quote: With its rising budget deficit and ballooning trade imbalance, the United States is running up a foreign debt of such record-breaking proportions that it threatens the financial stability of the global economy, according to a report released Wednesday by the International Monetary Fund.
Prepared by a team of I.M.F. economists, the report sounded a loud alarm about the shaky fiscal foundation of the United States, questioning the wisdom of the Bush administration's tax cuts and warning that large budget deficits pose "significant risks" not just for the United States but for the rest of the world.
The report warns that the United States' net financial obligations to the rest of the world could be equal to 40 percent of its total economy within a few years — "an unprecedented level of external debt for a large industrial country," according to the fund, that could play havoc with the value of the dollar and international exchange rates.
I should add that I have never heard anyone call the IMF a bastion of liberalism.
Posted by Starla* (Member # 5835) on :
If The IMF is a bastion of Liberalism, what does that make folks like me who protest the IMF for its money-grubbing, god-playing, corporation-like shennanigans? Nuts? Freaks? Conservatives?
Posted by Fooglmog (Member # 6088) on :
Sane starla, it makes you sane.
Posted by Starla* (Member # 5835) on :
Thanks, Fooglmog---I was beginning to think I had gone crazy.
But this is really strange--the IMF is criticizing the Bush Administration?? Wow. I thought they were birds of a feather so to speak.
No, it's the world that's gone crazy. (edited for info)
[ January 08, 2004, 09:53 PM: Message edited by: Starla* ]
Posted by Richard Berg (Member # 133) on :
We're the single largest contributer, but that metric hasn't stopped the World Bank, UN, or WTO from criticizing us. In this case, the alarm is well overdue: deficits in the current-account balance have been creating deflationary pressure on the dollar for over a decade. The underlying problem is not just this pressure, but the fact that until recently currency markets continued to overvalue the dollar in some vain attempt to reflect underlying economic strength. Thus, with said factor in question, the inevitable decline is going to look more like a crash. Oops.
Posted by Fooglmog (Member # 6088) on :
Richard, I don't know how you can claim the United States is the largest contributor to the UN, admittedly it should be, but seeing as they havn't payed their dues in about 15 years, it's hard to rationalize giving them that title.
Though I must admit, your analysis is spot on. Markets have been sugar coating reports about the American economy in order to postpone the decline in American economic strength we are seeing.
Posted by Starla* (Member # 5835) on :
Uh-oh...
Well, nonetheless---what the IMF is criticizing the Administration for is valid.
And nonetheless, I feel a several-pages-long thread coming on. Posted by Tresopax (Member # 1063) on :
The problem is, everyone knows this is a valid big concern, but our politicians aren't willing to take the potential political hit that doing something to fix it would entail.
The strategy we are "supposed" to follow is one where we run deficits as the economy starts to turn down and surpluses when the economy heats up again. The first part is easy - the Bush tax cuts are a fine example of this. But now that the economy is heating up again, Bush should be RAISING taxes to make up for the extra expenditure during the recession. But is he doing this? No. He won't, and the reason why is because it is bad to raise taxes in an election year. Thus the deficits keep building.
And the BIG problems are our military spending and the War on Iraq. Sure, it always sounds good to say we need our military to always be ready for anything. But the truth is, we can't afford it. When you are massively in debt, cutting taxes, and facing a recession, you can't afford such luxuries as the ability to invade whoever you want.
The question is, which of our politicians is willing to fix this problem?
Posted by WheatPuppet (Member # 5142) on :
Cut military? *scratches head* Last time I checked, we spent just as much on social security, which is a far larger quagmire than the military is. Social security is a dying program that either needs to be rapidly phased out or replaced with something that is financialy sustainable for America's rapidly aging population.
Posted by Starla* (Member # 5835) on :
Well, it looks like we have a problem on all sides.
I agree with Tresopax---you're right in posting that Bush will not raise taxes this year.
As for the military, Wheatpuppet, I believe that it is costing us waaaaaaaaay more right now than Social Security. Before the war, I wouldn't disagree with you, but right now, I must.
I do, however, agree that something needs to be reformed about social security. I read in an article a few years ago that the way it's set up now, the baby boomers will essentially suck it all up, and the young people working today (like myself) will get much less out of it than they put in.
Posted by Tresopax (Member # 1063) on :
Well, now Bush wants to send us back to the moon again, which the papers are saying is likely to cost nearly $1 TRILLION.
It's a decent idea but we should have thought of it BEFORE we committed all our money to wars and tax cuts.
[ January 09, 2004, 10:25 AM: Message edited by: Tresopax ]
Posted by The Rabbit (Member # 671) on :
The current budget deficit is not caused by social security. Social Security is a self funding program which currently running a large surplus. Social Security is not part of the general budget. Bush is borrowing from the Social Security fund to cover the war in Iraq. In a few years when the Baby Boomers retire, the surplus in Social Security will rapidly be eaten up. Borrowing from the SS fund to cover the general deficit is a major threat to the stabilit of the system.
Posted by Robespierre (Member # 5779) on :
quote: Bush is borrowing from the Social Security fund to cover the war in Iraq.
There IS no social security fund, it is a pay-as-you-go system, meaning current tax payers are funding current SS recipients. It is not a huge savings account.
quote: Bush should be RAISING taxes to make up for the extra expenditure during the recession.
Again, the Keynsian ideas on how to stop a recession were what prolonged the great depression, and caused a similar drop again in '38. Taking money out of the economy, then putting it back in to cause more "churn" has been shown not to work. However, by allowing those who are productive to keep more of what they earn, we encourage productivity.
quote: Markets have been sugar coating reports about the American economy in order to postpone the decline in American economic strength we are seeing.
Yet when you look at those who are most in a position to know about this decline, CEO's et al, those are the people putting the most money back into the economy right now. When you use a term like "markets" you refer to the conglomerate of everyone involved in the higher functions of the economy and all who are serviced by it. To attribute actions like "sugar coating reports" to "the market" is flawed.
The IMF is by no means an "independent" organization. They have been operating under the ridiculous theory that supporting third world dictators through loans is a good way to help their citizens. These people most certainly have an agenda, part of which is to ween people off of the dollar and onto the EURO which they can more closely control.
Posted by Richard Berg (Member # 133) on :
You're right Foogle, we're merely supposed to be the UN's biggest contributor.
The key to a stable domestic economy has little to do with fiscal policy; the only things we know for sure are that Keynsian ideas don't work very well and supply-side ideas don't work very well. The people in charge of monetary policy (Fed), who do have significant if not overwhelming influence, have thankfully done a great job of late.
Neither addresses the trade deficit, however, which as mentioned is both larger and older than Iraq. You can argue it'll correct itself once our consumer debt addiction comes to bear, but as sketchy as our debt situation is, overconsumption is the only thing keeping the economy even at its current growth rate. Oops.
Posted by Robespierre (Member # 5779) on :
I want someone to explain just where our trade deficit is. We don't just send money overseas for nothing, we get an equal sum of goods and services in return for that money.
When you go to the grocery store, you pick out items, give the grocer money in exchange for his goods. Your goods account is +X and your cash account is -x. The grocer's cash account is +x and his goods account -x. Yet we don't hear about our appalling grocery trade deficits.
Posted by Robespierre (Member # 5779) on :
quote: what does that make folks like me who protest the IMF for its money-grubbing, god-playing, corporation-like shennanigans? Nuts? Freaks? Conservatives?
If you protest them for those reasons, it makes you a socialist. Just like those opposed to globalization and free markets.
Posted by Tresopax (Member # 1063) on :
quote:Again, the Keynsian ideas on how to stop a recession were what prolonged the great depression, and caused a similar drop again in '38. Taking money out of the economy, then putting it back in to cause more "churn" has been shown not to work. However, by allowing those who are productive to keep more of what they earn, we encourage productivity.
There's nothing Keynsian about the notion of balancing the budget across the business cycle. Virtually every economic theory agrees that if you have deficit spending in recessions then you must have a surplus in expansions to pay back that debt.
You can argue all you want about whether or not it was right for Bush to cut taxes and create a deficit during the recession, but now that it's done we have to follow through and produce a surplus during better economic times.
quote:There IS no social security fund, it is a pay-as-you-go system, meaning current tax payers are funding current SS recipients. It is not a huge savings account.
Except the people paying now pay MORE than the people currently collecting get, which means there is extra money. That extra money is supposed to be saved for the future when the baby boomers start collecting more than the people pay in tax money. Instead, those savings are being taken away by other government agencies that shouldn't have their hands on it.
quote:I want someone to explain just where our trade deficit is. We don't just send money overseas for nothing, we get an equal sum of goods and services in return for that money.
To understand trade deficits you have to keep in mind that money is like a loan. When you give someone a dollar for some product, you are not giving them anything tangible. Instead you are giving them a promise that they can buy something else of equal value in exchange for their product. That is what money is.
If it helps, think of a dollar as a loan contract with society. Someone in society gives you a dollar for a turkey. This means society will at some point in the future give you something of equal value in exchange for that dollar. It's a loan.
When we trade money for goods with other countries, you can think of it as a loan too. We get their goods. They get the promise that (in exchange for their money) we will give them back something of equal value at some point in the future. So, when they have more of our money than we have of theirs, we essentialy owe them a sort of debt.
And since we owe this, at some point in the future we will have to run a trade surplus to balance it out. In order for this to happen, imports must decrease and exports must increase.
One way for this to happen is for the price of overseas goods to us to increase, and for the price of our goods for other countries to decrease. In economic terms, this is the same as saying our dollar is weakening (since the same dollar buys fewer foreign goods.)
Posted by Robespierre (Member # 5779) on :
quote: we have to follow through and produce a surplus during better economic times.
Ideally, I would want it to balance out at 0, but I think we agree here.
quote: Except the people paying now pay MORE than the people currently collecting get
This I find very hard to believe, but since I cannot find any #'s that confirm or deny, I cede the point.
quote: And since we owe this, at some point in the future we will have to run a trade surplus to balance it out.
Why? What do people in those countries, say China for example, do with our dollars? If those people put those dollars under their pillows and ignored them, we might have an issue. However, this is not the case. They turn around and invest that money in american markets. The US holds more foreign investment than any other country. At the very least, those people sell their dollars to chinese banks for chinese currency, and then those banks invest that money.
(minor grammer changes)
[ January 09, 2004, 04:44 PM: Message edited by: Robespierre ]
Posted by Fooglmog (Member # 6088) on :
quote:Except the people paying now pay MORE than the people currently collecting get
quote:This I find very hard to believe, but since I cannot find any #'s that confirm or deny, I cede the point.
Why is this so hard to believe? The Baby Boomers are a huge generation compared to those currently accepting SS, and they're still paying into it. And seeing as the entire idea behind SS is that you pay enough throughout your life to support yourself later (essentially forces investment) why is it hard to believe that a larger generation isn't paying more into it then a smaller one is being given?
quote:What do people in those countries, say China for example, do with our dollars? If those people put those dollars under their pillows and ignored them, we might have an issue. However, this is not the case.
They invest them in other nations. While I'll concede that the US is still a (argueably the) major link in the loop, it's becoming less and less so. And if every year only 90% of what America puts out is getting returned to America with the rest going to say... Europe, then the American economy is going to shrink and money is going to leave the US. Also seeing as the majority of natural resources distributed in the world come from places outside the US, and increasingly production of goods is also being taken overseas, the rate at which money is leaving America will only increase.
-Fooglmog Guy with no clue.
Posted by Robespierre (Member # 5779) on :
quote: And seeing as the entire idea behind SS is that you pay enough throughout your life to support yourself later (essentially forces investment) why is it hard to believe that a larger generation isn't paying more into it then a smaller one is being given?
As far as the amount you pay throughout your entire life goes, that number is just about meaningless. The only important figure is current collected SS taxes and current expenditures.
If we were to look at total lifetime contributions however, we would see some of the major reasons why the program needs to be scrapped. It takes money from one group, and gives it to another. Usually the money comes from the poor and minorities, and goes to rich white people. The reason behind this being that minorities typically have a much shorter life-span, 50-60 years, while rich white women live something like 77 years. So while the minority community pays through the nose during their entire lives, they don't live till retirement, while the rich white people retire at 55 and soak up all thats left until they die at the age of 80.
As far as the trade imbalance thing, why haven't we seen any of the supposed adverse effects of this situation yet? Why has the GDP grown so dang much lately? We must be producing some goods and services that people want.
(added last paragraph)
[ January 09, 2004, 05:48 PM: Message edited by: Robespierre ]
Posted by Fooglmog (Member # 6088) on :
I happen to agree that it's a flawed concept. You're taking money away from people to give them money later. It's forced investment, and in a country where freedom reigns supreme (well supposedly), I'd have thought people would want the freedom to invest their money any way that they like.
Wow, I'm really going against my left wing roots today...
-Fooglmog Guy with no clue.
Posted by Richard Berg (Member # 133) on :
Trade deficits are not inherently bad. The foreign-held dollars not reinvested here exert a downward pressure on currency valuation, which is also not entirely bad: basically, nice for exporters, bad for importers. As such, when the currency fluctuates normally, it has a self-balancing property. However, since the dollar has been kept artificially high for many years, the inevitable decline has the potential to be very sudden, which would cause a ripple effect big enough to destabilize countries like Korea that depend heavily on American imports.
Posted by The Rabbit (Member # 671) on :
quote:I want someone to explain just where our trade deficit is. We don't just send money overseas for nothing, we get an equal sum of goods and services in return for that money.
Its quite simple, a trade deficit means that there is more money being spent on import products than is being paid for exports. Imagine that the country were and individual -- this individual would be spending more at the grocery store than they get in their pay check. The only way this can be maintained for very long is if the person borrows money from somewhere. In foreign trade, the only way the US is able to maintain the trade deficit is by borrowing money from other countries -- i.e. foreigners have to invest money in US industries and financial institutions.
Posted by Robespierre (Member # 5779) on :
quote: the only way the US is able to maintain the trade deficit is by borrowing money from other countries -- i.e. foreigners have to invest money in US industries and financial institutions.
So do foreigners invest enough to make up the balance? I reject the idea that they need to invest 100% of the money we send back here, but even so, what % do they spend?
Posted by Fooglmog (Member # 6088) on :
I think you're underestimating the effect that that "ripple effect" as you called it will have on America. Businessmen won't know how low the US economy will go, it's impossible to predict the real impact this will have in the end, and for for the next decade or so businesses will start new operations in countries less relient on America as much as possible. (IE. Brazil and China) A decade worth of business growth in these countries will easily put them on a level playing field with the US who's economy will be stagnant. It may even give then the economic advantage leading to within 10 years a huge drop in American economic dominance. Once that dominance is gone, the huge population and work force advantages of countries like China and Idia will kick in, and America will take up second place to them, much as France and the rest of Europe has taken up second place to the US over the last century.
-Fooglmog Guy with no clue.
Posted by Robespierre (Member # 5779) on :
quote: I'd have thought people would want the freedom to invest their money any way that they like.
Offer people "free" money, and they usually don't question it. Now that the program is set up, its going to be hell to dismantle it, since people who have been paying in all their life will want something in return. But FDR had that in mind when he initiated the dang thing. I wish I had the exact quote, but it was something to the effect of "Ha! Let them try to take that one away! We are buying success for generations." Basically saying that democrats would always be able to point to SS dollars and remind people who's the daddy.
Posted by Fooglmog (Member # 6088) on :
That's the problem with politics, they're too political.
-Fooglmog Guy with no clue.
Posted by The Rabbit (Member # 671) on :
quote:So do foreigners invest enough to make up the balance?
They aren't currently which is why the US dollar has dropped over 30% relative to the Euro over the past 2 years.
Posted by The Rabbit (Member # 671) on :
quote: Basically saying that democrats would always be able to point to SS dollars and remind people who's the daddy.
Or maybe, as a progressive individual, FDR believed the Bible, understanding that it was the moral obligation of society to take care of the old, the sick, the widowed and the fatherless and set up a program by which we could do this for generations to come.
I am familiar with some of the poor retired people and disabled people who are living on Social Security, and I'd be willing to pay even higher SS taxes if I was assured it was going to them even if I never get a penny. The big problem with the SS system is that my money is also going to support the wealth retire fold who own two homes and spend 9 months a year touring the world in there grayhound size RVs. I'd really like to see some means testing
Posted by Robespierre (Member # 5779) on :
quote: and I'd be willing to pay even higher SS taxes if I was assured it was going to them even if I never get a penny.
Thats very touching, but the whole concept of SS runs against everything our government stands for. The concept of SS was initially struck down by the US Supreme court when it came up in 34-35. Then once FDR got his cronies into the court in 36 he got it back through, with the court actually reversing a decision it made not two years hence. The "general welfare" clause it what makes SS unconstitutional, as it only provides a benefit for very few(specific), at the expense of the many(general).
Posted by Robespierre (Member # 5779) on :
quote: FDR believed the Bible
Perhaps he should have enacted a prayer tax? Why allow greedy people who pray too much to get all the benefits of begging god for help?
[ January 09, 2004, 07:21 PM: Message edited by: Robespierre ]
Posted by The Rabbit (Member # 671) on :
That is a rather brutal strip quote Robe.
what I said was
quote:Or maybe, as a progressive individual, FDR believed the Bible, understanding that it was the moral obligation of society to take care of the old, the sick, the widowed and the fatherless.
And it was in response to your assertion that FDRs sole motivation for creating SS was to get votes for the democrats.
We can only guess at FDRs motivations. Mine I know with certainty. Caring for the old, sick, the widowed and the fatherless is a community moral obligation.
I guess you and I simply have a different view of what this country stands for. Every single government program benefits a few individuals at the expense of all. SS and medicare come far closer to serving all citizens equally than any other government programs I can think of.
As far as I'm concerned, programs which aid the the elderly and the poor promote the general welfare. I've am familiar with societies where the elderly are simply required to work until they drop dead unless they have family or personal wealth -- the whole society suffers as a result. I wouldn't want to live any any of those place.
Prayer is a fundamentally different moral question than caring for the poor and elderly. Prayer is a wholly individual action. Any individual who chooses to can reap the full benefits from prayer whether or not anyone else in the community or government participates.
In contrast, caring for the elderly, the poor and the sick is something we can do far more effectively if we work together as a community. It is therefore a community moral issue not a private moral issue.
[ January 09, 2004, 11:11 PM: Message edited by: The Rabbit ]
Posted by Fooglmog (Member # 6088) on :
Rabbit, while I'll accept mitigating circumstances, the simple fact is those collecting on SS are contributing nothing to society. They aren't providing a service, aren't still having kids, aren't providing a product of any sort. So I don't see how giving them money helps society as a whole. Why not just let people keep the money while they're still working and invest it themselves. If they choose to do somthing else ie. spend it, then they can live the last 30 years of their life as a hobo, it's their own fault.
All Social Security does is store money for an amount of time, but to store it, it creates a new level of beuracracy to handle the money, thereby spending some of it. If we don't spend it on that level of beuracracy, then citizens actually have more extra money on hand to invest as they wish then SS can give back to them.
Posted by Robespierre (Member # 5779) on :
quote: In contrast, caring for the elderly, the poor and the sick is something we can do far more effectively if we work together as a community.
I disagree. Before Social Security about 4% of the elderly were below the poverty level. What is the % now?
quote: It is therefore a community moral issue not a private moral issue.
I proclaim that the community can better decide who people should be married to. Since the community can better solve this problem, marriages will now be arranged by a new government agency. If you are not satisfied with your future husband and or wife, you may submit a complaint to the government office of Reproduction and Lifestyle Control Committee.
I proclaim that our economy can be run better if it is centrally controlled by the entire community. From now on, no one may open or close a business without government permission. Please wait 2-8 months for a response. Prices will be fixed by industry experts as well.
I proclaim that litter on our highways is a community problem, and requires a community solution. Therefor all adult citizens will be required to spend 2 days a month walking the roads and cleaning them. Penalty for shirking highway duty is a $10,000 fine and 3 months in jail.
I proclaim that the problem of terrorism is a community problem, and hereby declare all people subject to a new terrorism draft board. If drafted you will sit in a room and monitor phone calls and e-mails of US citizens to better handle this community problem.
(edited for cosmetic changes)
[ January 09, 2004, 11:29 PM: Message edited by: Robespierre ]
Posted by Richard Berg (Member # 133) on :
quote:I think you're underestimating the effect that that "ripple effect" as you called it will have on America.
I didn't mean to trivialize the effect on America! Merely to point out where it will start (countries dependent on the American economy, quickly including us of course), and by contrast where it will peter out and thus offer competitive advantages (China).
On SS, I have to count myself among the social liberals who still think it's a terrible idea.
Posted by TomDavidson (Member # 124) on :
"So I don't see how giving them money helps society as a whole."
Aren't you a Christian, Farmgirl? Would you really walk past the injured man on the roadside, unless you recognized that he was useful to society?
-------
For my part, I think SS is a great idea, but only in its purest form -- an untouchable fund of money that acts as a mandatory savings account (with variable rates of interest) for all working Americans. The fact that we're using it as a pay-as-you-go portion of the general fund (and filling it up with IOUs) has crippled it, and is one of the best arguments against deficit spending.
[ January 10, 2004, 10:21 AM: Message edited by: TomDavidson ]
Posted by HenryW (Member # 6053) on :
quote: For my part, I think SS is a great idea, but only in its purest form -- an untouchable fund of money that acts as a mandatory savings account (with variable rates of interest) for all working Americans. The fact that we're using it as a pay-as-you-go portion of the general fund (and filling it up with IOUs) has crippled it, and is one of the best arguments against deficit spending.
Thank you Tom - You summed up how SS was (and according to law is still suppose to be) set up. In its legal form it is a managed asset account with a gauranteed return. I argue (as do many) that taking from this fund for any other purpose is a crime. The interesting part is that if we had not robbed from the fund so often and turned it into normal business (it has become part of a general operating fund) our SS taxes would be much less today and services much higher. Shame on us.
And, darn it, I wish I could blame this on Bush. It seems to be something every president's administration after Eisenhower found acceptable.
Posted by Fooglmog (Member # 6088) on :
Cat's out of the bag, Pandora's box is open, hearts has been broken. Take your pick Henry, but there's no going back on using SS as a way of funding any pet project the government doesn't want to raise taxes to implement.
And actually I'm a christian city boy, you got 1 out of 3. And yes I would help someone, but the argument I was combatting was that giving them the money is good for society as a whole because those people are useful. Seeing as I'm opposed to SS for other reasons and think it should be scrapped, I'm not going to allow false statements to the contrary to go uncorrected.
-Fooglmog Guy with no clue.
Posted by Maccabeus (Member # 3051) on :
Since it keeps getting suggested that programs like social security are a way of fulfilling one's moral obligations to the poor....
I beg to disagree. We cannot simply hand off our obligations to the government and forget about them. Charity is something we are called to do personally. Sometimes it may be necessary to do something through an intermediary (for instance, if the people being helped are far away), but even then it needs to remain something voluntary which we must periodically renew.
Making charity into a government work ends by allowing us to forget our obligations. Somebody hungry by the side of the road? Oh, I paid my taxes, and the government will take care of him. And even if it doesn't, I've done my part. This is part of the reason one cannot legislate mercy--only justice.
Posted by Destineer (Member # 821) on :
Yeah, I'm sure there was a great deal more mercy in America prior to the New Deal. Posted by Fooglmog (Member # 6088) on :
That's not what Social Security is at all Macca, SS is basically you giving the government money for as long as you work so that once you no longer work they can give that money back to you. It's investment forced upon you by the state, not charity.
-Fooglmog Guy with no clue.
Posted by Maccabeus (Member # 3051) on :
Not that I disagree with you, Foog--I think you're right--but people are citing it nonetheless as a way of fulfilling one's obligation to give to the poor.
Destineer, by the accounts I've read, there WAS. Just that at the time of the Depression it didn't matter because very few people had anything to give.
[ January 10, 2004, 06:46 PM: Message edited by: Maccabeus ]
Posted by TomDavidson (Member # 124) on :
Sorry, Foog. I skimmed your name and thought you were, in fact, a user called Farmgirl. Posted by Fooglmog (Member # 6088) on :
Well Tom, I have to give you credit, that's an original name for me, I've never been called that one before. I'm frequently called "Fool" either because of accidental misreadings of my name, or just as frequently because someone thinks that I don't hear it two or three times a week and that they're being clever by intentionally miscontrueing my name in such an original fashion. Along with a bastion of other names placed upon me because of my always controvertial, frequently conflicting views on... everything. But you get the prize for the first original miscontrueing of my name in several years.
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