American Debt/Deficit Spending Crisis III

[Steve R.]

The debate on the US debt ceiling and the proposed US budget grows evermore misleading and absurd. A (temporary?) headline in the Washington Post today read: "Obama forges ahead in debt negotiations". This leads you to a second headline that you can click on: "Obama will still seek a $4 trillion debt deal despite GOP opposition, aides say". The lead paragraph below the headline reads: "Two of President Obama’s top advisers said he will continue to press for a far-reaching, $4 trillion deal to cut the deficit when he meets with congressional leaders on Sunday evening, despite new opposition from Republican leaders to such a compromise."

While I think that the Republican position on the budget/debt issue is as absurd as the Democrats, I think it was wrong for the Post to imply that the Republicans are obstructing Obama's (negative) debt reduction proposals. The Republicans want to cut the proposed spending, yet the Post makes it appear that it is what the Republicans are obstructing. Twisted logic.

According to this website the deficit for FY2011 is projected to be $1645.12 billion. In FY2008 the budget deficit totaled $458.55 billion. So in three short years the deficit has nearly quadrupled and the Post fails, in this article, to acknowledge the growth in deficit spending. How misleading can the Post get?

Obama has proposed record deficit spending. In response to the growing public outcry Obama appears to be considering reducing spending by some minor amount (but still increasing the deficit). So, to be credible, the headline should have read something like: "In the face of stiff Republican opposition Obama considers retracting his proposals for record deficit spending".

To help describe Obama's bait and switch on the debt ceiling/budget, I posted the allegory below as a response to the Economist article "Bargaining and blackmail"
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As an allegory, the bride before marrying Obama proposed to buy a $30,000 car for a family road trip vacation following the marriage. After getting married, Obama sees a nice top-end $100,000 dollar car for his trips to the golf course. When the family hears about it they scream in agony. As a compromise, Obama proposes to buy a more modest $50,000 car [for] visiting the golf course. Obama at the dinner table proudly proclaims that he has now saved the family $50,000 so there is nothing to worry about. What he does NOT tell the family is that he is still spending $20,000 more than originally proposed. Why the media fails to mention this discrepancy is a mystery.

As for the family road trip vacation; can't be done because of the need to trim costs due to the green fees.

 

[Vassago]

Show me a fair and unbiased news source, and I'll show you a flying pig. I'm sure Fox News was there to be their counterpart and bash them right back.

 

[Thales750]

The debate on the US debt ceiling and the proposed US budget grows evermore misleading and absurd.

You couldn't be more correct. The Republicans only consideration is to unseat the current administration.

No lie is too big, No cost is too great.

The evidence of the conservative lies is all around us; one of the symptoms they employ the most is trying to explain macroeconomic principles using microeconomic examples. It is such an effective tool at disseminating the most egregious lies, lies that are destroying the very fabric of our society and in particular the Middle Class. Sadly a lot of the conservative leadership actually believes those lies themselves. Which, of course, is necessary if the puppeteers are going to be effective.


This will backfire on them though, even their puppet masters are dubious about destroying the world economy.

This is probably the most dangerous place the world has been in since WWII. The conservatives are creating a frenzy of misinformation and soon they will start blaming one group or another for our woes.

The problem with the American economy is not about government debt; government debt is a symptom, not a cause. When the news organization and the elected officials start to discuss the real reason, then there will be hope.

Wait, wait wait, wait, I seem to recall someone actually doing that. Oh yeah, it was The President, but he was drowned out in the midst of the consorted republican lie machine.

The problem with the American economy is that we produce less than we consume.
End of story.
And one way or another we are going to work harder for less in the future. So get used to it folks; the only salvation is domestic energy, and a highly devalued dollar.

 

[Thales750]

WTF is wrong with the Speaker of the House.

Hold the American Economy hostage so the the richest can have it all.

Time is drawing to and end for the conservative movement.

 

[PNGBill]

I don't have any magic wand but just can't accept how the world economies are going.
Maybe since the Gold Standard was droped ?? but most world leaders appear to believe we can spend our way out of the current situation.
I am not saying some short term debt may not be needed but refer more to leaders encouraging the populous to spend more. Keep the retail shops busy..
Once upon a time people could work and save for what they needed.
Now we are drawn towards debt to get what we need as either inflation causes saving to impractical and or we just want it now.

Countries heavy in debt are lending to other countries also heavy in debt (except for China).

Surely something is going to be splattered all over the Punker sooner or later

We can't repeat the missery of life in the depression but we can't go on blindly geting into debt either.

The whole world is waiting for a solution on the US Debt Crisis and soon after that, they will be waiting on the next issue - Italy ?

 

[Adam Caramon]

WTF is wrong with the Speaker of the House.

Too much tanning?

They had a poll on CNN last night that said if the country defaults, who will you blame? It was 51% Republicans 30 some percent the President. That should be telling enough for Republicans to try to forge a deal.

Lastly, boy do we need more than these two political parties. If there were 5 parties, f/x, comprormise would be required rather than looked down upon.

 

[Thales750]

Well the congress has managed to prove once again how the US form of Government is really the best overall.

In their attempt to score political points, they have been exposed for the fools, liars, and thieves, that they really are.

“My side is all ready to compromise, but those evil doers on the other side are not cooperating”. My favorite though is the Republicans blaming Obama for this crisis. Anyway, as I said the American Public has had an opportunity to get an education of the ineptness of the individuals in congress.

 

[Steve R.]

Seems that the debt ceiling "solution" is a NON-solution. The US stock market serves as a barometer. It (Dow Index) is currently down just over 130 points furthering a continued downtrend, What this means is that the Market interprets the so-called debt ceiling "solution" as nothing more than "smoke and mirrors".

My quick take. The can is still being kicked down the road by the Congress to some future undefined date. The so-called debt ceiling solution would, in my opinion, only be valid through FY2012. The reason, in January 2013 a new Congress and perhaps a new President will be seated. I will hypothesize that one of their first acts will be to repudiated this agreement.

Another meaningless debate is over a proposed Balanced Budget Amendment. Any such amendment would not be worth the paper it is printed on.

The debt ceiling is a defacto balanced budget amendment. If Congress truly wanted a balanced budget, they could have done it now. The fact that they have not means that they won't have the will to balance the budget in the future either.

Particularity ludicrous the claim by some Congress people that a balanced budget amendment would give them "discipline". Now why would our Congress people believe that a piece or paper would give them discipline? It won't. If you can't act responsibly now, how will a piece of paper make you responsible in the future.

Any so called balanced budget amendment will have an escape clause. Have another Hurricane Katrina or high unemployment - Our Congress people will scream: Spend Spend Spend, since a balanced budget would not solve the crises-of-day. Of course our Congress people just love creating crises. Witness this debt ceiling debate which should never have been a crises.

The balances budget amendment, I believe, is also being tossed out as a "distraction". It would take years for a balanced budget amendment to become law. While such an amendment is slowly slowly winding its way through the approval process, our Congress people can solemnly claim that they are working on solving our deficit while they continue deficit spending with consequent increases in the debt ceiling.

 

[Thales750]

In the end the next form of government to emerge on the world front will be the Global Social Democracy.

The only way this continued global economy will work is for all of the major players to play by the same rules. Similar pollution laws, similar protection for health care and old age, similar tax structures, and floating currencies, only then will the process of globalization stop decimating the already established economies.

And this will happen no matter which party is in charge. Both are completely ineffectual in changing the coming tide. Unfettered capitalism, and communism, are seeing the end of their reign.

 

[Adam Caramon]

The day a president takes office and says "I don't want any special initiatives or programs, for the length of my term we will focus on paying down the national debt", is the day we will get serious about our debt. This day is also known as never.

 

[Thales750]

The day a president takes office and says "I don't want any special initiatives or programs, for the length of my term we will focus on paying down the national debt", is the day we will get serious about our debt. This day is also known as never.

America deficit crisis is not caused by too much spending it is caused by not enough revenue.

As a percentage of the GDP tax colection is at it's lowest since 1939.

 

[Adam Caramon]

America deficit crisis is not caused by too much spending it is caused by not enough revenue.

Its both. Yes, taxes on the wealthy are too low. Yes, other civilized countries can't believe we do not take care of our own citizens in need. We are a nation of everyone-for-themself.

However, spending does play an integral part in that equation. We have spent so much in the past, that we pay a ton towards interest on the debt. In the last 10 years here is how much money we have spent on interest only:

$4,130,137,477,327.14 (link)

That's 4 trillion dollars over the course of eleven years (2000-2010). What did that 4 trillion dollars buy us? The ability to borrow money. That's it.

Think what we could do with 4 trillion dollars if we weren't spending that money on interest.

So yes, revenue and spending need to be addressed. And a president would have to choose to be frugal, not start anything new, and focus only on paying down the debt in order to make a dent in it. If we had 3 or 4 two-term presidents in a row that did that, we might be able to get out of debt.

But like I said before, never going to happen.

 

[Steve R.]

This day is also known as never.

Quite true!

 

[Steve R.]

The US stock market serves as a barometer. It (Dow Index) is currently down just over 130 points furthering a continued downtrend, What this means is that the Market interprets the so-called debt ceiling "solution" as nothing more than "smoke and mirrors".

Well, at the end of the day, the Dow Index closed down just under 11 points; which is quite a recovery. Pundits attributed the downturn to lower than expected results for US manufacturing rather than it being an expression of displeasure with the so-called debt ceiling agreement.

 

[Galaxiom]

I wonder if spending over $5,000 per second directly on wars for over a decade had anything to do with the problem?

What kind of stimulus to innovation and infrastructre could have been achieved with that money instead?

 

[Galaxiom]

The only thing that saves the US Dollar is the fortune that international investors, including some countries, particularly China have tied up in it. Without that, the USD would be a complete basket case.

 

[Steve R.]

I wonder if spending over $5,000 per second directly on wars for over a decade had anything to do with the problem?

Well - below is one, of soon to be many scare headlines. I assume that these doom and gloom headlines will be liberally "planted" by special interest groups to intimidate Congress and the public into "protecting" the special interest from the budget axe. Washington Post article: "Debt deal expected to hit Washington area economy, defense firms"

 

[Thales750]

Without even reading the link I could have told you that. I live in the Washington economy.

I see a major down turn coming for this area. We have some ofthe highest home prices in the nation. What are all those people going to do with their 500,000 morgages?

 

[ColinEssex]

Without even reading the link I could have told you that. I live in the Washington economy.

I see a major down turn coming for this area. We have some ofthe highest home prices in the nation. What are all those people going to do with their 500,000 morgages?

The same as people in the UK did after the US caused the last financial crisis in 2008.

You continue to pay or you get reposessed.

Why doesn't the USA pay off the $14trillion debt instead of wasting it on useless projects like NASA and the like.

Col

 

[Steve R.]

Why doesn't the USA pay off the $14trillion debt instead of wasting it on useless projects like NASA and the like.

The US currently has a "bread and circuses" economy. The politicians just love doling out "free" money.

Our politicians also refuse to actually make the tough decisions they were elected to do. This debt/budget crises was totally unnecessary, it was a long-time known issue that could have been resolved long before the deadline. But solving a problem before it becomes a crisis does not make for good theater or face time before the cameras.

As for NASA, it is a sad reflection of what is wrong with America. We need programs such as NASA to promote scientific progress. To keep this short. The US is increasingly paralyzed through indecision. The US seems to also be devoting more and evermore resources to becoming a police state.

Just this morning, as a fallout of the pending debt ceiling legislation, the political right was cautiously pleased that there was no tax increase yet they lambast the deal for potentially cutting military spending. So if the political right does not want revenue then how should the military be funded? By cutting the entitlement programs of course. Maybe all citizens over 65 should be drafted.