Da Deficit

January 25, 2005 8:32 PM

How much? (sun times link) So the story is we're going to have an estimated $427 billion shortfall. So what does that mean? According to this guy the deficit is more of a metaphor than something real. According to newhouse news service the deficit gets added to the national debt (and is terrifying). According to this guy the deficit is not a well defined concept Will it stimulate the economy? Increase taxes? It's too complex for me even though it's in the news a lot. $7.9 trillion in debt doesn't sound good though... I think I'll just keep blaming this guy.
posted by Smedleyman (31 comments total)

I'm waaay lost on this. The papers seem to assume I'm an economist and I have any sort of idea how this is going to affect me, my home, my kids, etc. Except for the Clinton joke, I'm as apolitical on this as I can be.
Are we getting something now and paying it later? You can argue spending money on your charge card stimulates your going to work, but I wouldn't put in place as a policy.
posted by Smedleyman at 8:37 PM on January 25, 2005

It just means we will have our economic independence slowly usurped by China.

Communism anyone?
posted by GooseOnTheLoose at 8:40 PM on January 25, 2005

Deficit in terms of GDP, what's another $427 BILLION? In relative terms, it was worse in 1993, and 1982-1986 when democrats ran things.... oh, wait.

(the blue at the end of the graph was wishful thinking)
posted by Arch Stanton at 8:42 PM on January 25, 2005

National Debt Clocks

Smedley, I'm not sure why you blame Bubba; I thought he did a pretty great job on the economy.
posted by theora55 at 8:55 PM on January 25, 2005

I blame the corporapists for everything.
posted by VP_Admin at 8:59 PM on January 25, 2005

IANAE
According to the last pages of the latest Economist magazine:

Real GDP for 2004 is predicted to be: +4.4%
Budget Balance as a percentage of GDP: -4.4%

So it looks like to me the US borrowed a whole pile of money from Japan and China to get 4.4% growth instead of 0%. That assumes all money spent is spent on US economy ("most money spent" would be plausible).

The current account balance is estimated to be -5.5% of GDP for 2004.

So what does this all mean? The US is living on borrowed money and if it was not the worlds reserve currency, people (read countries) might decide to stop buying US currency and go to something safer (read Euro). At which point interest rates would have to go up to attract people to buy US bonds. At which point the US housing market would crash because people would go refinance there mortgage and realize they couldn't afford the monthly payment. Recession here we come. So IMHO keep your fingers crossed that Japan and China don't want the US to have a recession and will keep financing the debt.
posted by sety at 9:03 PM on January 25, 2005

You can argue spending money on your charge card stimulates your going to work, but I wouldn't put in place as a policy.

You see, it's just the opposite: spending money on your credit card stimulates the work of the person you're spending that money on, and then he spends the money stimulating someone else's work, etc.
posted by boaz at 9:07 PM on January 25, 2005

For the non-economist (mainly me) Pat sums it up pretty well in this article. Not a heavy discussion of economics but more a Cliff Notes prediction of the next few years with an emphasis on the economic side of the coin. I know dear leader portrays himself as a conservative (and pays others to do it too) but I think it's just one of those things he says blindly.
posted by j.p. Hung at 9:08 PM on January 25, 2005

Previous threads about dollar troubles and today's Krugman article about Greenspan leaving next year and being replaced by a possible yes-man by the Bush Administration.
posted by Arch Stanton at 9:08 PM on January 25, 2005

Excellent news if you're short dollars and long anything else. Get out of USD and into AUS, EUR, JPY or even INR if you're daring.

Communism anyone?
You mean Communism Inc.
posted by missbossy at 9:46 PM on January 25, 2005

Giant in decline
posted by homunculus at 9:52 PM on January 25, 2005

When we pays our taxes a certain amount of that money pays the interest on the debt. No where in the links did I find what the % rate of interest is, that seems to me most interesting.
posted by hortense at 10:50 PM on January 25, 2005

Spending our kid's inheritance.

The bumper sticker says it all.

Not only with debt but also with pollution.

It would be better that we have no children than subject them to a hellish future of debt and decline.
posted by nofundy at 4:51 AM on January 26, 2005

I had, for a long time, difficulty feeling the difference in numbers (between million/billion/trillion.)

Until I found this book: Innumeracy.

I'm going to share some numbers with you.
How long is a million seconds? 11 1/2 days.
How long is a billion? 32 years
How long is a trillion? Well, mankind has been on the earth just a little over a trillion seconds and the earth is less than 5 trillion seconds old
posted by filmgeek at 5:54 AM on January 26, 2005

It would be better that we have no children than subject them to a hellish future of debt and decline.

I chose option 3; bugger off to New Zealand where I think my kid's gonna have a much better chance of a good life.
posted by ehintz at 6:00 AM on January 26, 2005

I remember when the Cold War ended, many people credited U.S. military-economic policy for the demise of Soviet Communism. The line of reasoning was that in the arms race, our technology trumped Russia's ability to counter and they spent themselves into an untenable debt trying to keep up.

With about twenty airline tickets and some highly motivated followers, bin Laden is doing the same to the U.S. While not wanting to minimize the loss of life that occurred on 9/11, I feel the U.S. has grossly overreacted in its response, especially in terms of the invasion of Iraq. For all the money we've thrown in that hole, there are still at least twenty dedicated followers of bin Laden that could carry out attacks similar to those of 9/11.

With a modest investment on bin Laden's part, he shrewdly goaded the U.S. into an overreaction that is adding billions to our deficit, adding to the direct economic damage of the 9/11 attacks.

What the U.S. is done is kind of like a guy that lives near an orchard with an wolf in it. He buys a flamethrower and destroys all the trees, but in the end, the wolf lays low and is never caught. He is left to pay for the expense of the flamethrower and fuel, not to mention the fact that he has lost all benefit of the orchard and also pissed off all his neighbors. Okay, maybe there are flaws with that analogy, but it's something like that.

The point is that Bush encouraged people to spend their money in the aftermath of 9/11 because to let them change our economic behavior would be to let the terra-ists win. But his actions have resulted in a worsening in our economy and bin Laden is in a cave somewhere chuckling at all the money we've spent trying, unsuccessfully, to control him.

Bush, in his actions, is letting the terra-ists win.
posted by Doohickie at 6:00 AM on January 26, 2005

Well, Doohickie, it's just what Bin Laden said he wanted to do and yeah, it's working like a charm. Sadly, as you point out, all of this wasted spending can not prevent a few individuals from doing the same thing again - perhaps not to the same degree but at this point, I don't think that would even matter. Hysteria abounds.

We need a new 'strategery'
posted by j.p. Hung at 6:59 AM on January 26, 2005

Public debt as percent of GDP:

USA 1993: 49.4%
USA 2006(est):38.6%
Germany: 51.9%
France: 42.7%
Japan: 79.3%


Source: Bear Stearns via WSJ
posted by trharlan at 7:19 AM on January 26, 2005

Filmgeek - I think you're off on some of your numbers. If the earth is 5 billion years old, give or take, it's been around 157,680,000,000,000,000 seconds, which is 157,680 trillion seconds.

Unless you're a fundamentalist christian, in which case the earth was created by God 252,288,000,000 seconds ago.
posted by bshort at 7:26 AM on January 26, 2005

bshort, I use the number of seconds since the Unix Epoch.

Good point(s), Doohickie. BTW, does anyone else get really depressed after reading The Economist?
posted by shoepal at 8:10 AM on January 26, 2005

shoepal, the Economist is very depressing, as it constantly reflects the eroding financial future of the U.S. Not that voters read at all. *looks angrily at map*
posted by uni verse at 8:46 AM on January 26, 2005

trharlan... I don't think that's right. I just worked out the current figures, and I don't come up with those numbers at all... can you link to the source? (I'd be curious to see how they crunched the figures...)

It defies logic that 10% of the entire debt would disappear in 12 months. The economy isn't growing that fast nor have we cut spending in a meaningul way... given the war and all, that's not surprising.
posted by ph00dz at 9:05 AM on January 26, 2005

It just means we will have our economic independence slowly usurped by China.

Slowly?
posted by 327.ca at 9:06 AM on January 26, 2005

I had, for a long time, difficulty feeling the difference in numbers (between million/billion/trillion.)

To confuse matters (and derail slightly) there are differences in numerical conventions between the US and the rest of the world.

hortense, the average interest rate on the US outstanding debt is roughly 4.5%. (I don't believe that site takes into account the weighting of the various debt instruments - if someone has a better number I'd appreciate it.)
posted by malocchio at 9:20 AM on January 26, 2005

trharlan... I don't think that's right. I just worked out the current figures, and I don't come up with those numbers at all... can you link to the source? (I'd be curious to see how they crunched the figures...)

I was confused too until I noticed the word 'public' in front of debt. That specifically excludes intragovernmental holdings (like the Social Security trust fund), that have ballooned to over 40% of the total federal debt over the last decade (mostly during the Clinton administration).
posted by boaz at 10:42 AM on January 26, 2005

The Economist says US public debt is 62% of GDP as of 2003.

Highly negative balance of payments, zero net national saving rate, no wage growth to speak of, big household debt levels, huge federal budget deficits, rising income inequality... wow, this country's got everything!
posted by sfenders at 1:15 PM on January 26, 2005

Meanwhile, just as a data-point on how long these things take to repay...

The UK borrowed a lot of money from the US to buy the weapons, equipment and training it needed to fight WWII -- $4,336 million at 1945 values, or just over $43 billion at today's prices.

The UK will finish paying it back in December 2006.

Looks like the US could do with it, too.
posted by Hogshead at 2:24 PM on January 26, 2005

I just keep thinking that Bush and Co. want to bankrupt the US. They just want the deficit to get bigger- the debts from China and Japan get called in. They'd get that cheap labor market in the US with the subsequent crash and recession to compete with other third-world countries and China, without undermining quality of life of the upper echelons of society.

Stuff like this just makes me think about it more.

Besides, in terms of political power, there never has been, in the history of US, a point at which so much power has been given to one part of the government. The Congress are a bunch of yes-men. The SCOTUS will most likely see most of it's staff changed with yes-men. The DoD is getting filled with yes-men. Now, the Federal Reserve will have a yes-man, and both Fan and Fred have yes-men.

Every piece is in place.
I think.
posted by id at 5:44 PM on January 26, 2005

id - what's more confusing is the money doesn't seem to be based on anything. Debt of what? Labor? It certainly isn't gold anymore.
Thinking of it in terms of say, work or energy, what then do we pay back? And who's collecting that interest? And don't they owe us too?
Of course there is the whole land ownership thing, but that's based on theft ultimately.
I was born in debt along with a lot of other people.
At some point it seems like the whole facade will crash and folks will say "I don't owe you a damn thing."
Equally, it seems like that isn't ever going to happen.
posted by Smedleyman at 9:23 PM on January 26, 2005

man, if I keep buying porn on these credit cards I may not have enough money to buy a gun to shoot my neighbor
posted by nanojath at 8:03 PM on February 24, 2005

foiled
posted by shmegegge at 3:46 AM on February 25, 2005