and the interest on our debt exceeds what we spend on many necessities of government, how can it be that we don't have a debt problem?

Part of the question is how large the debt problem really is, what extent we can use assets to deal with it (and potentially to address revenue problems) and how open your mind is.

I realise that the US does not have an infinite number of assets. However, if you sell them, you can't use them ever again, unless you buy them back. So their very finiteness may mean that sale is not always the best option.

Basically, I'm wondering if you can think outside the box. Actually to stretch the analogy, I'm wondering if it's possible for you to think outside the single corner of the box that is right in front of you and think within all of its confines, let alone outside it.

I hope that by introducing the question of assets and their various possible uses, I have given some people food for thought, even if only as part of their answers to the thread title's call, if not to the assumptions that lie behind it. It's up to you whether you accept such morsels with any grace.

I wonder if you're a troll or an unlikeable person?

Just asking. Someone else can research it.