Ok you economic types...

[Dirty Hippie]

What are the implications of a $1.9 trillion deficit? Can we even survive this?

http://www.guardian.co.uk/usa/story/0,12271,999243,00.html

[JackDragna]

1. We can survive it. However..

..the biggest problems with having a huge national debt are the resulting increases in inflation and that an increasing amount of the national budget has to go to paying the interest on the debt. Government programs end up getting cut because the government needs every penny it can get to pay for this interest. The overall economy slows from the effects of inflation. We end up with a government spending program favored by conservatives: just enough money for defense, but everything else gets gutted.

[papau]

3. We will survive, but with fewer jobs, less economic growth, higher

than would otherwise be interest rates depressing business capital investment.

95% of the long-term rate is based on the current economic condition - lousy economy means low interest rates - see Japan with zero interest rates and zero growth -

But the anticipation of capital market demand in the future as the gov finances and refinances the greater and greater debt means current long term interest rates are a bit higher than the would otherwise be given our lousy economic situation.

Clinton/Rubin were the first to demonstrate this on the up side, and Reagan’s huge tax cute, deficits and 16 month recession after the 8/81 tax cut was the first to demonstrate this on the downside (despite the stimulus of 1.7 trillion in deficit over his 8 years, Reagan had the same growth in GDP per year as Carter after inflation! (Well ok - they both round to 3.3% per year, but Carter's was 3.25 compounded over his 4-year term, and Reagan's was 3.33 compounded over 8 years).

[Tigermoose]

2. Its no thing --

Unless people believe it is.

[sirshack]

4. OK...

Budget deficits are tricky.

For one, does the current climate suggest that a deficit is plausible?

Secondly, what is the deficit's size with regards to the total economy?

Third, how will future economic growth or declines affect the deficit (both in amount and as a portion of the economy)?

I recently read a good point somewhere, and I can't rememebr where. It noted that capital gains revenues from stocks have been next to nothing because...surprise...the stock market has been so lousy, so there have been no profits to tax. Something else to keep in mind....

[German-Lefty]

5. National Debt Clock

I'm sure most of you guys have seen this, but here's the online national debt clock. It updates every time you reload. I've gone a few cents more into debt while writing this!!!

http://www.brillig.com/debt_clock/

They've also got some debt related links.

Your share is $23,064.83 . There are countries like Norway that have a negative national debt. Their government loans money out to banks and collects interest. That means they can pay less taxes and have more social services.

Bush and buddies seem to be hell bent on making us pay lots of taxes while getting no social services. The rich will sit on bonds and the goverment will force us to pay taxes into thier pockets. The baby boom will retire and we'll be screwed. Maybe we'll just default on the debt then.

[stevebreeze]

6. just to add fuel to the fire

Our current record trade imbalances have almost the same effect on the economy as the national debt. Since we are consuming more then we produce as a nation we must also borrow this money, adding to the push on long term interest rates.

Wait it gets worse, interest rates have gone up 1/2 of 1% in just the last month as a direct result I of shrubs tax cuts. Clearly more money has moved from the bond market to the stock market. While this pushes up stocks it lowers demand for bonds and therefore drives up interest rates.

We need to remove this disaster from office now!
:kick:

[SyracuseDemocrat]

7. The deficit is caused partly

by the tax cuts... but more so by the excessive spending and waste. Bush's two tax cuts combined were around 2 trillion dollars. That is two trillion dollars not coming into the federal coffers. Now let's say that govt spending increases at roughly the same rate for the next 6 years. We will probably be spending at least 7 trillion dollars and, believe me, that's a very conservative estimate. To say that the tax cuts were the exclusive cause of deficits is a myth.

[stevebreeze]

8. of course the deficits are not the ONLY cause

but they are the MAIN cause. Other causes are the recession and yes the wild useless spending increases in defense spending. Most of the 'defense' spending is pure pork and waste. We never needed b2 bombers at @$ billion a pop. You can't even take them out in the rain! Star wars is yet another total waste since no country would be stupid enough to launch a missile with a trail leading back to itself. This would guarantee the launching counties end on this planet.

Just this week the resident told the biggest stupidest lie yet on Iraq. He said to reporters on the 14th that Sadam would not let the weapons inspectors back in and so we had to send in troops. Does this arrogant bastard really think we the people are so stupid that he can rewrite history and get away with it? Though clearly the so called liberal press has passed on this story. Bush is the president Quail we never had.
:kick:

[SyracuseDemocrat]

9. That's so great, man,

except you didn't address my point. Deficits are not the only cause? I never said that deficits were the cause of anything. What i SAID was that EXCESSIVE spending is the cause of the deficits, and not the tax cuts. The tax cuts are 2 trillion combined over 10 years. The spending over 10 years will top 12 trillion easily. It's not true to say that tax cuts cause deficits. I would refer you to a macroeconomics book if you have one available.

[phgnome]

10. Two Ways Out

There are only 2 ways out of this:
1. World War
2. Global space program.

Germany was in serious debt during both modern world wars. Debt plays a serious role in world war. It will not be enough just to war with Iraq and steal their oil. The system will need to try to destroy its creditors in order to clear the debt. Big depressions like this are generally spurred by

Or, re-direct the efforts of global economy towards putting humans in space with the aim of colonizing Mars. The US is pretty good at space, and it's already ahead of many countries in this industry. BUT, many, many countries are also entering the industry. The same technology used to produce weapons is also used to go to space. All that research is DIRECTLY applicable to putting humans in space. Except, to put humans in space, we need more to know.

World Wars erupt only when countries are bored, when the economies are bored, when there is no work to do, no work to be had, and unemployment is high. This means that many domestic markets are saturated. I recently heard a lecture by Margaret Visser who said that war is spurred by economic and social boredom. The media plays into it, too.

How did JFK use economics to get the troops out of Vietnam? Space race. It fuelled friendly rivalry with communist Russia ("Cold War"), where the two spied on each other to see how far the other one has gotten. It's nothing like the witch hunt going on today.

Now back to the root of why world wars happen -- it's a way to massively dispose of something the economy produces in order to spur demand again. Reduce weapons inventories so you will need to produce more. It's a way to start the ripple effect.

What I'm saying is that if we just put aside debts and profits and "growth" (how much can an economy in an enclosed environment grow?), we can do so many productive things that are better for long-term economic stability (such as putting in infrastructure for construction in space, allowing citizenry to go to space, begin building stations with access to Mars and find out what we need to do to make Mars a hospitable environment for human existence).

You say it will cost a lot but all the economics in the world must balance -- for every dollar owed, there is someone that we owe it to. Why not offer re-payment in terms of contribution to a government in terms of space race?

But it is important to see early on that we will not be in it for gain or growth. Just worry about sustainability -- aim to break even. (The beauty of a break even economy is often overlooked and we get trapped into the thinking about "growth"). If everyone in the world just broke even, the world would be a much happier place.

The aim is not to get into competition with other countries -- the aim is each country to find its niche of contribution with the efforts of an international committee coordinating the space race. The aim is to raise the standard of living for every person on the planet so that they can read, write, live healthy, and have enough to eat so that their talents they develop in their own cultures or countries can contribute the space race -- not just engineers and astrophysicists -- but all industries do research and development.

It's an enormous project that needs to be done sooner or later -- no shortage of work, better standard of living, and a population that actually has a goal to work towards.

These are the things that the Bush administration has not factored in when they believe that going to war will get them out of the economic rut. War is only a short term solution and the economy will need to go to war again in another 50 years, when it racks up debt but doesn't do much except consume. A project to send colonies into space and onto Mars is bigger than it seems and will be more effective at getting us out of the economic rut.

Plus, there are many aspects of it that serve our purpose right now (toxic chemical disposal, biological weapon disposal, radioactive waste disposal, etc.) -- industrial processes to recycle these things into a form that will serve as atmosphere stabilizing agents for Mars.

The media can ride off the space race hype because it can work to send cameras into space and generate public support. It makes a lot of money off propaganda -- the whole communications industry does -- there's no reason why the propaganda must be war-related. The industry would make just as much money if it were space-race propaganda. Instead of promoting hate, fear, and suspicion, the media can work towards promoting each country's contribution and inspiring patriotism, inspire every person in the world to feel proud that we are able to put all differences (debt and all) aside to work towards something that is tangible and forward several generations into the future.

Money is but a man-made concept. There is no reason that money should stop us from going to space and go to war to kill each other instead.