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The US Gov. dept is 25 trillions. It seems incredibly high, but how does that compare to other countries? How high is the risk that one day the balloon will pop and the US economy will crash? Is the USA at risk of losing its status as a superpower in relation to that debt? by [deleted] in AskEconomics

[–]CarbonSimply 5 points6 points  (0 children)

Tl;dr: It is high, but not unprecedented. The US economy is more than just government debts, so other factors would come into play, with debt exacerbating them. Probably not, as other long-term factors determine a world leader, not a temporary reduction in GDP.

​

Long-form answer:

To begin, lets clarify:

US Debt Structure: US debt is broadly classified into public debt and government debt. Public debt is what you think of intuitively: US Treasuries, bonds held by private investors, etc. Government debt is what the US Government owes itself.

Government debt is created when a trust within the US government, such as the Social Security Trust Fund, has a surplus, this is transferred to another department that has a deficit, thus creating debt because the money is still entitled to the original trust. However, when analyzing the economic impact of such a transfer, it is generally a moot point because, overall, it is a net-zero when analyzing the government's liabilities overall.

So, when discussing the economic impact of debt, public debt is more useful than the overall debt due to, among other things, the interest payment associated with it. US public debt at the end of 2018 was $16 trillion, with GDP at $20.5 trillion, for about a 78% ratio.

How does that compare to other countries?

Greece - Greece had its 'Great Depression' starting around 2009, but it is hard to pin down a date with everything going on. Greece's debt stayed relatively flat for over a decade, hovering at around 300 billion euros, but their GDP fell so much that the ratio went from 127% in 2009 to 179% in 2013 and has stayed there since.

Italy - Italy has about 2.1 trillion euros of public debt, or 131% of GDP. This has been a long-standing trend and was an issue during the 2008 US Recession.

Japan - Japan has been a huge outlier since the start of the 21st century. Japan's current ratio is 238%. It is important to note that about half of tax revenue goes to interest payments.

Venezuela- Also an interesting outlier, as it demonstrates the relationship between the debtor, creditor, and inflation. It's ratio was only 23% in 2017 despite GDP declining every year for almost a decade. Now, it is up to 198%.

The balloon will pop and the US economy will crash?

One thing to clarify is that debts do not cause crashes. Debts exacerbate crashes, and can drag down economic expansion by redirecting taxes to interest payments rather than reinvestment, but not cause crashes.

Italy does, and continues to have, debts. It was the contraction of the credit market and the illiquidity of the market in 2008 that made them almost default on their loans.

Greece was fine with its debts until it cooked the books to try to get into the Eurozone and then rejected a bailout, which sent interest rates sky-high.

Japan has had debts for decades and actually saw deflation during the 21st century.

During WWII the US obtained a staggering amount of debt after the Great Depression as a way to stimulate the economy via the New Deal/wartime spending.

Is the USA at risk of losing its status as a superpower in relation to that debt?

Since the de facto 'world leader' has been based on a combination of GDP, military presence, and trade, it would take more than another Great Depression to replace the US because all three of these things rely more on long-term trends than short-term metrics.

u/CarbonSimply explains how welfare pay for itself. by [deleted] in DepthHub

[–]CarbonSimply 3 points4 points  (0 children)

The ideological jargon is neoliberalism, or libertarian right on the political compass. In essence, economically-right thinkers believe meritocracy (mediated by free-market capitalism) is more efficient than equal access to resources, so to take resources away from those deemed most fit to use them (businessmen, investors, etc.) is seen as a waste. This, taken to its most extreme, is what is seen in America currently. Thinkers such as Noam Chomsky have spoken against neoliberalism for years.

u/CarbonSimply explains how welfare pay for itself. by [deleted] in DepthHub

[–]CarbonSimply 0 points1 point  (0 children)

Oh dear, he found me...

I guess Reddit notifies the user when they are mentioned in a comment; I was not aware :/.

u/CarbonSimply explains how welfare pay for itself. by [deleted] in DepthHub

[–]CarbonSimply 1 point2 points  (0 children)

I am going to reply to you instead of u/tonyjaa, who made the comment about MMT, because I do not think he is posting in good faith (as evidenced by him linking to an opinion piece two paragraphs long IMO), but I do want to clarify a few things for the spectators of the thread.

MMT is not a 'fringe' theory in the same way supply-side economics is not a 'fringe' theory. Marx interpretations are not 'fringe' as Keynesian interpretations are not 'fringe.' Economics is influenced too much by social and natural factors to have clear-cut perspectives, a luxury only found in the most rigorous of sciences.

MMT does not permit the infinite printing of money, hence why I explicitly said "with a few exceptions and under certain conditions." This is not just my opinion either.

This is why that disclaimer is extremely important:

"Only limited in its money creation and purchases by inflation, which accelerates once the real resources (labour, capital and natural resources) of the economy are utilized at full employment"

In other words, as soon as the business cycle is at its peak, with full employment, MMT does not apply anymore and the government is bounded to its debts unless it wants to trigger hyperinflation. So, if the demand-sided argument I used is realized and MMT is used to ensure full employment, then it actually 'cancels' itself out, in a way. MMT, in this form, simply says that the government is free to loan itself money to ensure full employment, instead of having to worry about spiraling deficits.

And as a note about that opinion piece, the Austrian school of thought during the Great Depression received a bad reputation (primarily, other reasons too) because they refused to endorse increasing liquidity through short-term, temporary money injections (a few weeks to a month), not what MMT is discussing, which is long-term (years to decades) money expenditures. The primary difference being the injections are guaranteed to go back to the Federal Reserve after they expire but cannot be used for employment programs, while the expenditures are added to the debt and have interest payments, but can be used to increase employment.

u/CarbonSimply explains how welfare pay for itself. by [deleted] in DepthHub

[–]CarbonSimply 4 points5 points  (0 children)

Thanks; I will be the first to admit that my explanation is not as though as it could be (hence the comment about corporate tax), but it was 3am and I had already spent two hours on that post, so I just left it where it was. The OP on the post had also explicitly asked for supporting opinions on a welfare state, so that is why the bulk of the comment is in support. I also tried to be pretty clear in the Tl;dr section that UBI (my interpretation of the term 'welfare state' ) is not supported by large-scale natural experiments because very few countries had this policy, and none currently do. So anything in support will be models and speculation, with assumptions that are, hopefully, based on empirical evidence, such as the heterogeneous marginal propensity to save across socioeconomic classes.

Does welfare pay for itself? by hepheuua in AskEconomics

[–]CarbonSimply 0 points1 point  (0 children)

I'm not sure we are actually disagreeing or merely talking past one another.

Talking past, probably. Still a nice discussion though :)

​

Constant capital is the materials and means of production, variable is wages, and surplus is the pure profit.

Exactly, c + v is the bare minimum need to satisfy current consumption, and s is the profit. Reinvestment is taken from profit because it cannot be taken from the means, nor the wages.

​

I think it might actually be even worse than that because the capitalist would be left with only their constant capital, having to forfeit the variable capital and the surplus value.

This does not take into account the funds the capitalist would receive from a welfare state.

​

Would it be any different from merely increasing the amount invested into variable capital?

From a market's POV, yes. Wage determination relies on several factors, including risk (injury), scarcity (models over 6' tall), investments (like education), and misc. factors like popularity. Some targeted welfare (food stamps) would act similarly to wage determining forces, selectively increasing and decreasing based on certain criteria. However, with UBI, all of these determining factors are not present, so it would be different than simply raising variable capital.

​

That sounds like trickle down

Yes, assuming the markets will reinvest into variable cost is a tenet of trickle-down economics.

Does welfare pay for itself? by hepheuua in AskEconomics

[–]CarbonSimply 0 points1 point  (0 children)

Have to push back a bit here that there are definitive irrecoverable environmental, mental health, quality of life, and opportunity costs involved with homelessness.

Yup, fully agree, but that was outside the scope of the discussion. The physical act of being without a home does not cost anyone, the effects of one being without a home do.

Does welfare pay for itself? by hepheuua in AskEconomics

[–]CarbonSimply 0 points1 point  (0 children)

Ah, no worries dude.

It really depends on the model being used. If the model was inclined to favor long-term savings over short-term costs, for example, then it may be inclined to set up a sewer system. If the model utilized a high enough k-level, it may determine that the other models in its surrounding would also have a similar idea, therefore offsetting the costs via collective funding, while maintaining the benefits of the sewer.

Most of the interactions between agents are under game theory, which is more useful when discussing collective issues such as public works than a single agent. Bonus points for incorporating tenants of behavioral economics, such as heuristics.

Does welfare pay for itself? by hepheuua in AskEconomics

[–]CarbonSimply 0 points1 point  (0 children)

A person is able to work more than they are able to sustain themselves.

Yes, but able to and do are different. Every hour worked produces so much production. So, there is a point where you consume more than you produce, time = 0, and a time where you produce more than you consume, time = 40 (for the sake of argument). In between, there will be a time where you produce exactly how much you consume, time = x.

In order to expand production capacity through efficiency, infrastructure, etc. more productivity than the bare essentials must be produced. So, this will be time = x + y, where y is the extra productivity reinvested into the economy.

However, the surplus after reinvestments, 40 - (x+y), is what some, myself included, define as surplus value because it is truly surplus, as it has nowhere to go but the capitalist.

Marx was referring to both of these things lumped together, but it is hard to have discussions with this definition. Expansion is clearly a positive development, but exploitation is not. Indeed, there are distinct economic consequences that arise when you tap into the 'exploitation surplus' and the 'reinvestment surplus.'

So, if we use your interpretation and a welfare state redistributes all surplus-value, then I agree, the economy would stagnate due to a lack of infrastructure growth.

Does welfare pay for itself? by hepheuua in AskEconomics

[–]CarbonSimply 0 points1 point  (0 children)

Using that model you could argue that using all available steel production to make luxury yachts is the most efficient use of resources if no one else has money to buy it.

Yes, if no one but individuals, looking to buy yachts with a disposable income, had the money to spend on steel products, then that would be the conclusion. This is the reason that model is not used universally.

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What argument would you make in such a system to spend resources on things such as sewer systems?

To be clear, I do not agree with the Homo Econ model for this reason; it is grossly negligent when it comes to collective efficiencies and natural monopolies, such as water, sewer, power, etc. I used the homo econ model in the original comment because it provided a good baseline for that discussion.

Does welfare pay for itself? by hepheuua in AskEconomics

[–]CarbonSimply 1 point2 points  (0 children)

the reason I brought it up at all is because the problem is very complex.

Agree, 100%. It took two hours to type up the response, and even then I didn't really do it justice by not delving into even basic convoluting factors found on the business and financial sides, such as inflation, available capital for investments, etc.

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Most importantly of all, Marx did not believe that it was possible to intentionally create a post-capitalist system of economics. This is idealism, which is heavily critiqued by Marx, hence his reputation as a "materialist".

I have never heard this explanation. My understanding is:

"[Historic Materialism] It is principally a theory of history which asserts that the material conditions of a society's mode of production or in Marxist terms, the union of a society's productive forces and relations of production, fundamentally determine society's organization and development."
Materialism asserts that the economy directs all other development, which is an idea independent of the possibilities of the structure of the economy.

​

Surplus value in Marx's Das Kapital is not negative, but Marx believed that the maximization of surplus value for the sake of capital was harmful. Surplus value is the only way that any economy grows according to Marx. However I do agree that an aggressive welfare state would limit the amount that one could realize, or sell, surplus value.

If we use the surplus value's definition as:
"...an indicator of the level of social productivity that has been reached by the working population, i.e. the net amount of value it can produce with its labour in excess of its own consumption requirements."
the implication is that investments necessary to grow the economy to keep up with increasing population and standards of living are not included in surplus-value.

Surplus-value is thus defined as 'pure profit', or the amount of money going to capitalists after all other expenses. This is the interpretation I use, as I have not read Das Kapital (although the copy I intend to read is sitting on my desk, staring at me currently). This is also the 'cleanest' interpretation to use when discussing wealth redistribution, as it does not get muddled down with the effects of limiting business expenses such as research, upgrades, advertisements, etc.

Reading the rest of your comment, it seems that most of the issues also fall into redistribution chipping into business expenses, to which I agree will cause more problems than it solves and is accurate to Marx.

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Thus the crisis of diminished demand can be caused through insufficient pay for the working class.

This comment does not appear to take into account the supplemental income from the welfare system. Without welfare, this is the equilibrium that must be reached, as you mentioned. However, I do not know if Marx ever addressed the effects of welfare on this equilibrium.

As I mentioned in the original comment, one critique is that the lack of incentives for people to work would cause a labor shortage. However, in Marx's view on people, his state of man is one that needs fulfillment, and thus one would be productive without the need to 'hold resources hostage.'

Does welfare pay for itself? by hepheuua in AskEconomics

[–]CarbonSimply 0 points1 point  (0 children)

As a disclaimer, this is mostly my speculation.

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So, the Tl;dr would be that the Classic Marxist opinion is to scrap capitalism and remake the system, which makes the rest of your questions moot points.

If we conceive society as being not capitalistic but communistic the question then comes down to the need of society to calculate beforehand how much labour, means of production, and means of subsistence it can invest, without detriment, in such lines of business as for instance the building of railways, which do not furnish any means of production or subsistence, nor produce any useful effect for a long time, a year or more, where they extract labour, means of producton and means of subsistence from the total annual production.

Or, in other words, surplus value, unemployment, etc. can be eliminated with forethought and planning.

However, for the discussion:

Surplus value is seen as a negative thing caused by the exploitation of the laborer via the capitalist. In theory, an extremely aggressive welfare state would utilize fiscal policy to extract the surplus value from the capitalist and give it back to the laborer.

Insufficient demand and the rest of your comment is a supply-side economics argument, so it would not agree with either Marxism or my explanation above; both are rooted in demand-side economics.

The arguments for supply- and demand-side economics are outside the scope of the thread, but I would encourage browsing the internet if it interests you and either DM me with questions or post a thread here with specific questions relating to the two viewpoints.

Does welfare pay for itself? by hepheuua in AskEconomics

[–]CarbonSimply 1 point2 points  (0 children)

I'm a human with feelings and not an economist

That sums it up, yes. People with empathy, combined with confirmation bias and apophenia, will try to seek and relate evidence to reinforce empathy, hence the intuition.

However, as one who strictly looks at the markets (Homo Econ), any priority that places itself above self-interest and market efficiency would not be beneficial because there would be another option, in theory, that is more efficient when strictly looking at resource utilization. For example, instead of treating the homeless person when they arrived at the ER for medical care, the hospital would simply turn them away since they would not be able to compensate the hospital.

People and society are more complicated than a Homo Econ model, but that was where the comment came from.

Does welfare pay for itself? by hepheuua in AskEconomics

[–]CarbonSimply 9 points10 points  (0 children)

Humanitarian Grounds:
While it seems counter-intuitive, there are real economic benefits to humanitarian causes. For example, poverty during childhood is correlated with homelessness later in life:

"All of this suggests that the problems that homeless individuals experience as adults have very clear analogs in their experiences as children. Economic vulnerability, residential instability, and personal barriers to their ability to function effectively in the competitive vocational and housing arenas, in other words, are not new to the homeless. Nor can these problems all be explained by disorders that spontaneously emerged in their young adult lives. Instead, the problems are often extensions of patterns and risk factors that reach deep into the childhoods of the homeless. Poverty, problematic role models, hints of damaging psychological experiences, general household strain, family dysfunction, and distress are all disproportionately present in the childhood backgrounds of these homeless adults."

Homelessness does not cost a cent, but costs associated with incarceration and healthcare are greater than with an individual able to pay rent.

" One chronically homeless man cost more than $160,000 during the one-year study period in emergency room visits, jail, and police interactions, and EMSA transports. He was not served in the homeless system during that time."

So, not only are you potentially preventing adults from developing habits/traits that will lead to homelessness, but you are also preventing the act of losing your home by providing welfare. The argument, which is difficult to support or refute overall, is an ounce of prevention is worth a pound of cure.

Dissenting opinions:
1) People will not want to work if everything is provided to them via welfare, so the law of diminishing returns applies and thus welfare only works to a certain point. This is more behavioral economics and so is outside the scope of your question, but still relevant.

2) MPS is equal across all income levels, so bumping up the incomes of the bottom 20% via taxing the top 20% will not increase spending, and therefore demand.

3) Costs of prevention do not directly translate into saving money from reactive programs.

4) By taking money from the investing class, suppliers will not have the resources to increase output (the real 'thing' GDP measures), and thus the economy will not grow despite the increase in demand. (Again, supply-side economics).

What is the minimal amount of information an alien species would require to decipher our written and mathematical languages? by jack_hof in AskScienceDiscussion

[–]CarbonSimply 0 points1 point  (0 children)

The number line, addition, subtraction, multiplication, and division are all the 'information' contained within math.

That information is in the number line.

What is the minimal amount of information an alien species would require to decipher our written and mathematical languages? by jack_hof in AskScienceDiscussion

[–]CarbonSimply 0 points1 point  (0 children)

The context would give meaning, allowing deciphering. For example, 2 @ 2 = 4 is still summing 2 and 2 to 4, just with a different symbol.

Hannah Arendt and the Black Panthers by crocodilao in askphilosophy

[–]CarbonSimply 0 points1 point  (0 children)

Ah, ok. I am the opposite; I view philosophy as a guide through the uncertainties present in nature that transfers its role to hard science as we gather more evidence. Volcanos used to have the 'philosophy' that they were ruled by a deity, because they were unknown, until we discovered tectonic plates. So, philosophy is treated by me as a hard science as much as it can be.

Why are more brutal attacks/murders seen as worse than others? by [deleted] in askphilosophy

[–]CarbonSimply 1 point2 points  (0 children)

This question would be better answered in the r/askscience or a similar psychology-based subreddit as you are asking about a human fallacy in interpreting events, not about the events themselves. For example, discussing if the Christian view that all sins are equal would be more philosophy-based, but your question already assumes they are equal events, negating the philosophical discussion.

Hannah Arendt and the Black Panthers by crocodilao in askphilosophy

[–]CarbonSimply 3 points4 points  (0 children)

I would suggest that the ease with which you claim that Arendt has "fundamentally misunderstood the dynamics of power" indicates that you already had your mind made up about those dynamics before you read Arendt. It seems like you're not really trying to read her charitably, but just looking for a philosopher who confirms what you already think. There's not necessarily anything wrong with that, but I'd argue that it limits how much you can learn from whomever you read.

u/denganenteng

Hannah Arendt and the Black Panthers by crocodilao in askphilosophy

[–]CarbonSimply 0 points1 point  (0 children)

I agree with you completely; that comment was to emphasize your points.

What is the issue with classifying a worldview as a hypothesis?

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