Zakalwe hit the nail on the head. If China, and Taiwan, and Japan, Saudi Arabia, and all the other countries who are currently funding our misguided government decide one day to stop – well, our society will radically change. The Nation columnist Katha Pollitt enumerates how and why quite well in this article.
How is it misguided? As you have pointed out, the debt has grown for decades. There were combinations of Republicans and Democrats in Congress and the White House. With balance of majority shifting left, right and all other directions during that time.
What is the fundamental problem in your view?
Can’t speak for Spatial Rift, but to me it seems pretty clear that the fundamental problem is that if your federal debt gets too big, your economy collapses. Even if it doesn’t reach that point, an excessive debt can seriously weaken your economy by requiring you to devote huge amounts of your revenue to servicing it.
We may not be at risk of seriously weakening our economy with debt just yet, but that is the direction we’re headed in as we continue to rapidly accumulate more debt, and there appears to be no realistic plan to reverse that direction.
That sounds pretty misguided to me.
Re: the Debt - My understanding of the current debt problem is as follows (I’m no economist so anyone who can correct/clarify, please do):
The national debt is currently huge, but is not much different in terms of percent of the GDP than it has been over the past century. Maybe a bit on the high side in the last few years but not terribly alarming. It also is about middling compared to other countries. And debt in itself is not necessarily a bad thing. For the most part it’s owed to your own citizens and institutions and so does not necessarily create a drag on the economy.
What is unusual and alarming (at least for the U.S.) is the huge increase in the *foreign * debt. In fact, until 1985 or so (mid-Reagan) there was no foreign debt. (foreign nations owed the U.S. government for most of its history). It now stands at about 20% of the national debt (over one trillion). Moneys owed foreign nations obviously are purely a drag on the economy since they’re not stimulating the economy and represent a steady siphoning of funds through increasingly large interest payments. Here you can see that both foreign debt rose steadily Bush I and Clinton but really took off in the past few years under Bush II. I’m not prepared to blame his policies until I understand what causes it though (increases in foreign debt as opposed to increases in domestic debt).
Anyway I barely understand the issue, let alone can I quantify how serious it is, but for what it’s worth here’s the IMF getting all worked up about the foreign debt.
Oh and the other large concern about the debt has to do with demographics. With the baby boomers starting to retire soon and starting to depend on social security we really need to be paying off the debt now and building surpluses now so that we’ll have the resources in the next couple of decades.
Re: The Hurricanes. I’m getting a lot more concerned about Rita’s effect than I am about the Katrina cleanup. We’re really in trouble if Rita hits the Houston area dead on, since there are so many refineries right there. I heard one report saying it could drive up gas prices another couple of dollars ( :eek: ). I can’t imagine that happening without an absolutely devastating impact on the economy/inflation. Does anybody remember the gas lines from the 1970s oil crisis? I’m thinking of stocking up now on gas myself. I’m really worried.