US Debt

[crazyyaya 4]

Withing a couple of years of US national debt could hit a enourmous landmark position of TEN TRILLION DOLLARS

This debt is so outstanding that debt clocks are becoming obosete becuase they cannot hold enought digits! 

(shown is a chart of the US debt as a pertencage of its GDP, not the auctual debt)

Your thoughts...

[coolotter88 2]

quick, raise the debt ceiling before the whole government closes down.

[Micah 16]

(This thread will be closely watched)

Well, I always knew the debt was in the trillions and Reagon faced the same exact thing during his term (not as high as under Bush), but it eventually came down. I thought the debt was decreasing these past few months (years?). Though, I'm probably wrong since I don't analyze the national debt like I do with stocks and private economy.

[Pixelrage 34]

a remedy can begin by paying all professional athletes a maximum of $15,000/year

[Voar Tok 4]

Originally posted by: Pixelrage a remedy can begin by paying all professional athletes a maximum of $15,000/year quote>

Out of curiousity, what would pay limits for anyone that didn't work for the government accomplish?

[Godzillaman 21]

maybe its because bush spends probably half his money making the doomsday army and spends the rest on america, hmmmm... seems fare, half for dominating the world, half for my country! someone tell me the budget and i might change my opinion.

[PathE 0]

One thing that could help is destroy the whole welfare program. Look at Hong Kong. Go, look at it. No welfare, and a really efficient city, also the fact that the Chinese govt. doesn't screw with its economy like we do our own.

[spa 970]

This is the big ticking time bomb in the US and world economy. Eventually debts do have to be paid and outstanding debts only grow with interest payments. To take an example from North of the border, in the 1990s Canada was on the verge of bankruptcy. The Wall Street journal mused the country might be on its way to becoming an honourary member of the third world (a tad of an overstatement but some validity given that the government had been spending beyond its means for 30 years!). To avoid disaster the government had to drastically cut programs and raise taxes. That combined with increased economic growth in the late 1990s carried the country through the crisis. Amazingly Canadians supported it. It was one of those rare moments where the collective consciousness just kind of gelled allowing the politicians to do what was necessary. Since 1997 Canada has actually paid down 100 billion of the 600 billion federal debt and almost all the provinces have made similar, although less dramatic strides (Alberta is debt free because of oil making it the only jurisdiction in North America to be in the clear).

The real tragedy is that the US was in the same boat in the late 90s. Under Clinton the US recovered from the recession and was heading for massive surpluses. Unfortunately the right-wing cut taxes under the argument that although it would cause a defecit it wouldn't matter because increased economic growth would make up for it in the long-run... I don't know why people keep falling for that one, it never works. It didn't here for Ontario and the people of that province will be paying for the debacle for decades to come. I have a feeling Americans will be doing the same and will have to go through the painful process that Canadians endured in the 1990s.

It's interesting. Canada and the US are usually in economic lockstep, but since the mid-90s the two have diverged significantly. I think it's only going to get worse when the US eventually hits the limit of what the market will accept. The way it's going the Loonie will shortly be worth more than the US dollar. What a difference a decade makes.

Finally, the US should be worried about the debt for security reasons. China holds a lot of the US debt and could send the US economy into recession at will... Luckily it's not in China's interest to see their biggest export market crash but China has knowingly made decisions that were detrimental to the nation's economic well-being in the past when the stakes were high enough. In short, the debt also makes the US more vulnerable to foreign pressure.

[A Nonny Moose 8,262]

The "richest" country in the world has the largest debt.  Noting that the trend of the ratio is upwards since WW II's peak, what is happening to the GDP in light of outsourcing overseas, global warming, and the retirement of the Baby Boomers?  Everyone in the "first" world has this problem, but many, like the U.S., act like ostriches.

[coolotter88 2]

not one country in the world will force the US to pay its debts.

a) they're too afraid of the US power

b) it wouldn't benefit them anyway if they made the US pay their debts.

there isn't much we can do about lowering the debt. to completely pay off the debt at this very moment, every single person in the united states has to pay over 200,000 dollars. it's a common misconception that the war is causing the debt but it really isn't. there are other programs the government funds that cost way more than the war in Iraq. right now, our government spends several hundred billion dollars a day. raising taxes would do little to slow down the debt. we would need to do as Canada did and cut a lot of benefits.

[Barbarossa 51]

there isn't much we can do about lowering the debt.quote>

Don't be so defeatist.

Of course we can do something about it... we can get a competent leader and a progressive government. We did not have this problem under Clinton.

Barbarossa

[Micah 16]

There's one thing I don't understand. I'm not picking on the Democrats at all, but I wish someone could provide me with the insight of how they plan to do this: create universal healthcare and universal education with the debt we have now. They say they will raise taxes on the rich, but how in the world will they not cause the debt to grow larger with universal healthcare and education?  Again, I'm not picking on the Democratic hopefuls, I'm simply curious.

[Barbarossa 51]

Marc, I am breaking the two post rule, so forgive me...

It is all a matter of how the money is spent. While universal healthcare (I'm not sure what you mean by education... we already have this - public schools) will be an expensive investment, we are wasting a lot of money in other areas. For example... ahem... Iraq. We also waste money on pork-barrel politics. We fund things that shouldn't be funded. We are bailing out the airlines, we are catering to corporations, etc. There are all sorts of ways to save money, just like there are all sorts of ways to spend money.

I think the bigger question is, what can we do to bring our spending under control? I wish I knew... it is very hard for the little guy to make an impact on government.

Barbarossa

[Micah 16]

Marc, I am breaking the two post rule, so forgive me...quote>

There isn't a two post rule in this forum.   (It's only in the Off-topic forum and I believe the forum games area).

I guess my viewpoint is that, if we do carry out universal healthcare, let's wait. The debt is far too large to carry out anything massive like universal healthcare and just think about the looming trouble that social society is about to bring us when it goes bankrupt in the upcoming years and decades.

I think the bigger question is, what can we do to bring our spending under control? quote>

Agreed. Those earmarks are a killer. Earmarks are those funds that are within all the paperwork and they are usually hidden, but they are for absolutely nothing like the Bridge to Nowhere.

[Barbarossa 51]

There isn't a two post rule in this forum.quote>

Awesome, Possum!

I guess my viewpoint is that, if we do carry out universal healthcare, let's wait. The debt is far too large to carry out anything massive like universal healthcare and just think about the looming trouble that social society is about to bring us when it goes bankrupt in the upcoming years and decades.quote>

I'm too much of a bleeding-heart liberal to agree! While I agree we need to get things under control, I do not think it should be at the cost of human life, which is where we are today. Too many people in the workforce have no coverage at all. And since many of them are hourly, they will never make enough to pay for it on their own. But, again, I do not know what to do to make it possible. It really is one of the biggest problems we face, going forward.

Barbarossa

[paperboy15 4]

Solution: Start dismantling the government, piece by piece. Destroy what's not necessary, privatize when possible, and keep the essentials.

Problems w/ the Solution: Yeah, I'm not even gonna bother.

Better Solution: Dissolve the USA, thereby creating 50 independent, sovereign nations. The USA would not exist, thereby eliminating the debt. Is that cheating?

And give all that other territory to, say, Liechtenstein.

[dev 47]

Originally posted by: Godzillaman maybe its because bush spends probably half his money making the doomsday army and spends the rest on america, hmmmm... seems fare, half for dominating the world, half for my country! someone tell me the budget and i might change my opinion.quote>

Wrong. Only 17 percent is used for defense.

Bush really has spent too much...I do support him, but one of the things I do not like about him is his liberal spending.

[crazyyaya 4]

Here's an interesting graph... this shows the debt as a percentage of the GDP for each president.

Looks like the Bush family is no good with money.

[DanWalker8 3]

Originally posted by: Micah  but I wish someone could provide me with the insight of how they plan to do this: create universal healthcare and universal education with the debt we have now. They say they will raise taxes on the rich, but how in the world will they not cause the debt to grow larger with quote>

hopefully not starting wars that cost billions daily.    One good thing about the debt is that it is mainly owned by China, which hopefully will delay them from invading us when they take over the world

[Micah 16]

I thought we owed debt to China, not the other way around?

[coolotter88 2]

he said the debt is owned by china (funny way of saying we owe money to china)

[crazyyaya 4]

auctually Japan holds the largest amount of US debt.

[DanWalker8 3]

crazyyaya is correct, i was mistaken. Japan holds 612.3 bn followed by china with 420.2 and then the UK 145.1..... then "Oil exporters at 113.0 bn. http://www.treas.gov/tic/mfh.txt for the rest

[Cjah 15]

I'm just gonna say this...when the US is forced to pay back its debt....

two things will happen we...probably won't pay it....

Or China will invade....

either way I'll be on the first ship back to Hungary when either one of those happens......

[Glenni 1,447]

Also you have the biggest dept of all countries in the world owing money to the UN

[Creathir 3]

Originally posted by: Cjah I'm just gonna say this...when the US is forced to pay back its debt....

two things will happen we...probably won't pay it....

Or China will invade....

either way I'll be on the first ship back to Hungary when either one of those happens......quote>

 

HA! I would like to see China invade. They cannot even invade a tiny island just off their coast, let alone cross the Pacific, then invade the most powerful nation in history...

I think you are going to be here for a long time.

 - Creathir

[Creathir 3]

Originally posted by: crazyyaya Here's an interesting graph... this shows the debt as a percentage of the GDP for each president.

Looks like the Bush family is no good with money.

quote>

 

Up until recently, all of those sessions of Congress were Democratically controlled, except for Clinton.

The Reagan increase was defensive spending, not social spending, which in my opinion, is perfectly acceptable.

I would like to see two more line graphs laid on top of this, with defensive spending and social spending. (

The Democratic Presidents CUT defensive spending, and increase social spending, while the Republicans do the opposite, usually salvaging our military and restoring it to what it once was. Notice, the graph leaves off the 100%+ that Mr. Roosevelt incured (Democrat) from the war spending of WWII. Defensive spending does increase our debt, when social programs lie on top of them. 

If the social programs were non-existant, our national debt would not be debt, but a surplus.

 - Creathir

[cogeo 960]

Originally posted by: crazyyaya Withing a couple of years of US national debt could hit a enourmous landmark position of TEN TRILLION DOLLARS

This debt is so outstanding that debt clocks are becoming obosete becuase they cannot hold enought digits! 

(shown is a chart of the US debt as a pertencage of its GDP, not the auctual debt)

Your thoughts...quote>

It's not that bad, it's still quite below 70% of GDP and the graph rather shows stabilisation trends, instead of an ever-growing figure. It's still very sustainable, quite a few countries in Europe have a debt level of 100-120% of GDP, which is rated as AA or better. Italy, Belgium and Greece are above 100%, but they have all cut deficits to below 3% (a requirement of the Maastricht Treaty). Greece in particular has a rating of A (still getting interests very close to the ECB base rate) but deficit has been cut to 2.6% (from 7.9%) and growth rate stands at 4% (meaning a shrinking debt as % of GDP), and an upgrade of credit is expected. Europe in general has cut deficits a lot, and most importantly this was done during a period of very slow growth (nearing recession) in the last years. Recently the economy has improved and now the next target is balanced or surplus budgets by 2010-11. With the US it must be easier, growth is fast, unemployment low and consumer spending high.

Originally posted by: coolotter88 not one country in the world will force the US to pay its debts.quote>

Originally posted by: spa Eventually debts do have to be paid and outstanding debts only grow with interest paymentsquote>

The US do not actually pay its debts. They just refinance their maturing debt and constantly issue more and more banknotes... This has sent the dollar to record lows. Hence the pressure on Arab nations not to accept euros for oil, only dollars (a void move to my understanding, as these can be exchanged everywhere).

Originally posted by: spa Finally, the US should be worried about the debt for security reasons. China holds a lot of the US debt and could send the US economy into recession at will... quote>

Given the dollar slide, China (and all other creditors) will see their "investment" loosing in value (good for US, bad for the rest). Should China decide to play games with the dollar, the federal bank or the US government could intervene and either issue more dollars or buy dollars on the cheap (if it gets really undervalued).

But this is not good for corporations and individuals, savers see their savings actually reduced. This only benefits the indebted ones. Savers should rather invest in stocks, commodities or foreign exchange. I don't think this is going to last forever, but for the moment things are quite like that.

[Voar Tok 4]

Originally posted by: spa This is the big ticking time bomb in the US and world economy. Eventually debts do have to be paid and outstanding debts only grow with interest payments. To take an example from North of the border, in the 1990s Canada was on the verge of bankruptcy. The Wall Street journal mused the country might be on its way to becoming an honourary member of the third world (a tad of an overstatement but some validity given that the government had been spending beyond its means for 30 years!). To avoid disaster the government had to drastically cut programs and raise taxes. That combined with increased economic growth in the late 1990s carried the country through the crisis. Amazingly Canadians supported it. It was one of those rare moments where the collective consciousness just kind of gelled allowing the politicians to do what was necessary. Since 1997 Canada has actually paid down 100 billion of the 600 billion federal debt and almost all the provinces have made similar, although less dramatic strides (Alberta is debt free because of oil making it the only jurisdiction in North America to be in the clear). quote>

Congratulations.  If we could get the government here to actually think like that, life would be better economically.

The real tragedy is that the US was in the same boat in the late 90s. Under Clinton the US recovered from the recession and was heading for massive surpluses. Unfortunately the right-wing cut taxes under the argument that although it would cause a defecit it wouldn't matter because increased economic growth would make up for it in the long-run... I don't know why people keep falling for that one, it never works. It didn't here for Ontario and the people of that province will be paying for the debacle for decades to come. I have a feeling Americans will be doing the same and will have to go through the painful process that Canadians endured in the 1990s.quote>

However, this is simple heresay.  One thing that history has shown us is that tax cuts stimulate the economy.  True, they give the government less money to spend, but the other part of the equation is that the government never spends it to pay off the debt, so why should they really have the money to begin with if they can't even figure out what to use it for in the first place.  On top of that, most of Clinton's inherent economic success was because the Congress, Republican at the time, deadlocked him on most of his spending bills.  Even then though, the recession that took place in the beginning of Bush Jr.'s presidency was already in the making... compliments of Clinton.  So much for Clinton's wonderful economic policies.  Success through the inability to pass spending bills, compliments of the Republicans controlling the House of Reps at the time, isn't success at all.  It's disaster being delayed.

Finally, the US should be worried about the debt for security reasons. China holds a lot of the US debt and could send the US economy into recession at will... Luckily it's not in China's interest to see their biggest export market crash but China has knowingly made decisions that were detrimental to the nation's economic well-being in the past when the stakes were high enough. In short, the debt also makes the US more vulnerable to foreign pressure.quote>

The one thing they know though is that sending the US into a recession will hurt them worse than it'll hurt us.  So why would they do it?

Now, about that chart that someone else posted.  It's interesting to note that it totally failed to include FDR in there.  So, I found one with him in it and let's see what things like like then.

The two steepest climbs in that list were in Woodrow Wilson's Presidency (a Democrat - which casts doubt on the apparently common belief that party affiliation means that you do or do not know how to handle money) and FDR (also a Democrat).  Now, Wilson had World War 1 happen right around the time of that spike, so when you think about it, he should be removed from the observation.  However, this still leaves FDR and his spending spree in the early 30's.  World War 2 didn't have a thing to do with that, so the only thing that it can be attributed to was FDR and his glorious New Deal.  Compliments of his public spending spree, we appear to have hit a point at which it's impossible to go any appreciable distance down without having the economy go into the toilet.  The rise in debt in the early 30s was a result of there being a President throwing around money, and a Congress to let him do it.  In Clinton's terms, we had a President more than willing to spend the money, but a House of Reps (Republican controlled) dead-set against him doing it.  Clinton really couldn't get much accomplished, and look what happened.  Public spending basically went no where, and the debt went down.  But that didn't happen until after the Democrats lost control of Congress.  Right around the beginning of Clinton's Presidency, the debt is still doing it's thing as if nothing had changed.  Now, look what happens when Bush becomes President and the Presidency and the Congress are controlled by one party.  The debt goes up.  Bush, backed by the power of Congress, has deep pockets.  However, so did FDR.  It doesn't matter what your party affiliation is, the idea of fixing the government by socialist means (lots of public spending) is going to backfire.  From FDR on, there isn't a single point in there where public spending noticeably increased (as in, greater than the economy would normally permit it - the era right after WW2 would have helped increase it a lot, but not disproportionately) and the debt noticeably decreased.

What would it take to fix the issue with the national debt?  Well, raising taxes would help ONLY if the money was used for absolutely nothing else.  Nothing shady like running off with Social Security money with promises to pay it back.  We all know that the government hasn't ever done that though, so it's totally pointless.  So, the best thing we can do is cut all the money wasted on crap like the "bridge to nowhere" and use it to pay for the debt.  An equally good idea though is to not spend the money on the crap in the first place.  And finally, don't mix a President of one party with a Congress of the same party.  Now that the Democrats control the Congress, we're already seeing some signs of deadlock, and guess what?  Spending bills aren't just being shoved right through.  Give Washington another ten years of this head-butting, and things will be looking pretty good again.

[spa 970]

Voar Tok: Interesting point about parties of different stripes blocking each other from spending, whether that be social spending or military spending. Political grid lock can be good for the government's pocket book... of course it can also do the reverse. One argument is that the continental European countries have been so slow to get a handle on their debt problems because of their fractured governments. Grid lock can be fine when things are going well but when things actually need to get done it can be problematic.

On China, since two people have challenged my argument. Yes it's true that China would be hurt by a US recession and would likely see more damage which means it's unlikely to happen in the near future. However, China isn't a democracy and its pain tolerance for economic hardship is, thus, substantially higher. China is a new and growing power with clear strategic and military goals that may trump economics if the stakes are high enough. For example, China is seeking more natural resources all around the world and is in direct competition with the US in many places (Alberta Oil Sands investment, Central Asia etc). If competition for scarce resources heats up China could decide that, despite harm to its export market, its time to take the US down a peg. I'm not saying that this will happen all I'm saying is that assuming that foreign creditors will never cash in because it will never be in their interest to do so becasue of potential economic harm to their own markets is assuming a lot.

In any case, there is a market limit to debt that is independent of any decision that China makes. The US dollar can only depreciate so far before sparking a crisis of the like that we've seen happen in the last decade or so in places Mexico, Argentina, Thailand and South Korea.