American debt

[Lurch]

This weekend, I read an article in Money Sense talking about US debt - apparently, total US debt (personal, corporate and public) has now surpassed the previous record level achieved during the Depression. Measured wrt GDP, total US debt now exceeds 300% of GDP, while during the peak of the Depression the debt got to about 285% of GDP.

The Bush-lovers always talk about how Reagan proved "Deficits don't matter" but the total debt to GDP ratio in the '80's was well below the levels today, and still there was a recession immediately following Reagan. (I don't have the article with me, so I don't have the exact #'s)

Anyway, the article scared me more than a little. For starters, a lot of people believe that the 'debt wall' is responsible for a lot of recessions, and if this is even somewhat true, the results this time around could be pretty severe. As interest rates begin to rise (which is already underway) the entire economy could buckle under this debt load. The thing that really scares me is that GW could be in charge when this happens, and I don't trust the guy's economic policy under good conditions, never mind a disaster.

[Lanny_MacDonald]

Interesting theory. I know the real estate market down here is completely out of control and the debt levels just keep piling up because of that huge investment people need to make to buy a home. Add in the American dream of driving the biggest and baddest vehicles on the road and the debt load gets even larger for the average person. Its gotta stop someplace. Where, who knows. All I do know is that the government is not showing any leadership in this regard. If the government doesn't care, why should Jack and Jill in small town America?

[Cowperson]

Originally posted by Lurch@Oct 4 2004, 03:33 PM
This weekend, I read an article in Money Sense talking about US debt - apparently, total US debt (personal, corporate and public) has now surpassed the previous record level achieved during the Depression. Measured wrt GDP, total US debt now exceeds 300% of GDP, while during the peak of the Depression the debt got to about 285% of GDP.

The Bush-lovers always talk about how Reagan proved "Deficits don't matter" but the total debt to GDP ratio in the '80's was well below the levels today, and still there was a recession immediately following Reagan. (I don't have the article with me, so I don't have the exact #'s)

Anyway, the article scared me more than a little. For starters, a lot of people believe that the 'debt wall' is responsible for a lot of recessions, and if this is even somewhat true, the results this time around could be pretty severe. As interest rates begin to rise (which is already underway) the entire economy could buckle under this debt load. The thing that really scares me is that GW could be in charge when this happens, and I don't trust the guy's economic policy under good conditions, never mind a disaster.

The only policy I've supported Bush on is Afghanistan/Iraq but I said before that latter conflict a change in the White House is needed in 2004.

It's everything else that the Bush team has done and particularly the piling up of monumental deficits that would cause me to vote Kerry if I had the opportunity.

The humorous thing for fans of neo-con theory is that Bush is doing more to surrender USA independence and sovereign decisions with massive deficits than might be the case with simply cow-towing to the UN.

When I was in L.A last year my inlaws said that it is not incommon to have like 50 year mortgages. The housing prices were insane. Is this true for the rest of the U.S?

The deductibility of mortgage interest from taxes - unlike Canada - would probably pump the desireability of such mortgages. And would probably pump up the value of the housing market as well.

Cowperson

[Flame Of Liberty]

Originally posted by Cowperson@Oct 4 2004, 05:10 PM

It's everything else that the Bush team has done and particularly the piling up of monumental deficits that would cause me to vote Kerry if I had the opportunity.

Cowperson

What makes you think that Kerry is going to run lower deficits if elected? If memory serves, through history of the US democratic presidents piled up more debt than republican presidents?

[Cowperson]

Originally posted by Flame Of Liberty+Oct 4 2004, 04:40 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (Flame Of Liberty @ Oct 4 2004, 04:40 PM)</td></tr><tr><td id='QUOTE'> <!--QuoteBegin-Cowperson@Oct 4 2004, 05:10 PM

It's everything else that the Bush team has done and particularly the piling up of monumental deficits that would cause me to vote Kerry if I had the opportunity.

Cowperson

What makes you think that Kerry is going to run lower deficits if elected? If memory serves, through history of the US democratic presidents piled up more debt than republican presidents? [/b][/quote]
Not much.

Bush is a sure thing. I can't see the deficit situation changing much. Let's see what the other guy does.

If I'm not mistaken, the Clinton period saw annualized budget deficits shrink to surpluses.

Cowperson

[FlamesAddiction]

Originally posted by Lurch@Oct 4 2004, 03:33 PM
The Bush-lovers always talk about how Reagan proved "Deficits don't matter" but the total debt to GDP ratio in the '80's was well below the levels today, and still there was a recession immediately following Reagan. (I don't have the article with me, so I don't have the exact #'s)

But those same people would tell you it mattered if the same kind of debt was racked up for universal healthcare instead of weapons of mass destruction and arms proliferation to 3rd world despots.

[Displaced Flames fan]

I'm sure you'd classify me as a Bush lover and I don't have that view of deficits at all.

[arsenal]

Originally posted by Cowperson@Oct 4 2004, 09:56 AM
Bush is a sure thing. I can't see the deficit situation changing much. Let's see what the other guy does.

If I'm not mistaken, the Clinton period saw annualized budget deficits shrink to surpluses.

Cowperson

Clinton had a little better situation than Bush.
Clinton's term was during the .com's, Enrons and Worldcoms.

The economy at that time was good for everyone. Administrations usually have little to no effect on the economy. But they do take credit for it when the economy is good.

Bush has inherited the fall-out of the .com crash, the Enrons and Worldcoms falsifying their numbers. Not to mention the 9/11 attacks against the heart
of the financial district. Airlines loosing huge amounts of money, becuase of new policies put in place by the administration. It is a trickle down effect. If large corporations loose money, they will look to rectify it. Hence outsourcing, lay offs, etc.

The economy will stabalize eventually, and it wont matter who is in office.

[Flame Of Liberty]

Originally posted by arsenal+Oct 6 2004, 05:32 AM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (arsenal @ Oct 6 2004, 05:32 AM)</td></tr><tr><td id='QUOTE'> <!--QuoteBegin-Cowperson@Oct 4 2004, 09:56 AM
Bush is a sure thing. I can't see the deficit situation changing much. Let's see what the other guy does.

If I'm not mistaken, the Clinton period saw annualized budget deficits shrink to surpluses.

Cowperson

Clinton had a little better situation than Bush.
Clinton's term was during the .com's, Enrons and Worldcoms.

The economy at that time was good for everyone. Administrations usually have little to no effect on the economy. But they do take credit for it when the economy is good.

Bush has inherited the fall-out of the .com crash, the Enrons and Worldcoms falsifying their numbers. Not to mention the 9/11 attacks against the heart
of the financial district. Airlines loosing huge amounts of money, becuase of new policies put in place by the administration. It is a trickle down effect. If large corporations loose money, they will look to rectify it. Hence outsourcing, lay offs, etc.

The economy will stabalize eventually, and it wont matter who is in office. [/b][/quote]
Well the problem is that administrations (governments) have huge effects on economy. Frankly, to date I haven`t heard anyone suggesting otherwise, whether they think these effects are positive or negative.

Another thing, total debt accumulated under Bush administration was the highest in the US history, even if you subtracted military expenses that can be attributed to the post 9/11 world.

However, this is not to say that Kerry would have done much better, quite the contrary - Kerry`s policies are far more on the `social spending side` where you can reasonably expect another increase of debts.

[arsenal]

Take Alberta for instance.
Province rich in oil and gas, ranches, and business.
We are probably the richest province in the country. What has the Klien government done to get us to this point?

They did funding to some programs back in early 90's. But thats it.
This didn't affect the amount of money comming into the province, from oil and gas sales. Becuase Klien made cuts to those programs when he did, we where able to cut our provincial deficient, and become debt free.

Thats all well and good, but Klien being in power doesn't have any effect on oil prices, gas prices, employment and unemployment stats.

There may be a cause and effect relationship, but I don't think it is as much as it is percieved.

Another example. The economy was booming in the late 90's. Why? Becuase everyone was investing in the "dot com's". The NASDAQ was up around 10, 000 - 11,000 points. People where creating companies, selling IPO's, and becoming millionaires.

What did Clinton do, that direct affected the economy in this way? Nothing. What did Bush do that directly affected the crash's of Worldcom and Enron? 2 of the largest companies in the US.

What the regular people care about which are jobs, unemployment, money, etc the government has no direct control over.
Yes, Bush has run up a huge defficet (sp?), becuase of the war on terror, the DOHS (department of homeland security). All this really does is affect how the US dollar is viewed on the world market. If the dollar goes down, more countries are willing to invest the US. Buying more goods than they usually would. Then with more people investing the country, the dollar will rise, and vise versa.

[Flame Of Liberty]

Take Alberta for instance.
Province rich in oil and gas, ranches, and business.
We are probably the richest province in the country. What has the Klien government done to get us to this point?

You can say the province (more preciselly, people in the province) could have been richer without governemnts. Ask what any govenrment could have done. Tax income, capital, property etc., regulate through environmental or other law. Set minimum wage, maximum working hours. Gazilion things. All acting against wealth creation. Among other things.


This didn't affect the amount of money comming into the province, from oil and gas sales. Becuase Klien made cuts to those programs when he did, we where able to cut our provincial deficient, and become debt free.

Is there a `gas tax` in Alberta? If there is, it increase the price of gas coming from Alberta thus affecting demand after Alberta gas and money `coming into the provice` (which is a debatable term, but for the sake of a conversation). Every other regulation works the same way.

The debt free status was achieved when income of the government is higher than its expenditure. If this is achieved by lowering expenditure, thats one thing. If balancing of the books is achieved by higher tax revenue, thats completely different thing. What I`m trying to say - `debt free` could mean two qualitatively very different things. It depends how it is achieved.


Thats all well and good, but Klien being in power doesn't have any effect on oil prices, gas prices, employment and unemployment stats.

No economic theory I know of would claim such thing. Everything government does has its effect on the market. Thats the purpose of the intervention. However, if the market are strong and government weak, the effects are minimalized, but they are still there.

I already mentioned oil and gas prices, employment is affected by such things as minimum wage, overall taxation, contract law, welfare programs, how easy it is to set up a business in bureacratic environment and million another things (maybe gazillion).


Another example. The economy was booming in the late 90's. Why? Becuase everyone was investing in the "dot com's". The NASDAQ was up around 10, 000 - 11,000 points. People where creating companies, selling IPO's, and becoming millionaires.........

This is whole another can of worms. Couple of cans actually.


Yes, Bush has run up a huge defficet (sp?), becuase of the war on terror, the DOHS (department of homeland security).

I have already stated that the deficit would be huge (the biggest to date) even if you subtracted war on terror costs. Later I might be able to dig up the link. But to me, other things than whether the debt is big or not matter. I outlined that above. It is how the budged deficit/surpuls was achieved that matters and how big the budget is matters too. Not to mention the state budget itself is an evil thing

[Bring_Back_Shantz]

Originally posted by arsenal@Oct 6 2004, 02:14 PM



Yes, Bush has run up a huge defficet (sp?), becuase of the war on terror, the DOHS (department of homeland security). All this really does is affect how the US dollar is viewed on the world market. If the dollar goes down, more countries are willing to invest the US. Buying more goods than they usually would. Then with more people investing the country, the dollar will rise, and vise versa.

Dude think about what you just said.

With a weaker dollar actually comes less investment, because they are getting their returns in the dollar, now whatever currency they started with, why would you trade a strong currency for a weak one. This lack of investment does what?????? That's right stops job creation. Big defeciets means less jobs. What the government does has a huge effect on the economy plain and simple.

[arsenal]

I can see your points on Alberta. If another party had been in power during this time, the province probably wouldn't be debt free at this point in time. On the other hand, who's to say that if another party (for arguments sake) the Liberals where in power, that we would be worse or better off?
Government does have to set up some checks and balances in order to keep money flowing for it to spend. But once that has been established, as long as the market doesn't change, they don't really have to do anything.

If Klien decided to give 100 million dollars to Calgary, and allowed Bronconier (sp?) to spend it any way he chose. What effect would that have on my life? Bronconier probably would spend it on roads, schools and infrastructure. That in turn, could make Calgary a more "attractive" city for companies to move to, creating jobs, etc. Same with roads, more construction jobs available. Does that mean the minimum wage is going to increase? Maybe, maybe not. House prices I know will increase, becuase of increased demand. Gas prices may go up, with more people in the city, supply may go down a bit.

I think it is more cause and effect than a direct correlation. Government can set things up for success, but it is up us a citizens to take advantage of the situation presented to us.

As for the states, say for instance, the US government passed a tax admendment that said "If you own a business, you don't have to taxes on your income or assests". Say you are the owner of the company, you no longer have to pay taxes. What do you do with all your extra money? Do you re-invest it into the company, to help build and grow it? Or do you take that fat check, and just go off and buy toys, vacations etc. Unemployment could still be high, as business ownders take their money and run.

The government can only do so much. The rest is up to the people. At least that is the case in a market economy. Communisim is a whole other thing.

[Bring_Back_Shantz]

Originally posted by arsenal@Oct 6 2004, 03:14 PM
I can see your points on Alberta. If another party had been in power during this time, the province probably wouldn't be debt free at this point in time. On the other hand, who's to say that if another party (for arguments sake) the Liberals where in power, that we would be worse or better off?
Government does have to set up some checks and balances in order to keep money flowing for it to spend. But once that has been established, as long as the market doesn't change, they don't really have to do anything.

If Klien decided to give 100 million dollars to Calgary, and allowed Bronconier (sp?) to spend it any way he chose. What effect would that have on my life? Bronconier probably would spend it on roads, schools and infrastructure. That in turn, could make Calgary a more "attractive" city for companies to move to, creating jobs, etc. Same with roads, more construction jobs available. Does that mean the minimum wage is going to increase? Maybe, maybe not. House prices I know will increase, becuase of increased demand. Gas prices may go up, with more people in the city, supply may go down a bit.

I think it is more cause and effect than a direct correlation. Government can set things up for success, but it is up us a citizens to take advantage of the situation presented to us.

As for the states, say for instance, the US government passed a tax admendment that said "If you own a business, you don't have to taxes on your income or assests". Say you are the owner of the company, you no longer have to pay taxes. What do you do with all your extra money? Do you re-invest it into the company, to help build and grow it? Or do you take that fat check, and just go off and buy toys, vacations etc. Unemployment could still be high, as business ownders take their money and run.

The government can only do so much. The rest is up to the people. At least that is the case in a market economy. Communisim is a whole other thing.

Man, I don't know how you can say with a straight face that the government doesn't have that big of an effect on the economy, especially when you've given the example of the government spending money on roads and that creating more jobs. That's not even a direct economic policy and it appears to have a pretty large effect on the economy.

I'm not trying to be a jerk, but it seems that the whole basis for you point is sure, they can do that, but I don't think it's that big.

[arsenal]

What I probably should of stated is that I am refering to a market / capitalist economy. Yes, if the government spends money on roads and what not, they will create jobs, in the public sector. This doesn't affect the private sector as much.

So yes, in certain areas, government spending money has a direct effect on the economy. Same with government taking away money has a direct effect on the economy. So in that aspect, I stand corrected.

But one cannot survive on public enterprises alone.

[Bring_Back_Shantz]

Originally posted by arsenal@Oct 6 2004, 03:50 PM
What I probably should of stated is that I am refering to a market / capitalist economy. Yes, if the government spends money on roads and what not, they will create jobs, in the public sector. This doesn't affect the private sector as much.

So yes, in certain areas, government spending money has a direct effect on the economy. Same with government taking away money has a direct effect on the economy. So in that aspect, I stand corrected.

But one cannot survive on public enterprises alone.

The government contracts most of that work out to private contractors, so yes it does have a rather large impact on the private sector.

Oh, you meant in a market/capitalist economy? Okay, is that the kind we have now in Canada (admitedly a little socialist), where we've already seen that the government has a pretty large impact on the economy, the one in the states (A little more market/capitalist) where we have also seen that the government has a pretty big impact on the economy (cause it works the same way it does here) or a true capitalist economy where the government has absolutey no role in spending and the economy. If you are refering to the last of the three choices (The one that doesn't exist) then I guess I'll have to agree with you becasue that is pretty much THE BASIC IDEA BEHIND THE WHOLE THING, but that is like me arguing the oposite, and using communism as an example.