What site was I at? They had two graphs from Wikipedia -- the one, showing Federal debt held by the public and gross Federal debt for comparison. My mind goes back to this graph, and to my recent pie charts comparing components of debt.
Here it is. Found it at Wikipedia:
The top panel is deflated so every year is in 2010 dollars.
Son of a bitch! "The top panel is deflated so every year is in 2010 dollars."
Pick a year: 1970. The Federal debt for 1970 included borrowings from 1969 and 1968, and from 1965 and 1960, and from the Korean War and World War Two, and for all I know it included borrowings from back to the time of Andrew Jackson.
For the Wikipedia graph, when the value for 1970 is "deflated" it is converted from 1970 dollars to 2010 dollars. In other words, all of that accumulated debt as of 1970 is assumed to have been originally borrowed in 1970. That's obviously wrong.
Very little of the Federal debt of 1970 was due to the borrowing of 1970. Most of that debt was from prior years. So deflating the debt as if all of it had been newly borrowed in 1970 is an error. A gross error. You can't swing a dead cat without seeing people make that mistake.
Now, the post I had in mind to write:
The Growth of the Gross Federal Debt
People are always showing the Federal debt: |
| Graph #2: Federal Debt Held by the Public |
People are always saying that's not right, that's just the part of the debt held by the public. And it does exclude the "intragovernmental" debt that Wikipedia mentions:
 |
| Graph #3: Federal Debt without (blue) and with (red) the "Intragovernmental" Debt |
You know what else it excludes? It excludes everybody else's debt:
 |
| Graph #4: Measures of the Federal Debt (red, blue) and Total Credit Market Debt (green) |
The green line shows "credit market debt". It includes everybody else's debt other than the Federal government, and it includes the blue, "held by the public" debt of the Federal government. It does not include the "intragovernmental" debt. Everything from the blue line up to the green line is debt other than Federal.
We can subtract the blue line from the green line, and add in the red line to get a measure of debt that includes all of the Federal debt, here in orange:
 |
| Graph #5: All the Debt I Know About (orange) |
Now...
I want to take all the debt I know about, subtract out the gross Federal debt, and compare what's left to all the debt I know about. And to make it a little more interesting, I'll also compare the gross Federal debt to all the debt I know about:
 |
| Graph #6: The Two Parts of All the Debt I Know About |
10 comments:
The money we could be paying in taxes to the government (for doing things like providing us the dollar) goes instead to lenders for providing us with credit.
It's the money the private sector could be spending to generate demand, employment and prosperity. Extinguishing it via taxation is no more economically useful right now than financial sector extraction of it to service private debt.
Art
So you believe that our taxes is what funds our federal government?
the point of the post, nb,
i know it is buried beneath a tangent and several manipulations of the data,
is that everybody else's debt is really high and the government's debt is really low,
so that those who complain about government debt are clearly barking up the wrong tree.
i know there are many people who certainly DO "believe that our taxes is what funds our Federal government" and i do like to occasionally phrase things in a way that those people might understand.
yes, i am inclined to prefer to think of government transactions in the same vein as business and personal transactions: money in, money out.
wax on, wax off.
//
geerussell, see how you used the words "right now" in your second sentence? That's perfect. It means that sometimes we do need less money in the economy, and sometimes we don't.
said and done, i would much rather see the government receiving most of the money that now goes to finance, because what goes to finance stays in finance. what goes in taxes is returned to circulation, and more besides.
Yes! What goes to finance stays in finance. That's the key. How do we turn the money away from finance to more productive stuff?
Art, are you on twitter?
no twitter.
q: How do we turn the money away from finance to more productive stuff?
a: the result we get is the result of policy and other things, but we can only change policy.
either policy encourages finance too much, or it fails to encourage the productive side -- they call it the "nonfinancial" side, for crying out loud!
i just signed on to twitter
its a friggin mess
q: How do we turn the money away from finance to more productive stuff?
a: 1) Regulation, as in Glass Steagal. You can thank Phil Graham for the current wild west world of finance.
2) Taxation. Tax capital gains as regular income. Actually, I could see taxing capital at higher rats than regular income.
In short, go back 40 years in regulation policy, and revamp taxation to disadvantage non-value added financial tail chasing.
Will it happen? Hell no. Big Finance owns the goverment.
Cheers!
JzB
geerussell -
It's the money the private sector could be spending to generate demand, employment and prosperity. Extinguishing it via taxation is no more economically useful right now than financial sector extraction of it to service private debt.
You're 1) buying into the idea of taxation as a dead weight loss, and 2) assuming that the private sector would actually do something with the money that would grow the economy.
What they would do is further increase executive bonuses, and engage in even more rent collection, and speculation.
It's why we need steeply progressive taxation and robust regulation - most especially of the finance sector.
You're 1) buying into the idea of taxation as a dead weight loss, and 2) assuming that the private sector would actually do something with the money that would grow the economy.
Dead weight loss implies no useful purpose. I'm identifying the principal function of taxes as economic brake pedal. A drain. This is a necessary and vital function in compliment to the gas pedal of spending. The faucet.
On the second point, I was quoting Art specifically with regard to the flow of funds extracted from the real sector to the financial sector through the channel of debt service. Rather than encouraging rent extraction, this is something that could only happen as a result of shutting off rent extraction along the lines you suggested such as regulation and taxes. To be 100% clear, I agree with and support your recommended remedies.
The counter-factual of those funds remaining in the real sector is the entire set of real uses across all real activity, which may include but certainly isn't limited to the payment of bonuses.
Also, bonuses paid for real activity are certainly less bad than bonuses extracted at the cost of real activity.
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