I think these two different ratings appropriately reflect the uncertainty of the situation.

The issue in the US is that there is a genuine ideological split between the two parties about what the US government should look like. The Democrats want a big government, which takes in a lot of taxes and provides a lot of services to everybody. The Republicans want a small government, which takes in minimalist taxes and provides minimalist services. (I'm not interested in debating the relative merits of these two ideologies today.) And this isn't just the parties' ideologues, either -- the same ideological split genuinely exists in the US public (contrast to many other countries where the "big government" types seem to have largely won the argument).

Either party could easily balance the budget on its own, given unlimited power. However, because of the way the US political system just happens to work, it's very hard to do anything without getting at least some of the other guys on board.

The Republicans have for many years had a "starve the beast" strategy, figuring that if you keep on cutting taxes then eventually the Democrats will have to agree to cut spending as well. In recent years the Democrats have invented the opposite "gorge the beast" strategy, in which you figure that if you keep on increasing spending then eventually you'll be able to pressure the Republicans into agreeing to tax increases. And the poor beast being starved at one and and gorged at the other starts to... wait, no, this analogy is breaking down.

What's the solution? There really isn't one. The ideological split in the American public is real and it isn't going away any time soon, and folks need to stop proposing "solutions" which basically just come down to "all we need is for the other side to come over and agree with us and it'll all be rosy." That's not gonna happen.

But perhaps the first step is to acknowledge that this ideological split is genuine, and real, and does actually reflect the ideological split within the US population. Perhaps we can compromise, but first we have to acknowledge precisely what it is we're compromising about.

edit: Wow, I can't believe this got modded down. I guess the true believers in the "No really, it's the other guys' fault" die hard.

I think Republicans want to allocate funding differently from the Democrats, but I'm not so sure they want to do any kind of 'small government'.

Not saying that that was the case, but you could be misunderstood in saying what you have.

Which Democratic spending initiatives are contributing to the current deficit? The Democratic war in Iraq, or the Democratic Homeland Security Dept? The Democratic Medicare Part D? You can argue the stimulus but that spending was all temporary and is gone by next year. The healthcare bill reduced gov't healthcare spending (and the tea party ran against it on a obama-is-taking-away-your-medicare scare campaign, I remember the attack ads, irony is not dead).

1999 wasn't that long ago. We had a surplus. The ideological split is mostly the result of opportunism by Tea Party commentators/legislators and the complete illegitimacy of any Democratic president in the eyes of about 50% of Republicans. Democrats will bend over backwards to not be perceived as ideological, as we saw last week.

With all of those repub approved initiatives, the last deficit under a repub congress was $160B/year and the trend was downwards.

The deficit jumped to $460B when the Dems took Congress (and Bush was still president).

Speaking of Medicare Part D, care to name three congressional Dems who objected to it on the basis that it cost too much? It's easy to find those who objected because it cover more, that is, cost more.

And, wrt Homeland Security, feel free to identify Dems who want to spend less on it. The vote on unionization will help you identify those who wanted to spend more.

> You can argue the stimulus but that spending was all temporary and is gone by next year.

Obama and the CBO disagree. They both project >$1T/year deficits for the forseeable future. (They disagree on how much over $1T.)

> The healthcare bill reduced gov't healthcare spending

Umm, no. The claim was the overall cost of healthcare would go down, but that govt spending would go up, being paid for by additional taxes and $500B in medicare "savings". (The scoring "worked" because the taxes started before the benefits.)

The medicare "savings" consists of paying doctors less, the "doc fix". That's been on the plate several times, but each time Congress has pulled back because doctors have said that they won't accept medicare patients if they're paid less.

> The ideological split is mostly the result ... and the complete illegitimacy of any Democratic president in the eyes of about 50% of Republicans.

Ah yes, no Dems ever questioned BushMcChimpHitler's legitimacy or were at all ideological about him.

Are you sure you're not being played for a sucker?

Yes, Democrats were more offended by the gross inefficiency of Medicare Part D than by the general idea of Medicare as a program. They voted against Part D. Republicans voted for it.

Having a projected deficit next year is hilariously orthogonal to the undisputed fact that stimulus spending ends this year.

And the point about Democrats questioning Bush's legitimacy is a great one. Here's someone who actually was arguably illegitimate for his first term, and what did Democratic officeholders and commentators do? Fall over themselves to disassociate themselves from the crazy hippies, and proclaim that we as a country need to move forward. There was no Democratic tea party, and frankly if the Republican tea party is honest about their concern with deficits, where were they prior to January 2009?

We agree that Medicare part D is bad. You claim that the fact that Repubs supported it and Dems didn't implies that Dems would have done better if they'd had their way. One problem with that argument is that it assumes that all alternatives are better. That's clearly false.

That's why I said that we should look at what the Dems wanted instead of Bush's Medicare Part D. What they wanted was 40% more expensive, so if you think that Bush's Medicare Part D is bad because of the cost ....

> Having a projected deficit next year is hilariously orthogonal to the undisputed fact that stimulus spending ends this year.

As I've pointed out, almost everyone else thinks that next year's deficit, post-stimulus, will be over $1T and that the same is true the year after and for the forseeable future under current law. (There's some disagreement over whether the trend is $1.2T or $1.5T.)

If you're correct, why isn't Obama shouting your number?

2) And, the stimulus isn't contributing to that deficit, hence the comment about it being "hilariously orthogonal". It was also 1/3 tax cuts if you don't remember. Anyways, medicare Part D, the war in Iraq, the Bush tax cuts, and the near-doubling of military spending are contributing to that deficit, as well as tax base shrinkage due to recession. If we're counting relative to the last time we ran a surplus.

As I said, we agree that it's bad. You've yet to establish that the Dem's proposal, which was more expensive, was better.

> And, the stimulus isn't contributing to that deficit, hence the comment about it being "hilariously orthogonal".

You're the only one talking about the stimulus. I've pointed out that the post-stimulus deficit is >$1T, while the pre-Obama deficit was $460 and the last Repub Congress deficit was $160B, both with the bush tax cuts and more war spending and the recession hadn't kicked in then.

The "out years" projections assume no recession.

But again, that's silly partisan point scoring and totally beside the point. Pulling one-sided stats with a total lack of intellectual honesty in order to try and claim my side's better.

You're actually arguing here, "but if we cherry pick from the peak of the housing bubble, my side looks great! Just don't look at the following year".

I don't blindly cheer for democrats like they're a football team, I try to objectively evaluate what's going on. If more republican football fans did the same, we might actually have a deficit reduction deal, or a plan to help the jobs situation.

As it is, this is the GOP plan: http://www.theonion.com/articles/new-gop-strategy-involves-r...

Yup, and Obama has gone deeper.

I'm not claiming that Bush was good - I've said that he's bad. I'm pointing out that Obama and the Dems have been worse.

> If we're doing stupid technicalities.

One "stupid technicality" is that the Obama and the Dems haven't been all that interested in passing budgets.

That's why I talk about spending.

> but if we cherry pick from the peak of the housing bubble, my side looks great! Just don't look at the following year".

You've repeatedly claimed that there will be a huge difference in spending after this year because the stimulus will be over. That makes a comparision with pre-recession reasonable.

Can you point out which spending? I'm under the impression that they're structural deficits created by Bush programs and exacerbated by the recession. But if you could point out some large Obama spending plan that passed, I'd change my mind.

This week, we found out that they scored the subsidies based on single people with no kids while the coverage goes to dependents as well, so the subsidies will cost a lot more than predicted.

Every week or so, there's another $100B or so of spending in the bill that we find out about that wasn't scored.

Pelosi was right - we had to pass the bill to know what's in it.

They, along with the rest of polite society, when some "brave artist" ranted about Bush's assassination.

> if the Republican tea party is honest about their concern with deficits, where were they prior to January 2009?

Actually, a lot of us were screaming about the bush deficits, ,which got a big boost in 2006, when the Dems took congress, something that you completely ignore.

However, as I point out, there is a difference between $160B deficits and $1T deficits.

Sure, you want to blame the economy, but even if that's the only cause, why is it reasonable to keep spending as if times are flush when they clearly aren't?

We aren't suddenly hitting the debt ceiling, we've been hitting it every year or two like clockwork for decades. It was raised over a dozen times during the Reagan administration, for example. Suddenly?

  But in general, yes, the Democrats do envision a larger
  government role in society (excepting defense/security)
  than Republicans do.

I'll never understand how some people can be discussing the size of size of government and then essentially ignore military spending (of which much has little to do with defense or security) and governmental abuses of power for the sake of security theater.

NPR? Big government.

PBS? Big government.

Rendition and torture? Not so much. Belongs in a parenthetical.

The ideological split is not between Democrats and Republicans. They are wings of the Washington, D.C. Nationalist Party. The Democrats are the emotionalist wing, the Republicans are the rationalist wing, but the motto of both wings is "We're from Washington, and we're here to help!"

1999 wasn't that long ago. We had a surplus.

Funded by a bubble.

The ideological split is mostly the result of opportunism by Tea Party commentators/legislators ...

The Tea Party is one public face of the decentralist sentiment that opposes the Washington, D.C. Nationalist Party. By their very nature decentralists do not organize national movements like the Tea Party until the situation is completely out of hand (as with the Regan Revolution). They give the centralists a real thrashing, spend a few years chainsawing the worst crap out of the government, then go back home. The centralists then start rebuilding power for the next showdown in another 30 years.

Yes, I know that one party talks about cuts a lot and the other party talks about spending a lot, but what do they actually do?

Wars? Wars are expensive. Entitlements? Well, entitlement spending is also quite expensive. Neither party will be the first one to threaten social security. Neither party will be the one to threaten medicare. Sure, there will be lots of hand-waving and other forms of gesticulation, but no elected politician in their right mind will take a hatchet to the programs that benefit America's senior citizens. It's just not good politics in a nation with a rapid electoral cycle. (Who votes? Answer that question and you can usually go from there.)

Ideologies - they don't matter. Grandiose claims of some great idealogical divide are wonderful to hear (and great for motivating the base), but what is actually done in practice? Well, the answer is whatever gets you re-elected. Which tends to be lots of sound and lots of fury but very little in the way of action.

I would prefer that states that want more government involvement implement that at the state level. The states could then better compete as more people (and companies) would move to the states where they agreed more fully with the rest of the population.

If one looks at the US Constitution, it appears (IMO) most concerns were originally and explicitly intended to be left to the states, and reading Jefferson's writings it appears even more so. This has the added benefit that we can probably bring more transparency and accountability to state legislators because of the smaller network size.

As science and economics are showing us a mixture of father and mother turns out to work best, the political differences between Republicans and Democrats are shrinking every year. As a consequence, the parties feel it is necessary to distantiate themselves more and especially the Republicans have spent several decades creating a vast narrative around where their priorities lie. Unfortunately, this has led to big changes in voter's habbits and ideological perspectives.

Wealthy opportunists have helped promote and taken advantage of the narrative to push an agenda of lower taxes for the rich in return for lavish campaign funding. A group of people bought into the narrative too deeply and now think that the myths about taxes they heared over the years are the hard facts, and that Democrats have misguided beliefs. Supported by the wealthy opportunists, these people have taken control of the Republican party and its policies. This is a corruption that has taken many years to develop, but now runs deeply into the belief systems of voters and the wallets of politicians.

In my opinion, the establishment in Washington consisting of the bureaucracy and life-long politicians is generally pro-government and pro-spending. The Republicans pay a lot of lip service to small government, but it is only the Tea Party types like Ron Paul that actually fight for smaller government.

Makes you wonder if the real answer is to split up the US.

Happened plenty of times to other countries over ideology- though each half could stand to lose a lot, seeing as various capabilities and industries are not evenly spread across the nation.

s/million/trillion/g, s/bank/China/g and s/you/United States/g and you've got my take on the current situation. Lots of the rest of the world's economy is based on selling things to the United States; it's pretty much China's explicit strategy for growth. If the US goes to everyone in turn and says, "Hey remember that $50 billion I said I'd get you last week? Yeah...I can give you $10 million," there will be a lot of grumbling, and hopefully some restructuring in the long term, but they'll still take the deal. Where else are they going to go?

TL;DR US has a monopsyny on monkey shaped shower curtain rings.

These rates are so low because the fed is buying the bonds and treasuries are currently the safest place to park huge amounts of cash. The rates even go negative at times because US bonds are are safe place for cash. If the treasury starts defaulting on its debts, that will change very quickly. Not only that but the status of the USD will change very quickly.

http://en.wikipedia.org/wiki/List_of_countries_by_current_ac...

The current account relates to the balance of trade[1], ie: the amount of good and services purchased from overseas vs sold overseas. The US Debt is money borrowed by the US Goverment[2], which isn't really related to trade directly at all.

There is a Wikipedia article that lists the different types of deficits: http://en.wikipedia.org/wiki/Deficit. The current debate in the US is over deficit budgets, whereas a Trade Deficit is a different problem,

[1] http://en.wikipedia.org/wiki/Balance_of_payments

[2] http://en.wikipedia.org/wiki/United_States_public_debt

Contrast that with stocks, where anybody can be an analyst and issue a rating, and where there is no mechanical, legalistic system of downgrades and upgrades.

The feds created the bond ratings agency oligopoly to "protect investors", but I'd argue we'd be better served by true ratings competition and more due diligence by investors.

I'm confused. Surely if I decided to set up my own bond rating agency nobody could stop me?

The catch is that the biggest rating agencies accept payments by the company issuing the bond. What happens is that Bank of Insanity gives Moody's a check for $500k to rate their super-senior diseased livestock bond. Moody's then says "at least 5% of the cows will probably survive, and $500k is a lot of money, so this bond is investment grade!"

That's why things work out so poorly.

Nobody can stop you, but nobody can legally use your ratings in regulatory filings.

I think this statement is a little stronger than is accurate. For a time I was on the career path of a stock analyst, and before my name could be on any notes urging investors to buy or sell, I had to take and pass a number of licensing tests: Series 7, 63, 86, and 87. These tests were mandated and run by FINRA, as ordered by the SEC.

So not just "anybody" can issue a rating.

However, I understand your larger message that there aren't larger legal implications surrounding your rating; other than simple anti- market manipulation type things.

The bond raters do still add some value by evaluating new issues or thinly traded securities. In those cases the markets don't give us useful information.

Your point does show though how ridiculous the current situation is. A country that is up to its eyeballs in debt really should not be the measuring stick.

That was Vlad's point. The US debt is, for the time being, 'too big to fail' in the sense that things like oil is priced in dollars. So almost by definition, the US debt is AAA and everything else is the same or less risky than that. (Talking strictly about soverign debt here, corporate debt is a different kettle of fish)

"Your point does show though how ridiculous the current situation is. A country that is up to its eyeballs in debt really should not be the measuring stick."

This seems to be a common misperception, which is where our 'eyeballs' are, relative to the amount of debt we are carrying as a country. Compared to the GDP and size of the economy, we're not in bad shape at all. Further, even at the anemic growth rates of 2%, if the Government cut nothing, which is to say kept the same budget this year (in terms of dollar expenditure) as they had last year (basically actually made the budgeting process 'net zero' so any new spending was matched by an equivalent cut) the country would be running a surplus in slightly more than 15 years. With 3 trillion in current revenue, 2% growth compounded over 15 years gets us to 4 trillion in annual revenue. Even running a half trillion dollar defict we 'win' by not spending any more. But it does depend on us having the discipline to do that.

The US defaulting doesn't mean all the bonds disappear. It doesn't mean nobody gets any of their money. It means the US doesn't fully meet its contractual obligations.

Scale this back: You only pay half of your mortgage payment one month. That means you're in default. Does your obligation disappear? No.

Were the US to default, the important questions are "By how much?" and "How long will it take to fix this?". Only once those questions are answered can you begin to answer the question of what other entities' debt ratings should be.

EDIT: Not all bonds would go into default at once, either. The US could pay some in full and not others, and could pick and choose which got paid how much. Country X that only has a limited amount of US debt might get shafted, while country Y that depends heavily on US bonds gets paid in full. What's the actual consequence there? Not much. Country X is mildly inconvenienced, Country Y has no problems.

This is way more complicated than 2+2=4.

Those in the know would describe the ratings agencies as "brain-dead", the lowest on the totem pole on Wall Street...traders who made money would game the credit ratings scores so S&P and Moods would rate the junk they were peddling AAA. A modern form of alchemy - turning junk into investment gold.

For a nice, easy-to-read account of those who made a fortune from the mortgage market collapse that tells you how exactly the ratings agencies were played for fools: The Big Short, by Michael Lewis (of Liar's Poker fame)

forecasters who forecast "sunny" paid handsomely, while forecasters who forecast "fog" aren't paid at all - what would be accuracy of a given forecast for London from these forecasters?

More apt would be if the weather forecaster wouldn't be paid for forecasting 'dreary, drab, grey, occasional pathetic rain, etc'. Which would be most of the UK summer...

do you really think that the US Treasury buys the rating like mortgage bond junk issuers?

http://en.wikipedia.org/wiki/Bond_credit_rating#Criticism

"Starting in the early 1970s, the "Big Three" ratings agencies (S&P, Moody's, and Fitch) began to receive payment for their work by the securities issuers for whom they issue those ratings, which has led to charges that these ratings agencies can no longer always be impartial when issuing ratings for those securities issuers."

Over the last 15 years or so, you could have made a lot of money with an investment strategy of "bet against S&P".

Coming from the east coast I trust the forecast less than just looking out the window. It's just too inaccurate.

When you look out the window and see that the US is still the healthiest big developed economy out there, what do you do? Do you trust your own eyes or the ratings agency?

Also Japan has far higher debt levels than the US, and it has an significantly more aging population, negative growth in population and is in more trouble than the US. However Japan is currently a safe haven from the US? Who decided that Japan is a safe haven? If the Japanese government had to pay much higher interest rates it would be in a lot of trouble, but at least it too can print it's own money.

"The United States has unmatched access to financing, meaning that the U.S. government can support higher debt levels than other governments."

"We think it's safe to lend them money, because they can borrow lots of money."

I would guess it's mostly the evolving European situation that's throwing us headlong into the abyss, with a hefty serving of realizing the USA is run by clowns who are utterly incapable of addressing any important problems. Note that this is beyond simple "politicians are teh stupid," which applies in any country, but in the USA particularly. Europe's facing serious problems, but that's because they're burdened with very tough choices as a result of badly thought out institutions from the 1990s. The USA faces very easy choices, but we're facing serious problems because... well, we want to? Because we have a dysfunctional government? Who knows. Regardless, it's an unforced error.

http://brontecapital.blogspot.com/2011/08/who-has-got-margin...

Was money lost? Sure -- but not last week or today -- rather, on the day the individual investor bought into these markets.

Anecdotically, I made a few nice profits with Bitcoins back in May/June when they were all the rage -- but I never ever confused them with physical wealth, I knew the nature of my gamble and I timed my exit -- not perfectly, but good enough to convert this "digital profit" or "paper profit" back into "physical goods". I'm not a full-time trader or gambler and I believe in investing my time more productively, but at the same time, sometimes it's fun to play money games. Too bad so many people on a world-wide scale believe it's a smart idea for their retirement estate to "take on debt to 'invest' in others' debts". This has been going on for a long time but it's not especially sustainable or otherwise inspiring -- especially since the debts are now backed by the children of your children. Think I'm off-topic by now? Think again!

That said, by "physical wealth" indeed I didn't really mean paper currency or receipts for commerce and I mentioned this mistakenly to "soften my message" for those purely and fully entangled in the paper world of yesteryear.

Agreed!

"purchase gold, " -- disagree:

You're right on all counts but you're simply expressing my point more "extremely" than even I did myself... certainly, every trade of physical or digital goods is a subjective value judgment of both parties involved. In fact, stocks are a lot more "solid" as an "investment" in my book than pure debt and bonds and "financial vehicles" etc. But then, another question is how many of "working peoples' savings" should be entrusted to the ever-swinging daily judgments of full-time traders and speculators, 'wealth advisors', 'funds and trusts' that always chase yesterday's bubble and collect their commissions one way or the other. If capital goes into real estate, surely enough new condos spring up in Florida and Bangkok. If capital chases dot.coms, new dot.coms get created left and right. Tulips can be grown at will, too! Certainly, paper wealth can be multiplied indefinitely in nominal terms, but not in "real terms". The question then is, what are "real" terms? Well what happens when capital, tired of all the bubbles, runs into Bitcoins? They cannot be duplicated easily but boy can they be hacked. Bonds? Safe to bondage the tax-payers of 2030, today, is it? Ultimately, savings and holdings that are not "for-play money" will have to return to seeking protection in stuff that cannot be hacked by smart script kids or replicated and duplicated at will or by 'economic emergency laws' -- savings will at some point no longer be entrusted to better-dressed Madoffs -- they will have to seek assets with a long history book of storing wealth generated by productive past work well into the future for reference. That could be Mona Lisas but there's only one of them. Or that could be any other tangible, non-hackable, fungible, liquid physical good that has no competing industrial use, most importantly cannot be produced or increased in quantity at will and has been valued consistently by the kings and millions of "normal people" around the world for millenia well into the present. Sure, the "currency prices" of such assets may well fluctuate but the mere storage of savings function might well out-perform today's vehicles and instruments over the long term. Plus, as you already noted, currency does not reflect "intrinsic" value either so these nominal fluctuations are a laughing matter at best :)

But wait, couldn't this be said of stocks either? Exactly! Long-term savers will know this and not panic much. But those who talk about "wealth that evaporated" -- they were likely trading and speculating for a paper profit next week or month, not for "value-investing" or "storing savings". So both you and me shrug at them and say, "look again, no real wealth did evaporate! No factory collapsed, no car or house mysteriously disappeared..."

Do you believe that gold has tripled its intrinsic value over the past 5 years? Or that virtually all other assets have lost 2/3 of their intrinsic value during that same time frame? Gold has very little intrinsic value (to my mind, at least), especially before the electronics revolution, and it is as subject to the whims of investors as any other asset. If you buy gold at $1700 today and it drops back to $500 in five years, you'll see the same loss as if you bought $1700 of Google and it dropped to $500. While I agree that gold cannot be multiplied indefinitely, the same applies to many (indeed most) other assets. The price of homes has no fixed limit, but neither does the price of gold. This is especially true when the market sells gold futures and such that are not necessarily backed by physical gold.

> But wait, couldn't this be said of stocks either? Exactly! Long-term savers will know this and not panic much. But those who talk about "wealth that evaporated" -- they were likely trading and speculating for a paper profit next week or month, not for "value-investing" or "storing savings". So both you and me shrug at them and say, "look again, no real wealth did evaporate! No factory collapsed, no car or house mysteriously disappeared..."

On this part, I agree. True wealth doesn't evaporate when the market drops. (That's not to say that a drop in the market can't hurt long-term wealth production; i.e. economic growth vs recession.) As you said, houses didn't fall down. Nothing changed except some paper values.

But then, anyone who understands how markets work should understand that wealth is not truly created or destroyed by trading in the markets. It's just exchanges of wealth. If you've got a share of stock and sell it to me for $100, the same wealth exists after the trade. If I turn around and sell that stock to someone else for $50, the same wealth still exists. The paper value of that stock might change, but no actual dollars disappeared as a result of the transactions. I lost money, but the economy did not. (I do believe that stock and commodities exchanges can themselves be real wealth, though, in the same way a village market is wealth.)

Also, in many ways, Europe and Japan are in even worse shape, and the recent sell-off is probably more driven by European events.

Of course, S&P is really just a bunch of corrupt idiots, so either way you shouldn't pay much attention to them.

Slightly increasing revenue in an environment where increasing revenue is simply seen as a reason to spend 117% of the revenue increase won't prevent debt downgrades.http://online.wsj.com/article/SB1000142405274870464860457562...

It's not a revenue problem, it's a spending-more-than-we-have-revenue problem. And I don't mean that it must be fixed with cuts only, but the idea that we can tax our way out of this problem is basically purely theoretical. With the real politicians we have, it won't work, unless after we fix the root spending problem.

it's a spending-more-than-we-have-revenue problem

Which can be fixed either by increasing revenue or decreasing spending.

Raising taxes increases revenue. Pair Clinton-era tax rates with some very modest reforms to Social Security and some much more significant ones to Medicare, and we'd honestly be sitting pretty well.

And even if we did nothing, even now the biggest economic issue by far is jobs, not projected deficits in 2040.

Edited: upvoted you, because I can't conceive of why others should have downvoted you...

That's actually not quite true. A truer statement would be that for a given constant level of spending deficit, it can be closed by either increasing revenue or decreasing spending. But you can't assume a constant level of deficit, because time progresses and politicians adjust based on their income and outflows. (Not necessarily in a good way, but they are looking.)

Try to put yourself more in a physics frame of mind than a political one. It's the difference between statics and dynamics. Solving the budget problem with a static snapshot of a dynamic process isn't going to work. With the track record that our politicians have, just handing them more money isn't going to solve the problem if they're just going to spend even more of it. A static-forces model of the political appropriations process fails to predict reality, the model where politicians dynamically increase their spending even more than revenue does historically fares better.

(... yes, I know it is odd to approach politics from the point of view of building models to predict reality and seeing which ones successfully, no sarcasm at all, I see hardly anyone take this approach. But there are in fact enough hard facts out there to have some success with this approach, if you can learn to take your science-trained sensibilities and look at the political world. Political science need not be an oxymoron, though I suspect an actual study of political science wouldn't look much like what is currently called that.)

It is fair to ask whether that's sustainable, as in the 2000s we saw our politicians take those projected surpluses and spend them on tax subsidies for the well-off. Which, indeed, is just what that model predicts. But that just speaks to the need to elect better politicians and create better institutions to act as an endogenous curb on unjustified spending.

It seems to me that reducing the deficit by 50% is damn good idea.

Part of the secret to my happiness is this: I permit myself to feel happy on days when my stock portfolio goes up, but not to feel sad on days when my stock portfolio goes down. In this particular case I'd much rather be happy than consistent.

Wealth is owning things that can make money, not things that are money or that were bought with money.

Wealth consists of all things that have value. Shares in a company are wealth. Dollars in your pocket are wealth. A house is wealth. A coal mine is wealth.

A lot of people live farther than walking distance away from work.

No, that's an asset. A car is wealth, and could be either an asset or a liability, depending on the car and what you do with it, but it's still wealth.

A magnifying glass and a $1B Bond is worth more than a $1B Bond, depending on the perceived stability of the economy's other banking institutions. When things get a bit less stable reserve ratios tighten up.