Too much debt?

[sdunn96]

Originally Posted by Lostviking

We have been bombarded with the idea that the US has too much debt. I think we are often lead to believe that this is bad and that the US is taking on much more debt than the rest of the world.

This chart shows debt to GDP ratios for the entire world. The US is high - but not much higher than many countries and certainly not the worst. (source: CIA factbook)



This next chart is more interesting to this discussion, it shows US debt since 1930 as a percent of GDP. When you look at this chart, remember that we were out of the Great Depression by 1945 - look where the US debt ratio was at that point!



We spent ourselves out of the last depression and we will in time spend ourselves out of this one. Obama would have a long way to go to come close to FDR's level of deficit spending. And, going back to the first chart, all countries do this. Ours is not an irresponsible level yet. Not if we we expand our GDP to meet our expanded debt level.

That said, its what we borrow money for that really matters - not our debt level. If we borrow to fund economic expansion, thats a good thing. If we borrow to keep crappy companies afloat and poor businesses in business, its an awful thing. We gave billions and billions this past year to keep the big three auto companies in business (With Obama's blessing). Now, while its true that many many people would have lost their jobs in the short run, in the long run we are stuck with three companies that can't possibly survive and a huge loss of borrowed money. This expenditure did not help our GDP or expand our economy.

I am all for the government spending money. If they stop we are all doomed. But its the way they spend their money that does matter. Unfortunately, the Obama administration do not seem to get this. Every action they take seems to support poor business models and unions. Not growth. restrictions and penalties are fine. Forced repayment of TARP money is fine. But new taxes? Controls that prevent growth? No, no, no.

I want to see our government spend money and make rules in a way that will expand our GDP. I am not afraid of debt. In fact, I welcome it.

You say that if we borrow for economic expansion, that is a good thing.
What in the $787 B dollar Stimulus was for economic expansion?

Also, if there were things why wasn't most of the funds pushed out in '09 vs. waiting til '10 to really start pushing out the money?

For me economic expansion is when you PRODUCE something that people want to buy and use, and there is a demand.

I agree with your view on "The BIG Three"....I fault Bush for starting it and Obama continuing it.
Best thing to have happen there was for them to go bankrupt so they can re-do contracts and shed money sucking black holes in the company.
Larry Kudlow back in '08 or '09 posted numbers for the year '07 for Toyota and GMC.
Both sold about the same number of cars (I believe that GMC sold like 16K more)...but the numbers:
Toyota - Profit of $17 Billion
GMC - Loss of $35 Billion
Legacy costs/Unions are killing our auto industry

I don't necessarily believe that if the Gov. stops spending, we are all doomed.
I view it as a pendulum, with the Gov. spending like they are we are all the way on one side of the pendulum.....now that keeps a certain flow.
Should they stop spending, then the pendulum begins to swing back to the other side.....during that swing there is a point that economically it will hurt us, but once the swing carries through to the other side, another "flow" will establish and growth can begin.
With doing what they are doing in D.C. they are taking money out of the private sector (whether directly right now through taxes, or later through paying back the loan) to put it back into the private sector. Only problem is that right now, the only growth in jobs has been government jobs and not private sector jobs....that will break the system if it keeps up. (think unions)

Some debt is good, but the amount of debt we are accruing will hurt at some point.

Originally Posted by Lostviking

We never ever ever pay for our debt. We just borrow more and more. If we ever stop - no more economy.

We also inflate it away.

Which is also very sad....Because inflation is a hidden tax on the citizens of that country.
So while you work and do what all the "smart" people say, "save for retirement"......well your retirement nest egg is being eroded because now the money you have is worth less. So your purchasing power later in life will be less, when you need it most.

Originally Posted by waiting

The best thing that Obama can do right now, is replace Ben Bernanke, Larry Summers, and Tim Geithner. And people should really listen to what Elisabeth Warren has to say on the situation. The problem is that as soon as Obama appears to be reigning in the Wall St. crowd, the market goes way down, and everyone starts pointing their fingers at him and saying he is screwing things up even worse. People need to understand that we cannot be held hostage to the whim of Wall St. if we are to remain a viable nation. And that new laws and regulations must be in place that keep what just happened from happening again.

Well yes of course the market goes down, cause if his "laws" are put in place, it makes our banks or whatever less competitive so people with capital will go elsewhere, so we lose money.
Plus keep in mind, that most banks have paid back their TARP loan plus interest...while others are in the process of doing so.
They are wanting this tax to cover the loss of money they are incurring by propping up GMC/Chrysler.

What Obama, Congress and their cronies are doing is very anti-capital and anti-competitive.
The best thing that could have happened was for when the Congress wrote out the TARP rules, Dodd should have left in there that bonuses would not be paid out......but he didn't. He took it out and thus the banks continued business as usual.

You can not fault capitalism if you remove the repercussions that you incur when making bad decisions.
Plus no on in D.C. seems to put the government on the hook for helping with the problem of the melt down. There were/are tons of gov. intervention and regulations in the banking arena just as in other parts of the market.

Originally Posted by Aunt Sam

Now that the corporations can legally fund billions into purchasing our government officials, maybe they should just take care of our national debt.

I find this laughable.
That Obama wants to make sure that enemy terrorists and illegal aliens are afforded rights under our Constitution, but he is mad if corporations in the U.S. taxed by the government are afforded protection under the First Amendment.

This coming from the guy who promised McCain during the campaign that he would do like McCain and take the public matching funds....but then realized that once he got the nod, he could get more money from private areas (unions, banks, etc..)

So corporate/private funding was still there, just in a different way.
Remember that Obama was able to get over $600 Million dollars for the campaign.



Obama and his group need to back off a bit and allow some stabilization to our economy. No one knows what he is gonna do or what will pass, so no company will hire during this time if they know that later they are gonna get hit w/ taxes.

[sdunn96]

And also another point on gov. spending bringing us out of the Great Depression.

I would bet more on the fact that WWII ended and everything in Europe and Asia was toast.
And S. America was not an economic engine it is today.

So the only place to go was to the U.S. for the products because our assets were still in tact for production.

[Lostviking]

Originally Posted by sdunn96

You say that if we borrow for economic expansion, that is a good thing.
What in the $787 B dollar Stimulus was for economic expansion?

None of it, which is why it failed as a stimulus.

I think you missed my point, sorry if it wasn't clear. So far,our current government has given out the wrong kind of stimulus.

That said, its what we borrow money for that really matters - not our debt level. If we borrow to fund economic expansion, thats a good thing. If we borrow to keep crappy companies afloat and poor businesses in business, its an awful thing. We gave billions and billions this past year to keep the big three auto companies in business (With Obama's blessing). Now, while its true that many many people would have lost their jobs in the short run, in the long run we are stuck with three companies that can't possibly survive and a huge loss of borrowed money. This expenditure did not help our GDP or expand our economy.

In my opinion, it only helps if it is money the government spends on things and services. Like healthcare, construction, energy. Things that involve money changing hands 11 or 12 times before that money hits a savings account. Thats what drives the economy.

For me economic expansion is when you PRODUCE something that people want to buy and use, and there is a demand.

True, and you are just restating what I said in the first post. But the government can pay for production - and it does boost the economy. There are all sorts of data on this, but the most conservative estimates place the effect on GDP at around $1.45 for each government dollar spent on goods and services. For each dollar the gov spends on salary and aid, it is about $0.80 GDP growth.

In other words, if the government keeps spending on goods and services it can make this country infinitely better off, and on the flip side, if it keeps bailing people out and simply putting them on the payroll we eventually have a shrunken economy. Negative growth.

You are kidding yourself if you think ANY growth would occur without the federal government spending a dime.

I agree with your view on "The BIG Three"....I fault Bush for starting it and Obama continuing it.
Best thing to have happen there was for them to go bankrupt so they can re-do contracts and shed money sucking black holes in the company.

And that will continue until they are looked at as not-too-big-to-fail.

Unions are killing our auto industry

Yes they are! And our president has done nothing but make them more and more powerful. Not the direction that will boost our economy.

They are wanting this tax to cover the loss of money they are incurring by propping up GMC/Chrysler.

I will go one better - Obama wants this tax because he want to be seen as the enemy of big banks. He believes the american public will view such taxes as a just punishment for their evil deeds. He thinks we will look at him like Robin Hood.

I know that most banks have repaid tarp money. (But not Wells Fargo). I also know the money was actually forced on many banks. Should the whole industry be taxed it will do two things. One - they will pass the expense onto their customers in the form of higher fees. Two - the banks will have less money to hire and invest. Read less economic growth as a result. Tax everyone or tax no one.

Dodd should have left in there that bonuses would not be paid out......but he didn't. He took it out and thus the banks continued business as usual.

They had to take it out because it violated 200 years of contract law. Unless you force a company into bankruptcy, you cannot void all contracts you find offensive. Had they allowed for bankruptcies instead, all the current contracts would have been voided legally. To illegally rip up a contract at the governments whim is exactly what you would expect in third world countries, not in the US. It would have made ALL contracts made in this country worthless, because it would mean that the government could cancel any contract at will.

[sdunn96]

You are kidding yourself if you think ANY growth would occur without the federal government spending a dime.

I agree with this point, if it is done right as you stated.
I would disagree though that healthcare is one of those areas.
We have Medicare, Medicade, S-CHIP, and those first two are not in good shape. Even the Mayo clinics (the ones Obama held up as ways of doing it right) are turning away Medicare patients because they are losing too much money.
That is one thing that really bothered me about this healthcare debate....they wanted to strip out $500 B in waste....I thought this if true should have been a separate bill on its own.

I live in Va. Beach, so we are surrounded by military installations, so I know the economic engine it provides for our area.

They had to take it out because it violated 200 years of contract law. Unless you force a company into bankruptcy, you cannot void all contracts you find offensive. Had they allowed for bankruptcies instead, all the current contracts would have been voided legally. To illegally rip up a contract at the governments whim is exactly what you would expect in third world countries, not in the US. It would have made ALL contracts made in this country worthless, because it would mean that the government could cancel any contract at will.

Well that didn't stop them when they did what they did with the bond holders of the auto companies.
The bond holders had legitimate rights to the having first dibs on the companies, but the government pretty much gave them the finger.
Could say the same for people losing property to eminent domain.

So most likely they were just looking out for their bank buddies.

[Lostviking]

Originally Posted by sdunn96

Well that didn't stop them when they did what they did with the bond holders of the auto companies.
The bond holders had legitimate rights to the having first dibs on the companies, but the government pretty much gave them the finger.
Could say the same for people losing property to eminent domain.

So most likely they were just looking out for their bank buddies.

sdunn - you are preaching to the converted on that one I couldn't agree with you more. And I must say it eroded a lot of my hope for Obama. There were many other ways to do that - bankruptcy comes to mind - that did not violate the law. He changed the value of all bonds that day. And what was worse was he labeled legal bond holders "greedy" for wanted the law upheld.


As to the comment about healthcare - I meant an expansion of healthcare will result in overall economic expansion. The more the gov spends on it the more dollars move around the whole system. But it is a very flawed system.

[sdunn96]

There were many other ways to do that - bankruptcy comes to mind - that did not violate the law. He changed the value of all bonds that day. And what was worse was he labeled legal bond holders "greedy" for wanted the law upheld.

Yes indeed.
When the news came down on that I felt it sent really bad signals...but I guess only time will tell.

[Lostviking]

Originally Posted by sdunn96

Yes indeed.
When the news came down on that I felt it sent really bad signals...but I guess only time will tell.

Yes - but its not looking good.

I know several retired people who were slammed by that GM bond thing. Their retirement money evaporated just like that. What could they do? You can't sue the government and the president was calling them "greedy". One guy lost 1/3 of his retirement egg in that instant. He does not like Obama.

[vonnegut]

Originally Posted by Rocky Raccoon

See, just because it hasn't had to happen yet, doesn't mean it won't.

Who's going to make us, hmmm? Canada?

Resource Shortfall.

[Brian]

Hey now, no picking on Canada.

[vonnegut]

<3 that picture.