Good News: Deficit to be $30 Billion says Bloomberg

[Argus]

waldo addressing the deficit hysteria from the usual suspects:

if not deficit spending now... when the cost of servicing federal debt is the lowest it has been in 50 years... then when?

When it's absolutely needed. It is not needed at the moment. And like most progressives, you have the attention span of a puppy. You see its sunny today and think it will always be that way. You have no ability to look even a few years down the road nor the imagination to consider that economic circumstances could be drastically different then.

Look at your own statement. The cost is the lowest its been in 50 years. Yes! In fact it's enormously lower than its average over the last 50 years. The average is about 5%. Pay attention, Waldo. That's TEN TIMES THE CURRENT RATE. That's the average. Never mind those wild days of the early nineties when it ballooned to 16%.

The plan, such as it is, of the Trudeau Liberals is to grow the debt higher so that we're paying UNDER HISTORICALLY LOW RATES about $35 billion of each year's budget on interest fees. But we're not buying a car, Waldo. This isn't going to be paid off in four or five years. That debt will be with us in 20 and 30 and 40 years.

What happens when interest rates return to normal? We're spending over 11% of revenue on interest payments at the moment. That will rise even without an increase in interest rates, as Trudeau borrows more. But one of the factors which causes long term interest rates to rise is - government borrowing. And the money we're borrowing now is going to have to be refinanced one day, almost certainly at much higher rates. Suddenly that $35 billion interest rate payment explodes upward to consume an enormously larger slice of the overall budget.

[Smallc]

The Harper government took more than $25 billion in revenue from the public purse yearly. Before them, the Chrétien and Martin Liberals took even more. Raise taxes to cover any deficit that's been artificially created. Lower taxes when we can actually afford it.

[Argus]

The Harper government took more than $25 billion in revenue from the public purse yearly. Before them, the Chrétien and Martin Liberals took even more. Raise taxes to cover any deficit that's been artificially created. Lower taxes when we can actually afford it.

Running up a tab gets worse the longer you do it and the higher the tab gets. And like most progressives you have a basic lack of understanding of how economies work and the impact higher taxes have on them.

[dre]

When it's absolutely needed. It is not needed at the moment. And like most progressives, you have the attention span of a puppy. You see its sunny today and think it will always be that way. You have no ability to look even a few years down the road nor the imagination to consider that economic circumstances could be drastically different then.

Look at your own statement. The cost is the lowest its been in 50 years. Yes! In fact it's enormously lower than its average over the last 50 years. The average is about 5%. Pay attention, Waldo. That's TEN TIMES THE CURRENT RATE. That's the average. Never mind those wild days of the early nineties when it ballooned to 16%.

The plan, such as it is, of the Trudeau Liberals is to grow the debt higher so that we're paying UNDER HISTORICALLY LOW RATES about $35 billion of each year's budget on interest fees. But we're not buying a car, Waldo. This isn't going to be paid off in four or five years. That debt will be with us in 20 and 30 and 40 years.

What happens when interest rates return to normal? We're spending over 11% of revenue on interest payments at the moment. That will rise even without an increase in interest rates, as Trudeau borrows more. But one of the factors which causes long term interest rates to rise is - government borrowing. And the money we're borrowing now is going to have to be refinanced one day, almost certainly at much higher rates. Suddenly that $35 billion interest rate payment explodes upward to consume an enormously larger slice of the overall budget.

Pay attention, Waldo. That's TEN TIMES THE CURRENT RATE.

No... yields on the ten year benchmark bond are sitting at around 2.2%, but the real interest rate is higher because inflation is lower.

And the money we're borrowing now is going to have to be refinanced one day, almost certainly at much higher rates. Suddenly that $35 billion interest rate payment explodes upward to consume an enormously larger slice of the overall budget.

That scenario is unlikely. Debt is always being refinanced and its made of bonds that mature anywhere between 30 days and 50 years. As long as revenues grow at a reasonable pace your scenario is not plausible.

[Argus]

That scenario is unlikely. Debt is always being refinanced and its made of bonds that mature anywhere between 30 days and 50 years. As long as revenues grow at a reasonable pace your scenario is not plausible.

What do you regard as reasonable given that without paying the debt down it continues to grow year by year? And what is plausible? Yields tripled over the course of a few years back in the nineties. What makes you think the yield won't be 6% in ten years?

[dre]

And like most progressives you have a basic lack of understanding of how economies work and the impact higher taxes have on them.

Its really quite comical that would be knocking ANYBODIES understand of economics, given that your posts are so packed full of errors, omissions, simplistic half truths, and outright falsehoods. You refuse to account for the link between revenue and debt serviceability. You refuse to consider the difference between real and nominal rates. You seem to have no grasp of the relationship between interest rates and bond rates what-so-ever.

Running up a tab gets worse the longer you do it and the higher the tab gets.

Another simplistic half-truth. Debt serviceability is always based on debt maintenance ratios, not absolute numbers. Your debt could double but if revenues triple then debt serviceability will improve.

[dre]

What do you regard as reasonable given that without paying the debt down it continues to grow year by year? And what is plausible? Yields tripled over the course of a few years back in the nineties. What makes you think the yield won't be 6% in ten years?

The decrease in nominal interest rates is not a short term valley, its a trend that has persisted for more than 35 years. Interest rates have gone down because monetary and economic policy has been effective in keeping inflation in check.

As for your claim that bond yields tripled in the 90's we actually saw a linear decline.

If you average out the peaks and valleys you'll see rates for the most part following inflation.

[Argus]

Its really quite comical that would be knocking ANYBODIES understand of economics, given that your posts are so packed full of errors, omissions, simplistic half truths, and outright falsehoods.

Oh? Let's have a list.

You refuse to account for the link between revenue and debt serviceability.

No, I merely refuse to go along with your fairy tale notion that revenues will rocket upwards because we borrow more and spread it around. If that actually worked then Greece would be an economic powerhouse today.

You refuse to consider the difference between real and nominal rates.

Are present rates at historical lows or are they not? Can the present rates double or triple within the course of ten years or can they not?

You seem to have no grasp of the relationship between interest rates and bond rates what-so-ever.

Can bond rates double or triple within ten years or can they not?

Another simplistic half-truth. Debt serviceability is always based on debt maintenance ratios, not absolute numbers. Your debt could double but if revenues triple then debt serviceability will improve.

Yes, but debt fees rising is an absolute certainty as we continue to stack more debt on top of what we already have, even without the inevitability of rising borrowing rates. Revenues doubling or tripling is nothing but wishful thinking.

[Argus]

The decrease in nominal interest rates is not a short term valley, its a trend that has persisted for more than 35 years. Interest rates have gone down because monetary and economic policy has been effective in keeping inflation in check.

What we see from your chart is rates rising abruptly though the 80s to an abnormally high rate, which took almost twenty years to fall back to rates approaching normality. Then we see them falling from those 'normal' historical levels due to the financial crisis of 2008. So this is not a sustained trend below historical averages but a temporary fall due to the financial crisis and recession.