Uncle Ki-moon Pulls the Wool Over Poor Little Trudeau's Eyes

[Smallc]

Cite? Most people have their income grow throughout their life. Over the course of a 40 year career, most people will see their income at least double. This is comparable to the ~2% rates of real economic growth that are typical in advanced countries.

Incomes generally haven't grown that fast in recent times, where economies have. Still people do maintain debts over their lifetime. Of course then, they die. Generally, countries don't do that.

The future is foreseeable until it's not. Conditions change rapidly.

And so you adjust when that happens.

Few foresaw the financial crisis in 2008. Few will foresee the next contraction, as well. Investing in critical infrastructure is always a good idea. Maintaining deficits for many years because social programs cost more than taxes provide is not.

There's no evidence that we're doing that at the moment - at the federal level anyway.

Edited February 19, 2016 by Smallc

[Smallc]

That 'pool' DOES come from the bigger pool of GDP that's true but as I said the government cant arbitrarily decide how much they take if they want to stay in office. And the portion of that GDP that the government has to work with is shrinking.

Yes, it was shrinking (it isn't now). That's irrelevant, as it's still available.

Sure it is. They need to make interest payments and they have to buy back treasury instruments when they mature. And they have to do that out of the federal budget or they have to sell more treasury instruments to get money to buy back the old ones.

Don't get me wrong. I'm not a deficit hawk, and whether debt is good or bad depends on what you spend it on. I'm just pointing out that debt to GDP is not a very good measure of how a country is managing its debt.

I agree with most of what you're saying. I just think we have to use the generally accepted method of comparison.

BTW, I'm no deficit fan, but I understand why we need higher taxes and or deficits right now.

Edited February 19, 2016 by Smallc

[Bonam]

Your quote is all messed up so I won't requote it, but, average incomes only growing slowly misses the point, which is about individual people. An individual typically starts their career at an entry level job and then works their way into higher jobs over the course of their 40 year career. Their income grows over their lifetime. You can easily confirm this for yourself by looking at data that shows income vs age. A 2-4% annual increase in income is probably about average for individuals over the course of their career as they move up through various jobs, just as it's about the average rate of economic growth for countries.

As for adapting when it happens... you have a lot less capability to adapt when you are already burdened by debts from before that you were hoping would fade to irrelevance due to perpetual economic growth. And yes, governments die just like individuals do. The average lifespan of governments is only about 250 years, only about 3 times longer than individuals in advanced countries.

[Smallc]

Your quote is all messed up so I won't requote it, but, average incomes only growing slowly misses the point, which is about individual people.

Individual people are where statistics come from.

An individual typically starts their career at an entry level job and then works their way into higher jobs over the course of their 40 year career. Their income grows over their lifetime. You can easily confirm this for yourself by looking at data that shows income vs age. A 2-4% annual increase in income is probably about average for individuals over the course of their career as they move up through various jobs, just as it's about the average rate of economic growth for countries.

Sure, and on the average, that hasn't really been happening with incomes anymore. Like you said, things change.

As for adapting when it happens... you have a lot less capability to adapt when you are already burdened by debts from before that you were hoping would fade to irrelevance due to perpetual economic growth.

Which is why I propose perpetually shrinking debt as a percentage of GDP, no matter what that means. You only deviate from that during times such as now.

And yes, governments die just like individuals do. The average lifespan of governments is only about 250 years, only about 3 times longer than individuals in advanced countries.

There's no evidence that's going to continue to be the case into the future.

[dre]

If I was the government I would just make the money I need at the mint instead of borrowing it as long as inflation is under 3%. If it went over 3% Id start selling bonds again.

[Bonam]

Individual people are where statistics come from.

Sure, and on the average, that hasn't really been happening with incomes anymore. Like you said, things change.

Have you really never heard of how earnings change during an individual's career? You're not aware that people get entry level jobs in their 20s and then move up into higher level jobs, on average? Sigh, I guess we have to belabor this point because most people have never looked at any income stats other than what makes it into news headlines.

Here, this is income vs age in Canada:

The average person with a university degree starts with an income of ~15k in their 20s and peaks with an income of ~75k in their 50s. That's a factor of 5 in 30 years. Even for people with not even a high school diploma, there is a factor of 2 increase in earnings throughout their careers.

Do you get it yet or do we need to keep belaboring this?

[Smallc]

Do you get it yet or do we need to keep belaboring this?

I'm saying for many people that doesn't happen (me, for example). I can't argue with the average though. The difference, of course, is the fall at the end of the chart. Theoretically, that won't happen to a country.

[Bonam]

I'm saying for many people that doesn't happen (me, for example).

Aren't you like 30 or something? You've got plenty of time for your earnings to grow over the course of your career. Also, your statement about the average earnings growth not happening for all people also applies to countries... not all countries will experience continual economic growth either. Consider Japan, which has been stagnating for decades. If they had borrowed with the assumption that the typical 3% economic growth would kick in and grow the debt away, they would long ago have gone bankrupt.

I can't argue with the average though. The difference, of course, is the fall at the end of the chart. Theoretically, that won't happen to a country.

Why would it not happen to a country? Historically, many countries have experienced economic contraction prior to dying.

[Smallc]

Aren't you like 30 or something? You've got plenty of time for your earnings to grow over the course of your career.

No, I make at or above the average and am unlikely to see that change a lot in my lifetime.

Also, your statement about the average earnings growth not happening for all people also applies to countries... not all countries will experience continual economic growth either. Consider Japan, which has been stagnating for decades. If they had borrowed with the assumption that the typical 3% economic growth would kick in and grow the debt away, they would long ago have gone bankrupt.

But they have. They owe more than 200% of GDP, yet they aren't bankrupt:

http://www.tradingeconomics.com/japan/government-debt-to-gdp

Canada is in little danger of problems.

[Bonam]

No, I make at or above the average and am unlikely to see that change a lot in my lifetime.

A lot can happen in a lifetime, both for an individual and a country. But sure, if you say so.

But they have. They owe more than 200% of GDP, yet they aren't bankrupt:

http://www.tradingeconomics.com/japan/government-debt-to-gdp

Canada is in little danger of problems.

They'll be in a world of hurt when interest rates go up. And yes, Canada is in a relatively strong economic position compared to many other countries. That doesn't mean now is the time to relax and party, it means it's time to work to strengthen that position even more and get further ahead. By all means, build infrastructure... that almost always has a positive return on investment, in any case, even if debt financed. But your larger argument that running deficits is fine because expected economic growth will eventually make today's debt tomorrow's pocket change doesn't convince me at all.

[Smallc]

They'll be in a world of hurt when interest rates go up. And yes, Canada is in a relatively strong economic position compared to many other countries. That doesn't mean now is the time to relax and party, it means it's time to work to strengthen that position even more and get further ahead.

Interest rates have little to no effect on the borrowing ability of a country, as a country, as long as it keeps inflation low, can borrow from its central bank or simply create the money. Still, I don't advocate for that. I'm advocating for deficits for about the next 5 years. We're in a bad situation economically in Canada and around the globe. At the same time, Canada has an infrastructure deficit and a social deficit that can be closed with one time funding. Two birds with one stone.

[Argus]

We actually spend a lower percentage than we did just a few years ago with a larger debt. Governments don't really care about the prime rate. Rates are based on our worthiness. Canada is seen as very worthy of lending.

That is nonsensical. To borrow money the government pays what the market wants. At the moment the market only needs a very low interest rate. But that rate is so low it is deceptively dangerous. If you're paying 10% interest the rate has to really skyrocket to double your minimum payments. If you're paying 2% then the market only has to return to something near normal to double your payments. Are interest rates going to go up to 4% this year? No, of course not. But this debt will still be with us in 10 years, and 20 years and 30 years, and it's virtually certain rates WILL be doubling well within that time frame. We already pay over $32 billion a year to service our existing debt. Add more debt and double the service costs and that easily climbs to $75 Billion or more. For comparison purposes, DNDs budget is arond $20 billion.

[Smallc]

That is nonsensical. To borrow money the government pays what the market wants.

Which has nothing to do with prime interest rates. Government has multiple vehicles to make debt meaningless, though some are very messy.

[cybercoma]

Have you really never heard of how earnings change during an individual's career? You're not aware that people get entry level jobs in their 20s and then move up into higher level jobs, on average? Sigh, I guess we have to belabor this point because most people have never looked at any income stats other than what makes it into news headlines.

Here, this is income vs age in Canada:

The average person with a university degree starts with an income of ~15k in their 20s and peaks with an income of ~75k in their 50s. That's a factor of 5 in 30 years. Even for people with not even a high school diploma, there is a factor of 2 increase in earnings throughout their careers.

Do you get it yet or do we need to keep belaboring this?

That graph is meaningless in this discussion. You need panel data following individuals over their lives and you need to keep their income in constant dollars to see if they're actually earning more. Barring that, just look at the aggregate real income over time. The bottom majority do not make more or make very little more over time. Edited February 19, 2016 by cybercoma

[Bonam]

That graph is meaningless in this discussion. You need panel data following individuals over their lives and you need to keep their income in constant dollars to see if they're actually earning more. Barring that, just look at the aggregate real income over time. The bottom majority do not make more or make very little more over time.

I've seen longitudinal studies following groups of individuals and they all universally and unambiguously show income growth over the course of careers.

I agree there is likely some bottom % of people (not the majority though) who probably spend their lives going back and forth between various minimum wage jobs and periods of joblessness and don't see their incomes grow much over their lives. But that is not the average person.

In any case, the point being discussed here was the already overworked and overstretched analogy between individual budgets and national budgets. Individual incomes grow over time as do national revenues (even if this is not true for all individuals or for all nations), but neither is a case for loading up on debt and hoping for it to become trivial over time.

[Argus]

Which has nothing to do with prime interest rates. Government has multiple vehicles to make debt meaningless, though some are very messy.

You mean like Greece?

[Smallc]

You mean like Greece?

Greece doesn't control their own monetary policy and does not fully control their own fiscal policy, so not like Greece. Links have been provided to you in previous threads explaining the fallacy in the comparison.

[WestCanMan]

Apparently you haven't been following Rona Ambrose very closely. She whines incessantly with talking points about F 18's that are so similar to the cookie cutter stuff she was supposed to be getting beyond in the wake of how poorly that approach worked for Harper.

Dude Trudeau bitched about $90,000 for three years. Then he went and blew $30,000,000,000 of our money in a weekend Vegas.