Bush's deficits and the coming crunch.

[The Mad Viking]

Originally posted by Lawrence of Arabia


import. developing countries would benefit greatly with no farm subsidies on cash crops and increasing populations in the first world.

Not clear what you mean. No farm subsidies on US crops, or no farm subsidies on developing countries' crops?

[Kuciwalker]

No subsidies on either.

[Whoha]

Originally posted by Kontiki


???

You can't tamper with the money supply and not effect inflation.

Originally posted by KrazyHorse


Are you an Argie by any chance?

its sarcasm, I hope.

[KrazyHorse]

I don't think so.

[Ted Striker]

Originally posted by Oerdin
One of the few Bush policies I can support is making it easier for illegals to gain legal status. It simply isn't good for the nation to have 10-13 million people who exist off the legal books.

I agree wholeheartedly.

It's the one thing Bush is doing right.


Unfortunatley his own people might not support him on this one.

[Lawrence of Arabia]

Not clear what you mean. No farm subsidies on US crops, or no farm subsidies on developing countries' crops?

no farm subsidies on US crops of course. (the other is not an issue because they can produce it for cheaper anyways)

[Vanguard]

No. We pay interest on our debt.

If we simply stop adding to the debt then in 100 years our debt will be, oh, I don't know, let's say five times our GDP? Something like that.

Don't get me wrong here. I don't actually think that our current debt will grow to five times GDP in a century. My purpose here was to expose the assumptions behind phrases such as "simply stop adding to the debt".

In reality, of course, our current debt will be gone in fifty years ---- one way or another. However the fact that debts "disappear" with time does not mean that somebody will not be paying down that debt. Huge debt payments will be made by the US during this entire period. Those payments, plus interest, will, in reality, pay off the entire US debt over the next fifty years(either that or we will default). What will remain after those payments may indeed be "nothing". But the payments will still be made. And they are big payments.

So what does this mean? Well, it means that you will be paying down the national debt instead of Republicans. The whole reason we ran up most of this debt was to give tax breaks to rich Republicans. They get that money up front and can invest it.

You on the other hand will have to either: a. Pay the higher taxes in the future needed to maintain our debt service; or b. lose income in the future due to the drag on the economy caused by our high debt payments.

Rich people however can avoid either the higher taxes or the consequence of debt to the economy . They get their money now, in the form of tax breaks on money they have invested. They can easily "cycle" all their money through these tax breaks to ensure that they never have to pay more than 15% tax on all of it. Whereas you will have to pay 35% or more on all future earnings. Either that or you will have greatly reduced future earnings due to a debt ridden economy with very high gas prices (due to the collapsing value of the dollar).

Of course, if the rich invest in the US economy with their extra money this would be somewhat less important. But, by and large, they won't. That would be stupid. The US has a huge debt to pay down over the next fifty years. If you invest in the US now, then the money you earn here will be taxed heavily in the future to pay down the debt. Or, alternately, your return on investment will be reduced by the effect of the debt service on the economy. Either way you have a large incentive to invest elsewhere. Or to speculate against those people who are investing in the US economy.

Running up debts to give tax breaks has only one purpose: to transfer wealth from the general economy to people who have lots of money. It is nothing more or less than theft on a grand scale. You've been conned. You should be angry about it, as I am.

[DanS]

I note that, according to the Bureau of Economic Analysis, the US economy is growing a 7.2% annualized nominal rate.

That nominal rate will accomodate a rather large deficit.

[KrazyHorse]

Now now. You are ignoring the fact that the US financial position is in decline, Dan. It may be a sustainable decline, but it's still a decline. When combined with the general indebtedness of the average American consumer it's even more worrying. You folks seem to have a propensity to consume more than you earn.

BTW, NIIP of the US just reached something like -25% GDP (from being historically positive all the way through to the mid 80s)...

[DanS]

A decline in the US financial position does not necessarily indicate bad things. The way you are presenting it is biased toward the negative.

I think a good argument can be made that the decline was used to do something good for economy. We have moved people from working in manufacturing to areas in which the United States is comparatively advantaged. Others are financing this transition.

As that process winds down, our trade balance probably will come back to something more resembling balance.

[KrazyHorse]

Bull****.

Other first world economies managed to make that transition without seeing the same calamitous decline in financial position.

Overconsumption is all it payed for.

[DanS]

No major economies have completed the transition. The US is the farthest along by a good piece.

[KrazyHorse]

"completed"?

Hah.

Everybody took a big giant bite out of that **** sandwich. Some have failed the challenge (Germany, Japan, US) while others haven't.

That piper's going to have to be paid, Dan...

[Colonâ„¢]

Originally posted by DanS
A decline in the US financial position does not necessarily indicate bad things. The way you are presenting it is biased toward the negative.

I think a good argument can be made that the decline was used to do something good for economy. We have moved people from working in manufacturing to areas in which the United States is comparatively advantaged. Others are financing this transition.

As that process winds down, our trade balance probably will come back to something more resembling balance.

As it stands now, the corporate sector is a net provider of capital, while both the gov't and household sectors are net borrowers. I really don't see how any transition from would cause the corporate sector's traditional deficit to flip to a surplus. If anything a costly transition would cause business to require more capital, not less. No?

[KrazyHorse]

Good point.