Deficits Don't Matter

[Gary Sisco]

That's right. Cheney's correct. Deficits don't matter *to him and his kind* -- especially since they've excused themselves from taxes, so they won't be bothered with paying the deficits back (plus interest and etc), and even if they were, he'll be making such a fortune off of Hallicheney, Inc's guaranteed in advance blood profits in Iraq that his tax bill would have been lunch money by comparison, anyway.

From Andrew Sullivan's site:

THE PRICE OF DEFICITS: "Deficits don't matter," Dick Cheney casually remarked not so long ago. Well, maybe they do. This sobering piece from the Economist explains a simple truth:
The dollar has been the leading international currency for as long as most people can remember. But its dominant role can no longer be taken for granted. If America keeps on spending and borrowing at its present pace, the dollar will eventually lose its mighty status in international finance. And that would hurt: the privilege of being able to print the world's reserve currency, a privilege which is now at risk, allows America to borrow cheaply, and thus to spend much more than it earns, on far better terms than are available to others. Imagine you could write cheques that were accepted as payment but never cashed. That is what it amounts to. If you had been granted that ability, you might take care to hang on to it. America is taking no such care, and may come to regret it.
The chances of a serious dollar collapse and a big spike in interest rates are by no means minimal.
- 1:45:25 AM

[Gary Sisco]

Here's the article from The Economist that Sullivan references:

World economy

The disappearing dollar

Dec 2nd 2004
From The Economist print edition


How long can it remain the world's most important reserve currency?

Get article background

THE dollar has been the leading international currency for as long as most people can remember. But its dominant role can no longer be taken for granted. If America keeps on spending and borrowing at its present pace, the dollar will eventually lose its mighty status in international finance. And that would hurt: the privilege of being able to print the world's reserve currency, a privilege which is now at risk, allows America to borrow cheaply, and thus to spend much more than it earns, on far better terms than are available to others. Imagine you could write cheques that were accepted as payment but never cashed. That is what it amounts to. If you had been granted that ability, you might take care to hang on to it. America is taking no such care, and may come to regret it.



The cost of neglect
The dollar is not what it used to be. Over the past three years it has fallen by 35% against the euro and by 24% against the yen. But its latest slide is merely a symptom of a worse malaise: the global financial system is under great strain. America has habits that are inappropriate, to say the least, for the guardian of the world's main reserve currency: rampant government borrowing, furious consumer spending and a current-account deficit big enough to have bankrupted any other country some time ago. This makes a dollar devaluation inevitable, not least because it becomes a seemingly attractive option for the leaders of a heavily indebted America. Policymakers now seem to be talking the dollar down. Yet this is a dangerous game. Why would anybody want to invest in a currency that will almost certainly depreciate?




A second disturbing feature of the global financial system is that it has become a giant money press as America's easy-money policy has spilled beyond its borders. Total global liquidity is growing faster in real terms than ever before. Emerging economies that try to fix their currencies against the dollar, notably in Asia, have been forced to amplify the Fed's super-loose monetary policy: when central banks buy dollars to hold down their currencies, they print local money to do so. This gush of global liquidity has not pushed up inflation. Instead it has flowed into share prices and houses around the world, inflating a series of asset-price bubbles.

America's current-account deficit is at the heart of these global concerns. The OECD's latest Economic Outlook predicts that the deficit will rise to $825 billion by 2006 (6.4% of America's GDP) assuming unchanged exchange rates. Optimists argue that foreigners will keep financing the deficit because American assets offer high returns and a haven from risk. In fact, private investors have already turned away from dollar assets: the returns on investments in America have recently been lower than in Europe or Japan (see article). And can a currency that has been sliding against the world's next two biggest currencies for 30 years be regarded as “safe”?

In a free market, without the massive support of Asian central banks, the dollar would be far weaker. In any case, such support has its limits, and the dollar now seems likely to fall further. How harmful will the economic consequences be? Will it really undermine the dollar's reserve-currency status?

Periods of dollar decline have often been unhappy for the world economy. The breakdown of Bretton Woods that led to a weaker dollar in the early 1970s was painful for all, contributing to rising inflation and recession. In the late 1980s, the falling dollar had few ill-effects on America's economy, but it played a big role in inflating a bubble in Japan by forcing Japanese authorities to slash interest rates.

This time round, it is a bad sign that everybody is trying to point the finger of blame at somebody else. America says its external deficit is mainly due to sluggish growth in Europe and Japan, and to the fact that China is pegging its exchange rate too low. Europe, alarmed at the “brutal” rise in the euro, says that America's high public borrowing and low household saving are the real culprits.

There is something to both these claims. China and other Asian economies should indeed let their currencies rise, relieving pressure on the euro. It is also true that Asia is partly to blame for America's consumer binge: its central banks' large purchases of Treasury bonds have depressed bond yields, encouraging households in the United States to take out bigger mortgages and spend the cash. And Europe needs to accept, as it is unwilling to, that a weaker dollar will be a good thing if it helps to shrink America's deficit and curb the risk of a future crisis. At the same time, Europe is also right: most of the blame for America's deficit lies at home. America needs to cut its budget deficit. It is not a question of either do this or do that: a cheaper dollar and higher American saving are both needed if a crunch is to be avoided.



Simple but harsh
Many American policymakers talk as though it is better to rely entirely on a falling dollar to solve, somehow, all their problems. Conceivably, it could happen—but such a one-sided remedy would most likely be far more painful than they imagine. America's challenge is not just to reduce its current-account deficit to a level which foreigners are happy to finance by buying more dollar assets, but also to persuade existing foreign creditors to hang on to their vast stock of dollar assets, estimated at almost $11 trillion. A fall in the dollar sufficient to close the current-account deficit might destroy its safe-haven status. If the dollar falls by another 30%, as some predict, it would amount to the biggest default in history: not a conventional default on debt service, but default by stealth, wiping trillions off the value of foreigners' dollar assets.

The dollar's loss of reserve-currency status would lead America's creditors to start cashing those cheques—and what an awful lot of cheques there are to cash. As that process gathered pace, the dollar could tumble further and further. American bond yields (long-term interest rates) would soar, quite likely causing a deep recession. Americans who favour a weak dollar should be careful what they wish for. Cutting the budget deficit looks cheap at the price.



Every bubble must sometime burst.

Sleep tight...

[Ennis Snavely]

I'm sure they know what they are doing.

[claude]

I know that the falling US dollar has hurt some of my clients who export to the US. On the flip side importers (and shoppers) are smiling. I know that my most recent CD purchases were much cheaper than in the past .

Having said that I would rather be in the Cdn situation of paying down federal debt than in the US situation of running up debt. I have been concerned about the potential for an inflationary spiral in the US. I wonder what will happen if the trade deficit doesn't improve with the falling dollar, prices would have to rise (based on my foggy understanding of economics). I would hate to see a return to a high inflation environment. The discussion in these articles about a run on US debt sounds even scarier than what I was considering as a potential consequence of the weakening dollar.

[Root Doctor]

Wednesday December 1, 8:31 PM
FOREX VIEW: It's Official - Dollar Story Goes Mainstream
(This article was originally published Tuesday)

By Grainne McCarthy
A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)--Financial journalists sometimes quip that once a business story hits the pages of the mainstream media, it's running out of steam.

There's a certain insider spin to that view. It's also not necessarily true. Another theory holds that when a seemingly financial market story suddenly bursts into the general press, it's because it's taken on more potential widespread significance for the man on the street.

Nowhere has that been more evident lately than with the seemingly blanket coverage in the U.S. press of the falling dollar.

Of course, the dollar hasn't unexpectedly started to decline. To a large extent, it's been on a downward track since July 2001, when an index that measures the dollar against a basket of currencies hit its long-term peak. Yet, having lost about 22% against the euro from the beginning of 2003 until February 2004, the dollar had pulled back and stabilized in very narrow ranges for much of the rest of the year.

That all changed in October, when once again the dollar started to fall. Since then, the euro has moved convincingly above $1.30 into record territory, while the yen and other key rivals have hit multi-year highs.

This time, the renewed dollar decline is getting more attention. On Nov. 13, the New York Times noted in an editorial that for all its professed desire for a strong dollar, the Bush administration has apparently decided that letting the buck slide is a good way to shrink America's trade deficit. "This is dubious economic policy," it opined.

An editorial in USA Today weighed in on Tuesday. "The dollar's fall could be the proverbial canary in the coal mine, signaling the world's increasing impatience with the United States' habit of living beyond its means," the newspaper said. "If so, the consequences could be ominous: sharply higher interest rates, a steep drop in the stock market and danger for the economy generally."

The Wall Street Journal, admittedly a business newspaper, featured a front page story on the falling dollar and an editorial among its coverage in the past month. Its editorial warned that `'More than one White House term has been damaged by currency crises."

Not Down And Out In Paris Now

Perhaps most surprisingly, the `Talk of The Town" column in the New Yorker magazine weighed in on the subject in its latest edition. Bringing a characteristic literary flair to the subject, magazine regular John Cassidy wrote that during the nineteen-twenties and thirties, when Pound, Hemingway, and Stein were in Paris, they lived on modest remittances from home which, translated into francs, bankrolled lazy afternoons in the Jardin du Luxembourg and giddy evenings on the Boulevard Montparnasse.

"Two people, then, could live comfortably and well in Europe on five dollars a day and could travel," Hemingway wrote.

John Maynard Keynes also merited a mention. Cassidy noted that after the 1944 Bretton Woods conference confirmed the dollar's role as the linchpin of the global economy, Keynes acknowledged the new economic reality: He and his fellow-Brits might have the brains, he is said to have commented, but the Americans had the money.

Not any more. The deluge of coverage - not just in the print press, but on television and everywhere on the Internet - underscores the fact that the U.S. precarious financial situation isn't just fueling alarm among large trading partners overseas, it's starting to interest a broader audience.

We're not quite at a point where every man on the street is talking about the dollar. Because many Americans never travel overseas, they probably don't dwell upon the question of the value of the dollar. It's worth half a subway fare in New York City, or roughly half a gallon of gasoline nationally, many might say.

Yet, as the broad press coverage suggests, there is a risk that the falling dollar will ultimately push up the cost of the imports on which the U.S. has become so dependent, raising the cost of goods for consumers. It could also prompt foreign investors - who lend the U.S. some $2 billion every day to allow it to service its current account and budget deficits - to demand higher returns on their investments.

That could have particular ramifications in the U.S. Treasury bond market, where foreigners, in particular Asian central banks have become a massive presence. In turn, it risks pushing up the cost of borrowing and feeding through to consumers via higher mortgage rates at a time when homeownership in the U.S. is at record highs.

As Cassidy writes in the New Yorker, unlike in previous times in history, the U.S. isn't borrowing to finance investment: "it is taking on debt to finance the government's day-to-day expenses, and to pay for imported consumer goods, such as autos, toys, and electronics."

And, the USA Today editorial argues, the Bush administration is pursuing what seem like very counterproductive twin strategies.

"Ironically, as the U.S. shows increased determination to play from a position of strength on global security issues, it is becoming more and more dependent on the kindness of strangers on economic matters."

(Grainne McCarthy is Assistant Managing Editor for fixed income, macroeconomics and foreign exchange news. Grainne was previously Indonesia bureau chief and also reported for Dow Jones Newswires in Belgium).

-Grainne McCarthy; Dow Jones Newswires; 201 938 2381; grainne.mccarthy@dowjones.com

[Coda]

The US is purposely letting the dollar drop against the euro. It cannot continue much longer without causing interest rates and inflation to come creeping into the equation, but so far so good. Interest rates are still at historical levels, but will increase for the next year or so.

The reason behind this has more to do with Europe not wanting to stimulate it's econonmy, instead relying on cheap exports to maintain sales. It is having a huge effect on the global economy with the US largly the benefactor. Maybe once Europe stops buying our T-bills will we see the dollar stabalize. Also watch Gold, it's now at all time highs.

From a historical perspective the US deficit isn't that alarming. More alarming are the historically low rates of personal savings. As a counter to the posted article, higher imported goods may result in less consumer spending (read: higher savings) or a switch to complimentary US goods - both which will help the US economy.

[claude]

Originally Posted by Coda

As a counter to the posted article, higher imported goods may result in less consumer spending (read: higher savings) or a switch to complimentary US goods - both which will help the US economy.

A decrease in imports with no decline in consumer spending would obviously be good for the trade imbalance, not so good inflation-wise unless there is a lot of idle capacity in the us system (I don't think so). Where you are losing me is the idea that less consumer spending is good for the economy? I fail to see how less economic activity (read sales) would be good for growth in any way. That would potentially minimize inflation (maybe), remember stagflation? I have been concerned for some time about the direction of the US economy and I have yet to see persuasive arguments as to how this can work out in a good way.

[Juju]

It's my understanding that a modest deficit is not a bad thing.

It's also my understanding that ensuring "democracy" around the world means ensuring the value of the dollar. Case in point: The value of oil is traded in dollars, hence having dollars makes sense. If countries go to buying oil in Euros, which is gaining momentum, that essentially trades back US dollars for Euros, which essentially puts more dollars back in America and leads to inflation.

Here's a semi-decent breakdown of the theory taken from the Foundation for Economics of Stability. I'm trying not to do the cut-and-paste thingy anymore, but it takes a better explaination than I am capable of:
--------------------------------------------
Cóilín Nunan: Oil, Currency and the War on Iraq



It will not come as news to anyone that the US dominates the world economically and militarily. But the exact mechanisms by which American hegemony has been established and maintained are perhaps less well understood than they might be. One tool used to great effect has been the dollar, but its efficacy has recently been under threat since Europe introduced the euro.

The dollar is the de facto world reserve currency: the US currency accounts for approximately two thirds of all official exchange reserves. More than four-fifths of all foreign exchange transactions and half of all world exports are denominated in dollars. In addition, all IMF loans are denominated in dollars.

But the more dollars there are circulating outside the US, or invested by foreign owners in American assets, the more the rest of the world has had to provide the US with goods and services in exchange for these dollars. The dollars cost the US next to nothing to produce, so the fact that the world uses the currency in this way means that the US is importing vast quantities of goods and services virtually for free.

Since so many foreign-owned dollars are not spent on American goods and services, the US is able to run a huge trade deficit year after year without apparently any major economic consequences. The most recently published figures, for example, show that in November of last year US imports were worth 48% more than US exports1. No other country can run such a large trade deficit with impunity. The financial media tell us the US is acting as the 'consumer of last resort' and the implication is that we should be thankful, but a more enlightening description of this state of affairs would be to say that it is getting a massive interest-free loan from the rest of the world.

While the US' position may seem inviolable, one should remember that the more you have, the more you have to lose. And recently there have been signs of how, for the first time in a long time, the US may be beginning to lose.

One of the stated economic objectives, and perhaps the primary objective, when setting up the euro was to turn it into a reserve currency to challenge the dollar so that Europe too could get something for nothing.

This however would be a disaster for the US. Not only would they lose a large part of their annual subsidy of effectively free goods and services, but countries switching to euro reserves from dollar reserves would bring down the value of the US currency. Imports would start to cost Americans a lot more and as increasing numbers of those holding dollars began to spend them, the US would have to start paying its debts by supplying in goods and services to foreign countries, thus reducing American living standards. As countries and businesses converted their dollar assets into euro assets, the US property and stock market bubbles would, without doubt, burst. The Federal Reserve would no longer be able to print more money to reflate the bubble, as it is currently openly considering doing, because, without lots of eager foreigners prepared to mop them up, a serious inflation would result which, in turn, would make foreigners even more reluctant to hold the US currency and thus heighten the crisis.

There is though one major obstacle to this happening: oil. Oil is not just by far the most important commodity traded internationally, it is the lifeblood of all modern industrialised economies. If you don't have oil, you have to buy it. And if you want to buy oil on the international markets, you usually have to have dollars. Until recently all OPEC countries agreed to sell their oil for dollars only. So long as this remained the case, the euro was unlikely to become the major reserve currency: there is not a lot of point in stockpiling euros if every time you need to buy oil you have to change them into dollars. This arrangement also meant that the US effectively part-controlled the entire world oil market: you could only buy oil if you had dollars, and only one country had the right to print dollars - the US.

If on the other hand OPEC were to decide to accept euros only for its oil (assuming for a moment it were allowed to make this decision), then American economic dominance would be over. Not only would Europe not need as many dollars anymore, but Japan which imports over 80% of its oil from the Middle East would think it wise to convert a large portion of its dollar assets to euro assets (Japan is the major subsidiser of the US because it holds so many dollar investments). The US on the other hand, being the world's largest oil importer would have to run a trade surplus to acquire euros. The conversion from trade deficit to trade surplus would have to be achieved at a time when its property and stock market prices were collapsing and its domestic supplies of oil and gas were contracting. It would be a very painful conversion.

The purely economic arguments for OPEC converting to the euro, at least for a while, seem very strong. The Euro-zone does not run a huge trade deficit nor is it heavily endebted to the rest of the world like the US and interest rates in the Euro-zone are also significantly higher. The Euro-zone has a larger share of world trade than the US and is the Middle East's main trading partner. And nearly everything you can buy for dollars you can also buy for euros - apart, of course, from oil. Furthermore, if OPEC were to convert their dollar assets to euro assets and then require payment for oil in Euros, their assets would immediately increase in value, since oil importing countries would be forced to also convert part of their assets, driving the prices up. For OPEC, backing the euro would be a self-fulfilling prophesy. They could then at some later date move to some other currency, perhaps back to the dollar, and again make huge profits.

But of course it is not a purely economic decision.

So far only one OPEC country has dared switch to the euro: Iraq, in November 2002,3. There is little doubt that this was a deliberate attempt by Saddam to strike back at the US, but in economic terms it has also turned out to have been a huge success: at the time of Iraq's conversion the euro was worth around 83 US cents but it is now worth over $1.05. There may however be other consequences to this decision.

One other OPEC country has been talking publicly about possible conversion to the euro since 1999: Iran2,4, a country which has since been included in the George W. Bush's 'axis of evil'.

A third OPEC country which has recently fallen out with the US government is Venezuela and it too has been showing disloyalty to the dollar. Under Hugo Chavez's rule, Venezuela has established barter deals for trading its oil with 12 Latin American countries as well as Cuba. This means that the US is missing out on its usual subsidy and might help explain the American wish to see the back of Chavez. At the OPEC summit in September 2000, Chavez delivered to the OPEC heads of state the report of the 'International Seminar on the Future of Energy', a conference called by Chavez earlier that year to examine the future supplies of both fossil and renewable energies. One of the two key recommendations of the report was that 'OPEC take advantage of high-tech electronic barter and bi-lateral exchanges of its oil with its developing country customers'5, i.e. OPEC should avoid using both the dollar and the euro for many transactions.

And last April, a senior OPEC representative gave a public speech in Spain during Spain's presidency of the EU during which he made clear that though OPEC had as yet no plans to make oil available for euros, it was an option that was being considered and which could well be of economic benefit to many OPEC countries, particularly those of the Middle East6.

As oil production is now in decline in most oil producing countries, the importance of the remaining large oil producers, particularly those of the Middle East, is going to grow and grow in years to come7.

Iraq, whose oil production has been severely curtailed by sanctions, is one of a very small number of countries which can help ease this looming oil shortage. Europe, like most of the rest of the world, wishes to see a peaceful resolution of the current US-Iraqi tensions and a gradual lifting of the sanctions - this would certainly serve its interests best. But as Iraqi oil is denominated in euros, allowing it to become more widely available at present could loosen the dollar stranglehold and possibly do more damage than good to US economic health.

All of this is bad news for the US economy and the dollar. The fear for Washington will be that not only will the future price of oil not be right, but the currency might not be right either. Which perhaps helps explain why the US is increasingly turning to its second major tool for dominating world affairs: military force.

Energy and climate section of this website

Petrodollar or Petroeuro? A new source of global conflict: November 2004 article by Cóilín Nunan

REFERENCES

1. Anon., 'Trade Deficit Surges to a Record High', Reuters, (January 17, 2003), http://www.centredaily.com/mld/centr...ws/4970891.htm.
2. Recknagel, Charles, 'Iraq: Baghdad Moves to Euro', Radio Free Europe (November 1, 2000), http://www.rferl.org/nca/features/20...2000160846.asp.
3. Anon., 'A Look At The World's Economy', CBS Worldwide Inc., (December 22, 2000), http://www.cbsnews.com/stories/2000/...in259203.shtml.
4. Anon., 'Iran may switch to euro for crude sale payments', Alexander Oil and Gas, (September 5, 2002), http://www.gasandoil.com/goc/news/ntm23638.htm.
5. Hazel Henderson, 'Globocop v. Venezuela's Chavez: Oil, Globalization and Competing Visions of Development', InterPress Service, (April 2002), http://www.hazelhenderson.com/Globoc....%20Chavez.htm.
6. Javad Yarjani, 'The Choice of Currency for the Denomination of the Oil Bill', (April 14, 2002), http://www.opec.org/NewsInfo/Speeche...SpainApr14.htm.
7. The Association for the Study of Peak Oil, Newsletter 26, (February 2003), http://www.asponews.org.
FURTHER READING

* William Clark, 'The Real Reasons for the Upcoming War With Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth', (January 2003), http://www.ratical.org/ratville/CAH/RRiraqWar.html.

[Gary Sisco]

A modest deficit? Like half a trillion dollars?

The main point of the Economist article is very serious. If foreign investment in the US dollar ceases (as any investment that doesn't pay off will, never mind one that loses huge amounts and will only continue to if nothing changes in a radical fashion, compared to today's mad practice), it will be time, as the writer says, for all of those outstanding checks to be paid. And everyone knows the first rule: Everyone has to pay The Man, sooner or later, one way or another. No one can violate that rule forever. Not even Alfred E. Strasser and his madcap handlers.

You think savings are at a low rate now? Wait for the enormous tax *increases* that will have to come to pay back the borrowing that's creating these unprecedented deficits, plus their interest, plus the mindboggling national debt and its interest that long preceded it.

And to think that the Repub Party in the Reagan Daze (which is most of the same people in power today) were willing to all but kill (Americans -- foreigners they didn't mind killing by the hundreds of thousands and still don't) over the deficit issue.

Go figure.

[Coda]

The dollar bounced overnight. Oil dropped to $42/barrel.

The dollar bounce has to be from foreign countries buying more T-bills. It seems that the appetite is still quite healthy. Still, I expect the dollar to continue to drop over the longer term - and I think the drop will be significant enough to force the european governments to come up with a growth strategy that does not rely on exports to the US. The dollar traded around .82 Euros in July, now at .74 (an all time high) and my prediction is that it was fall as low as .60 in the next two years.

Now, why would foreign investment in the dollar cease? Efficent markets would increase interest rates until an equilibrium existed. I couldn't fathom a reason why, other than political, that a country would do this. If it were a political decision, it would be disasterous to that foreign leader unless s/he had a plan in place to offset the market disruption.

Why do most all currencies (read countries) peg the value relative to the dollar and not the Euro or Yen or whatever?

[stonemonkts]

Originally Posted by Coda

Also watch Gold, it's now at all time highs.

Not even close.

I have a vivid memory of gold hitting 890 bucks back in 1980.

[Coda]

True. I forgot about the J. Carter years, or more likely my memory blocked it out as a self protecting mechanism.

[Gary Sisco]

Because they do, Coda, does not mean that they will in future. Capital moves wherever the widest profit margin is. If the dollar ceases to be a profitable investment, it will lose its status. And there is no indication at all that anyone in the US will do anything other than what they are already doing.

When I was in the service, years ago, a dollar bought 300 yen and sometimes more than that. Even a lowly enlisted puke like myself could afford an occasional night in Tokyo, with a (shared) hotel room to boot. I couldn't afford a taxi to the airport there today, or a bowl of curried rice.

[stonemonkts]

Originally Posted by Coda

True. I forgot about the J. Carter years, or more likely my memory blocked it out as a self protecting mechanism.

Here are the yearly highs for spot gold and the President at the time (bolded years are when it was higher than today's price):

1981 - 647 - Reagan
1982 - 522 - Reagan
1983 - 545 - Reagan
1984 - 435 - Reagan
1985 - 346 - Reagan
1986 - 471 - Reagan
1987 - 531 - Reagan
1988 - 522 - Reagan
1989 - 448 - Bush
1990 - 451 - Bush
1991 - 432 - Bush
1992 - 384 - Bush
1993 - 435 - Clinton
1994 - 425 - Clinton
1995 - 422 - Clinton
1996 - 401 - Clinton
1997 - 365 - Clinton
1998 - 313 - Clinton
1999 - 326 - Clinton
2000 - 316 - Clinton
2001 - Present - 294 - ~445 - Little Bush

[Gary Sisco]

Too bad his father wasn't named Dick, what?

[willy]

Federal Deficits do indeed matter, just like a family being in debt does matter, but only so far as your ability to pay the debt off is concerned. If I'm in debt $200,000 and only make $20,000 a year then I'm hurting. If I make $500,000 a year then it's not that big of a deal. So a half a trillion dollar deficit is indeed modest if your yearly income is, say, 5 trillion dollars, no?

How much is the current national debt? Not the deficit, but the total national debt. How much do the US taxpayers make a year (total income nationwide)?

[sonic1]

Isn't a conservative hallmark controlling spending???

Or is that only when a democrat is in office.


They are all full of shit. Especially this group of goons. They have spent more than any other president previous. You can't blame 911 for that, you blame an uncontrolled republican agenda with no check and balance.

The same happens when democrats are uncontrolled, though they prefer programs like education and healthcare over starting paranoid wars.

Willis, your people are just as silly as any democrat. They all have agendas. This administration is even more hell bent on their agenda. That is what spending is all about.

BTW your avatar is a rude little bastard with his little pointing fingers. I always take offense. That is why I like calling you little man. Hope you don't mind.

[Gary Sisco]

You don't have an income if you're half a trillion in the hole, duh.

[Gary Sisco]

Is there nothing Republicans won't apologize for or betray in their own party's tradition?

I can't think of any but one, at this point, which they also share with their alleged opposition party: lying at every opportunity.

[sonic1]

hey you! you! don't pick on republicans!

[Gary Sisco]

Why not? The Dems won't.

[sonic1]

THis guy tried.



"wa wa wah wah wahw wawa wahwah hwah waha wa"

[stonemonkts]

Originally Posted by willy

How much is the current national debt? Not the deficit, but the total national debt. How much do the US taxpayers make a year (total income nationwide)?

It is not the taxpayer gross income which factors into any equation regarding the national debt, but rather the revenue which the U.S. government receives, if you wish to make a meaningful comparison, that is.

One shouldn't factor the US taxpayer’s total income into some imaginary comparison for argument sake, but rather the actual revenue flowing into the U.S. Treasury.

I'm not an economist but that's how I would look at it, if I were to bother drawing any comparisons.

If I'm wrong hopefully somebody who knows will correct me.

[sonic1]

no I think you are right. and bush is cutting taxes more so whatever number you come up with, get ready to subtract a little more.

[frank m]

Remember the plan divulged during the Reagan administration. Cut taxes, supposedly to stimulate the economy. (Sound familiar") If the deficit rises, it will mean there will be less room in the budget for social spending (makes republicans happy on both counts).

[Darryl G. Thomas]

Frank M.,

It was called "starving the beast" by one of Reagan's economic advisor's Stockman (can't remember his first name).

It's based on the premise of the free lunch. Americans like middle class entitlements like Social Security and Medicare. So it's deemed political suicide to just end them. However, Americans really don't want to pay for them (taxes). And Americans love tax cuts, even teensy-weensy ones that may save them a couple of hundred dollars a year.

So if you can't legislate programs out of existence you de-fund them. You make them fiscally impossible. Reduced revenue leads to reduced government spending (supposedly).

Democrats used to be derided as being "tax and spend" liberals. Wasting "your" money on the undeserving. But now we have tax-cut and spend Republicans (I refuse to call them conservatives because economically they're not).

For now we're getting our free lunch, but eventually you have to pay the man. But because we're so notoriously short-sighted, we don't care. We want our candy now, screw the consequences.

[sonic1]

More conservatives who have trouble with Bush's policies:


Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan
administration. He was Associate Editor of the Wall Street Journal
editorial page and Contributing Editor of National Review.


The Bush Delusions

Successful at Incompetence

By PAUL CRAIG ROBERTS

Is the Bush administration competent? There is enough information at hand
on which to base an objective opinion.

On the eve of President Bush's second term, the US economy has fewer jobs
than when Bush was inaugurated four years ago.

During Bush's first term, the US economy was unable to create jobs in both
export and import-competitive sectors. The formerly powerful US jobs
machine has been allowed to run down to the point that jobs can only be
created in nontradable domestic services.

The service jobs that have been created are too few in number to offset
the loss of manufacturing and knowledge jobs. Unemployed manufacturing
workers, US software engineers, computer programers, and IT workers number
in the hundreds of thousands.

During Bush's first term, the value of the US dollar declined dramatically
in relation to other traded currencies. The extraordinary diminution in the
dollar's exchange value threatens its role as the world's reserve currency.
If the dollar loses its role as reserve currency, there will be
catastrophic consequences for US living standards and superpower status.

The decline in the dollar's exchange value has failed to reduce the US
trade deficit, because the Bush administration permits China to peg its
currency to the dollar. As the dollar declines, China's currency declines
with it, thus maintaining China's advantage in US markets while China gains
greater advantage in all other markets. Because China pegs its currency to
the dollar, the dollar's decline has not reduced the advantage of
outsourcing to China.

The ink in the federal budget is as red as that in the trade account. A
country with a $440 billion budget deficit and a $600 billion trade deficit
is not financially positioned to start a war in the Middle East. Instead
of dealing with serious economic problems at home, Bush marched off to a
gratuitous war.

Bush's invasion of Iraq is one of the greatest strategic blunders in
history. The Bush administration assumed that the invasion and occupation
of Iraq would be a "cakewalk," because the indigenous population would
welcome and support Americans as liberators.

The reality is that all available US troops are tied down by a few
thousand lightly armed insurgents who have the support of the Iraqi people.
The US is so short of military manpower that it has been forced to call up
the reserves and the National Guard, to keep troops deployed who have
served their time in uniform, and, now, to call up men in their 50s who
have not been in uniform for 20 years.

Bush's invasion has turned not only Iraqis but all of the Middle East
against the US. Where there were no terrorists and no support for
terrorists, there are now tens of thousands of terrorists. America's puppet
regimes in Egypt, Pakistan, Jordan and Saudi Arabia are endangered by the
anti-Americanism that is engulfing the Middle East.

Like Hitler at Stalingrad, Bush cannot recognize the danger. Unable to
occupy Iraq, Bush plans to expand the war to Iran and Syria. The identical
Bush officials who lied about Iraq having nuclear weapons or weapons
programs now lie about Iran having nuclear weapons or weapons programs.

Immune to evidence, the Bush administration is delusional and capable of
horrendous miscalculation. The flowers with which the US Department of
Defense said our troops would be greeted in Iraq turned out to be bullets,
rocket-propelled grenades, and roadside bombs.

On November 22, the US military hospital in Landstuhl, Germany, reported
that its doctors have treated 20,802 US troops from Iraq. Few of the
injured have been able to return to their units.

That is twice the casualty figure reported by the Pentagon and comprises
15% of the US army in Iraq. In exchange, since the invasion the US has
killed some 100,000 Iraqi civilians and perhaps 2,000 insurgents.

The ultimate test of competence is ability to admit mistakes. This the Bush
administration cannot do. Steadfastly denying any mistake, Bush is
promoting those responsible for the Iraq carnage to higher office. Will
four more years of Bush terminate America's superpower status?

When Bush attacked Iraq, he jettisoned a half century of American foreign
policy. He unilaterally threw diplomacy and allies out the door to invade a
country that had done nothing to the US despite suffering a decade of
American bombing and embargoes that, according to the UN, killed 500,000
Iraqi children.

Indiscriminate killing of Iraqi civilians and torture in US military
prisons have destroyed the virtuous image that Bush claims for US
aggression.

Not content to cause turmoil in the Middle East, the Bush administration
is arrogantly and foolishly stirring the pot in Ukraine, interfering in an
election in Russia's sphere of influence. In just four years, Bush has
created a new image of America as a reckless hypocrite that lectures others
about democracy, while engaging in electoral fraud in Ohio and Florida and
imposing a puppet government on Iraq at the point of bayonets.

[Darryl G. Thomas]

sonic1,

I'm not an expert on conservative politics but I was under the impression they followed certain guidelines:

Limited government
Fiscal restraint
A strong military
Avoidance of foreign "adventures"

Right now Bush is violating 3 of the above. There are a ton of conservatives out there who are deeply disturbed by Bush's fiscal policies. But I believe they set aside their concerns because they wanted to insure that a Republican was sitting in the White House after Nov. 2. Look at Alan Greenspan. Everything was peachy-keen prior to the election. Now that Bush won Greenspan's out there talknig about the dangers of high deficits.

[sonic1]

naw darryl it all about FREEDOM

[willy]

Sonic,

I never take offense when it comes to liberals and their name calling. Like most Americans I just ignore liberals these days