http://money.cnn.com/2009/06/05/retirement/next_crisis_americas_debt.fortune/index.htm This article was just e-mailed to me, and it's spot on. We're facing a VAT future.
I understand the concern over the rising federal debt, and I share those concerns. But I have yet to see a critique of this administration's budget that projects any growth in the economic base or in incoming foreign investment, both of which would help offset federal expenditures. All of these economic doomsday scenarios seem like saying that you shouldn't invest $20,000 in your 401(k) because you'd be out $20,000. Well, yeah, if you assume that the money you are putting into your 401(k): A) Won't ever grow, ever B) Cannot be diverted to other funds or otherwise altered to maximize investment gains Meanwhile, nobody seemed to have a problem with our previous president throwing $12 billion/month at a war of attrition halfway around the world. I didn't hear "game over for the future of our economy" then. And fuck ... you can make a pretty strong argument that funding a war has zero monetary investment benefit. And btw, let's not turn this into a discussion about the necessity of going to war. Regardless of how you feel about the war, you can't argue with the finacial impact on the federal budget. -Pop
These aren't "doomsday" scenarios. These are CBO numbers, which if anything are pro-Democrat. And I know you want to raise a point and then not have anyone oppose it, but defending this nation is in the preamble to the Constitution. Building turtle tunnels and the 11,000 other earmarks in the "stimulus" bill isn't.
The CBO is understandably conservative with their projections because they have to be. But I happen to believe that this federal investment is going to create jobs and new economic opportunities that will grow the base. My sense is that our founding fathers had a very different view of what "defending this nation" meant. -Pop
Ah, I see. So you believe that this massive increase in government spending and entitlements will be a positive NPV investment? I haven't seen any studies that show that scenario to be the case. Instead, we're being told that it's "only fair" or we have to "share the wealth". If the Federal Government could make positive NPV investments, we could all stop working and just let the Government do everything for us, because that would create wealth. You mean like the Whiskey Rebellion or the Barbary Wars?
At some point in time debt like this can cause hyper inflation and subsequent defaulting on US notes & bonds. What will we do then. In bankruptcy court, the case will be called United States v. United States.
Obama's administration has been using more optimistic growth numbers than basically any other group, and his administration's projections still show staggering growth in the deficit. It would be pretty silly to think his own administration is trying to paint a doomsday scenario for the public in order to get his budget passed? No, it isn't like that at all. Some of just realize that the US government isn't the fiscal equivalent to the perpetual motion machine. Perhaps you also think perpetual motion is possible? blah, blah, blah. More defending Obama's crappy decisions with Bush's crappy decisions. Get over it. You apparently didn't read the article, because the article talked about Bush starting the gross deficit spending. Obama is just taking it to a whole new level.
For Barfo: After 2019 the debt rises with no ceiling in sight, according to all major forecasts, driven by the growth of interest and entitlements. The Government Accountability Office estimates that if current policies continue, interest will absorb 30% of all revenues by 2040 and entitlements will consume the rest, leaving nothing for defense, education, or veterans' benefits.
$12B x 12 = $144B x 10 years comes to $1.4T. A mighty big number. But it pales in comparison to just ONE year's deficit - $1.8T this year alone). To date, we've spend maybe half that $1.4T figure. I'm not a fan of balanced budgets, but I am shocked by the size of these deficits and what they mean to each and every family here. With the typical ~3% growth we've had for decades, additional interest payments on a modest deficit is quite affordable. With negative growth, it requires massive tax hikes to pay just the additional interest on the massive borrowing going on. As far as military spending, it's one of the few things govt. really should be doing, and it's a modest % of our GDP. Including Iraq and Afghanistan combined. Sad to say it, but I don't see any of the spending as any kind of investment. The administration is talking about bulldozing whole neighborhoods in cities (I actually agree with doing so), which isn't any kind of investment at all. By definition, it's turning investment into rubble. I've pointed out before that GM at its peak was worth maybe $300B if you sold every share of its stock for top dollar. Doesn't pay for the wars, and certainly doesn't make much of a dent in $1.8T sized deficits. Do tell what investments you see paying off big?
For me? Gosh, you shouldn't have! Why for me? I'm not even in this thread. Well, ok, now I am... I agree the entitlement programs are a huge problem. Were you expecting me to disagree w/ that? barfo
I don't know what to expect. I do know I've pointed out these things in numerous posts that you've argued with me, though. Now you have respected economists of all stripes, including your boy Krugman and Auerbach (from that conservative bastion known as Berkley), and Gale from Brookings echoing my words. The point of the article makes that Onion.com video ring true. Put your money in the bag and drop it in the nearest mailbox. You can probably earn it back over time.
I have argued with you in numerous posts, about numerous topics. But have I ever argued with the idea that entitlement programs are a problem? I don't think I have. barfo
I warned that increased debt payments crowd out all other kinds of spending, which pretty much is the nail in the coffin of Social Security. At least we'll have crappy health care that we can't afford instead. The VAT talked about is akin to doubling everyone's social security witholdings. Or in the minds of progressives, it's tripling those witholdings (since the employer's contribution isn't the employee's money). That would raise $1T in additional revenue, assuming people spend. The logic in a VAT is absurd, when you consider consumer spending is a big part of the engine that drives the economy. No matter how you slice it, people will spend less or get 15% less product (15% less going into job formation, etc.).
This new temporary spending. That's rather a different subject than the baby boomer entitlement blowup. barfo
Obama isn't even talking about how to solve that coming crisis. It'll just be more tax to cover it, right?
Social security was blowing up before the current economic crisis happened. Nothing has changed, other than the date of failure getting a little closer. barfo
