Compare and Contrast

In the AFR today is a recycle of an oped by Robert Rubin in the Washington Post.  It is titled:

America’s debt has exploded. Why does no one care?

Robert Rubin is the former US Treasury Secretary under President Bill Clinton.  He is also the Rubin in the (Bob) Rubin trade as described by Nassim (Black Swan) Taleb:

Robert Rubin collected one hundred million dollar in bonuses from Citibank, but when the latter was rescued by the taxpayer, he didn’t write any check.

But this post is not about Rubin but what he wrote:

Tax revenue (in the US) as a percentage of gross domestic product is expected to be 16.5 per cent next year.

Now this 16.5% is after a large tax cut and is leading the US to a YUGE debt and deficit problem.  On the other hand, Australia has a “target” for tax revenue as a percentage of gross domestic product to be 23.9% – slightly larger than 16.5 and we too have a YUGE debt and deficit problem.

Is everyone out there relaxed an comfortable also?

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12 Responses to Compare and Contrast

  1. Bruce of Newcastle

    Would that be this Robert Rubin?

    Obama’s economic team shows influence of Robert Rubin – with a difference (NYT, 2008)

    WASHINGTON — It is testament to the star power of former Treasury Secretary Robert Rubin among many Democrats that as Barack Obama fills out his economic team, a virtual Rubin constellation is taking shape.

    Would that be this Barack Obama?

    Obama Leaves Office Having Added $9.3 Trillion to Debt (Jan 2017)

    When Obama took office on Jan. 20, 2009, the outstanding public debt totaled $10,626,877,048,913. On Jan. 20, 2017, when Obama left office, outstanding public debt totaled $19,944,429,217,106, an increase of roughly $9.3 trillion.

    It’s a mystery.

  2. Singleton Engineer

    Doubling the federal debt isn’t necessarily a left-right thing.

    Australia’s coalition governments of the past half dozen years have also managed to double the federal government’s net debt.

    There is a recent $444 M example that comes to mind, while our government is determined to reduce tax rates.

    Spend more and tax less. That couldn’t possible be related to the debt, could it?

  3. Neil

    Australia’s coalition governments of the past half dozen years have also managed to double the federal government’s net debt.

    Not quite. Net debt went from minus 3.3% of GDP in 2007 ie less than zero, to 13% by 2013. And it is at 19% now. But debt exploded under Rudd/Swan and the Coalition has done nothing to stop the runaway debt truck

  4. .

    Net debt is bit of a crock.

    What matters is how much we’re paying to service the debt. If that gobbles up growth it means the debt eventually causes recessions.

  5. flyingduk

    Government has to be paid for somehow, whether by taxes, borrowings, inflation of the monetary supply, or by default/war. So far we have seen numbers 1-3 fail to keep up. I wonder how long before 4 and 5 are wheeled out? It was ever thus

  6. Nicholas (Unlicensed Joker) Gray

    The US is the world’s reserve currency, for now. Apparently, so I keep reading, that allows you to be more reckless when it comes to debt. Don’t ask me how- I’m not an economist!

  7. .
    #2789539, posted on August 15, 2018 at 1:55 pm

    Net debt is bit of a crock.

    What matters is how much we’re paying to service the debt. If that gobbles up growth it means the debt eventually causes recessions.

    There was a time when children were responsible for their parents debts (like a negative inheritance) and many were forced into Indentured Servitude. Lets call it Slavery Light.
    Borrowing money instead of increasing taxes is immoral, just like indentured servitude. Unborn children should not be liable for the follies of the current generations.

  8. Neil

    that allows you to be more reckless when it comes to debt

    Most of the US debt is local ie owed to their own citizens. Same goes for japan. Furthermore both those countries have vast overseas assets to cover the difference.

    However for Australia most of our debt is foreign

  9. Tim Neilson

    Borrowing money instead of increasing taxes is immoral, just like indentured servitude.

    Partly wrong. Borrowing money instead of cutting spending is immoral. Borrowing and increasing taxes are both like indentured servitude.

  10. Neil

    Net debt is bit of a crock.
    What matters is how much we’re paying to service the debt. If that gobbles up growth it means the debt eventually causes recessions.

    Not quite true. Table 4 says govt NET debt was minus $40B ($39.9B) in 2007 ie less than zero and we received NET income of $1B on that money. But GROSS debt in 2007 was plus $50B. When the Howard govt no longer needed to borrow money a discussion was had whether the bond market should be kept open. They found that some organisations like Super funds like to put some money in govt bonds. So they decided to keep approx. $50B on issue even though the Howard govt did not need to borrow money. So from approx. 2003-2007 bonds on issue flatlined at approx. $50B. Of course all that changed when the govt started borrowing money again under Rudd/Swan

    https://www.budget.gov.au/2018-19/content/bp1/download/bp1_bs11.pdf

  11. .

    Shut up Neil.

    Having “net assets” never stopped a currency collapse.

  12. Neil

    I was just pointing out we had GROSS debt of $50B in 2007 but NET debt was minus $40B ie less than zero. WE were actually earning $1B/year in income on out net debt. All that changed when we started running deficit budgets again

    https://www.austrade.gov.au/images/useruploadedimages/5723/iload39901___source.gif

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