Why Americans fear the debt? - Politics Forum.org | PoFo

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Everything from personal credit card debt to government borrowing debt.

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By Rugoz
#13741712
You gave the answer yourself.

http://en.wikipedia.org/wiki/Net_intern ... t_position

% of gdp

Italy: -12.9
US: -24.3
Ireland: -58.4
Greece: -75.7
Portugal: -99.3
(Total EU is probably positive, as is of course chinas)

Nobody can bail out the US.

Historical development:

http://en.wikipedia.org/wiki/File:Netto ... enUSen.PNG

Its not dangerous yet, but if this continues for another 10-20 years...(don't think it will)
Found that article:

http://www.petersoninstitute.org/public ... cfm?id=150
By Wolfman
#13742713
The people we owe money is asking for it back. Same problem with Greece, Portugal, etc. Debt is only a problem if your creditor wants his money back.
User avatar
By Red Barn
#13743799
Well, I think the average American "fears" the debt largely because they've been told to. Debt makes a a terrific excuse to cut social spending - hence the ramping-up of hysterical rhetoric about Big Government and the need for Draconian "austerity" measures.

Funnily enough, though, we apparently don't fear debt enough to bring tax rates on the very rich back to pre-debt levels. So it's cuts, cuts, cuts and more cuts, with nary a mention of increasing revenue. It's pure idiocy, really.
User avatar
By Dave
#13743857
Red Barn, are you seriously suggesting that we should not fear "the debt"? :eh:

Because that is the implication of your post, even though I agree that we should also raise taxes.
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By Ombrageux
#13743871
The Americans are in a significantly worse place than Europeans with regard to debt. Overall debt levels are about the same but while the EU as a whole has about a 6% deficit (mainly at national level, with wide variations), for the US it is double at 12%.

There is no indication, despite the claims of Obama's financial wizards, that this will attain a reasonable level any time soon:
1) On foreign policy, Obama has fully committed to expanding both the defense budget and American overseas interventions (notably in Afghanistan, where he increased commitment by 60,000 men, cost of $1 million per man per year).
2) Republicans, now dominating Congress, will prevent all attempts to reasonably increase taxes, even on the über-wealthy.
3) Despite Republican posturing, there will be no major reductions on the elderly's welfare expenditure, the biggest outlays of the federal budget (Medicare, Social Security). Minor gains will be predictably made by targetting for elimination welfare for the poor and the black community.
4) There is no indication yet, although it is extremely complex and things will get clearer with time, that Obama's health reform will in any way reduce America's hideously inefficient healthcare system (17% of GDP, normally 10% for an industrialized country).

As such, Americans should be worried. They will continue along their current decadent path for some time, misled and lied to by their leaders. It may be the US economy can simply outgrow the problems posed by its structurally defective political system. However, it also means America's current state is extremely brittle: any "double dip recession", unexpected war or crisis could simply lead to unsustainably high expenditure and thereby high inflation or bankruptcy.

And this doesn't even mention the massive private and personal debt in the United States, used to fund their oversized cars, housing, healthcare and 5-6 figure college educations.

The only hope is that, if a crisis were to occur, it would enable the political elite to get past its artificial divisions and do the necessary reforms (some combination of reduced welfare (not my preferance), effective health reform, defense cuts and tax hikes). Given recent history, I think this optimistic scenario is unadulterated fantasy.
User avatar
By Red Barn
#13743896
Dave wrote:Red Barn, are you seriously suggesting that we should not fear "the debt"? :eh:

"Fear" engenders panic and recklessness, so yes, I think fear is counter-productive reaction to debt - or to any other social ill, for that matter.

Far better to examine the causes of debt, and to proceed from there. I don't think it takes any special insight to realize that shifting the tax burden from the very wealthy to the working classes, while simultaneously freezing wages and encouraging borrowing on the part of the citizenry, has been disastrous. This approach has resulted in unsupportable levels of personal as well as national debt, and is completely unsustainable on all fronts.

I don't see these issues addressed in the popular media at all, though - and this, I think, is the core problem.
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By Dave
#13743926
Red Barn wrote:"Fear" engenders panic and recklessness, so yes, I think fear is counter-productive reaction to debt - or to any other social ill, for that matter.

A reasonable response, but what about worry?

Red Barn wrote:Far better to examine the causes of debt, and to proceed from there. I don't think it takes any special insight to realize that shifting the tax burden from the very wealthy to the working classes, while simultaneously freezing wages and encouraging borrowing on the part of the citizenry, has been disastrous. This approach has resulted in unsupportable levels of personal as well as national debt, and is completely unsustainable on all fronts.

Federal tax revenues as a share of GDP have been relatively constant since the late 1940s. Recently they have plunged owing to the economic crisis, but cyclical changes in revenue collection are ordinary. But because this crisis is not ordinary, the fall in tax revenues has been particularly sharp.

Image

All of the other issues you raise are important, but not necessarily to the national debt issue.

The basic cause of the debt is political irresponsibility. Since the Reagan years the federal government has been fiscally irresponsible, leading to an inexorable increase in debt. There was a glimmer of hope in the Clinton years brought about by spending discipline and faster than expected (by the CBO and OMB) economic growth, but during the Bush years this was torpedoed by unnecessary tax cuts (though the expanded R&D tax credit and accelerated depreciation were useful) and spending (in particular, unnecessary defense spending and Medicare Part D).

The actual size of the national debt isn't too alarming. After the Napoleonic Wars Britain's national debt was estimated by modern economists to be 215% of GDP, and Japan's is approaching that if you ignore debt held by the Japanese government (and BoJ) itself. What's alarming is the trend line in combination with other economic indicators.
User avatar
By Red Barn
#13743957
All of the other issues you raise are important, but not necessarily to the national debt issue.

Oh, but they are.

We're currently in a crisis that seems virtually unsolvable because the working (or "middle") classes are rapidly becoming unable to sustain themselves. Personal debt is at astronomical levels, and savings are nonexistent. The government is in no position to create jobs when the private sector can't, and is cutting social and infrastructure spending exactly when it's needed most. I, personally, can't think of a single reason to suppose that a "recovery" is anywhere in the offing, and the working population is tapped out.

I don't think the dip in tax revenue is going away any time soon, and it's pretty hard to imagine what - short of taxing the wealthy and addressing both unemployment and shrinking wages - can be done to prevent the complete destruction of the middle class. That being the case, it's hard to see who, exactly, can be squeezed to pay the debt. There's a limit to how much you can expect from an already stressed citizenry, and I think we've just about reached that limit.

(And yes, indeedy, I certainly do believe this is a cause for worry.)
User avatar
By Dave
#13743981
Red Barn, it seems like you only wish to discuss your pet issues and not the actual issues at hand.

One can have no middle class at all, a pauperized country, but no national debt.

Personal debt (as well as business debt) is a serious problem but not directly related to national debt.

I fail to understand how social spending is needed most today when the country is increasingly insolvent and most new demand is satisfied by imports. In fact, it would worsen the problem.

Increasing wages is desirable in the long run but for now it would simply worsen competitiveness unless connected to actual improvements in productivity. I suppose you could increase wages only in non-tradeable sectors of the economy, but this would have the effect of moving needed labor out of the tradeable sectors that we need to focus on most.

The only points you raise actually related to the issue at hand (the national debt) are employment (employed people pay taxes) and raising taxes.
By eugenekop
#13744036
The Americans are in a significantly worse place than Europeans with regard to debt. Overall debt levels are about the same but while the EU as a whole has about a 6% deficit (mainly at national level, with wide variations), for the US it is double at 12%.


What deficit are you talking about?

Dave, it seems no one can answer this simple question. When the average European public debt is just as big as the American, why aren't the Europeans worried about it and the Americans are so worried and always were worried? My assumption is that Americans are more free market leaning people, and its hard for them to cope with such huge government debt, while Europeans are used to rely on the government for everything, so they don't even really know about the huge public debt in their countries. That's only a guess though.
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By LehmanB
#13744039
lol. everyone are in debts. even china is in debts, and is the one who gave loans to the US. And even the bussiness sector is in debts, and the government helped it with cash in 2008.

:eek:

Something is very wrong here.
User avatar
By Ombrageux
#13744066
Eugenekop: The American deficit is much bigger than the average European one.

Data here.

Budget deficits for 2010:
UK: 10.4% (due to bailing out the banksters)
France: 7%
Germany: 3.3%
Euro area average: 6%
EU average: 6.4%
USA: 11.2% ($1.65 trillion according to latest figures)

The sooner your ideology can integrate these unalterable facts the better. If the Americans are more concerned about their debt than Europeans it is because their situation significantly worse in addition to whatever is due to the Conservative ideology and any natural propensity for hysteria (as documented since "The Paranoid Style in American Politics").
Last edited by Ombrageux on 29 Jun 2011 19:46, edited 1 time in total.
By Wolfman
#13744068
it seems no one can answer this simple question. When the average European public debt is just as big as the American, why aren't the Europeans worried about it and the Americans are so worried and always were worried?


Because American debt collectors are coming around asking for their money back. Simple.

My assumption is that Americans are more free market leaning people, and its hard for them to cope with such huge government debt, while Europeans are used to rely on the government for everything, so they don't even really know about the huge public debt in their countries. That's only a guess though.


That's actually a stupid guess, because our (the US) period of lowest debt in the last hundred years was also the period of highest regulations, taxation, and general market intervention (mid forties to mid seventies). Based on that, it seems like the opposite is the reason.
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By Red Barn
#13744096
Red Barn, it seems like you only wish to discuss your pet issues and not the actual issues at hand.

You're missing my point entirely; no doubt because I'm not expressing it well. Perhaps Prof. Wolff's article will help to clarify:

Richard Wolff wrote:Greece, Again: Demystifying "National Debt"
April 27, 2010

Yet again, business leaders, politicians, academics, and media are blowing smoke around Greece's efforts to cope with "national debt" problems. Something far more important for the world than this small country's financial travails is at stake. Indeed, what is at stake affects us all. What is happening in Greece parallels developments everywhere; only details and timing vary.

The struggles in Greece begin with the complex relationship among workers, employers, and the state. Workers and employers are locked into the endless, multi-layered struggles of capitalism (workers vs. employers over wages and working conditions, workers competing for jobs, and capitalists competing against one another for profits). One object of these struggles is the state: varying combinations of workers and employers press the state to (a) serve their interests rather than others', and (b) shift the cost of doing so onto the others.

Struggle over the state includes the state's debt: the accumulated borrowing by the state that remains to be repaid. Employers want the state to secure the flows and prices of their inputs and likewise of their marketed outputs. They press the state to protect, subsidize, and otherwise support their profit-making enterprises (by means of costly military apparatuses, public education of their workforces, suitable infrastructures, etc.). Employers also seek to "socialize" the costs of these expensive state programs and institutions: to shift as much as possible of their costs onto their workers. Of course, workers can fight back, demanding government programs for their benefits and trying to shift the costs of state programs onto employers and the wealthiest recipients of corporate wealth (their highest paid managers, professionals, etc.). Struggles over the state among different groups of workers and among different groups of employers are also significant but are not taken up here.

Often the political organization, mobilization, and financial resources of the employers' side prevail: the state then serves the employers' program while taxing mostly the workers. However, where the latter are well organized and mobilized, the state cannot so directly do the employers' bidding. Enter the national debt, an indirect way for the state to serve the employers at the expense of the workers. In this case, the state largely serves the employers while not taxing them the full cost of doing so. Moreover, the state likewise does not tax the workers to pay for the remaining costs of the state's employer-focused programs. Indeed, to gain workers' support, the state may not tax workers for the full costs of state programs benefiting them either.

With too few taxes flowing to the state from employers and workers to finance its programs for both of them, the state must borrow the difference between tax revenues and programs' costs. By borrowing, the state escapes, at least temporarily, the dilemmas of its position within capitalism's class struggles. It postpones the day of reckoning until it can no longer borrow its way out of those dilemmas. Now, the global crisis of capitalism has brought Greece that day of reckoning, just a little sooner than everywhere else.

When the state borrows, its loans come overwhelmingly from the class of employers and their richest beneficiaries (highest paid managers, professionals, etc.). The state thus saves that class from a tax burden, borrows that money instead, and thus must repay such loans back to that class with interest. State borrowing may likewise relieve the working class from paying more taxes now to cover state programs. However, because workers can and do lend very little to the state, workers cannot look forward to state interest payments and principal repayments as the employers can. Instead, workers can look forward to demands that they help the state make such payments to the employer class.

The modern national debt is a normal routine of contemporary capitalism. Its politically neutral-sounding name disguises its actual function as an indirect means to tilt state activities toward employers and against employees. Because capitalism's economic crises usually provoke ballooning state borrowing, they can readily morph into state crises. This happens when state borrowing confronts limits imposed by their lenders' unwillingness to take further risks.

Greece was, of course, drawn into this latest global capitalist crisis -- the worst since the Great Depression of the 1930s. Workers and capitalists have been struggling harder to make the state, among other social institutions, solve their own economic problems while simultaneously shifting those solutions' costs onto others. Programs to bail out banks and capitalist corporations compete against programs to support employment, wages, etc. States everywhere seek to postpone the basic economic and social issue of who pays for state activities: they all try to borrow still more.

However, the accumulated national debts of many countries and the sizes of their new crisis-induced borrowing have raised the risks to lenders. The normal routine of the national debts stalls. Lenders today remember what happened, for example, when Argentine capitalism collapsed early in the decade: when the dust settled in 2005, owners of Argentina's state debt lost two thirds of the value of their loans. There was no global economic crisis then. In today's conditions, lenders to states have much more to worry about.

Today, the employer class is anxious that its long-successful use of national debts to avoid taxes is in difficulty. The risks of that indirect way to manipulate states into serving its class needs while charging the working classes have risen sharply. Employers now reckon that states must restore their credit worthiness first, before new lending can resume. And the way for states to do so -- in the employers' view -- is to levy more taxes on the working classes and/or cut state programs serving those classes. The alternative, taxing employers and the rich while cutting state supports for them, is largely omitted from public discussion.

That is the meaning and content of today's Greek debt crisis and tomorrow's parallel crises in Ireland, Spain, and Portugal and future crises in most other capitalist economies. In each case, particular conditions and past histories will shape the specifics. Most important, the political organization and mobilization of the working classes will shape how far (and perhaps whether) those crises get resolved at the workers' expense.

http://www.rdwolff.com/content/greece-a ... ional-debt

Eugene asked why Americans "fear" the debt. I think this article goes a long way towards explaining both the causes of national debt in general, and the reasons why we, in the US, are collectively instructed to "fear" debt itself, rather than to examine its relationship to the larger economy.
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By Dave
#13744110
Red Barn apparently clinically incapable of discussing the issue at hand and instead focusing all economic issues on her dislike of capitalism.

By the way, you failed to acknowledge that you were shown incorrect about the shift in the tax burden accounting for recent growth in the national debt--confirming the pattern of you being a parasitic poster who is unwilling to admit fault or discuss anything other than pet issues.
User avatar
By Dave
#13744126
Psychologizing the issue? You're not actually addressing the substantive issue of the national debt and focusing instead on class conflict.

While that is interesting and important, it doesn't strictly relate to this. I might as well grouse about how many white resources are transferred to non-whites via the state, how many producer resourcers are transferred to non-producers, or how many youth/middle-age resources are transferred to the elderly.

It's irritating even if you are pleasant and earnest.
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By Rugoz
#13744221
When the average European public debt is just as big as the American, why aren't the Europeans worried about it and the Americans are so worried and always were worried?


Well america's debt is approaching 100% of gdp and approx. 32% of public debt is owned by foreigners. Some european countries have higher foreign ownership figures, but the owners are usually friendly neighbors in europe. The US on the other hand owes are large part of its debt to china and japan. Luckily china or japan have no interest in a collapsing american economy, so right now its not much to worry about. China owns 1.160 trillion, which is less than 10%, so I don't know how critical that is.

By the way don't tell me the greek are not worried about public debt, I bet they are. The same can be said about portugal or ireland.

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