What is a "sustainable" national budget deficit?

  1. Ralph Deeds profile image67
    Ralph Deedsposted 5 years ago

    http://www.nytimes.com/2013/03/31/busin … f=business

    According to George W. Bush's economic adviser, Gregory Mankiw, our national goal should be a "sustainable"  national budget deficit, not elimination of the deficit. He defines a "sustainable" deficit as one that will not leave the country "too vulnerable when the next catastrophe (war or recession) strikes."

  2. CHRIS57 profile image59
    CHRIS57posted 5 years ago

    From a microeconomic (business) standpoint, sustainable is whatever is necessary to do the financing of your sales. If it takes 6 months to manufacture something and linear accumulation of value is assumed, then 3 months of revenues would be allowed for sustainable debt. For a pizza baker who is buying, making and selling on a day to day period, this would mean only 1 day of revenues in debt, however add investment minus depreciation and you get the picture.
    I am no economist, but i think common sense applies to the macroeconomic side as well. There revenues are the GDP. We have to figure out how much of GDP is associated to Government. Lets make it 40% of GDP. Now public hand has to finance a lot of services and capital investment.While services are good for lets say a 4 month period and make up 75% of spenditure, the other quarter is capital investment, buildings, infrastructure, roads, coastguard, firefighting, even military, the whole show. I assume that depriciation would result in a 6 year period in average (from coffee maker to lawn mower to administration building and F22 fighter jet.
    Where does this get us?
    Services: 30% of GDP with 4 month period
    Capex: 10% of GDP with a 6 year period
    Services is worth only 30% x 4 month / 12 months = 10% debt/GDP
    Capex: is worth 10% x 6 years = 60% debt/GDP
    In total it adds up to 70% public debt. How is that for a milkmaids calculation? :-)
    We can move this up and down a little, but things get dangerous in the range of 80%. Then options for demand side stimuli get tricky. Same with supply side stimuli (cutting taxes).
    Debt is not limited to government. Every employee who receives a monthly paycheck actually is a creditor to his employer with a month period. Within that period he has to finance his living and may get into debt for 2 weeks of pay. Same story. So it makes sense to look at the whole economy, not just government. The whole is public hand, households, nonfinancial and financial business. http://www.gfmag.com/tools/global-datab … z2P91tfOv7
    Again i want to draw a line to microeconomic situations. If a company goes bankrupt, all assets in the books will just evaporate in value. I donĀ“t have too much experience with this, but i think assets deteriorate to some 30% of pre bankrupt figures. I we look at the total assets of an economy, then i would assume them to be in the range of 600% to 1000% of GDP (i would put the US on the "rich" side with something around 1000%.) That would allow the US to accumulate a total debt of some 300% of GDP and still have all debt covered in case of a national bankruptcy. And this would explain, why the US is still a trustworthy debtor, even if current situation and administration piles another 1 or 2 Trillion of debt in the near future.

 
working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)