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rjs said...

Economist karl smith showed that with interest rates as low as they are now, we could eliminate all federal taxes today & borrow 30 years out, & make a profit on that borrowing if the country grows 1.1% annually or more over that 30 year stretch...by not borrowing now, when the rest of the world is paying us to borrow, and investing in infrastructure, renewable energy, job training, and our youth, we are missing a once in a lifetime opportunity...it's not crazy or unprecedented; we had a higher debt/GDP ratio coming out of world war 2, and eisenhower ran deficits to send returning vets to college & build the interstate highway system, and the debt to GDP ratio came down during the 50s expansion anyhow...

http://modeledbehavior.com/2011/09/09/moving-the-overton-window-why-is-the-us-government-still-collecting-taxes/

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PeakTrader said...

RJS, in the first year, even with the record low 30-year T-Bond rate at 3.5%, it'll add about $140 billion of interest payments to the national debt.

However, bond investors would expect inflation to accelerate quickly, sending rates higher, because so much capacity has been destroyed and the economy remains overregulated.

The Fed will drain dollars out of the economy, to compensate, and rising interest rates will likely tip the economy into a long and deep depression.

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Yields are low, because investors expect slow growth or recession.

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The best way to spur growth over the next year may be:

1. Cut spending $400 billion.
2. Cut taxes $400 billion.
3. Deregulate heavily (including health care, environment, education, energy, etc.).

And when the expansion is underway, overhaul the entire federal government, including taxes, i.e. an overdue creative-destruction process, to make it much more efficient.

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PeakTrader said...

"...green-jobs subsidies of $17.2 billion have created about 3,545 new permanent jobs, at a cost of $4.85 million per job."

The government is destroying capital faster than the private sector can create it.

So, it has to destroy foreign capital too.