Is this an accurate assessment of the US financial situation?

Discussion in 'Politics and News' started by JoeyP, Nov 12, 2012.

  1. JoeyP

    JoeyP Senior member

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    Can someone please explain how our financial situation got so bad? I'm not sure too many Americans understand it, let alone are able to describe the problem.

    The message I'm getting is that the overall expenses have continually outpaced the revenue coming in, and this has been going on for years with a compounding effect. So when bills that provide services get signed into law and do not get enough funding, we borrow to cover the costs, and this adds to the national debt. So now we're forced to fund the expenses and service the debt.

    Has it occurred to anybody that it is disingenuous and irresponsible to continue funding programs that were built on money that isn't there? I'm not suggesting scrapping all government services, but an influx of revenue from taxing the rich, or all taxpayers for that matter, is not addressing the root cause. And this feel good "balancing the budget" sounds an awful lot like "we'll find ways to pay for this year's budget items even if we project 10 years out." Doesn't address the existing debt, right?

    I'm not trying to make this political, but is this accurate? If not, please correct.
     
  2. EagleKeeper

    EagleKeeper Discussion Club Moderator<br>Elite Member
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    Just like living beyond one's means. The government has been living off of credit cards (bonds) and getting a new credit card & taking a cash advance on it when the old one is fully used up.

    As long as you can find a bank that will issue a new CC, one is OK. Eventually, someone is not going to and at that point; expenses have to be trimmed or a way to pay for the CCs has to be found.

    Our problem is that some of the "banks" are overseas; which is not a good thing.
     
  3. Fern

    Fern Elite Member <br> Super Moderator
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    Yes, that's (mostly) correct.

    I say "mostly" because with the very low interest rates the past few years the compounding effect hasn't been fully realized yet.

    Fern
     
  4. fskimospy

    fskimospy Elite Member

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    Generally no, it is not accurate. The cause of our current deficits is primarily due to a few things: massive tax cuts that were not paired with spending reductions, decrease in tax revenues relative to population due to a huge recession, and increased social safety net spending from laws long ago on the books. So really our laws are doing exactly what we expected them to do.

    Generally deficits like this are what we actually want in our current situation because reducing them now would be a catastrophic economic mistake. (look at Europe's foolish attempts at balancing their budgets and the resulting economic damage) Focusing on deficits and debt now is exactly the last thing that we should be worried about.

    In terms of long term debt issues what we should concentrate on going forward after the economic crisis is dealt with is reducing our debt/GDP ratio. That is far more important than the absolute quantity of debt. Really though what drives future deficits is one thing: health care costs. If we can get health care inflation under control our long term fiscal situation magically turns out pretty fine.
     
  5. techs

    techs Lifer

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    Actually that's pretty innacurate.

    We had one party drastically reduce revenue then prevent the other party from restoring it.

    It's a revenue problem, not a spending problem.

    Take away the Bush tax cuts and the terrible economy which is hopefully temporary and the deficit is back to what it has been historically as a percent of GDP.
     
  6. RabidMongoose

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    Basically the GOP wrecked everything up. The end.
     
  7. IronWing

    IronWing Lifer

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    As far as the long term debt goes, the government has some unique abilities not afforded to other debtors. The government can print money, and has been doing so at an astonishing rate. The effect is to diminish the true value of the debt owed. Second, it can lie with impunity. The government is the keeper of the inflation rate used to determine its liabilities such as social security and pension payouts. By lying about the rate of inflation it can inflate away its future obligations via a combination of money printing and understating the inflationary effects of this money printing. So while beneficiaries get every penny owed them, the value of those pennies is diminished.

    On the revenue side, the effect of money printing is, in the long term, inflationary on wages and earnings. By not indexing tax brackets to inflation, income tax payers are pushed into higher tax brackets while the true value of their income has not increased.
     
    #7 IronWing, Nov 12, 2012
    Last edited: Nov 12, 2012
  8. LegendKiller

    LegendKiller Lifer

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    It was also the $400bn/yr increase in defense spending, the addition of Medicare D and DHS and others after 9/11.
     
  9. yllus

    yllus Lifer<BR>Elite Member

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    Man, you aren't kidding - look at these disgustingly low rates. Have things really been perceived as so dire lately that people are nearly paying the U.S. government to hold their money for them? Hell, it actually makes complete sense to keep borrowing and put off paying for now.
     
  10. Matt1970

    Matt1970 Lifer

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    And yet another 3rd grade response from you. Does your mom know you are on this site?

    We have a revenue problem due to the shitty economy and tax rates but as this graph shows we have a drastically larger spending problem.

    [​IMG]
    Even if we repeal the Bush tax cuts on the $250k and up bracket that is going to generate a total of $100 Billion more in revenue by CBO and Whitehouse numbers. When the economy finally turns around that will surely help but if we wish to continue spending at these levels, we are going to have to raise taxes across the board and that is never a popular move.
     
  11. ivwshane

    ivwshane Lifer

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    But we wont be spending more, the Afghanistan war will be over in 2 years and military spending will be cut.
     
  12. Doppel

    Doppel Lifer

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    Yes, it is accurate. It has happened due to a lack of leadership from both national parties and a rank ignorance among the majority of voters. Combine apathy with ignorance and smother it with greed (politicians and voters) and you get what you see. Humans in general prefer to either leave things for later or have somebody else pay for them, so debt can be dealt with later and/or left for a future generation.
     
    #12 Doppel, Nov 12, 2012
    Last edited: Nov 12, 2012
  13. sao123

    sao123 Lifer

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    Globalization is the cause of our financial troubles of today...
    just like a balloon keeps the air trapped inside, globalization has let out all of the higher paying industrial jobs (the strong middle class of the coal miners and steel mills) and turned them into low wage overseas jobs. all that remains now are services positions, and local markets (mcdonalds/walmart/midas) which cannt relocate due to the buyers being here. Wages are low, unemployment is high.

    Its time for a return to the post WW-1 nationalized self sustaining economy. limit the capital markets. close the borders. Eliminate the H1B Visa program. Reinstate all trade tarrifs. Maximize workforce development.
     
  14. dawheat

    dawheat Platinum Member

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    We've spent about 1.3 trillion on the wars in Iraq and Afghanistan - those costs continue to drop and should come to a substantial end in 2014.

    The Bush era tax cuts should get repealed and general revenue should increase as the economy improves.

    We need to get a handle on Medicare before it overwhelms us.

    We need to intelligently bring down defense spending.

    As long as we can tread water with the ridiculous interest rates available to us, there's still time to put in long term solves.
     
  15. Juror No. 8

    Juror No. 8 Banned

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    It's deliberate. Imagine you want to take an old building down and replace it with a new one. Well, you have to destroy it somehow. You bring in a demolition team, rig it with explosive charges, and pull the switch. If all goes according to plan, the old building implodes and becomes a big rubble pile, which can be removed to make way for the construction of a new building.

    It's essentially the same with a nation-state. Instead of a demolition team, though, you bring in politicians who will deliberately destroy the financial health of the nation, and instead of explosive charges, they use debt. That's what's really happening. The United States is being "leveled off", "brought down a notch", and "reworked" by the social engineers who operate behind the scenes.

    Of course, the corporate mass media doesn't report or even hint at this, so most of the American people are left scratching their heads as to why their government, regardless of party, keeps piling on debt, weakening its own currency, and destroying its own economy through onerous taxes, regulations, and other interference. It's all happening on purpose.

    That's all there really is to it. The old America is being imploded to make way for the new, more globalism-friendly Amerika.
     
  16. spacejamz

    spacejamz Diamond Member

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    OP, those responsible for creating our budgets who share this opinion is the answer to your question...
     
  17. Darwin333

    Darwin333 Lifer

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    Out of curiosity, why isn't your side trying to do exactly that if its the right thing to do?
     
  18. LegendKiller

    LegendKiller Lifer

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    I have to agree with this although I think you lean more towards saying it's just a spending problem.

    It's both. We keep dropping rates while spending too much. Furthermore, the idea that we can just allow foreign competitors to devalue their currency to maintain trade surpluses (China, Japan and Germany) without repercussion has gutted our manufacturing sector, lowering tax collections, both from corporations and individuals. All of that is a multiplicative wealth, and tax, effect.

    Both sides have done this to us, it will require both sides to fix it. However, neither side takes responsibility for the past nor responsibility to educate themselves on the issues to fix it. Instead they just swallow talking points (It's spending only! NO NO, it's revenue only!) rather than coming to a reasonable assumption.

    It's like people bitching about having to have dual incomes. Sure, many families need it, but many do not. How many families no have to pay $150/mo for cable, unlimited phone and high-speed internet? How many pay $100/mo for a cell phone with data? How many want to buy all of this or that with huge gas guzzling SUVs?

    It's choice on how to spend your resource (time) on goods (money). You have limited time and misallocation leads to issues.
     
  19. Genx87

    Genx87 Lifer

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    The real problem as Eskimospy said is social safety net spending coupled with a reduced tax revenue stream because of tax cuts and a recession. Medicare, Medicaid, and eventually SS spending will swallow our entire budget within 2 decades. This means we will literally have no tax revenue left to spend on all the other govt programs.

    The wars ending helps but it isn't a magic bullet that will solve our problems. We need to reform those three safety nets while seeking new revenue streams to reduce deficit spending. If we don't, we will run right off the cliff. I have been hearing about this for my entire life. Now it is finally a potential reality. We have a matter of years to fix it or sink.

    But to even suggest reforms to those programs brings the ire of AARP. I have little hope it will get fixed until it simply collapses.
     
  20. DLeRium

    DLeRium Lifer

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    every couple years this issue comes up, but we stuff it back down and bury it because no one's willing to deal with the fundamental flaws of social security, medicare, and medicaid. no one will fix it, and they will only use band-aid solutions. It's time to bite the bullet and make a solvent system.
     
  21. OBLAMA2009

    OBLAMA2009 Diamond Member

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    this country is living a lie. it thinks its a superpower, but that "power" is based on money borrowed from other countries. america could never pay off even its current debts (the politicians know this, so they dont bother even trying to address it), hence the continual need to engage in militarism and conquest around the world. long term, america has only two choices: conquer the rest of the world or succumb to its financial woes
     
  22. LegendKiller

    LegendKiller Lifer

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    If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.
     
  23. JoeyP

    JoeyP Senior member

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    No politician who wants to get elected will ever suggest reducing funding for any of these. The current recipients do not have the means to pay for the services themselves with the current model, because they trusted the system to do it for them.

    Thanks all for clearing up some of this.
     
  24. Agent11

    Agent11 Diamond Member

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    Anyone else notice a distinct trend on that graph? Whenever a Republican gets nominated since Reagan spending goes up and revenue falls. Trickle down is such bs.
    These house Republicans are about as irresponsible as they come. Damn your country for an oath to a lobbyist.

    We have recently fought two wars while cutting taxes and hemorrhaging jobs over seas, lowering the tax base.

    The world wars were two pivotal moments in history, the fact that we were able to win and recover from the great costs of those wars is what has defined our country today.

    Why is it that raising taxes to pay for WWI and WWII was acceptable yet raising taxes now is not?


    [​IMG]
    Dwight Eisenhower

    What do you think Ike would say about the modern Republican Party?

    Should we follow a proven debt reduction strategy advocated by some of our nations greatest hero's or lick a lobbyist's feet?
     
    #24 Agent11, Nov 13, 2012
    Last edited: Nov 13, 2012
  25. Matt1970

    Matt1970 Lifer

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    Well lets see, since it is so popular from the Democrats, I am sure you can appreciate a little blame game. Reagan was handed over 10% unemployment; gee I wonder why revenue was down..... The revenue decline for Bush Jr. started Oct 2000 before he was even in office and almost a year before his first tax policy was put into place. As you can see, or maybe you don’t want to see, revenue was quick to recover in both instances.