The US National debt in context

[DaddyHoggy]

Very clever, very scary...

http://www.wtfnoway.com/

[CaptSolo]

This situation has been building for quite some time. Many factors involved but the biggest one is the cost of waging the war on terror. Americans as a rule are high on themselves and that is always a mistake. "It is in our interests" is now a foul stench in the nostrils.

[RyanHoots]

The USA needs help. Serious help.
Just for fun, maybe I'll create an alternate savefile on my computer that has a 15 trillion credit debt, and then try to repay it.

[lfnfan]

...the biggest one is the cost of waging the war on terror.

at least, that's the line the Democrats keep trying to sell to the American public. Some are happy to hear that narrative and not look any harder. But it's worth calculating the cost to the American economy of all the domestic and international 'social' programmes and the anti-industry green legislation that has popped up, or ramped up, in the last 3 years.

And what's the fuss about the smelly war on terror? Didn't the USA give up fighting "to win" a few months after going in to Iraq? Now it's a war to make sure everyone feels warm and fuzzy, and is entitled to 'one person, one vote, one time'?

The USA needs help. Serious help.

and not just the USA; what's going on with China's centrally-directed capitalist experiment? And the Eurozone is seeing the cracks appear faster than they can be papered over. The world has an increasingly integrated economy. And that's the scary part.

[Smivs]

The world has an increasingly integrated economy. And that's the scary part.

Disintegrating, I'd say, and that's even scarier.

[Dragonfire]

Here's the two cents of a comparative and US politics scholar. There are a few major problems with the US economy, and unfortunately, they are pretty common in most major nations.

1. 75% or more of the nation's total wealth is concentrated in the hands of 10% or less of the population.

This is ultimately what created the Great Depression. Most of you probably know that the stock market is largely an illusion - the values of a stock have very little to do with the actual net worth of a company and its products. Thus, when the stock market crashed, the the illusion of American businesses being worth little to nothing, and the losses taken by people who played the stock market, combined to prompt the wealthiest 10% to go into protective mode. They pulled their money (remember, a majority) OUT of the economy, leaving the 90% of the population with LESS than a quarter of the nation's wealth to support 100% of the economy.

What brought us out of the Great Depression? It was our entry into World War II. Whether you support war or not, war IS profitable on many levels. With the promise of income, the wealthiest 10% started putting money back into the economy. And the illusion of prosperity restrengthened, without the distribution of wealth ever changing.

Problem is, that distribution never changed, and many economists think we never left the Great Depression's financial setup. The money going into the economy gave the appearance of the 90% of the population having money, but through disproportional taxation, corporate structures, and various loan structures (including credit cards), that money just goes right back into the pockets of the 10%.

2. The government is overspending, and wasting a good portion of their money. Here in the U.S., "special project" earmarks show up on just about every bill that passes, and most of these projects are just waste. A huge chunk of tax money is marked for a "secret budget" that only the Congress knows about (even the President isn't allowed to know!)

Don't blame one single party. Republicans and Democrats are equally guilty, with Independents not far behind. That's a major problem with any government, and a law of political science. As soon as a system presents opportunities for personal betterment of the people in charge, the problem will always get worse until the government ceases to exist.

3. The tax distribution is off kilter. While at first glance, U.S. taxes (and the same with a lot of other major countries) may seem only a little off, when you factor in tax breaks and refunds, the wealthiest 10% (again, with 75% or more of the nation's wealth) pay next to NOTHING in taxes. Thus, no matter how much or little you tax the middle and lower class, the government cannot bring in enough to fund their budget (which, again, needs trimming as it is).

Again, don't blame any one party. It ties into that law of political science I mentioned earlier. By giving the wealthiest 10% and the big corporations tax breaks and whatnot, politicians receive a number of kickbacks, including campaign money.

4. The U.S. economy relies far too heavily on off-shores production and on imports. So many jobs are overseas, away from U.S. government regulation (and from a lot of taxes), that not only is it further starving the government income, but it is adding to (if not almost solely responsible for) the high unemployment rate in the United States. Corporations know they can get cheaper labor and raw materials abroad without anyone stopping them, so they take advantage of that, to the detriment of the US economy.

(In case you're wondering, I've taken an interest in economics and politics since an early age, so I've had almost two decades to learn from observation (started watching the evening news at age 3 or 4), added to a lot of studying and researching, including a few courses, over the past five years. Its a hobby.)

[Cmd. Cheyd]

Ahh... To be young and ignorant again...

[Dragonfire]

You're more than welcome to make your counter-argument, you know. In fact, I'd be interested to see your side of the issue.

(For the sake of argument, just about everything I've mentioned is common knowledge. I've just tied it together.)

[lfnfan]

edit: apologies for the 'tone' - I just re-read this and it sounds a bit harsh.

Hi Dragonfire

Whether you adopt a socialist or capitalist model, I would argue that one equation holds true: it is not possible to spend more than you earn ad infinitum. I guess we can basically agree on that?

So maybe you can explain to me how either of the two things you talk about would change that equation:

(a) changing the distribution of wealth either equally to every citizen or keeping it centralised in the government
(b) diverting taxation 100% to the 'entitled needy'.

If a person or a country doesn't live within its means, eventually it will come unstuck. Isn't it as simple as that?


A couple of your other statements were also a bit hard for me to come to terms with but I don't have the heart to address them.

On a different note, I think Oolite is based squarely on a capitalist model (from the perspective of a commander, anyway). Which is possibly why I enjoy it so much

[Dragonfire]

You bring up some very good points, lfnfan. (edit: I didn't take any offense at your post. it sounded pretty reasonable to me.)

It is true that you cannot spend more than you earn. (In the short term, it may appear otherwise, thanks to credit. But really in the end, it just exacerbates the debt.) The US government (and a lot of other major countries' governments) often live far beyond their means...no duh, otherwise this topic wouldn't exist. And they suffer for it by having these national debts.

However, while no amount of financial restructuring is going to alleviate this dynamic, it will raise the threshold on what we CAN spend. The government is honestly forfeiting billions, if not trillions, of dollars of income (over several years, I'll add) by not taxing the wealthy ten percent. (Think about it...even if all income tax was set at a solid percentage across the board, taxing someone who makes $500,000 is going to bring in much less than someone who grosses $1.9 million a year.)

Further lowering that threshold is the economy's strong ties to imports and off-shore labor. With money steadily flowing OUT of the US economy, the population in general has less money to give TO the government.

That said, changing the wealth distribution is difficult, often impossible, on many levels, as a government would have to undermine the capitalist structure. While true, many socialist systems are stable and effective governments, they often have a number of their own issues (many would argue, far more due to the inherent lack of market freedoms.) The same is true of the tax structure - any one group carrying all of the burden is never good. We need a balance. Especially in a capitalist system, if taxation is limited to those with the most income, that can provide an incentive to not work, thus further harming the economy. (There's a very similar phenomenon in France, I believe, where an emphasis on income tax has contributed to a high rate of unemployment. Not sure if that dynamic has changed at all since 2006, tho, which is when the textbook discussing that was put out.)

>On the matter your last point, about overseas jobs - the U.S. is their own worst enemy there. The problem was created largely by American business owners, and the results seriously harm the country's economy. In a nutshell, its fiscal suicide.

>As to the stock market, let me clarify: I think we can agree on the fact that a company's stock values and the actual net worth of the company often have little to do with each other. Look at the fact that, a single badly worded press release can cause a company's stock to plummet in value. The net worth has changed little, if at all, but the stock has very little value. This is because the stock market is less about what a company is really worth financially, and more about what people think it will potentially be worth.

The problem with that is it gives a false idea of the value of companies, and that has a profound effect on the national and global economy. In the Great Depression, a major contributing factor was that many business people began to see American companies as having little value, simply because their stocks were low. Yet the products had not changed in real value, and were no less worth buying. At the time of the crash, the companies had not actually lost value. It was the speculative stock value that everyone was looking at.

>War is profitable in that it provides many businesses an opportunity to sell massive amounts of product to the government to fund the war effort. Food, clothing, medicine, weapons and munitions, aircraft...all of this costs money, and during war time, a lot of these products are needed, which is a HUGE chunk of income for producers. In context with my statement, World War II brought the U.S. out of Great Depression conditions because money started going back into the economy when the wealthiest 10% realized there was a lot of money to be made in this, and started investing their time and money into production (materials, utilities, labor).

It is certainly a dynamic I don't agree with, and don't like. But then, there are a lot of political dynamics I don't like.

>Money largely goes back into the pockets of the wealthy through many different avenues. The middle and lower class makes money at their job, and then spends it to buy things they need and want. When a product or service is bought, companies make money. I don't think we have to debate that a lot of that goes into CEO, investor, and stock holder pockets (in some cases, a disproportionate amount).

Money is also siphoned back into the wealthiest 10% via the various loan structures in our country. Mortgages, credit cards, bank loans. Interest is paid, thus the bank or business doing the loaning is making a profit. There isn't anything wrong with that, persay - the companies have to have income somehow. However, like with the previous example, the corporate structure redirects a large portion of funds to the top of the company.

Finally, disproportional taxation lends to this issue. Our taxpayer money goes into the government, which is then used for a number of things. Purchasing goods and services that are needed (or wanted...look at the Congressional gym)...again, corporate structure. Company bailouts (remember where a lot of that money went?) Once again, more money going to the 10%.

(Mm, I do love a good formal debate.)

[Disembodied]

Wikipedia has some numbers for people to disagree about ...

Economics is faith-based: that's why there are major disagreements about what happens when you change something basic. You can't have disagreements about fundamentals this big and be a science. Economists are also prone to taking moral standpoints, e.g. "The accumulation of excess wealth in the hands of a tiny minority is immoral"; or, "Depriving someone of the hard-won fruits of their labour is immoral", etc. Socialist economics seems closer to Judeo-Christianity: "We have a Bearded Prophet, a Chosen People, and a Big Book of Answers!" Capitalism seems closer to Taoist mysticism: "Take your hands off the controls, stop trying to steer, and the universe will sort everything out for itself: use the Force, Luke!"

Historically, societies run on faith-based systems never do very well in the long term.

Economic behaviour seems to be a chaotic process, prone to sudden mood shifts which are not directly linked to objective reality – hence the sudden collapse of bubbles. One day, shares in "an undertaking of great advantage, but none to know what it is" are red-hot; the next, someone has a crisis of confidence and it's all just junk paper.

Historically, economies regularly collapse. Again historically, societies have used the wars which result from these collapses to reboot the economy. Unfortunately, we've now reached a position where that avenue – a major armed conflict between economically significant nations – would be rather too much of a reboot. Interesting times!

[Rxke]

Waitaminute...

A discussion about politics? WITHOUT namecalling????


Oolite BB is *really* the friendliest place this side of Riedquat

[DaddyHoggy]

And to think I only posted it because I thought (as a teacher/lecturer) it was a very good visual interpretation of the issue - should have known, we'd have a politics debate (although it's obviously not a proper politics debate because nobody has called anybody else any silly names yet... )

[Griff]

The last example should just have a big 'Oolite scale' cobra III dwarfing everything, or maybe just one cargo pod

[Dragonfire]

Wikipedia has some numbers for people to disagree about ...

Economics is faith-based: that's why there are major disagreements about what happens when you change something basic. You can't have disagreements about fundamentals this big and be a science. Economists are also prone to taking moral standpoints, e.g. "The accumulation of excess wealth in the hands of a tiny minority is immoral"; or, "Depriving someone of the hard-won fruits of their labour is immoral", etc. Socialist economics seems closer to Judeo-Christianity: "We have a Bearded Prophet, a Chosen People, and a Big Book of Answers!" Capitalism seems closer to Taoist mysticism: "Take your hands off the controls, stop trying to steer, and the universe will sort everything out for itself: use the Force, Luke!"

Historically, societies run on faith-based systems never do very well in the long term.

Economic behaviour seems to be a chaotic process, prone to sudden mood shifts which are not directly linked to objective reality – hence the sudden collapse of bubbles. One day, shares in "an undertaking of great advantage, but none to know what it is" are red-hot; the next, someone has a crisis of confidence and it's all just junk paper.

Historically, economies regularly collapse. Again historically, societies have used the wars which result from these collapses to reboot the economy. Unfortunately, we've now reached a position where that avenue – a major armed conflict between economically significant nations – would be rather too much of a reboot. Interesting times!

Some very good points. Honestly, in my opinion, when one goes to one extreme or another between capitalism and socialism, things get pretty ugly. I personally think that a capitalist system with the government serving as an impartial mediator (while enforcing only a handful of controls, such as the U.S. anti-trust and labor laws...which they haven't done much with in a while.) Tho, in reality, I know this is more of a fantasy than a reality. Government is rarely capable of being impartial. Too many personal benefits to taking sides.

Waitaminute...

A discussion about politics? WITHOUT namecalling????


Oolite BB is *really* the friendliest place this side of Riedquat

I know, feels great, doesn't it? I haven't been in a polite political debate like this is a good three years. I was starting to miss these.