The Deficit

[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.