The US Economy - A Ponzi Scheme

[whell]

The U.S. Treasury has been forced to issue $1,040,965,000,000 in new debt since fiscal 2015 started just eight weeks ago in order to raise the money to pay off Treasury securities that were maturing and to cover new deficit spending by the government. During those eight weeks, Treasury took in $341,591,000,000 in revenues. That was a record for the period between Oct. 1 and Nov. 25. But that record $341,591,000,000 in revenues was not enough to finance ongoing government spending let alone pay off old debt that matured.

https://www.fms.treas.gov/fmsweb/vie...e=14112600.pdf

The Treasury also drew down its cash balance by $45.057 billion during the period, starting with $126,568,000,000 in cash and ending with $81,511,000,000.

The only way the Treasury could handle the $942,103,000,000 in old debt that matured during the period plus finance the new deficit spending the government engaged in was to roll over the old debt into new debt and issue enough additional new debt to cover the new deficit spending.

“A Ponzi scheme," says the Securities and Exchange Commission, “is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. “With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue,” explains the SEC. “Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.”

A Ponzi scheme is exactly what we're doing, and I've made this point before about Soc Sec, which is funded in the same manner. The Federal gov't continues to spend more than it earns, despite record tax revenues. In terms of comparing US Treasury receipts in constant 2014 dollars, we're now in the same range as previous record receipt years that occurred in the 2nd term of both the Clinton and G W Bush presidencies. See below.



More here: http://cnsnews.com/mrctv-blog/terenc...s-pay-old-debt

The article goes on to explain how the US continues to roll over debt into short term notes which tend to have a lower interest rate: about $1.4 trillion worth of short term debt. However, this strategy relies on short term interest rates remaining at their current absurdly low levels (thank you Federal Reserve). If market conditions were to change and the cost of short term debt start to rise - it wasn't all that long ago that such rates were in the 4% range (not to mention the 12 - 15% range during the Carter years), the impact on the nation's long term debt would be staggering.

[finnbow]

It ain't a Ponzi scheme, Whell. Were it not for Reaganomics, Dubya's tax cuts and his lax enforcement of securities law, we'd be sitting fat.

[Tom Joad]

[whell]

Originally Posted by finnbow

It ain't a Ponzi scheme, Whell. Were it not for Reaganomics, Dubya's tax cuts and his lax enforcement of securities law, we'd be sitting fat.

Sorry, but the facts presented don't support that contention, even though I know that's the lefty programmed response any gov't spending issue that might be raised. Note my comment that appears just above the graph in the OP:

In terms of comparing US Treasury receipts in constant 2014 dollars, we're now in the same range as previous record receipt years that occurred in the 2nd term of both the Clinton and G W Bush presidencies.

Now, I don't want to rehash old discussion, but to further the point:

http://www.taxpolicycenter.org/taxfa....cfm?Docid=200

Note the deficits when expressed as a ratio of GDP. Declining in Reagan's 2nd term once the impact of tax policy kicked in, and would have declined faster if similar reductions in budget that were targeted weren't given away at the budget negotiation table. Also declined significantly under G W Bush in term 2, despite "Dubya's tax cuts". Then, jumping to stratospheric levels under Obama, and remaining there despite allegations of economic growth the addition of jobs and the "summer of recovery".

What's interesting to me - and not represented in the graph, so you actually have to do the math - is to compare the relative fiscal discipline of each Administration by comparing the ratio of budgeted income to outlays. Reagan and Bush Sr's a higher than Clinton's on average. "Dubya's" is lower than Clinton's average for their respective terms. Obama's ratio is stratospheric by any comparison.

[finnbow]

Originally Posted by whell

Sorry, but the facts presented don't support that contention, even though I know that's the lefty programmed response any gov't spending issue that might be raised. Note my comment that appears just above the graph in the OP:

In terms of comparing US Treasury receipts in constant 2014 dollars, we're now in the same range as previous record receipt years that occurred in the 2nd term of both the Clinton and G W Bush presidencies.

Now, I don't want to rehash old discussion, but to further the point:

http://www.taxpolicycenter.org/taxfa....cfm?Docid=200

Note the deficits when expressed as a ratio of GDP. Declining in Reagan's 2nd term once the impact of tax policy kicked in, and would have declined faster if similar reductions in budget that were targeted weren't given away at the budget negotiation table. Also declined significantly under G W Bush in term 2, despite "Dubya's tax cuts". Then, jumping to stratospheric levels under Obama, and remaining there despite allegations of economic growth the addition of jobs and the "summer of recovery".

What's interesting to me - and not represented in the graph, so you actually have to do the math - is to compare the relative fiscal discipline of each Administration by comparing the ratio of budgeted income to outlays. Reagan and Bush Sr's a higher than Clinton's on average. "Dubya's" is lower than Clinton's average for their respective terms. Obama's ratio is stratospheric by any comparison.

What I see from those numbers is that Clinton balanced the budget (something you've denied for years) and that Dubya screwed the pooch immediately thereafter, with consequences that we're just digging out of.

[whell]

Originally Posted by finnbow

What I see from those numbers is that Clinton balanced the budget (something you've denied for years) and that Dubya screwed the pooch immediately thereafter, with consequences that we're just digging out of.

I've never denied he "balanced the budget" as gov't wonks define a balanced budget. My point has simply been that the definition of balanced as our gov't uses the term includes borrowed funds as "income". That's like saying: "I paid off my Master Card with my Visa."

The idea that we're still experiencing the consequences of Bush budgets is yet another leftist apologist phrase. How you label yourself a "fiscal conservative" is beyond me if you cling to that fable.

[finnbow]

Originally Posted by whell

I've never denied he "balanced the budget" as gov't wonks define a balanced budget. My point has simply been that the definition of balanced as our gov't uses the term includes borrowed funds as "income". That's like saying: "I paid off my Master Card with my Visa."

The idea that we're still experiencing the consequences of Bush budgets is yet another leftist apologist phrase. How you label yourself a "fiscal conservative" is beyond me if you cling to that fable.

Not his budgets, per se, but the lasting effects of his policies (i.e., his tax cuts persist as does the legacy of the recession that resulted from his lax regulatory policy).

[MrPots]

Originally Posted by finnbow

It ain't a Ponzi scheme, Whell. Were it not for Reaganomics, Dubya's tax cuts and his lax enforcement of securities law, we'd be sitting fat.

Indeed. Kansas was well set financially until Brownback told the rich folks they didn't have to pay taxes any more. Now the red ink is endless.

Self inflicted wounds.....

[Oerets]

Originally Posted by MrPots

Indeed. Kansas was well set financially until Brownback told the rich folks they didn't have to pay taxes any more. Now the red ink is endless.

Self inflicted wounds.....

Just their simple math from the Right. No money, no social programs. A way to cut the ""entitlements"" they don't like!



Barney

[finnbow]

I'm not willing to google them up again, but I've posted several graphs in the past from reliable sources showing that the lion's share of debt growth in recent years were directly a result of Bush's tax cuts, the costs of two protracted and mismanaged wars, and the costs associated with the avoidable (through proper policy and enforcement) recession.

You can wish this away if you want to, but I haven't bothered to do so. It would be an exercise in trying to deny the obvious.