A Question About Public Debt in Western Nations - Politics Forum.org | PoFo

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#13968383
Are the debts and deficits currently being faced by Western Countries (U.S., France, Japan, U.K., Canada) a very serious problem? Will the amount of debt accumulated lead to economic collapse?

Is the best way to solve this crisis involve cutting government programs or making sure corporations and wealthy individuals pay a fair share of tax and don't take jobs out of the country to other countries?

I am very confused by this issue. :eek:
#13968666
foxdemon wrote:The solution is taxing wealth in western countries to pay off debt. Wall Street could get a bit more taxation to pay off the bail outs, for example.


There is no revenue problem. There is a spending problem.
#13985048
The question is not the debt, the debt is a non-issue, it can be defaulted on. The real problem is the underlying economic structure and the soundness of this structure. This structure is very unhealthy in the western world and that is why serious reforms are needed.

As for whether stimulus or austerity is best? Austerity because it increases the economic control of private businesses over the economy and private businesses are virtually always more productive than government companies which means you get higher living standards if the economy is privatized.
#13985108
Defaulting on debt is an issue if you wish to engage in international trade.
So it's importance is of differing levels depending on each specific country.
Global trade is facilitated through the exchange of money, rather than a direct exchange of goods. Promissary notes. If your promise is worthless, trade with you as we know it ends.

Austerity is just an execise in common sense.
If you spend more than you produce, eventually your economy will fail. The big question to my mind is "when?", rather than if.
There is an argument to be made that I might borrow money in order to start a successful business. That the act of borrwing will make me richer in the long term.
The problem here is the track record of those people in our governments who have been using this argument. Have they done so successfully, are they doing so for the greater good of the whole or just their own political clientele?
An easy way to judge this would be to check and see that those debts have been repaid, or whether, the debt is still rising. If it is continually rising, instead of just having risen for a short period and then got repaid, it is clear that profits are not being made.
Further to this, the profits that are made must outweigh any intrest payments on the money to be worthwhile. So once the cost of borrowing reaches a certain scale it is no longer a solution anyway.

The cost of borrowing is going to go up if you show no sign of repaying, if your economy is in defecit, or if you start sounding like you are willing to default.
So you can't just run endless social programs, the option is not available. You have to balance the amount of programs you wish to have with the amount of resources you have available to maintain them.


It is my opinion that political power > economic power.
So as hard as I may work to achieve my goals, a group of people can always take it off of me by warrant of their group power. It is after all easier to gang up and take someones factory than it will ever be to gang up and build one for yourself.
It is for this reason that I expect my economy to collapse sooner or later.

Once this conclusion has been reached any sensible person must endeavour to place his savings and securities elsewhere. Beyond the political ability of others to take from them.
So if your solution is to tax the most productive members of any society more, the resultant behaviour we can reasonably expect from them is to move beyond your ability to exercise control over them. To go somewhere where they will not be discriminated against.
#13985160
Reality created economics not anything naturally balancing the moment. Solutions come when one gets real and out of reality's rules of self deception.
#13985756
Is the best way to solve this crisis involve cutting government programs or making sure corporations and wealthy individuals pay a fair share of tax and don't take jobs out of the country to other countries


Disregard the answers from "debt is our only problem" fools.

If I owed a $100,000.00 in private debt I could try to pay it off by turning up my thermostat and using the money to pay off my debt. It would take a few hundred years but it would work. OR. I could reduce spending to a more comfortable level AND make more money by getting a separate job.

Now I would not cut my health insurance because that is important. I would not cut my savings for retirement because that is important. I would not drop insurance on my house because that is important. I would not cut money for my kid's education because that is important. I might drive a more efficient car, not take so many vacations, eat more meals at home and drop the movie channels from my cable. Those are the kinds of cuts to spending the US should make. Cut the frills but not the things that are important.

My new part-time job, which will go the farthest to pay off my debt is the same as a moderate raise in taxes.

REAL conservatives advocate a careful combination of cuts and revenue enhancement to pay down the debt. BUT>

We are in a recession. Interest rates make money very cheap right now. This is not time to make radical cuts. We are easily paying our debt payments and in no danger whatsoever of defaulting.

Consider. The US relative GDP is higher than the entire Eurozone combined. And our debt is temporarily lower.

Growing the economy could reduce the debt dramatically so some investment in stimulous is called for. Further.

The very wealthy in this country are sitting on large amounts of underused capital. One way to make them spend it on growing our economy is to tax the shit out of it if they don't. That is the other side of the coin.

Please don't let the corporatist assholes tell you that a balanced budget can be achieved by lowering taxes on the wealthy and cutting spending on the poor. They are wrong. They are NOT conservatives though they think they are. We can't balance our budget by cuts alone. The numbers don't work and I don't know a serious economist who thinks we can.

But the upside is that we are not in trouble like some Eurozone nations are. Our economy is actually growing somewhat led by the manufacturing sector. We tend to think that everything is made in China when actually the US manufactures almost as much as they do with 1/10th of the workforce. We are doing fine.
#13986677
Consider. The US relative GDP is higher than the entire Eurozone combined. And our debt is temporarily lower.


Don't know here you get your data, dude. Wrong on both accounts. It's more the same for both with the US having slightly lower GDP and more debt.

US GDP = $15.094 trillion (2011) US Public debt = $15.616 trillion / 100.0% of GDP (2012)
Europe GDP = $17.578 trillion (2011) Europe debt = € 13.130 trillion (82.5% of GDP) (2011) based on exchange rates from today

http://en.wikipedia.org/wiki/Economy_of ... ted_States
http://en.wikipedia.org/wiki/Economy_of ... pean_Union

Somehow Germany is weathering the current crisis pretty well. Of course long before the boom that started about 5 years ago they took "extreme" austerity measures under Schröder. Being in the Euro zones helps as well. The currency stays low even with huge trading surplus.

I truly believe Germany has a few long term competitive advantages that will help it stay competitive and being able to pay off debts.
1. A free university system; The hurdles of getting in are much harder, but heck its a free ride after that. (not this SAT and ACT garbage)
2. One of the best infrastructures in the world. I have yet to find one pot hole in this place.
3. Patent per capita similar to the east coast, doesn't reach silicon valley levels, but nobody does. And do computer patents help many American jobs anymore?
4. A broad approach to enact cuts and tax increases when push comes to shove.
5. Compact cities; making citizens have to engage with their neighbors.
6. Spending only $625/capita on military spending vs $2150 in the US
7. People who hold their politicians to very high standards
8. Governmental policies based on facts and science
#13986683
GermanOgre wrote:Being in the Euro zones helps as well. The currency stays low even with huge trading surplus.


How is that a benefit? That just means german workers have to work longer for less reward, it is the same bullshit China is doing, debasing the currency thereby enslaving workers to an economy where they produce tons of shit but dont have the purchasing power to buy the things they deserve to get from their work because the government engages in currency manipulation and refuses to let trade surplusses develop into increased purchasing power and living standards.

Under a gold standard the countries that produce are the countries that get to enjoy high living standards.
#13986693
That just means german workers have to work longer for less reward,


Why is that less reward? It is only comparatively less if they leave the country and have lower buying power with their euros. Their wages are the same and the costs of living is the same in Germany even if the Euro were to make gains. Did you in the US feel the dollar losing 50% of its value in the 80's and 90's no not really unless you traveled abroad.

The main benefit is that the weak Euro keeps German manufactured products competitive vs other competitors from other countries. I know as an American, this concept of a manufacturing based economy may be foreign to you, but the strength of your currency compared to those of your customers can give you a competitive advantage in the manufacturing world.

it is the same bullshit China is doing, debasing the currency thereby enslaving workers to an economy where they produce tons of shit but dont have the purchasing power to buy the things they deserve to get from their work because the government engages in currency manipulation and refuses to let trade surplusses develop into increased purchasing power and living standards.


Germany is not manipulating the currency. It is just shares the currency with some really weak governments.

China's living standards have increased at dramatic rates over the last 20 years. Over half of all building construction today is done in China. Don't cry just because the US could not compete with China. You let your MBA people outsource your manufacturing to China now pay the price. Germany has a trades surplus with China. Long term policies always beat short term policies.
#13986727
Kirby wrote:Are the debts and deficits currently being faced by Western Countries (U.S., France, Japan, U.K., Canada) a very serious problem?

Not in the case of Japan. Otherwise, yes.

Kirby wrote:Will the amount of debt accumulated lead to economic collapse?

If not stopped, eventually -- but it'll still take another decade or so.

Kirby wrote:Is the best way to solve this crisis involve cutting government programs or making sure corporations and wealthy individuals pay a fair share of tax and don't take jobs out of the country to other countries?

Neither. Wealthy individuals pay the bulk of taxes in the US (the middle class does in most of Europe, which has higher taxes). American corporations pay an obscenely unfair amount of taxes already, which has led to declining living standards as capital purchases are hindered and the economy becomes less and less capital-intensive. Offshoring is a symptom of this. Cutting programs without the private sector picking up demand will simply lead to a slump.

The best way to get over the crisis is to: 1) make the tax system more favourable to investment, 2) freeze current spending, 3) transfer spending to supply-side stimulus measures, and 4) reduce debt servicing costs by using state assets as collateral.
#13986759
The best way to get over the crisis is to: 1) make the tax system more favourable to investment, 2) freeze current spending, 3) transfer spending to supply-side stimulus measures, and 4) reduce debt servicing costs by using state assets as collateral.


That is a recipe for disaster as it amounts to business as usual.
#13986767
I personally prefer trying to free up the market by breaking up the biggest companies in order to create a more flexible and competitive environment, which would likely raise revenues without a tax increase. This is the only way to end "too big to fail" which is itself one of the sources of our current fiscal woes and the entire problem (in my opinion) with neo-liberalism. Unfortunately, we have one side that wants to help by having more government investment that is paid for with higher taxes, and another side that wants to help by cutting taxes on the big players. One is a mediocre idea that will take a generation to show results and the other is just a terrible idea that will have negative results within a few years. No one seriously considers an action that would actually generate competition at no real cost because that action doesn't immediately further a voting block's agenda.

This is why Evola talked about "riding the tiger", a guy just has to batten down the hatches sometimes because real solutions are generally a last resort.
#13986811
Kirby wrote:Are the debts and deficits currently being faced by Western Countries (U.S., France, Japan, U.K., Canada) a very serious problem? Will the amount of debt accumulated lead to economic collapse?

Depends on a few things.
1. Who's financing the whole she-bang? The US has sought foreign loans with increasing frequency. This means a lot of $US dollars will go out of the country, interest on the loans over and above the capital borrowed. Alternatively, most of Canada's debt is owned by Canadians. It will cost the taxpayers just like it will cost the US taxpayer, but the whole amount, capital and interest, stays in Canada. The American way will most likely slow US economy, the Canadian way will be the one that more likely stimulates Canada's economy. As to economic collapse, Canada and France's banks are sound. The US has huge financial commitments going forward, but with creative thinking, it might not be too harsh. Sometimes one problem can be handled to solve another problem.

2. How's the money being spent? Every ledger has two sides, credit and debit. As Dr Lee pointed out, some social programmes, ie education, law, and health create a positive investment for both the individual and for the country. Some, not so much. Look at education for a moment. Red states are laying off teachers just to reduce state budgets a squidge. Out of 34 countries, the U.S. ranked 14th in reading, 17th in science and 25th in math. Increasing class sizes and decreasing time between the teach and individual students aint going to help.

Politicians have to learn the average working stiff spends or invests every dime s/he makes in the local economy or for his/her pension. A huge part of a teacher's salary goes back to the state for taxes, and pays into the teacher's pension plan. And retired teachers, like working teachers pay taxes and spend the bulk of the rest locally. Conversely, you're paying for the teacher to sit on Unemployment Insurance, later maybe dole, and if s/he doesn't get work again, you'll also pay his/her pension. And your kids will be dumber than the ones who move to the US to get the good jobs that still exist within your country. Does firing teachers still sound economically viable?

Spending to rebuilt the power grid, positive, spending to build a bridge to nowhere, forcing cuts in better programmes has a positive impact on the congressman who managed the boondoggle, a negative impact on almost all others.


Kirby wrote:Is the best way to solve this crisis involve cutting government programs or making sure corporations and wealthy individuals pay a fair share of tax and don't take jobs out of the country to other countries?

Cut where you can, but as the Indians say "What will it look like tomorrow" For example, if putting a stop to welfare meant a large and immediate increase in crime, you'll be much further ahead to continue welfare programmes. Stop building fighter jets you'll never use is a probably to the good.

Supply-side economics, deregulatory practices, two wars, tax cuts - especially when fighting two wars, and giving away pallets of money to foreign interests and at-home businesses (including oil subsidies) created the mess the US is currently in.
#13986876
Supply-side economics, deregulatory practices, two wars, tax cuts - especially when fighting two wars, and giving away pallets of money to foreign interests and at-home businesses (including oil subsidies) created the mess the US is currently in.


I would agree with most of the list, but would make the repeal of the Glass Stegle Act as the original creator (or tip of the iceberg) of this mess. It allowed banks to invest in the markets. That with the advent of unregulated derivatives in the 90's brought us this mess. Getting paid to share the risk of high risk subprime mortgages sounds like a great way to make lots o' money. Even some German banks bought into that.

When I think working as an engineer, how much financial due diligence we had to do, when working on a project costing maybe $50,000 and these MBA types at the big banks (who learned the trade of working with money) made derivative contracts in the billions so callously. And we bailed them out without any future oversight in place. This in my opinion is a greater danger to western society than any debt crisis. The debt is mostly out there and visible (only the Greeks lied about their debt and took out derivatives). Derivatives are still invisible and in 10 to 15 years we will have the same problem.
#13986968
Stormsmith wrote:Supply-side economics, deregulatory practices, two wars, tax cuts - especially when fighting two wars, and giving away pallets of money to foreign interests and at-home businesses (including oil subsidies) created the mess the US is currently in.


Yeah, you left a bit out.

The CRA, Fannie Mae and Freddie Mac, and bad fiscal policy by the Fed...those things were significant factors in the creation of the mess.

I know it's in vogue to hold government economic policy in general and Democrats in particular blameless, but it's not reality. That's part of the reason this administration's attempts to "stimulate" the economy haven't worked, because the people in charge refuse to acknowledge the real extent of the blame.
#13987089
I
would agree with most of the list, but would make the repeal of the Glass Stegle Act as the original creator (or tip of the iceberg) of this mess. It allowed banks to invest in the markets. That with the advent of unregulated derivatives in the 90's brought us this mess. Getting paid to share the risk of high risk subprime mortgages sounds like a great way to make lots o' money. Even some German banks bought into that.


Yes. There should be banks and investment firms but not both under the same roof.

I know it's in vogue to hold government economic policy in general and Democrats in particular blameless, but it's not reality. That's part of the reason this administration's attempts to "stimulate" the economy haven't worked, because the people in charge refuse to acknowledge the real extent of the blame


Who is holding democrats blameless? Certainly not the liberal faction of the party. They are blaming them plenty. If there are two people who are responsible it is Barney Frank and Bush. The later because he spent like a drunken sailor on new social programs, started two unfunded wars and cut taxes while doing it. So he gets the lions share of the blame. He did far more damage than any other player. BUT. The former, Frank, should have been minding the store. He wasn't. The democrat led banking committee was firmly in the pockets of the banks and dropped the ball big time.

One thing is sure Joe. The answer to this is MORE regulation and not less.
#13987096
I would agree with most of the list, but would make the repeal of the Glass Stegle Act as the original creator (or tip of the iceberg) of this mess. It allowed banks to invest in the markets.


I disagree. Banks could (and did) write mortgages before Glass Stegle was repealed. The most troubled institutions in the recent crisis were not subject to Glass Steagall at all, including Lehman, AIG, Bear Stearns and, of course, Fennie Mae and Freddie Mac.

One thing is sure Joe. The answer to this is MORE regulation and not less.

Everybody seems to agree that the latest financial crisis represents regulatory failure. Clearly, the mandate of regulators included prevention of such crisis.

Now then, why is it that when X fails, you call for more X? Is there any level or degree of regulatory failure that will persuade you that the problem is with the regulatory regime itself?


For the banking system, how about the following simple solution:
1. Make it very clear (not quite sure how) that no more bail-outs will ever rescue failed financial institutions
2. Allow banks to opt-out of the FDIC insurance scheme, provided that they clearly display in all their marketing material the words "Not FDIC Insured".
3. Restrict government regulation to FDIC-insured banks
4. Create 100%-reserve bank accounts. Money deposited in such accounts has to be backed 100% by deposits with the Federal Reserve Board, and would be available to account-holders without delay or risk in the event of bank bankruptcy. Similar accounts are available for government securities, but not for cash.

Those Americans who want to security of government insurance will still be able to put their deposits in FDIC-insured banks. Those who want perfect safety could choose to use 100%-reserve accounts.

Others who prefer higher returns and are willing to take the risk will be able to do so knowingly.
#13987107
Drlee wrote:Who is holding democrats blameless? Certainly not the liberal faction of the party.


Sure they are, when they call for even more of the same thing that precipitated the whole thing. When they continue to blame Bush for Obama's lousy handling of things. That's the same as holding them blameless.

Drlee wrote: One thing is sure Joe. The answer to this is MORE regulation and not less.


Eran wrote: Now then, why is it that when X fails, you call for more X? Is there any level or degree of regulatory failure that will persuade you that the problem is with the regulatory regime itself?


I'm pretty sure they'll tell you the only time the regulatory regime can possibly be wrong is when they're not in charge of it.

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