So wealthy, deficits don't matter?

[Stunt]

So with the latest budget deficit numbers and trade deficit numbers, I've decided to post this theory on the US economy i'd like you guys to consider.

As far back as we can remember America and its companies have been working together to build a massive global empire. It has been an amazing relationship where companies have lobbied for lower taxes and borrowing rates and in turn the companies have evolved into massive multinationals and have accumulated massive amounts of wealth.

Could the US be so wealthy these days, deficits both trade and fiscal are almost totally irrelevant?

How am I justifying these two very hated aspects of the US economy?
Consider a retiree (the US) with so much wealth he can live off nothing more than the interest and dividends from his investments. Compared to other people within the society (other countries) the retiree contributes little to no productivity to the rest of society. But the retiree does consume heavy amounts of services and goods from these other people as they offer products he needs for cheaper than he can provide for himself. Now consider the amount the retiree is using small amounts of his wealth ($500B deficit vs. $44T net worth of US) to invest in his house, kids, health and other things with potential to increase his net worth and quality of life moving forward? Can this retiree (US) not live off his immense wealth even though his net income is not positive (but investing) and continue to consume goods from other people even though he offers little more than money to the trade?

 

[arsbanned]

No.

 

[dmcowen674]

Originally posted by: Stunt
Topic Title: So wealthy, deficits don't matter?
Topic Summary: a theory I've tossed around, what do you think?

As far back as we can remember

Your young age and naitivity shows more and more everyday. Sad

 

[Stunt]

Originally posted by: dmcowen674

Originally posted by: Stunt
Topic Title: So wealthy, deficits don't matter?
Topic Summary: a theory I've tossed around, what do you think?

As far back as we can remember

Your young age and naitivity shows more and more everyday. Sad

And what is it you show everyday dmcowen??

 

[ntdz]

Originally posted by: Stunt

Originally posted by: dmcowen674

Originally posted by: Stunt
Topic Title: So wealthy, deficits don't matter?
Topic Summary: a theory I've tossed around, what do you think?

As far back as we can remember

Your young age and naitivity shows more and more everyday. Sad

And what is it you show everyday dmcowen??

Idiocy

 

[sandorski]

Extreme positive views of One's situation is a sure sign of sudden and unexpected failure. Deficits do matter, they may not seem like it right now, but soon they'll matter more than can be imagined.

 

[Stunt]

Originally posted by: sandorski
Extreme positive views of One's situation is a sure sign of sudden and unexpected failure. Deficits do matter, they may not seem like it right now, but soon they'll matter more than can be imagined.

I agree...unjustified deficits are not a good situation for any country. Just considering the same old from a different perspective...

 

[feralkid]

One word.


China.

 

[Stunt]

Originally posted by: feralkid
One word.


China.

What about China?

 

[Engineer]

An example of how wealthy you really AREN'T.

 

[CSMR]

Originally posted by: StuntSo with the latest budget deficit numbers and trade deficit numbers, I've decided to post this theory on the US economy i'd like you guys to consider.

Macroeconomics is not simple. I would advise you to know the existing theories and their implications before positing your own.

Could the US be so wealthy these days, deficits both trade and fiscal are almost totally irrelevant?

A deficit has to be paid back so it's not irrelevant. The deficit is not negligible in comparison to the US GDP.

How am I justifying these two very hated aspects of the US economy?
Consider a retiree (the US) with so much wealth he can live off nothing more than the interest and dividends from his investments. Compared to other people within the society (other countries) the retiree contributes little to no productivity to the rest of society. But the retiree does consume heavy amounts of services and goods from these other people as they offer products he needs for cheaper than he can provide for himself. Now consider the amount the retiree is using small amounts of his wealth ($500B deficit vs. $44T net worth of US) to invest in his house, kids, health and other things with potential to increase his net worth and quality of life moving forward? Can this retiree (US) not live off his immense wealth even though his net income is not positive (but investing) and continue to consume goods from other people even though he offers little more than money to the trade?

A better analogy would be a person with debt but with a high income. He can choose when to have a debt and when to pay it off. (He can have a perpetual debt as long as it doesn't become too large.)

 

[charrison]

Originally posted by: Stunt
So with the latest budget deficit numbers and trade deficit numbers, I've decided to post this theory on the US economy i'd like you guys to consider.

As far back as we can remember America and its companies have been working together to build a massive global empire. It has been an amazing relationship where companies have lobbied for lower taxes and borrowing rates and in turn the companies have evolved into massive multinationals and have accumulated massive amounts of wealth.

Could the US be so wealthy these days, deficits both trade and fiscal are almost totally irrelevant?

How am I justifying these two very hated aspects of the US economy?
Consider a retiree (the US) with so much wealth he can live off nothing more than the interest and dividends from his investments. Compared to other people within the society (other countries) the retiree contributes little to no productivity to the rest of society. But the retiree does consume heavy amounts of services and goods from these other people as they offer products he needs for cheaper than he can provide for himself. Now consider the amount the retiree is using small amounts of his wealth ($500B deficit vs. $44T net worth of US) to invest in his house, kids, health and other things with potential to increase his net worth and quality of life moving forward? Can this retiree (US) not live off his immense wealth even though his net income is not positive (but investing) and continue to consume goods from other people even though he offers little more than money to the trade?

About 1/2 of the trade defecit is US conpanies doing tradie with their foreign counterparts.

 

[BaliBabyDoc]

In Bush's ridiculous $2.7T budget . . . over $400B will go to DOD . . . much of it wasted. Naturally, the budget doesn't include the additional $100B or so in :roll: supplemental/emergency:roll: funding.

Social Security is the largest single component of our budget but SS actually highlights just how much deficits matter. Bush (and every administration before him) used SS hide the true magnitude of the deficit. The difference between Bush and his predecessors is that current SS surpluses are HISTORIC. As a %GDP, Bush deficits would rival the worst of the Reagan/Bush years without the SS surplus.

National defense is a very close 2nd but it's questionable just how much "value" we are getting. In fact, it looks like a negative return on investment.

In general, spending (even deficit spending) makes sense if you are buying something that will either maintain its value, appreciate, or provide some other significant benefit. I'm not talking drug company subsidies, "democracy building by bomb", energy company subsidies, bridges to nowhere, crop subsidies, or dubious central educational planning. Unfortunately, that's what we currently have.

We aren't so wealthy that deficits don't matter. What's occurring is that the people consuming borrowed wealth and the various countries providing the money . . . fully expect FUTURE generations to pay the bill.

 

[Polish3d]

Originally posted by: dmcowen674

Originally posted by: Stunt
Topic Title: So wealthy, deficits don't matter?
Topic Summary: a theory I've tossed around, what do you think?

As far back as we can remember

Your young age and naitivity shows more and more everyday. Sad

As opposed to someone who is your age but still shows such zealotry?

 

[charrison]

Originally posted by: BaliBabyDoc
In Bush's ridiculous $2.7T budget . . . over $400B will go to DOD . . . much of it wasted. Naturally, the budget doesn't include the additional $100B or so in :roll: supplemental/emergency:roll: funding.

Social Security is the largest single component of our budget but SS actually highlights just how much deficits matter. Bush (and every administration before him) used SS hide the true magnitude of the deficit. The difference between Bush and his predecessors is that current SS surpluses are HISTORIC. As a %GDP, Bush deficits would rival the worst of the Reagan/Bush years without the SS surplus.

Reagans defecits peaked at close to 6% of gdp, Bush deficits peaked at about 3.5 percent of GDP.

National defense is a very close 2nd but it's questionable just how much "value" we are getting. In fact, it looks like a negative return on investment.


In general, spending (even deficit spending) makes sense if you are buying something that will either maintain its value, appreciate, or provide some other significant benefit. I'm not talking drug company subsidies, "democracy building by bomb", energy company subsidies, bridges to nowhere, crop subsidies, or dubious central educational planning. Unfortunately, that's what we currently have.

Shame there is so much goverment waste in every part of goverment, not just the DoD.

We aren't so wealthy that deficits don't matter. What's occurring is that the people consuming borrowed wealth and the various countries providing the money . . . fully expect FUTURE generations to pay the bill.

But if we continue to on average grow faster than out debt, it wont be a problem for the next generation either.

 

[BaliBabyDoc]

There you go again . . . the deficit in fiscal 2003 was 5% of GDP . . . that is indeed Reagan/Bush territory.

Bush and the GOPie Congress were enjoying a record year of SS receipts. Accordingly, SS generated a surplus of 1.5% of GDP.

As for the broader economy growing faster than debt . . . that's a red herring and you know it.

1) Future liabilities in SS and Medicare aren't factored in. It most certainly will be quite expensive to take care of an aging, unproductive population yet no preparations are being made for them. In fact, we are spending the money (SS) that should be "invested" in making it easier to deal with the old farts in the future.

2) While we can count on our future liabilities, only Bush's Enronesque accounting assumes rapid GDP growth. Naturally, their estimates are largely unrealistic. I seriously doubt they called the 1.1% for Q4 2005.

3) The US economy was largely built on a broad consumer middle. Those people had good jobs making things. Today, many manufactured goods are made elsewhere. The well-paying manufacturing (and service) jobs are on the decline. That's a prescription for lower GDP not higher.

4) US consumers are currently imitating the government, they spend more than they earn. At some point, consumers MUST repay that debt. Since wage growth has NOT kept pace with inflation, consumption will fall.

 

[Engineer]

Originally posted by: charrison

But if we continue to on average grow faster than out debt, it wont be a problem for the next generation either.

But since 1980, we have not "on average" ketp debt below GDP growth. Also, 2005 was the first year in 6 that has happened. With additional spending coming online, it might not happen again for several more years (might, might not). Again, one year does not make a trend. The trend since 1980 has been to have larger growing debt than GDP. (as evidence of the fact that debt to GDP ratio has grown from 30% to 70% since then).

 

[Genx87]

Bush and the GOPie Congress were enjoying a record year of SS receipts. Accordingly, SS generated a surplus of 1.5% of GDP.

So has every other president, including your beloved Clinton.
Now imagine what happens when we lose that 1.5% SS gives us and have to start adding that to the deficit?

 

[charrison]

Originally posted by: Genx87

Bush and the GOPie Congress were enjoying a record year of SS receipts. Accordingly, SS generated a surplus of 1.5% of GDP.

So has every other president, including your beloved Clinton.
Now imagine what happens when we lose that 1.5% SS gives us and have to start adding that to the deficit?

And Bush wsa propsoing to take that money out of the hands of congress as well. It seems babydos wants to complain either way.

 

[charrison]

Originally posted by: Engineer

Originally posted by: charrison

But if we continue to on average grow faster than out debt, it wont be a problem for the next generation either.

But since 1980, we have not "on average" ketp debt below GDP growth. Also, 2005 was the first year in 6 that has happened. With additional spending coming online, it might not happen again for several more years (might, might not). Again, one year does not make a trend. The trend since 1980 has been to have larger growing debt than GDP. (as evidence of the fact that debt to GDP ratio has grown from 30% to 70% since then).

And a good portion of that increase was the defeat of the soveit union. I think we can both agree that was a good investment. NOw if i we can just get some people in DC that are willing to pay some of that debt down.

 

[Genx87]

Originally posted by: charrison

Originally posted by: Engineer

Originally posted by: charrison

But if we continue to on average grow faster than out debt, it wont be a problem for the next generation either.

But since 1980, we have not "on average" ketp debt below GDP growth. Also, 2005 was the first year in 6 that has happened. With additional spending coming online, it might not happen again for several more years (might, might not). Again, one year does not make a trend. The trend since 1980 has been to have larger growing debt than GDP. (as evidence of the fact that debt to GDP ratio has grown from 30% to 70% since then).

And a good portion of that increase was the defeat of the soveit union. I think we can both agree that was a good investment. NOw if i we can just get some people in DC that are willing to pay some of that debt down.

I would actually settle for a balance budget and let the economy simply outgrow the debt.
In 50 years with a GDP of 30 trillion a 7 trillion debt wouldnt be hard to manage.

 

[charrison]

Originally posted by: BaliBabyDoc
There you go again . . . the deficit in fiscal 2003 was 5% of GDP . . . that is indeed Reagan/Bush territory.

Bush and the GOPie Congress were enjoying a record year of SS receipts. Accordingly, SS generated a surplus of 1.5% of GDP.

As for the broader economy growing faster than debt . . . that's a red herring and you know it.

1) Future liabilities in SS and Medicare aren't factored in. It most certainly will be quite expensive to take care of an aging, unproductive population yet no preparations are being made for them. In fact, we are spending the money (SS) that should be "invested" in making it easier to deal with the old farts in the future.

2) While we can count on our future liabilities, only Bush's Enronesque accounting assumes rapid GDP growth. Naturally, their estimates are largely unrealistic. I seriously doubt they called the 1.1% for Q4 2005.

3) The US economy was largely built on a broad consumer middle. Those people had good jobs making things. Today, many manufactured goods are made elsewhere. The well-paying manufacturing (and service) jobs are on the decline. That's a prescription for lower GDP not higher.

4) US consumers are currently imitating the government, they spend more than they earn. At some point, consumers MUST repay that debt. Since wage growth has NOT kept pace with inflation, consumption will fall.

1.Yes, congress is spending the SS surplus, just like they are supposed to. Until we take those funds out of the hands on congress it is going to get blown on wasteful goverment spending. Private accounts anyone?

2. Even the great economy under clinton had some low growth quarters. qtr1 2006 is supposed to bounce back.

3.automation is taking more manufacturing jobs than offshoring. Even manufacturing jobs are being lost overseas to automation. There are many good paying service jobs, you should know that.

4. Someone we are spending more than we earn, yet our assets keep growing in value. IIT seems there is a contradiction in the stats.

 

[BaliBabyDoc]

Originally posted by: Genx87

Bush and the GOPie Congress were enjoying a record year of SS receipts. Accordingly, SS generated a surplus of 1.5% of GDP.

So has every other president, including your beloved Clinton.
Now imagine what happens when we lose that 1.5% SS gives us and have to start adding that to the deficit?

1) Nothing beloved about Clinton . . . he just didn't sux as much as the other guy. Granted, it was tough voting against Dole in my 2nd Presidential election.

2) Uh, most Presidents WISH they had 1.5% of GDP to play with. Carter had relatively little . . . remember when Bush was running for Congress talking about SS going broke? Congress AND Raygun fixed SS in the 80s (ie kicked the can down the road).
- Bush41 received a nice bump with a peak of 1% of GDP.
- Clinton peaked in 2000 with 1.5% but a nadir of 0.7%.
- Bush43 has AVERAGED over 1.4%.

3) As to your trailing question . . . once SS stops generating surplus we will get . . . truth in accounting! SS pays for current retirees. If government is going to waste SS on odysseys in the desert, subsidies for energy exploitation, and tax cuts . . . we might as well have PAYGO.
- Cut SS taxes so it only generates enough to cover current SS benefits.
- It's a tax cut for everyone (but biased towards lower income).
- Budgets actually reflect reality instead of the federal version of EBITDA.
- Ugly REAL deficits may compel elected leadership to live within our means.
- As FICA creeps up every year, we will finally have frank discussions about just how much we can "afford."

 

[BaliBabyDoc]

Originally posted by: Genx87

Originally posted by: charrison

Originally posted by: Engineer

Originally posted by: charrison

But if we continue to on average grow faster than out debt, it wont be a problem for the next generation either.

But since 1980, we have not "on average" ketp debt below GDP growth. Also, 2005 was the first year in 6 that has happened. With additional spending coming online, it might not happen again for several more years (might, might not). Again, one year does not make a trend. The trend since 1980 has been to have larger growing debt than GDP. (as evidence of the fact that debt to GDP ratio has grown from 30% to 70% since then).

And a good portion of that increase was the defeat of the soveit union. I think we can both agree that was a good investment. NOw if i we can just get some people in DC that are willing to pay some of that debt down.

I would actually settle for a balance budget and let the economy simply outgrow the debt.
In 50 years with a GDP of 30 trillion a 7 trillion debt wouldnt be hard to manage.

Balanced without including SS? Sounds like a good idea . . . I wonder where we can find 435 copies of Tom Coburn without the social agenda?

 

[Engineer]

Charrison,

Do you have any statistics showing that automation is taking more jobs from the current manufacturing jobpool than offshoring? I work in manufacturing and the automation projects don't come close to eliminating the same number of people that offshoring has. Automation eliminated a few operator jobs but has created a net gain in the plants for engineers/technicians where it has been implemented. Offshoring (Mexico, etc) has closed the plants down entirely eliminating not only EVERY operator but EVERY engineer, quality personnel, maintenance person, manager, etc. Automation might not be a sum gain, but it's far from the losses of offshoring. (and yes, I see it every single day at my company. Majority of our plants are now in Mexico. I doubt that we are alone in that venture. Just go across the border and look around. I have).