The Deficit

[ripdog]

It scares me. I feel like the USA is just a house of cards waiting to be blown over, for the proverbial straw that breaks our backs. I am particularly dismayed that our debt is being bought up by countries like China and Saudi Arabia, both countries that I don't like or trust. Are we selling out our children and grandchildren so that we can live high on the hog today? As of this afternoon, the deficit sits at over $7.7 Trillion and climbing. I'm not sure I can wrap my brain around a number that large. $77,000 billion. Nope, can't imagine how much that is either. $770,000 million. $7,700,000 thousand. ~$26,000 per American.

Could the Democrats scare the [censored] out of us in 2008 by mapping out the consequences (please assume that they wouldn't puss out like Kerry did in 2004 with the Gun Boat Veterans for Smearing People)? Please read the URL below:

Rep. Carolyn Maloney's Floor Statement on Increasing the Debt Limit (http://www.house.gov/maloney/issues/banking/debtlimitstatement.html)


Here's one from the other side of the aisle, that I think is BS, but you can tell me otherwise:

Economic Woes Begin at Home (http://www.house.gov/paul/tst/tst2003/tst110303.htm)


And here's on more from Lieberman (a bit long and semi-related):

Meeting the Offshore Outsourcing Challenge (http://lieberman.senate.gov/newsroom/release.cfm?id=221346)

[BCPVP]

[ QUOTE ]
As of this afternoon, the deficit sits at over $7.7 Trillion and climbing.

[/ QUOTE ]
This is the nat'l debt, not the deficit.

[ripdog]

oops. still scares me, though.

[kurto]

Just be glad we have fiscal conservatives in the White house. /images/graemlins/crazy.gif

[adios]

[ QUOTE ]
It scares me. I feel like the USA is just a house of cards waiting to be blown over, for the proverbial straw that breaks our backs. I am particularly dismayed that our debt is being bought up by countries like China and Saudi Arabia, both countries that I don't like or trust. Are we selling out our children and grandchildren so that we can live high on the hog today? As of this afternoon, the deficit sits at over $7.7 Trillion and climbing. I'm not sure I can wrap my brain around a number that large. $77,000 billion. Nope, can't imagine how much that is either. $770,000 million. $7,700,000 thousand. ~$26,000 per American.

Could the Democrats scare the [censored] out of us in 2008 by mapping out the consequences (please assume that they wouldn't puss out like Kerry did in 2004 with the Gun Boat Veterans for Smearing People)? Please read the URL below:

Rep. Carolyn Maloney's Floor Statement on Increasing the Debt Limit (http://www.house.gov/maloney/issues/banking/debtlimitstatement.html)

[/ QUOTE ]

This one was pure politics. As I've posted many times in the past, the Washington Post and the National Taxpayers Union estimated that Kerry proposals would have increased the deficit more than $200 billion above current levels. I've posted links to both the article and the report. There was this thing called a recession in 2000-2001 that led to decreased federal revenues. And if your going to talk about the tax cuts, check out the trend in job growth since the tax cuts were enacted. There's nothing that's noteworthy in the Congresswoman's perspective IMO.


[ QUOTE ]
Here's one from the other side of the aisle, that I think is BS, but you can tell me otherwise:

Economic Woes Begin at Home (http://www.house.gov/paul/tst/tst2003/tst110303.htm)

[/ QUOTE ]

This statement from the link is hilarious:

Economic Woes Begin at Home

Many in Washington are concerned about the loss of jobs in our nation’s manufacturing sector, but few seem to understand the role Federal Reserve currency manipulation plays in that loss. The economic problems currently facing this country are the direct result of a boom-and-bust cycle caused by inflationary Fed policies. An open debate on monetary issues therefore is long overdue.

During the Greespan tenure as Fed Chairman, the U.S. has undergone the longest economic expansion in it's history; the bond market has been in a 20 year bull market indicating Greenspan's success in his major mission which is price stability; and there have been 2 recessions in 18 years and the 2000-2001 recession was a very, very mild one. This is what he calls boom and bust? After reading the nonesense I quoted I didn't bother reading the rest.


[ QUOTE ]
And here's on more from Lieberman (a bit long and semi-related):

Meeting the Offshore Outsourcing Challenge (http://lieberman.senate.gov/newsroom/release.cfm?id=221346)

[/ QUOTE ]

I really like Senator Lieberman. This article is a well written, well thought out perspective IMO. From the article:

Fourth, our talent base is what ultimately sizes our economy, yet the number of U.S. graduates in engineering and physical science is dropping 1% a year. In China, 45% of all graduating students received their degree in engineering. In the United States, it’s only 5%. Education reforms are no longer a policy option for us. They are a necessity, from kindergarten through university diploma.

This indicates part of the reason that engineering work does get outsourced, there aren't enough people in the U.S. going into the engineering field which results in a void that has to be filled for innovation and investment which is the key element to economic growth.

[bholdr]

Personally, i feel that carrying a reasonable ammount of nationl debt is benificial to this country. it provides with a powerful tool for regulating the economy via intrest rates, etc, and 330 B odd in intrest a year is probably very slightly +EV

what is 'reasonable'? less than one year's GDP, of course, but we're nowhere near that yet. (GDP was 11 trillion last year, if i recall correctly) I'd like to see it at about half of what it is, however.

[QuadsOverQuads]

Fret not, my child. All we need do is pass a large enough tax cut to cause revenues to soar through the roof and thereby save us from the folly of our insane debt. Thus saith Saint Laffer, and thus saith Saint Reagan, so thus it must be. All hail the glories of the Holy Market.


q/q

[lehighguy]

Yes, it is a problem.

No, it won't be solved.

See how calmly I just said that. It's cause I know I can't change anything. And the people that can won't.

[tolbiny]

"330 B odd in intrest a year is probably very slightly +EV"

If that interest was going into US banks and being pumped back into our economy it would be good for us. However each year more of our debt is bought up by forgien banks/countries, and larger chunks of that 330b are going overseas.

[CCass]

I do not like deficit spending, which increases the national debt, and we should have balanced budgets every year.

However, the current debt level is the equivalent of a US household having an annual income of $110K, and total debt of $77K. Not that bad when you put it into perspective.

[ripdog]

[ QUOTE ]
Yes, it is a problem.

No, it won't be solved.

See how calmly I just said that. It's cause I know I can't change anything. And the people that can won't.

[/ QUOTE ]

Your response is precisely why people now refer the the United States as a "Once great nation". I agree that the people who can won't, but if everyone who felt as you and I do stood up and got angry as one, something would happen.

[ripdog]

[ QUOTE ]
"330 B odd in intrest a year is probably very slightly +EV"

If that interest was going into US banks and being pumped back into our economy it would be good for us. However each year more of our debt is bought up by forgien banks/countries, and larger chunks of that 330b are going overseas.

[/ QUOTE ]

This is precisely why I'm nervous. The folks buying up our debt do not have our best interest in mind when they do it.

[adios]

Considering that the U.S. could buy back most of the debt issued in the last few years (sell high, buy low) at lower prices why is this such a bad thing? Just curious.

[ripdog]

Responding one by one:

I don't care about what Kerry would have done. He lost and is a non-factor. I hate what Bush and Company are doing, and I really hate the media for being such wusses about reporting it. As far as checking out the trend in job growth since the tax cuts were enacted, I'm not sure I buy that as an explanation. I think the money could have done greater good if it were applied to education and lifting more people into the middle class, whatever that is.

The second article was a joke--pure political grandstanding.
I stopped reading when Mr. Paul said that the debt that China is buying up eventually has to come back to us. Like they're just going hand it back on a silver platter.

I liked the Lieberman article too. I think that we have to realize that we are competing against well over 1 Billion Chinese and close to a Billion Indians. If we don't invest heavily in our education as Lieberman noted, we're in for a serious ass kicking. All we get from these a-holes is lip service about the importance of education.

Thanks for the response.

[ripdog]

[ QUOTE ]
Considering that the U.S. could buy back most of the debt issued in the last few years (sell high, buy low) at lower prices why is this such a bad thing? Just curious.

[/ QUOTE ]

That would kick ass. Except that I don't see it happening. Is this a strategy that Bush is ready to employ? Nah, it's more pipe dreams...

[adios]

Corporations do it all the time. Actually as the economy grows and the deficit is reduced, the deficit becomes less of a concern. I also point out that the current amount of deficit spending when normalized for GDP isn't anywhere close to a record. I'd also point out that one of the reasons that foreign buyers buy U.S. treasuries is to inhibit their currencies from appreciating more against the U.S $. If they stop intervening on behalf of their U.S. treauries will be worth even less. If you look at the federal budget outlays for interest rate payments on U.S. debt, you'll see that in the first years of the Bush administration these payments dropped a lot even though the deficit rose.

[Arnfinn Madsen]

Hi,
Large deficit is no problem as long as GDP is substantially growing, as it will erode with GDP-growth. The US economy is driven by consumption and such the Adminstration's philosophy is that as long as it keeps the consumption growing the deficit is not so dangerous, and this is true.

Could it pose a problem?
It poses a problem if treasury bonds starts to lose the 100% credibility they have now. Then lenders will demand higher interest rates and this will often coincide with a recession. Then you enter a bad cycle that is very difficult to get out of (has happened to a lot of countries many times).

So basically the US economy is a bubble since government spending is higher than government income and imports higher than exports but still the chance of it bursting soon is small.

[Felix_Nietsche]

/images/graemlins/smile.gif

[QuadsOverQuads]

[ QUOTE ]
The US economy is driven by consumption and such the Adminstration's philosophy is that as long as it keeps the consumption growing the deficit is not so dangerous, and this is true.

[/ QUOTE ]

And growth in consumption, in turn, must be fueled by growth in (1) wages, (2) savings or (3) consumer debt.

Guess which one is fueling it right now.


q/q

[adios]

[ QUOTE ]
The US economy is driven by consumption and such ...

[/ QUOTE ]

Which economy isn't driven by consumption?

[lehighguy]

Other countries derive a much smaller portion of thier GDP from consumption. For instance, our creditors.

If you have a trade surplus that boosts GDP. If you invest your money in long-term capital that boosts GDP. Ala the simple equation:

GDP = Consumption + Investment + Net Exports + Government Spending

Our country has a high C. Others have high I and NXs.

[adios]

All of the components of the equation for GDP are driven by consumption.

Production == Consumption which is what the formula means.

To state that an economy is driven by consumption is stating that

1 == 1.

An economy may be driven primarily by the consumption of it's trading partners but it is still driven by consumption.

[WillMagic]

First off, you need to make a distinction between the budget deficit and debt. The national debt is 7.7 trillion, the deficit is ~400 billion.

But in the end, both these numbers have no meaning when taken alone...or even divided by the number of people in this country. Debt is only relevant when compared to income...for example, If I were to say I had a million in debt...you would be like "Wow, that's a lot of debt," but if my income was 7 million/year, suddenly a million in debt is nothing to worry about.

Well, the income of the country is the GDP, and the GDP is massive. Plus, it's not like China and whoever get to hold on to our debt forever...they get to hold on to it for however long the bonds are for, and then pay those bonds off and issue new bonds to replace the debt.

Also, can you name a single economic crisis that has ever been caused by exceessive U.S. deficit spending?

I can't.

Will

[jokerswild]

that's because it's the largest theft in the history of the USA. 2 trillion in T-Bills that the average taxpayer now owes to the wealthy. That's the net effect of your Fuhrer's rob the country blind policies.

I bet that you have pictures on the wall of your beloved stock swindling drunk. His new book, "My Struggle" , is oming out soon.In his mind, he didn't plaigiarize the title. He wrote it the same way he wrote his college papers that received better than a c-.

[jokerswild]

too bad about your marriage license being thrown out. Keep voting log cabin! LOL!

[WillMagic]

[ QUOTE ]
that's because it's the largest theft in the history of the USA. 2 trillion in T-Bills that the average taxpayer now owes to the wealthy. That's the net effect of your Fuhrer's rob the country blind policies.

I bet that you have pictures on the wall of your beloved stock swindling drunk. His new book, "My Struggle" , is oming out soon.In his mind, he didn't plaigiarize the title. He wrote it the same way he wrote his college papers that received better than a c-.

[/ QUOTE ]

This is the problem with the democratic party. Half of the party is completely focused on vigilantly defending the status quo. The other half is so full of insane anger that it can't compose a reasoned argument. And neither half would understand a sound economic argument if it smacked them in the face.

Will

[lehighguy]

It is useful to seperate temporary consumption, such as crap you buy and throw away in a year, versus long term investments, such as plant, property, and equipment. In this country we have more the the former then the latter.

[Arnfinn Madsen]

[ QUOTE ]
[ QUOTE ]
The US economy is driven by consumption and such ...

[/ QUOTE ]

Which economy isn't driven by consumption?

[/ QUOTE ]

I should have been more clear and named it private domestic consumption.

Quite a few economies are driven by other factors actually. To simplify, let's say that GDP-growth comes from increase in private consumption, government spending, investment or net exports. US stimulates private consumption to avoid recession, other countries (i.e. Northern Europe) typically increases government spending to do this, many choose to focus on stimulating investment (i.e. SouthEastern Asia), others manipulate the currency to stimulate net exports (several developing countries).

[frizzfreeling]

However, the current debt level is the equivalent of a US household having an annual income of $110K, and total debt of $77K. Not that bad when you put it into perspective.

You are mixing up GDP with government income, which is somewhere in the area of 2.5 trillion, not 11 trillion. This means our government debt is around three times our government anual income. Thats like having a $25k job, with most going to living expenses, AND having a debt load of $77k on top of that.

We are in a very dangerous position with debt this high. If interest rates were to rise to the level of the late 70's and early 80's, our government would likely go bankrupt, even with a tax hike to cover debt cost. This is because a major tax hike would cause a recession, which in turn would create less revenue for the government. Simply saying that the inflation/interest rates of 25 years ago will not happen again because of better understanding of economics, the Greenspans of the world, etcetera, is short sighted at best.

Our government no longer has the borrowing capacity to handle any kind of major crisis brought apon us. A global conflict like WWII would sink us in a heartbeat. The Iraq war, small peanuts compared to WWII or even Vietnam, is already straining our finances. On the domestic front, a major recession can no longer be combated with government spending either. No more "new deal" or public works programs to get the masses back to work.

Another fact people miss is that if our government goes bankrupt, or EVEN looks in trouble, the value of the dollar will plummet. The same thing happened in Germany in the 1920's and is happening in some countries today. Imagine trying to buy a loaf of bread with a weelbarrow full of $100 bills. All of a sudden, everyone's life savings is worthless and millions go hungry.

Most people dont realize the magnitude of the consequences we are facing for having such a massive debt load. They have the mindset of "it cant happen here because this is America".

Just my 2c worth. Wont be responding further.

[Zoelef]

Back around 2000, Donald Trump (of all people) was campaigining to impose a one-time luxury tax of 14.25% on all assessed wealth over $10,000,000(?) to directly pay off all our debt (at the time).

I wouldn't vote him to his local Board of Education, but I did like this idea.

[WillMagic]

You actually weren't making a bad argument until right here...

[ QUOTE ]
If interest rates were to rise to the level of the late 70's and early 80's, our government would likely go bankrupt

[/ QUOTE ]

I'm sorry. That's patently ridiculous. First off, in World War II we had a national debt in the neighborhood of 120% of GDP. Did a financial crisis occur? Not quite. Rather, one of the greatest periods growth in the history of our country followed.

Right now, the debt is about 60-70% of GDP. We are nowhere near the level of borrowing we were at in WWII. And even if we hit that level of borrowing, we have the Federal Reserve to prevent hyperinflation.

But even beyond that...saying that the government will go bankrupt is just flat out...wrong. I could see recession, I could see periods of inflation...but saying we will go bankrupt? The empirical evidence is dead-set against that. And comparing the U.S. economic situation to post-war Germany's economic situation is also patently ridiculous....we have a Federal Reserve and an infrastructure that isn't bombed to hell along with a consistently strong economy.

[ QUOTE ]
Our government no longer has the borrowing capacity to handle any kind of major crisis brought apon us. A global conflict like WWII would sink us in a heartbeat. The Iraq war, small peanuts compared to WWII or even Vietnam, is already straining our finances. On the domestic front, a major recession can no longer be combated with government spending either. No more "new deal" or public works programs to get the masses back to work.

[/ QUOTE ]

First off, you have it the wrong way around. RELATIVE TO OUR GDP, Iraq/Vietnam were small peanuts in comparison to WWII. Again, debt in terms of dollars is simply not relevant...it is only relevant as a percentage of GDP. The costs of WWII in comparison to GDP were MASSIVE in comparison to the Iraq war. And on what exactly are you basing this idea that we can't borrow anymore?

Oh, and by the way, I'm sure you are a big FDR fan, but the New Deal wasn't exactly great at getting us out of the depression. The Social Security Act probably extended the depression by a good 3-4 years. "Gee, unemployment is at a record high! I guess we should increase the tax on employers to make them even less inclined to hire people!"

[Dead]

[ QUOTE ]
Back around 2000, Donald Trump (of all people) was campaigining to impose a one-time luxury tax of 14.25% on all assessed wealth over $10,000,000(?) to directly pay off all our debt (at the time).

I wouldn't vote him to his local Board of Education, but I did like this idea.

[/ QUOTE ]

That's a stupid and unfair idea.

The wealth has already been taxed once. Taxing it again is wrong. If the money generates interest, then you can tax that, but taxing the principal is wrong.

[lehighguy]

Why is taxing wealth generation right but not taxing wealth that is just sitting there wrong. Your basically just penalizing people that create wealth.

[natedogg]

He's saying that to tax BOTH the generation of the wealth AND the mere possession of the already-taxed-generated wealth would be wrong.

natedogg

[Dead]

[ QUOTE ]
He's saying that to tax BOTH the generation of the wealth AND the mere possession of the already-taxed-generated wealth would be wrong.

natedogg

[/ QUOTE ]

Bingo. Maybe it's my libertarian streak showing, but I just have a problem with taxing money that has already been taxed.

[Hoi Polloi]

[ QUOTE ]
And if your going to talk about the tax cuts, check out the trend in job growth since the tax cuts were enacted.

[/ QUOTE ]

And your point is that the economy has not come anywhere near the predictions coming out of the White House concerning how many jobs would result from the tax cuts--short at least 5 million now? Or are you referring to the fact that month after month the economy is rarely creating enough jobs to keep up with new workers entering the workforce (~150k per month). Or are you referring to the relative steadiness of the unemployment figures which does not count folks who give up looking for work? Or are you looking at the income gap that measures the difference between the income of the jobs lost versus the income of the jobs being created--it's a negative number? Or are you pointing to the ever growing period of unemployment, that is, how long it takes a laid off worker to find a new job? Or are you referring to the fact that Mr. Bush was the first President since Herbert Hoover to preside over 4 years of negative job growth--less jobs in 1/2005 than in 1/2005.

Or are you just looking at the GOP talking points? Not our fault. Never make mistakes. 9/11, WOT, gays want your guns and bibles, the tax cuts are working, Clinton's fault. What were we talking about?

[jaxmike]

[ QUOTE ]
That's a stupid and unfair idea.

The wealth has already been taxed once. Taxing it again is wrong. If the money generates interest, then you can tax that, but taxing the principal is wrong.

[/ QUOTE ]

Wow. I am proud of you Dead. Keep talking like that, and they will kick you out of the club.

[Scuba Chuck]

Re: Rep Carolyn Maloney's comments:

Her comments regarding the economy are dead on. Unfortuantely, she squarely lays the blame on republicans for two reasons. One, she is partly correct (although I view the real problem as the total body politic, not just one party) in blaming the republicans, as GW has far different views on budget balancing figures than the previous democratic president. Two, she obviously has a political agenda, which is why I despise politics so much.

The quote from the Gale and Orszag paper:

[ QUOTE ]
“ The United States has never before experienced such large long-term fiscal imbalances. Sustained chronic deficits will gradually reduce national income and living standards, and carry with them the risk of a fiscal crisis.”

[/ QUOTE ]

...this comment carries a lot of weight with many of the respected economists of the world, as it likely carries the truth.

Unfortunately, dear OP, the problem is so entrenched in our political system, that there's nothing that will be done to prevent any sort of disasters, they can only be fixed once they occur. F.ing politics. If you follow the breadcrumbs, perhaps you'll begin to notice that a lot of these problems stem from campaign financing concerns. But, alas, most Americans fail to see how these two items can be related, nor willing to discuss a REAL problem.

[adios]

[ QUOTE ]
[ QUOTE ]
And if your going to talk about the tax cuts, check out the trend in job growth since the tax cuts were enacted.

[/ QUOTE ]

And your point is that the economy has not come anywhere near the predictions coming out of the White House concerning how many jobs would result from the tax cuts--short at least 5 million now?

[/ QUOTE ]


My goodness why don't you post something that actually has some data in it instead of pulling numbers out of your ass.

[ QUOTE ]
Or are you referring to the fact that month after month the economy is rarely creating enough jobs to keep up with new workers entering the workforce (~150k per month).

[/ QUOTE ]

Over the past year job growth in the economy has been greater than this 150,000 number and what you've brought up is a non sequiter. The usual tactic around here. I stated that check the trend in job growth since the tax cuts. You haven't offered one piece of evidence to refute what I stated.

[ QUOTE ]
Or are you referring to the relative steadiness of the unemployment figures which does not count folks who give up looking for work?

[/ QUOTE ]

People who aren't looking for work shouldn't be counted in determining the unemployment rate.

[ QUOTE ]
Or are you looking at the income gap that measures the difference between the income of the jobs lost versus the income of the jobs being created--it's a negative number?

[/ QUOTE ]

Again a non sequiter to what I posted about. To comment intelligently about this you need to post the data you're referring to. How much labor is paid is a function of how much they're worth to their employers. The tax cuts implemented spurred employment growth by increasing the amount of disposable income that tax payers have as well as providing businesses incentives to make more investments.

[ QUOTE ]
Or are you pointing to the ever growing period of unemployment, that is, how long it takes a laid off worker to find a new job?

[/ QUOTE ]

Yet another non sequiter to what I posted. Again this is a function of what the skills an employer needs vs. what a laid off worker has. Please post your numbers and a source to discuss this further.

[ QUOTE ]
Or are you referring to the fact that Mr. Bush was the first President since Herbert Hoover to preside over 4 years of negative job growth--less jobs in 1/2005 than in 1/2005.

[/ QUOTE ]

Actually this is patently false.


[ QUOTE ]
Or are you just looking at the GOP talking points?

[/ QUOTE ]

No.

[ QUOTE ]
Not our fault. Never make mistakes. 9/11, WOT, gays want your guns and bibles, the tax cuts are working, Clinton's fault. What were we talking about?

[/ QUOTE ]

Yet another incoherent, ignorant tirade. I haven't read the other responses to my posts in this thread as I'll do that later. These days I'm reluctant to point out the silly crap people post but somethings I just can't ignore them.

[adios]

[ QUOTE ]
I should have been more clear and named it private domestic consumption.

[/ QUOTE ]

Yep you should have been. It may seem like I'm nit picking but I read so much silly crap on this forum that I wanted to make sure that it was understood that your original statement needed clarification. Now that I understand you simply made a poor choice of words (I'm guitly at times as well) I understand that you're making a legitimate, consistent argument. Not one that I necessarily agree with but one that holds together more or less.

[adios]

What were your grades at Harvard and Yale?

[hetron]

[ QUOTE ]
[ QUOTE ]
that's because it's the largest theft in the history of the USA. 2 trillion in T-Bills that the average taxpayer now owes to the wealthy. That's the net effect of your Fuhrer's rob the country blind policies.

I bet that you have pictures on the wall of your beloved stock swindling drunk. His new book, "My Struggle" , is oming out soon.In his mind, he didn't plaigiarize the title. He wrote it the same way he wrote his college papers that received better than a c-.

[/ QUOTE ]

This is the problem with the democratic party. Half of the party is completely focused on vigilantly defending the status quo. The other half is so full of insane anger that it can't compose a reasoned argument. And neither half would understand a sound economic argument if it smacked them in the face.

Will

[/ QUOTE ]

LOL...and as you can see the Republican Party is filled with folks who understand sound economic arguments.