Republicans & Conservatives: Archives

Chops:
“I am the first member of the Party of Fiscal Responsibility.”

Chops, why not just call yourself an Old School Republican, rather than a Neocon? You’d be among many others then — just talk to a few older people who’ve always voted Republican and you’re bound to find plenty who will agree with you.

You could be right, but no one can say yet. We are after all at war. So far our taxes have not been raised in a time when we would naturally be spending the most. Now I agree we haven’t seen a lot of cleaning house and I think thats partly due to the fact that we don’t have a fiscally responsible President. The majority of the party agrees with you. I guess we’ll see what happens in the next couple of years.

Tony, we shifted tax hikes in the present to the future by adding 2.5 Trillion dollars to the national debt courtesy of Bush and the GOP Congress in control of the purse strings.

You may think that is lucky for you, but, the next generation won’t be thanking this one.

Chops, good article. I am aware very aware of the schism in the GOP over fiscal responsibility. It is very sad that the many Republicans such as yourself are not in control of the GOP and the Rep. Congressional leadership, or Whitehouse.

Voting Republican because one is a Republican is proving to be not always a sound voting strategy. Same is true of the Democrats, as they are acutely aware now.

Fiscal Responsibility? That a joke? We are scheduled to stay in Iraq forever at a Billion a month at least. Welcome to Republican Heaven. They get to send others to die AND get their Tax Cuts too!!!

Aldous - war cost is closer to $5.3 billion a month, or around $65 billion a year. That may be a significant chunk of money, but it’s less than 3% of US tax receipts. For bigger issues of fiscal irresponsibility and lack of accountability, look at the energy bills, special interest handouts, education programs, and costly regulations. But let’s not genererate this discussion into another argument over Iraq.

Everyone can argue about the wisdom of spending money in Iraq or on roads or on anything else. Two thirds of today’s Federal budget is entitlements. This is up from one third a generation ago, but much less than it will be very soon. That is what we have to tackle. Nothing else matters as much.

A balanced budget amendment is not the saviour it seems to be. A certain amount of deficit spending is vital for recovery from a recession, and the borrowing can easily be paid off in good times. Just ask the Germans or the French how they feel about being straitjacketed into having a balanced budget as one condition of joining the Euro.

CHOPS!!

Where do I sign?? Great article and great idea!!

As far as the deficit is concerned, how far would cutting pork go to making up the difference? That should come before cutting any social programs.

There is so much that could be done, but for special interest!!

Perhaps all political donations should be made to a central fund, a percentage of which goes to the party of choice, and a percentage to the federal budget. Just a couple of random thoughts.

Chops, this democrat applauds you.

Do you think most Americans really understand the magnitude of the problem ?
Do they even know how many zeros are in $1 trillion ? Politicians don’t seem to. But, then, few of them majored in math or economics. Perhaps, another repercussion of our troubled education system ?
They just hear and throw around big numbers, but do they really understand the ramifications ?

If they did, shouldn’t they be more than a little worried ?
Likewise, due to the many foreign investors that are helping us wall-paper the U.$. dollar all over the planet. Don’t they realize it’s like giving the whole bottle to an alcoholic ?

Have we have reached the era of total fiscal irresponsibility ? We may have reached the point of no return, in which case, it could get much worse. We haven’t suffered much yet, but the bill will eventually come due. It always does. It’s difficult to see how the government will ever be able to solve this problem (the easy way). The problem will get solved. But it will probably be the hard way (the very painful way; just based on the federal governments track record of irresponsibility and unaccountability). And to make things worse, there are many pressing problems that are exacerbating the problem, leaving us fewer and fewer options and solutions, and those pressing problems grow in number and severity. Any two or three, culminating at the same time, could wreak havoc.

Consider just the National Debt (just one of several serious issues).
Interest on the National Debt is about $1 billion per day.
And, the federal government is borrowing another $billion per day.
That’s about $700 billion.
That’s about one third of total annual tax revenues. And, almost two thirds of that annual revenue is already dedicated to Social Security, Medicare, and other entitlements. The remainder goes mostly to the military (typically less than 100 billion; but the cost of the Iraq war is approaching $184 billion).
It’s so out of control, it would take 127 years to pay down the debt if they started 01-Jan-2006 paying $1.0034 billion per day, and also stopped borrowing $1 billion per day. And, that only if the federal government ever managed to find the discipline to do it. Not likely. And, even if they did, the total cost in interest alone will be over $37 trillion (in 2005 dollars). When the federal government is spending about $billion per day on interest, and also borrowing about $billion per day to pay that interest, what’s the likelihood they’ll ever have the discipline to stop doing it?
Probably never. Probably, not until up to the very last second when they have no other choice.

Afterall, you can only crap in your own nest for so long, before the branch breaks.

graph: home.comcast.net\~d.a.n\NationalDebtPayOff20060101.gif

CORRECTION on military spending:
Military spending since 1998 (using 2002 dollars)
1998 296.7
1999 298.4
2000 311.7
2001 307.8
2002 328.7
2003 379.31
2004 379.91
2005 400.11
2006 419.31

Well, how much has military spending really increased? If I adjust d.a.n’s figures for inflation (so 2002 dollars, but inflation-adjusted to 2006; 2.5% estimate for year 2005), we get this:

1998 357.91
1999 354.46
2000 361.71
2001 346.10
2002 359.43
2003 408.27
2004 399.84
2005 410.11
2006 419.31

So we see that military expenditures (and I’m assuming that d.a.n included supplementary war expenditures in these figures and that they are accurate) stayed fairly steady under Clinton, jumped 12% or so under Bush’s first year in office (corresponding to 9-11) and stayed fairly steady afterwards. The real net increase from 1998 to 2006 is 17.2% - for an average annual increase of 2.1%. This is hardly the big jump that liberals say it is.

Estimating tax receipts at $2 trillion, military spending is therefore 20% of the federal budget, or about 3% of the $12 trillion US GDP. Is 3% too much to defend the U.S. and fight terrorism? Let’s focus on the other pork-barrel spending problems.

By the way, CIA.gov says that military spending is only about $370 billion for 2004 (although some of its other figures confirm the results I obtained on my math above). Please provide sources on your figures.

CHOPS!
I HERE YOU LOUD AND CLEAR!
Only problem is I don’t think we’ll get fiscal responsibility from either party.
What we need to do starting next election is to fire EVERY member of congress and every president that won’t practise fiscal rsponsiblity until they finally get the message.
But by then it will most likely be to late.

Gandhi,
Yes, military spending has gone up, but not as much as some think.
But, the really alarming issue is not just military spending, but total borrowing and spending, pork-barrel, waste, and ever growing entitlement systems that have been plundered (i.e. are really only pay-as-you-go).
How much longer do you think the U.S. can continue to borrow over $300 billion per year to pay the $300 billion for interest on the $8 trillion National Debt?
And, what will the impact of looming shortfalls in Social Security, Medicare, and GPBGG and pensions, and $40 trillion in personal debt?
There seems to be only a few people concerned about the result of so much debt.
Is it because people think our children can worry about it? With an aging population, will we have enough younger workers to bear the tax burden?
Perhaps they will revolt. Who could blame them?

Ron Brown wrote: What we need to do starting next election is to fire EVERY member of congress and every president that won’t practise fiscal rsponsiblity until they finally get the message.

Hear ! Hear !
Ron Brown, I agree with that 1000percent !

Someone is playing my song:
Vote ‘em all out.
Vote only for a non-incumbent / non-main-party candidate.
Repeatedly. Every eletion.
Until things get better.
Until these 9 steps are performed: home.comcast.net/~d.a.n/NinePointPlan.htm

Some people just think we need to elect different or better people to office. That’s not working. That’s not the solution. The system is rotten, and the solution is to treat Congress and the Executive Branch as one entity. The people must treat government as one entity to create the peer-pressure required to make politicians police their own ranks and act responsibly.
Just think if only 20% of all incumbents were voted out of office. It could have an overwhelming impact, and send a loud and clear message to government to immediately implement the 9 Point Plan. Thus, even a minority of voters could change the political landscape significantly. It may be the only peaceful option left. It may be the only way left to peacefully restore a balance of power, not simply shift it.

For the record, I’m as much for fiscal responsibility as Chops is. I was responding to Aldous’ typical response of blaming the war for everything. It is actually possible to fight a war, cut taxes, and cut spending all at once. But not in the way that the current administration and Congress is doing it.

Gandhi,
That’s great. Few think there’s any problem. Not too long ago, they used to talk about surpluses. While spending slowed, between 1992 to 2000, the National Debt still grew every year.
Some people actually thought we were in the black. Even at the end of 2000, the National Debt was $5.7 trillion.

Do you believe this sort of thinking (seen in book called “Free Money” ?)
___________________________________
[X] The federal deficit/debt are too low (And our children never will be forced to pay them.)
[X] Social Security and Medicare never can go bankrupt, even without changes in the tax laws or payment schedules.
[X] The U.S. government does not use or need tax money to pay for goods and services.
[X] The U.S government also does not need to issue T-bills, notes and bonds.
[X] Low interest rates do not, and never have, stimulated our economy; high rates actually provide a slight stimulus.
[X] Massive federal spending and/or a large federal deficit never have led to inflation.
[X] Federal deficits always make our economy grow and surpluses have caused every depression in U.S. history.
[X] All money is a form of debt, and all financial debt is a form of money.
[X] All taxes, even taxes solely on the rich, hurt the poor and the economy.
___________________________________
Personally, that sort of thinking is inviting disaster, but it’s what a lot in government believe.

Should we all run our households the same way?

d.a.n
I’m having troble getting your page to come up.
Could you link it?
Thanks
Ron

Nice post, Chops.

In this climate, it does not take a Rovian genius to realize that the Democrats can score points with voters and businesses by promising a return to fiscal responsibility.

Ah, yes, The Golden Age of Clinton. :)

Chops, the problem for GOP values voters is that the Christian wing of the Republican Party doesn’t care about fiscal responsibility, and the northeastern wing (fiscal conservatives like Chaffee and Lugar) isn’t paletable to you guys.

For the old-school Republicans, check out Christie Todd Whitman’s organization. And be sure to read her book, “It’s My Party Too”.

The sooner you guys take back your party, the better off we’ll all be.

BTW, did you notice that talk of a balanced budget amendment disappeared from the GOP party platform in 2004?

“You cannot manufacture a consensus for statutory controls when the consensus for budget discipline is not strong enough,” said Representative Jim Nussle, Republican of Iowa and chairman of the House Budget Committee. “I do not believe, unfortunately, there is a broad enough consensus necessary to enact budget controls into law.”

d.a.n I’m having troble getting your page to come up. Could you link it? Thanks

Sure. Just click on name: my Posted by: Posted by d.a.n at July 29, 2005 09:37 AM
For the 9 Point Plan mentioned above, just cut and paste the following into your browser’s Address box, and press Enter: home.comcast.net/~d.a.n/NinePointPlan.htm
You might have to put this in front of link: http://
I’d supply a hyper-link, but they’ve disabled that feature.

A.P. wrote: BTW, did you notice that talk of a balanced budget amendment disappeared from the GOP party platform in 2004?

I think the problem (re: Fiscal Responsibility) is that many in government believe there is no problem. They believe the following theories (yes, they say one thing, but actually believe and do otherwise):
___________________________________
[1] The federal deficit/debt are too low (And our children never will be forced to pay them.)
[2] Social Security and Medicare never can go bankrupt, even without changes in the tax laws or payment schedules.
[3] Federal deficits always make our economy grow and surpluses have caused every depression in U.S. history.
___________________________________
Therefore, they’re spending like crazy, because they think it’s OK. They don’t want to believe there are any fiscal problems.

I may be wrong (or missed something in Economics 101) but there’s something about this smoke-and-mirror economics that seem to be inviting disaster. Especially the rampant spending.
How is simply printing more money not going to cause inflation?
In some countries, where they tried that, it wasn’t long before a full wheel barrow of money was required just to buy a loaf of bread.
And how does crushing debt helps us?
What’s the benefit of paying a quarter of every tax revenue dollar to interest alone?
How long can we keep borrowing $1 billion per day to pay the $1 billion per day in interest?
If I ran my household or business that way, I’d be bankrupt.
So, how can the government justify fiscal irresponsibility, when those same principles don’t work for any business or household?
I really don’t understand this voodoo economics (to coin a phrase from Ross Perot), and would love to hear an explanation for such theories.

How is simply printing more money not going to cause inflation?

I thought we were borrowing it from tha Chinese. I’m gonna laugh if they foreclose on us, and we have to hand over Unocal.

: )
That’s funny. Sort of. Perhaps it’s a plan or conspiracy for China to gain control of the U.S. ?
When we default, or the value of the U.$. dollar falls to near-nothing, what will be the impact world wide ?

This problem is simple.

Give the President line item veto.
He/she is the only person elected by everyone.

Congress votes for pork, expecting them to control it is insane, they never will.

If they veto the porkchops you wanted, dont vote for them again.
If you didn’t vote for them, but your porkchops were veto’ed anyway, buy your own freaking porkchops, most voters didn’t want to support your BBQ.
Problem solved.

Better yet, only allow ONE ITEM PER BILL:

It will increase transparency.
It will help us see what’s really happening.
It will reduce pork-barrel, waste, & graft.
It will increase accountability and responsibility.

Simplify government by allowing ONLY ONE item per bill, which will cut out the pork-barrel, and reduce conflicts-of-interest currently hidden in huge bills consisting of tens of thousands of pages that almost no one (much less voters) reads or scrutinizes.
This will allow Voters to easily see how politicians voted. Currently, it’s impossible to tell why anyone really voted for/against a bill. It’s too nebulous (by design). This will increase transparency, which will lead to more accountability, and responsibility.

While I have always been in favor of a line-item veto, I may change my mind here. Line-item veto would allow the president to allow his party’s pork and veto the opposition’s.

I am more for the one item per bill. The sneaking in of off-the-wall stuff that has nothing to do with the intent of the bill is appalling to me. And the bills are so big the legislators don’t have time to read them in their entirety in order to make decisions. Even when they do, stuff is snuck in at the last minute without their knowledge.

This kind of reform is very necessary, and as Dan says, would create a needed transparency about voting records.

As it is now, if a legislator votes for or against a bill, that information is used for/against them politically, when the reason for the vote could very well be an addition that had nothing to do with the original intent of the bill. This is happening all the time.

Chops:

I agree with you in part. On the other hand, I think it is a great time to celebrate some fantastic ecnomic news.

1. The budget deficit if falling dramatically. (see http://www.usnews.com/usnews/opinion/baroneweb/mb_050715.htm for example).

2. Unemployments is down to 5.0% which is excellent for out economy.

3. Housing has created more wealth per capita then ever before in our country.

4. GDP growth has been excellent for our country. I define excellent as sustainable growth that produces increasing standard of living for out citizens. (Not too high nor to low).

5. Low interest rates. The 10 year treasury is still way under 5.0% as foreigners still find US Treasuries as the place to be. These low rates should continue for a long long time.

6. Low inflation numbers. Inspite of high energy costs, inflation is contained and should remain so for the distant future. Many economists expect inflation to decrease from here instead of increase.

7. Corporations are raking in near record after tax profits as a percentage of GDP.

8. Corporations are awash in cash, if amounts unseen for many decades.

2006 is looking like a great year in this country. Troop levels should start to fall in Iraq.

It’s ok to be frustrated by a bill or two, but the big picture looks great!! Just in time for the 06 elections!! Go Republicans!!

Craig

Craig, you are a master of spin. The deficit is falling dramatically? Give me a break. Nearly 1/3 of a trillion dollar deficit is good news to you? Are you aware of the IRS amnesty program for tax dodgers that is going to sunset which is motivating dodgers to come forward and settle for 50 cents on the dollar owed, while the rest of us pay our full bill each year? That fact, and the 2.8% revised GDP in the previous 2 quarters and the 3.? GDP in the last quarter increasing tax revenues are what account for the lower deficit than was expected.

Once the IRS amnesty program ends, collections will drop significantly, and we will be left with the GDP contributions to revenues which will not balance the Republican spend and borrow spree that has been going on since before Bush was elected.

Unemployment has been holding steady hovering around 5% for quite awhile which is good, at least it is not rising. But, the laid off reemployed are having to settle with employment with either or both lower wages and fewer benefits.

The housing bubble will burst, leaving folks who bought high with debt exceeding assets. This is not a good deal, it is a bubble much like tech stocks at the end of the last century.

I could go on, but, what is the point? You want to see the glass half full regardless of the amount of liquid in it, and that is your prerogative. But, folks who stay abreast of such issues and news know what is really going on. Transition! And it is better than doomsayers said it would be at this time and worse than the Whitehouse and GOP would have voters believe.

I too could appear well off if I borrowed to the limit on a dozen or two credit cards. But the illusion would crumble eventually when the bills came past due and exceeded income, year after year after year as has our deficits since Bush came into office and had a GOP majority Congress to work with.

Craig,

: )

Some of these pressing problems are too hard to ignore: home.comcast.net/~d.a.n/PressingProblemsFacingTheUS.htm

What is amazing, is that things aren’t much worse than they are, in view of the federal governments’ total fiscal irresponsibility and unaccountability. But, then perhaps it’s just a matter of time. Everything seems great, as you spend and spend, and rack up more and more charges on that credit card…that is, until the bills and interest start coming due. And, if you let it get too out of control, you’re struggling just to make the interest payment. So, you sign up for another credit card account, get a cash advance, and use it to pay the interest on the other account. And so on, and so on, and so on.

Is that voodoo economics?

I’m not real knowledgeable about voodoo-free-money economics. If I ran my own business or household the same way, I’d be bankrupt, homeless, and destitute.

It’s ok to be frustrated by a bill or two, but the big picture looks great!!

LOL! Craig, you’re a better (or worse) partisan than I am. I tip my hat to you.

Like that hard-charging, all-America, General George S. Patton used to say: “L’audace, l’audace, toujours l’audace.” Keep up the good work. :)

Every year our federal government spends our money on five different items. In 2001 before the war in Iraq, it looked like this:

1) Interest on the National Debt - 18%
2) Defense - 15%
3) Healthcare (Medicare/Medicaid) - 19%
4) Social Security - 21%
5) Everything Else - 27%

Until we get a handle on lowering the public costs of healthcare and eliminating wasteful defense spending (do we really need to spend more money than NATO, Russia, China, Cuba, Iran, Libya, North Korea and Syria combined and build another super carrier battle group when we already have nine of them and no other nation on earth has any?), any efforts at governmental fiscal responsibility become tantamount to rearranging the deck chairs on the Titanic.

We’ve got an administration that has embraced the Reaganomic credo of borrow and spend instead of tax and spend.

When Reagan took office in 1980, the national debt was less than $1 trillion. When his recently converted acolyte to voodoo economics (George I) left office in 1992, it was more than $4.4 trillion, an increase of nearly four and a half times. Today under George II it’s approaching $8 trillion, and it’s almost two thirds of our Gross Domestic Product (GDP). The last time the ratio of the national debt to the GDP was that high, we were paying off war bonds from WWII and fighting a war in Korea.

This kind of profligacy has two benefits for the current administration. First, by borrowing instead of taxing to pay their bills, it makes it appear that their harebrained economic theories are actually working. Simple Keynesian economics. Second, at some point in time a day of reckoning will arrive. The fed will lose its credit worthiness and become essentially bankrupt, thereby achieving Reagan’s (and George II’s) goal of eviscerating the federal government.

If all you care about is the appearance of short-term economic success and hope to destroy government eventually, you couldn’t dream up a better fiscal policy than the one currently embraced by the President and the Congressional Republicans.

David:

Craig, you are a master of spin. The deficit is falling dramatically? Give me a break. Nearly 1/3 of a trillion dollar deficit is good news to you? .

There must be at least one positive thing in this economy that that left can point too!!!! The deficit going down is good news. It is something we should all be happy about.

This in not as you say because of a one time amnesty program. Corporate taxes are up over 40%.
President Bush is well on his way to keeping his campaign promise of cutting the deficit in half.

The housing bubble will burst, leaving folks who bought high with debt exceeding assets. This is not a good deal, it is a bubble much like tech stocks at the end of the last century.

What National housing bubble??? There is no national housing bubble. There is a definite bubble in California and certain metropolitan regions, (Housing in Boston is pretty high) but NO bubble nationwide.

What we do know is that there is record home ownership, and record per capita wealth in our country. At a time when Americans have never been richer is not a time for pesimism or defeatism from the left.

But, folks who stay abreast of such issues and news know what is really going on.

Who for instance??

The economy is doing fine and should continue to do fine for the forseable future.

Your thoughts on inflation going forward??

Craig

Craig, bankruptcy filings are rising precipitously too? But let’s ignore that. Our national debt and interest on that debt is rising precipitously, but let’s ignore that. Other nations are displacing American jobs, but let’s ignore that. Our borders are as porous today as they were on 9/11, but, let’s ignore that. There is a battle taking place as to whether science or religion should be taught in our schools, but, let’s ignore that. Bush and the GOP are escalating spending on social programs, but, let’s ignore that.

Yes, by all means, let’s focus on snapshots of data that are bad, but, not as bad as expected and call that success and rejoice! Absurd. Farcical in the extreme. But, hey, what is life without a little humor along the way, eh?

What we do know is that there is record home ownership, and record per capita wealth in our country. At a time when Americans have never been richer is not a time for pesimism or defeatism from the left.

Never mind the $40 trillion in personal debt to buy all of it on credit, nor $8 trillion National Debt, plundered pensions, and near total fiscal and moral bankruptcy of government in this era of selfishness and irresponsibility.

David:

bankruptcy filings are rising precipitously too? But let’s ignore that.

“As we predicted, consumer bankruptcies rose during the first three months of this year, fueled in part by fears over the impact of the coming new bankruptcy lawâ€, said Samuel J. Gerdano, ABI’s Executive Director. Total filings for the quarter were the third highest first quarter ever. With the new creditor-friendly law due to fully take effect on October 17, “we expect bankruptcy filings to remain high throughout the summer and early fall, even as households do their best to try to pay down consumer debt,†he added.

However, the total number of bankruptcies filed in federal courts in the 12-month period ending March 31, 2005 fell 3.9 percent.

Short term trend is up, longer term trend is down. Recent upswing is predictable because of recent legislation. I am not understanding your poing on this.

Our national debt and interest on that debt is rising precipitously, but let’s ignore that.

Our federal deficit is near where it was in Clinton’s fifth year of office. As a percentage of GDP it is at or near historic averages, and looks fine compared to our trading partners.

Interest on the publicly held debt in fiscal year 2004 amounted to $160.2 billion — roughly 7 percent of the federal budget. During the 1980s and 90s, before the 1998-2001 surpluses, interest regularly consumed 13 percent or more of the federal budget a year, reaching a high point of 15.4 percent in 1996. Interest on the publicly held debt equals 1.4 percent of GDP. Its recent high point was 3.3 percent of GDP in 1991.

You are wrong about the interest on the debt. It costs far less to finance the nations debt than it did in the nineties.

Other nations are displacing American jobs, but let’s ignore that

Unemployement is lower now than the average of the 70’s, 80’s or 90’s.

If you want to look at displaced jobs, that is ok, but we have to look at the benefits to consumers through lower prices. This is exactly why (well one of the reasons why) we should have low inflation for a long long time. Consumers are benefiting bigtime from outsoursing.

There is a battle taking place as to whether science or religion should be taught in our schools, but, let’s ignore that.

A very tiny battle. And that battle has been going on for over a century. It will also be going on when you and I are dead and gone. I think you are over worried on this one.

Bush and the GOP are escalating spending on social programs, but, let’s ignore that.

He is keeping his promise to cut the deficit in two before he leaves office.

Like I have said many times. The economy is doing just fine.

Craig

It only appears to be doing fine, only until the credit cards are all maxed out.
But, perhaps there’s something I don’t understand about money (really, no kidding). Perhaps all the principles of spending and borrowing that apply to businesses, households, and people, don’t apply to nations?

I’m glad things appear as good as they do, and have no partisan or political reasons to want it to seem to appear one way or the other.

It just that so much of it seems contrary to conventional reasoning.

Craig, really (all kidding aside), how can these many pressing problems ( home.comcast.net/~d.a.n/PressingProblemsFacingTheUS.htm ) , growing in number and severity, not eventually culminate to cause an economic meltdown (or worse)?

Is there some fiscal theory or policy that supports the spending and borrowing behavior of the federal government?

Dan:

Craig, really (all kidding aside), how can these many pressing problems ( home.comcast.net/~d.a.n/PressingProblemsFacingTheUS.htm ) , growing in number and severity, not eventually culminate to cause an economic meltdown (or worse)?

Thank you for your response. My first reaction to the list you provided (thanks) is that there will always be a list. There has never been a time in history when there were not problems.

The reason why the doomsday senerio does not come is because the list is well known, and our community continues to work on the problems and they come up. For all of our election complaining, they really do work.

I hope this explaination doesn’t sound too strange, but imagine out culture going down a path with a cliff on each side. The curve looks like a sign curve. Much of the time it is heading toward one cliff or another, but the curve ALWAYS turns. Got the picture?

My own language of why doomsdayers are always wrong is that they commit the error of extrapolation. They assume that the line wont curve back toward the other “cliff” when history shows that it always does.

Take spending for instance. There are times when governements spend more, (war time and in recessions), and times when we cut back on spending (properity). The left is currently extrapolating fiscal policy since 9/11 into the future and saying what we already know; that if we keep going, we will go off the cliff. The problem is that the line is trend is going to change and already is.

Is there some fiscal theory or policy that supports the spending and borrowing behavior of the federal government?

Yes there is. The nominal rate of growth of the US economy is about 6%. (Real growth plus inflation). If the rate of growth of the debt is equal to or less than 6%, then in relative terms our debt stays in the same relative position.

For instance, lets say you make $100,000 a year and owe $100,000. If you get a raise and earn $110,000, and have a debt of $110,000 then you owe more money, but are in the same relative position.

In general terms since governments in theory never reach retirment age, you can grow at these rates forever, and never have a problem.

As the left will be quick to point out, Bush exceeded these limits with his budget cuts. What they do not point out is that this is necessary in times of war and recession. Now since we are out of recession we need to slow deficit spending down a bit in order to “catch up” to this long term trend. That is why Bush is promising to cut the deficit in half.

Hope this helps!!

Craig

Craig,
Thanks. Perhaps you’re right. I really hope you’re right.

But, let’s just take one thing for a moment. Let’s look long term.
So, as you and others say, the spending needs to slow down now. Why? Because it could cause trouble later?

Let’s consider the $8T National Debt for a moment?
Let’s suppose for a moment that the federal government:
(a) stopped borrowing about $1B per day to pay the daily interest of $1B per day,
(b) and even paid back an additional $1B per day.

The $8T National Debt would only stop growing, at best.

But, if the federal government could also somehow manage to pay an additional $34 Million per day, toward the National Debt, it would still take until 2082 (77 years) to pay down that debt (with a total cumulative finance charge of $20T on the original $8T).

Is that $8T of debt worth paying $20T of interest on? And, what’s the likelihood the spending will stop, much less reduce the National Debt.
Many say the total debt is lower compared to GDP than some past periods in history, but that was during WWII, and we’re not likely to see the growth that occurred after WWII. So, isn’t there some justification to be a little alarmed about this kind of debt? Especially when combined with $40T in personal debt, looming shortfalls in Social Security and Medicare, plundered pensions that are $1.6T in the hole, an aging population requiring higher taxes on the younger population, rampant pork-barrel, and a National Debt that has grow every year for the past 45 years ?

I’m just startin’ to have doubts that this all can’t help but lead to some serious pain in the next 10 to 20 years.

The numbers, calculations, trends, history, (despite some of the current positives you mention) are generating several valid concerns among a lot of people nation wide, and the track record of Congress doesn’t provide much comfort.

So, the question is, given the staggering size of the National Debt (80% of GDP), the difficulty of paying it down (increasing every year for 45 years), do you think the problem is can just be passed on to the next generations (despite the increasing number of aging Americans, and the decreasing percentage of working American tax payers)?

The models and calculations I’ve done don’t look comforting at all. The only easy way out of it is if there is a long period of tremendous growth, like what followed WWII. And, it would have to also be accompanied with consirable fiscal discipline (which seems highly unlikely).

Some might find this interesting, in regard to the defense budget figures quoted earlier.

And another thing: you really do need to look at deficits and debt in terms of total GDP or tax revenues, not in absolute or adjusted dollars, because their importance is related to the ability to pay them down. This link shows the deficit as a percentage of potential GDP since 1960. I intensely dislike the policies of this administration, but we all need to keep the facts straight.

Dan:

Let’s consider the $8T National Debt for a moment?
Let’s suppose for a moment that the federal government:
(a) stopped borrowing about $1B per day to pay the daily interest of $1B per day,
(b) and even paid back an additional $1B per day.

What about the other side of the equation? (Assets). Assets owned by Americans have increased more than 8 trillion since the bottom of the last recession because of housing and the stock market.

If you look at the US economy as a wealthy business person does, (Net worth= assets - liabilities) it shows that our citizens are richer than ever before.

Another point that I was reading on the other day. I am sure you have seen graphs that show how much more in debt we are as citizens than in previous generations. There are graphs that show huge increases in consumer debt. If you “drill down” into the numbers, this debt is nearly totally explained by a the following factors.

1. Increased percentage of citizens buying homes.
2. Increased numbers of homeowners due to the baby boon generation.

Managing the debt is not a problem, because in short citizens are simply paying on debt instead of paying rent. If you want I can dig through my pile of articles to find the numbers, but it comes from a pretty good sourse.

So, the question is, given the staggering size of the National Debt (80% of GDP), the difficulty of paying it down (increasing every year for 45 years), do you think the problem is can just be passed on to the next generations (despite the increasing number of aging Americans, and the decreasing percentage of working American tax payers)?

I don’t think it is important if we pay it down. My dad bought a home for $10,000 in 1959 that is now worth $130,000. If he had never paid a penny of principal, and still owed the original $10,000 it wouldn’t matter one bit to him. As a retired many he might have that in his checking account!!

The nominal rate of growth of the US economy is 6%. That means the economy doubles about ever 12 years. If we stopped borrowing and went to interest only, in 12 years (using your figures) the national debt would only be 40% of GDP. In 24 years it would be 20%.

So, as you and others say, the spending needs to slow down now. Why? Because it could cause trouble later?

I think the numbers you are quoting with regard to federal debt as a percentage of GDP are a good way to look at the debt because it is a realative number. I think the trendline should generally be down and to the right. I also think the trendline should be up and to the right in times of recession or war. When the recession/war is over, the long term trend (down and to the right) should resume.

Basically reducing the federal debt as a percentage of GDP builds equity in the economy.

I have been looking on the net for the assets/verses liabilities for the US economy. I would encourage you to find them even though I have not been able to yet. It only matter how much you owe, when compared to how much you own. What we are worth as a country is moving up dramatially right now because of housing.

Actually, debt to equity would be a great way to look at our national debt.

Craig

Hmmmmm….I’m not sure I’m convinced.

(1) The debt wouldn’t fall that much in 12 years just paying interest only.
(2) What you call 6% growth per year should really be called inflation; the government prints more money, which creates inflation, and the inflation shrinks the original debt. Just like your father’s house that originally only cost $10K. Due to inflation, it’s now worth $130K. How’s inflation beneficial, except to those in debt and able to create inflation? I see what the government is doing (by design), but I believe it is destablizing and dishonest.
(3) Congress seems unlikely to ever get the discipline to slow spending, much less stop borrowing…the National Debt has grown every year for the last 45 years.
(4) That part about a $10K house now being worth $130K; over what time period? 42 years? What about the interest? 30 year loans mean paying for the house many times over too. So, did you really come out ahead? Not really. What people often perceive as increased value, is really inflation.
(5) Americans lost a lot of money in the markets between 1999 and 2004. So, they’re not that much better off.
(6) $40T in per personal debt, 5 times GDP, can’t be good.
(7) If another recession (or worse) comes along, which could easily happen these days, a lot of those homes will be forclosed, since they are a large part of the $40T in personal debt.

Craig, I hope your right. Really.
I get all that about growth, interest, equity, inflation, GDP, National Debt etc.
I’m just not convinced. There’s gonna have to be a whole lot more growth, inflation, fiscal responsibility, and low interest rates for a long period of time. It doesn’t seem likely.

Dan:

(2) What you call 6% growth per year should really be called inflation;

This assumes 3.5% real growth and 2.5% inflation.

Actually inflation should continue to trend down for a while so the 6.0% might be a bit high. Lets say there were zero inflation and we didn’t pay a nickel of principal. That would mean the economy would double every twenty years. (3.5% is the long term average growth rate of the US economy). That would mean that the debt would decrease in half in that period of time on a relative basis.

It is really unimportant that we pay off the debt. I think it is important that the trend line for debt be as a percentage of GDP generally be down and to the left. That is achieve with a deficit below the growth rate of the economy.

What David has been correct in pointing out is not so much what we are talking about here, but rather medicare/medicaid expenses in the future. The Bush deficits are nothing compared to what is ahead is something isn’t down.

Craig

Yes, Medicare has looming shortfalls.
And, there’s also the PBGC (Pension Benefit Guaranty Corp; www.pbgc.gov) that’s about $400 billion in the hole, and plundered pensions that are about $1.6 trillion in the hole, and $40 trillion of personal debt, and looming shortfalls in Social Security, and globalization that’s not helping to increase growth in the U.S., not to mention energy vulnerability, and war in Iraq and Afghanistan, declining quality of education, increasingly unaffordable health care, and the $8 trillion National Debt.

Craig, I hope you’re right. There’s no doubt the system can withstand a lot of abuse, but there may be several things culminating all about the same time (e.g. next 10 to 20 years) to potentially create a perfect storm. No one can be certain, since it is complicated, and the many models are complicated and contradict each other, and fail to accurately predict, and no one has very good models yet for forecasting that far out. But mistakes we make now (increasing in number and severity) could very likely hurt us badly 10 to 20 years from now. It almost seems as though some in government are trying to find out just how much abuse is possible. They shouldn’t forget their history (i.e. The Great Depression, Civil War, Revolution, wars, 9/11, etc.). The current trends aren’t comforting, because they could be reaching a point where much pain in the future will be unavoidable, and at the very least, reducing our options, should things become worse.

emediawire.com/releases/2005/6/emw249139.htm
__________________________________
New Economic Reports Forecast Business Conditions & Recessions Nine Months out
RDLB, Inc. today announced a new analytic device ? Mr. Model ? that uses hard data to accurately forecast economic conditions and recessions for the next three quarters. Mr. Model, published monthly, offers a nine-month heads-up on economic conditions, giving businesses and investors ample time to gear up for an expansion or tighten belts for a bust. Free sample reports and subscriptions are available at www.nospinforecast.com.
_________________________________

Of course, for every model you find that predicts trouble, there’s another that doesn’t.
But, we’re not invulnerable.

Craig, the reason you can’t find asset/liability ratios for the US economy is because such an analysis is useless. The US debts don’t counter liquidatable assets. How does one reposess a road, a national monument, or national park, space satellite with military capability or nuclear weapons?

Revenue/liabilities is useful, and GDP as a predictor of Revenue is useful (Only in the short term, however). But since the US will not be put up on the auction block to the highest bidder in the event of default on debt instruments, assets has no meaning.

Government financial measures while born from the same theoretical constructs, have to handled differently from those of corporations or individuals, whose indebtedness, by law, cannot be passed on to the next generation as Government debt can and does. And that is precisely why debt is a far more complicated and serious condition to deal with for government, since, it does pass on to generations who will experience their own cycles requiring borrowing.

Bush says it is wrong to pass our problems and debt on to future generations, but in the absence of his use of the veto pen, and in light of his incessant drive to reduce revenues, his words are little more than lies of appeasement to the uneducated. Bush is doing more to harm future generations economically than any President I can remember. And the Republican Congress is outpacing the President in its rush to further indebt our nation and children’s future.

David/Dan:

Craig, the reason you can’t find asset/liability ratios for the US economy is because such an analysis is useless. The US debts don’t counter liquidatable assets. How does one reposess a road, a national monument, or national park, space satellite with military capability or nuclear weapons?.

Here is the quote I was looking for:

Since the end of the recession in 2001, U.S. household liabilities have increased by $2.9 trillion, up from $2.7 trillion in the first quarter of 2005, according to BusinessWeek. The good news is that household assets, which include such things as home values, securities and retirement accounts, have surged by $10.6 trillion over the same period, up from $10 trillion in the first quarter. Household net worth began 2005 around 12% higher than it was at the peak of the stock market bubble in the first quarter of 2000.

What this means is that household WEALTH has increased $7.7 trillion since the end of the the last recession. It is great news that Household wealth is up over 12% from it’s peak at the top of the stock market bubble.

When looking at debt, national or otherwise, it is very important to look at the assets that back it up!! As the expansion continues, we should expect additional wealth to accumulate.

Be careful when looking at figures that show debt climbing on consumers. Much of this debt is in the form of house payments instead of rent payments as more and more taxpayers own homes. What looks like a negative on the surface is in reality good for the economy, and good for wage earners.

Craig

$7.7 trillion from 2001 to 2005?
Well, less really, because of the inflation during that period (accompanied with little growth).
And, there were huge losses in the markets and retirement plans, in which Americans lost a few trillion (possibly also exacerbated by Greenspan’s and meddling).

Craig, I still hope you’re right. I don’t disagree with much of what you say, but it’s hard to see such a rosy outlook, because a lot of that home ownership has 20 and 30 year loans to go with it. So, that’s almost a wash, since those people will pay 2 to 4 times the original price (depending on their interest rate). Only, sometimes, for a few lucky, if they hold onto it long enough, does that property really generate a nice profit. And, many experience losses, because some neighborhoods and property values decline (severely).

And everytime there’s a recession or hiccup, a significant percentage of them get foreclosed on, because they’re not planning for a rainy day, and they’ve bought more than they can afford. It would be so much better if they didn’t get into these 30+ year loans (essentially, buying more than they can really afford). Likewise with the government; carrying that much debt is negative, no matter how you look at it. It’s really a bit of a ponzi scheme. Borrow, print more money, cause inflation, to shrink the national debt, call it growth, but really destabilize the economy and value of the dollar, and cause everyone to run around like chickens with their heads cut off, looking for a place to put their money so it will at least stay ahead of the inflation, which leads to risky and failed investing, and more losses, and the vicious circle starts all over again.

Where is the average person supposed to invest? Sure, many put it into homes, but they really don’t own them yet; not until they’re paid for (several times over).

Dan:

Craig, I still hope you’re right. I don’t disagree with much of what you say, but it’s hard to see such a rosy outlook, because a lot of that home ownership has 20 and 30 year loans to go with it. So, that’s almost a wash, since those people will pay 2 to 4 times the original price (depending on their interest rate).

My point on this is that generally consumers are better off paying on a mortgage than rent. So increases in consumer debt that is tied to new homebuyers is a good thing long term. Of course some will loose their homes because new homebuyers are the most at risk, but that is true of every first time homebuyer that ever was!!!

I accept your point quoted above. My counter is to ask what would happen if these consumers did not buy, and rented for the same period of time?? Record home ownership necessarily increases the debt load on consumers. But when these dollars would have been spent on rent anyway, it is fine. They obviously have the money to service the debt.

I am not arguing for a rosey picture. I am arguing for a non doomsday picture. There will always be problems in the economy. I think the future is a bright as it always has been. The status quo should continue as we bump along.

Craig

Craig

OK. Thanks.
Yes, buying a home is usually better than renting (provided, it’s not too expensive).

…imagine our culture going down a path with a cliff on each side….Much of the time it is heading toward one cliff or another, but the curve ALWAYS turns.

—————————
I think the future is a bright as it always has been. The status quo should continue as we bump along

Hmmm….the status quo doesn’t always just seem to just bump along.
Lately, it seems more like stumbling, and we had better be careful we don’t stumble over the cliff, because it has before, and it will again, and there may be signs now that we’re close to the edge now.

Perhaps we should all take a deep breath and remember that the last two presidents to have surpluses for government spending were…. Clinton and Carter. Both democrats.

I always hear about the great fiscal restraint of republicans, but look at President Reagan. Deficits ballooned under him. I guess we’ll have to wait until we get another “tax and spend” liberal in the white house to get the budget under control

EA:

Perhaps we should all take a deep breath and remember that the last two presidents to have surpluses for government spending were…. Clinton and Carter. Both democrats.

Are you sure you want to bring up Carter??

On assuming office in 1977, President Carter inherited an economy that was slowly emerging from a recession. He had severely criticized former President Ford for his failures to control inflation and relieve unemployment, but after four years of the Carter presidency, both inflation and unemployment were considerably worse than at the time of his inauguration. The annual inflation rate rose from 4.8% in 1976 to 6.8% in 1977, 9% in 1978, 11% in 1979, and hovered around 12% at the time of the 1980 election campaign. Although Carter had pledged to eliminate federal deficits, the deficit for the fiscal year 1979 totaled $27.7 billion, and that for 1980 was nearly $59 billion. With approximately 8 million people out of work, the unemployment rate had leveled off to a nationwide average of about 7.7% by the time of the election campaign, but it was considerably higher in some industrial states. Source: Grolier’s Encyclopedia, “The Presidency†Dec 25, 2000

Besides, Bush’s first term stacks up well against Clinton’s first term from an economic point of view.

Craig

Dan:

Hmmm….the status quo doesn’t always just seem to just bump along. Lately, it seems more like stumbling, and we had better be careful we don’t stumble over the cliff, because it has before, and it will again, and there may be signs now that we’re close to the edge now.

How so?? I am really puzzled by your comment. Seriously. What news are you reading that makes you think the economy is limping along?? We are growing at a rate that is exactly where we should be, inflation is low, interest rates are low, employment is up, and americans are richer than ever before.

There is one theory in economic circle that I read. Basically the first Clinton term and the first Bush term were about a was economically.
Arguements could be made both ways. However, Clinton received much more favorable pres coverage that Bush on economics. The theory is that since most reporters are democratic, democrats get better economic coverage than republicans.

Compare unemployment, economic growth, job growth, etc for the years 1992-1992, and 2000-2004 and you will see what I mean. The only real difference is that Bush became president at the beginning of a recession, and Clinton right after a recession. Discounting the timing of the recession, and they look pretty close to me.

We will have to see what the future holds. Wow was that one great second term for Slick Willy!! Those numbers will be hard to beat!!

Craig

Craig,

I agree about all those indicators. The short term looks OK. But, it’s not hard to create the appearance of lookin’ good by spending, borrowing, spending, maxing out the credit cards, etc. For a while anyway.

Really, one of my biggest concerns is not only the National Debt.

What worries me is the combination of the following:
(01) the size of the $8 trillion National debt, and the track record of it growing every of the last 45 years;
(02) looming shortfalls in Social Security;
(03) looming shortfalls in Medicare/Medicaid;
(04) GPBGC $400 billion in the hole;
(05) pensions $1.6 trillion in the hole;
(06) $40 trillion of personal debt;
(07) cost of the war in Iraq & Afghanistan;
(08) cost and impact of terrorism; the probability of one (or more) terrorist attacks;
(09) increasingly unaffordable and unreliable health care (and that will probably be the next entitlement which will grow government ever larger; that will be promised by pandering politicians);
(10) the increasing cost of illegal aliens burdening our healthcare, schools, law enforcement, and national security;
(11) crumbling infrastructure;
(12) corporate/investor fraud; cooking the books; stock fraud; failure of the SEC to regulate and prosecute violators; $trillions lost in the stock markets;
(13) the 40 hour work week is more like 50+ hours (and now, typically also 2 workers per household);
(14) globalization (global village? or global pillage?); not helping growth in the U.S.; wealth and jobs leaving the U.S.
(15) energy vulnerability and rising cost of fuel and energy
(16) inflation, created by design, to shrink debt; it’s a vicious circle that can also destroy savings and destabilizes the economy;
(17) and the historical cycle:
______________________________________________
[a] oppression, totalitarianism
[b] courage, responsibility, revolution, war
[c] liberty, growth, abundance,
[d] selfishness, complacency, fiscal irresponsibility
[e] apathy, dependency, fiscal & moral bankruptcy; return to step [a] above
______________________________________________

(18) and the lack of serious concern about any of the above; no end in spending and borrowing in sight, much less reduction of the crushing debt; no politicians or parties willing to tackle tough issues, for fear of risking re-election; increasing corruption of government that is increasingly for sale; the shrinking middle income class; etc.

I could go on and on, but no one will read it anyway.

Dan:

So long term there are some problems. Pick the worst one from your perspective, and I will show you how “the curve” will turn before we go over the cliff.

Craig

OK, but let me pick three things, because it’s the combination that’s really the issue (not just any one by itself).

Let’s suppose:
(1) government irresponsibly continues to spend and borrow about $1 billion per day just to pay the interest due each day (and continues to grow the debt like every year of the last 45 years),
(2) ignore and fail to head off the looming shorfalls in entitlements (S.S., Medicare, Medicaid, etc.),
(3) and, we have a prolonged energy shortage (i.e. months), with high fuel costs, long lines at the pump, areas without electricity, temporary blackouts, etc.

I could have added something about war, terrorism, or terrorist attacks, but that’s not necessarily our fault or something we can completely control, but we are also facing huge costs for each of those too.

Dan:

1. Federal Debt. The CBO estimated in march that over the next 10 years we would at $1.35 Trillion to the federal debt. That would leave a total of $9.2 Trillion. If you assume average growth of the ecnomomy of 3.5% and inflation of 2.0% we should have a $20 Trillion dollar economy by then. That reduces the deficit from 66% of GDP now to about 45% then. If we achieve the number of CBO then we should be fine.

Give me some time to think about the other two parts and how they interelate.

Craig

Dan:

As for medicare/medicaid, we truely are heading for a cliff!! Social Security is nothing the compared to Medicare/medicaid shortfall.

The error of extrapolation states means that we current assumptions will stay the same and we will go over the cliff. The fallacy of this view is that assumptions WILL change.

I remember the nuclear freeze movement around 1980. That movement was based on the assumption that the Soviet Union and the United States were roughly at equal points, and that the cold war was a stalemate and so both parties should freeze their numbers of weapons. Wow were those proponents wrong!!!

Assumptions that will change, are, the age of retirement, what we should be investing reserves in, and how much health care to provide the elderly. Watch through the years as this problem approaches. It will be like driving a car towards the mountains. The “mountain” of doom will continue to move away.

First of all, there are economic assumptions that are simply wrong. It doesn’t matter what they are, since they are long term they are either to optimistic or pessimistic. As we go toward doomsday the margin of error which is huge now will drop eventually to zero.

Second, when do people retire? The answer is, when they can afford it. When people retire is a function of money. As health care costs go up, so will the retirement age.

Third, there is much to gain from rethinking medicine. Much of medicine can be outsourced. Xrays do not need to be read here. Neither do lab results. Medical professionals around the world can provide these services for less than half what Americans pay.

Fourth, It’s time to import drugs.

I will stop here. The list is so long on ideas to cut costs. It will all happen as Baby boomers want to retire, but can’t afford to because of medical costs.

Craig

Craig,
Thanks. I hope you’re right.
Perhaps we can avoid going over the cliff if we change course soon enough. Yes, soon enough is the big question?
Because, sometimes, navigation corrections can come too late. Like a giant ocean tanker with tremendous momentum that can’t possibly turn or stop soon enough.

At any rate, I think the federal government is dangerously flirting with potential disaster, unnecessarily decreasing the chance of just-in-time course corrections, by irresponsibly spending and borrowing, failing to deal with many tough issues due to fear of risking re-election, and failing to adequately deal with these many pressing problems: home.comcast.net/~d.a.n/PressingProblemsFacingTheUS.htm

Even if we don’t go over the cliff, and these many pressing problems may never culminate to create the perfect storm, there’s almost without a doubt, going to be some belt-tightening and pain to come in the next 10 to 20 years.
Pessimism and optimism have their pros and cons, but it takes all kinds. The optimists, realists, and pessimists hopefully will balance each other out, and keep us on from going over the cliff.

Thanks for the info. Most forecasting models seem to predict a rosy outlook too. Perhaps you and them are correct. If so, it’s truly amazing how much abuse the system can sustain without going over the cliff.

Dan:

Some of the issue is expectations. We are a spoiled country. Even if we have to belt tighten (thinking of medical expenses), we are still so much better off than the rest of the world. There are many models of health care that have increased longevity in ways that mirror our own. The only problem with them is that they don’t give “relief” on demand, and you don’t have as much control over your doctors etc etc. But if we have to go to a cheaper model, so what?? Individually we may “suffer”, but as a country we will grow from it.

I do think our attitudes about many things will change as we get closer to that 20 year mark. Have you read any of Dent’s work on the future? It’s pretty scarey.

Craig

No. Is that Harry S. Dent, Jr. ?
_________________________________________
Dent predicts the following to look forward to:

The Dow hitting 40,000 by the end of the decade
The Nasdaq advancing at least ten times from its October 2001 lows to around 13,500, and potentially as high as 20,000 by 2009
Another strong advance in stocks in 2005, with a significant correction into around September/October 2006
The Great Boom resurging into its final and strongest stage in 2007, and even more fully in 2008, lasting until late 2009 to early 2010
_________________________________________
Currently, one of the most notable financial market gurus is Harry S. Dent, an energetic speaker who earned his reputation of predicting several correct calls in the mid and late 1990s. Dent is the author of “The Roaring 2000s Investor”, as well as several other books.
_________________________________________
In Dent’s formulation of his wave theory he holds that the secular bull market that began in 1982 won’t end until the 2007-2010 period, when the spending wave peaks and when the current “growth boom” of the “information economy” peaks. www.safehaven.com/article-71.htm
_________________________________________
Where’s the scarey part? Is it much later? After 2010 ?

Dan:

Yes, he is the one. He is predicting a global depression next decade very much like the 30’s. Basically his point is that older people do not consume as much as younger people. When babybooners retire who will buy their investments??

Counter Jeremy Siegel a well repected author who has written a book I am about 2/3 the way through called “The future for investors”. Siegel takes a close look at Dent’s work. (More indepth). He says that Dent’s premise that demographics impact the markets is correct. He challenges Dent however because he says that Dent does not adequately look at globalization. Siegel would say there will be plenty of “younger” people to purchace our securities when we retire. Many will be from India and China.

Reading both books, I am a very light Dent. (I dont’t think the dow will hit 40,000, but could hit 17 or 18,000 by 2010. I also believe demographic will effect a great deal more than Social Security. But there needs to be more thought. Yesterday I read an article by a well repected economist that said we are basically over doing the outsoursing thing. He said that globalization is “measured” and steady, even methodical.

I think Siegel has some great points in that even with a measured and steady pace, there are a lot of Indians and Chinese that will make a great deal of money going forward.

Truthfully, I don’t think we know much about 20 years from now. I look at predictions made 20 years ago about today, and they are way off base. I think we do need to have predictions, as they give us goals to work on. We need however to continue to monitor and seek real evidence and information before we make bold moves. (I think Bush is over reaching on Social Security for instance).

Craig

Yes, 10 to 20 years out is tough to predict.

Yes, the aging population is a factor to consider.
It’s in my list of pressing problems: home.comcast.net/~d.a.n/PressingProblemsFacingTheUS.htm

Most models have a rosy outlook for the future.
None of them seem to consider historical cycle or the prevailing psychology either: home.comcast.net/~d.a.n/HistoricalCycle.htm

The aging population is a valid argument. How do you decrease the average age of the population? It’s going to take an awfully big baby boom, and/or a lot of immigration.

It’s interesting that Dent, someone who has acurately predicted mostly fair to rosy conditions, is now predicting something as bad as the Great Depression.

I think some (maybe the pessimists and realists), build a good case though that we may be building momentum and inertia (i.e. some big unwieldy problems) and we won’t be able to change course soon enough. Also, there are several believable scenarios in which two or more problems culminate near simultaneously to create a perfect storm. It’s happened before; it could happen again.

Thanks for the two names. I’ll want to read up more about Harry S. Dent. I’ve seen Jeremy Siegel’s web-site. He’s got some steep prices for some of his charts, slide-shows, and articles, but there’s certainly a lot of analysis, historical data, and research there.

Oh, Also, another thing to consider is that baby boomers lost trillions in market between 1999 and 2004. So, many don’t have nearly as much net worth as before 1999.

Dan:

Oh, Also, another thing to consider is that baby boomers lost trillions in market between 1999 and 2004. So, many don’t have nearly as much net worth as before 1999.

Babyboomers did loose a great deal in the market between 2000 and 2002. Actually between housing and the stockmarket rise of 2003 and 2004, personal wealth is at an altime high.

Since the end of the recession in 2001, U.S. household liabilities have increased by $2.9 trillion, up from $2.7 trillion in the first quarter of 2005, according to BusinessWeek. The good news is that household assets, which include such things as home values, securities and retirement accounts, have surged by $10.6 trillion over the same period, up from $10 trillion in the first quarter. Household net worth began 2005 around 12% higher than it was at the peak of the stock market bubble in the first quarter of 2000.

We will see what the future holds!!

Craig