Discuss.

How big is it in practical terms (not simply dollar amounts)?

How problematic is it?

10/20/2006 10:33:15 PM

what is the actual amount. i havent heard a figure in a while

10/20/2006 10:53:18 PM

paging LoneSnark

10/20/2006 11:05:43 PM

Quote :

"The federal budget deficit, helped by a gusher of tax revenues, fell to $247.7 billion in 2006, the smallest amount of red ink in four years. Both spending and tax revenues climbed to all-time highs in 2006. The sharp narrowing of the deficit reflected the fact that revenues climbed by 11.7 percent, outpacing the 7.3 percent increase in spending."

http://www.startribune.com/535/story/735487.html
http://bea.gov/bea/dn/home/gdp.htm
So, all in all, taking a low-balled 2006 GDP figure of 13,197.3 billion dollars, the current deficit is running about 1.877% of GDP. In proportion to the U.S. economy this is a very responsible deficit (the national GDP is growing almost twice this fast, somewhere north of 3%).

In other words, economic prosperity cures all ails (at least for awhile).

10/20/2006 11:29:57 PM

I think he meant the National Debt as in the 8.5 trillion we owe.

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

10/20/2006 11:47:57 PM

^ Oh, right, duh.

Well, it sounds bad to say, but if you contain the deficit then you have contained the debt. While it would be good to pay some of it off at least we are making it easier for future generations to do so (GDP growth and inflation are making the debt appear smaller every year).

10/21/2006 12:03:32 AM

it'll never get paid off so why worry about it?

10/21/2006 9:53:14 AM

Our debt is going to hurt us with North Korea if we ever have to pressure China to get their support.

10/21/2006 10:27:50 AM

^lol, It must be fun to be able to just make those kinds of economic assertions without having to be tied down to proof or soundness.

10/21/2006 12:04:02 PM

its a problem that lots of people have written about. heres the first google link:

http://www.theatlantic.com/doc/prem/200510u/nj_schneider_2005-10-25

10/21/2006 12:14:19 PM

Quote :

"Our debt is going to hurt us with North Korea if we ever have to pressure China to get their support."

how?

10/21/2006 12:16:55 PM

haha "hey china, you better do what we say or we are going to stop borrowing so much money from you"

10/21/2006 12:21:36 PM

http://www.theatlantic.com/doc/by/william_schneider

This guy has great record of writing earth-shattering economic analysis, lol

BTW, please 2 not cite editorials.

10/21/2006 12:38:33 PM

Quote :

"haha "hey china, you better do what we say or we are going to stop borrowing so much money from you""

Don't forget that what you see is "us borrowing money from them" is only the flip side of the coin to the trade deficit. What that means is that if they stopped buying our bonds, it would mean that we, at the same time, stop having such a large trade deficit.

If you don't see how this works, please take EC 348 or EC 448/449
or please go learn the economics of international finance. Then we can chat about how horrible the deficit is.

10/21/2006 12:42:29 PM

debt

10/21/2006 12:47:46 PM

legalize and tax it

10/22/2006 4:43:41 PM

Quote :

"Don't forget that what you see is "us borrowing money from them" is only the flip side of the coin to the trade deficit. What that means is that if they stopped buying our bonds, it would mean that we, at the same time, stop having such a large trade deficit."

yeah, i'm not too worried about the trade deficit with China, for that very reason. in the end, they pour enough money into our securities markets that we end up coming out ahead on the deal.

10/22/2006 7:37:34 PM

http://www.itulip.com/forums/showthread.php?t=466

10/22/2006 8:06:23 PM

If the Chinese threaten to dump our debt that would cause a drastic currency devaluation, rendering all those hard-earned T-Bills worthless to the Chinese. I suspect we don't have much to fear from it for this reason.

Especially when you realize why the Chinese government is creating the imbalance: They want reserves to stave off financial crises in the future. You see, a U.S. dollar crisis is easy for China to weather, they can print yuan and rescue the dollar will. However, if the yuan began collapsing China is unable to print dollars, it cannot ensure help from the IMF or the US, so it's only hope is to have a large stash of dollars readily available to fix any such eventuality.

In my opinion, however, this is in error. China is still operating under the international financial model of a small country such as Korea or Hong Kong, where wild currency fluctuation is a real threat. However, a large diverse economy such as the U.S. or China do not face such worries because sufficient domestic activity exists to swamp any international disturbances.

[Edited on October 22, 2006 at 11:46 PM. Reason : .,.]

10/22/2006 11:34:58 PM