National Debt vs GDP - why does it matter?

[Hasbinbad]

That was a somewhat enlightening and very informative post Kraft. Thank you.

I propose we cut spending to the military budget and raise taxes on the highest brackets. That way we can stop owing our souls to China etc., and afford to buy some more asphalt.

[Humerox]

Originally Posted by Zenlina [You must be logged in to view images. Log in or Register.]

In the end i dont think it would matter, to me the US dollar is make believe at this point. If they run out, they just print more and more and eventually abolish it altogether and start from zero which would mean the US will be the richest country.

Not by a long shot.

China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years.

The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said.

The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass).

Like I been saying...better brush up on your Mandarin.

[Kraftwerk]

China is so misunderstood by so many people these days. People just picture this overflowing piggie bank when they hear anyone say China. The reality of the situation is that China is heading for a hard landing as their growth is slowing. Also, more likely than not, is that China has also been padding stats to make things seem A-Okay, when in reality the situation is akin to those of the western nations, but they're slightly better off.

The big issue though, is the Chinese real estate market. It's a bubble. A big bubble. And when it pops, hell will break loose over there.

[Kraftwerk]

Originally Posted by Hasbinbad [You must be logged in to view images. Log in or Register.]

That was a somewhat enlightening and very informative post Kraft. Thank you.

I propose we cut spending to the military budget and raise taxes on the highest brackets. That way we can stop owing our souls to China etc., and afford to buy some more asphalt.

I concur in that we need to cut spending. Military spending in 2011 is ~$700B. But you know what else we need to cut, permanently? Obamacare. Medicare/Medicaid is already ~$800B this year (Social security is a nice #2 at $730B) and the insanity that is healthcare for everyone will cost us an arm and a leg. Military cuts and a stop to socialist policies will help reduce our spending and maybe, MAYBE, get us back to a surplus, or at least less of a deficit annually. But you know my opinions on government policies - cut, cut, then cut some more.

I'm glad I could help you visualize the importance of Debt/GDP though, knowledge is power.

[Humerox]

Originally Posted by Kraftwerk [You must be logged in to view images. Log in or Register.]

The reality of the situation is that China is heading for a hard landing as their growth is slowing.

Even with a US-induced slowdown, China will still average a 5% economic increase annually.

The central date for China's GDP to overtake the US at market exchange rates is 2019 - a study of growth assumptions and analyses.


The real estate bubble problem is interesting; China should overcome it without breaking a sweat. The strongest opposition argument is:

Regarding China’s urban population, the report forecasts that between 2011 and 2020 it will ‘increase by 26.1% or over 160 million people, while urban per head disposable incomes will increase by 2.6-fold to 51,310 RMB (about US$7,500 at current exchange rates).

Oh...answering the original point.

The US as we know it will cease to exist in less than 20 years. We'll probably become a collection of city-states.

[vaylorie]

Kraftwork called it right. The Military budget is about 58% of discretionary spending.... Discretionary spending accounts for less than 35% of total outlay. Mandatory spending is about 60% by now. Debt service makes up the rest ~5-6%.

Generally when talking about federal budgets people only seem to reference discretionary spending to avoid the entitlement programs that WILL crowd out all other spending given a long enough time frame.

Look at defense spending as the biggest category of discretionary spending... Assuming rough 2010 numbers, Defense is 58% of 35% of the total budget. Even if you did a 20% cut to defense (significant) you would be talking about a ~4% overall cut from annual spending. So gutting the military is a minor savings in the big picture especially contrasted to no mandatory spending reform. (not arguing that it couldn't use some cutting regardless)

Considering the source but understanding they are based on CBO & Public estimates... consider the below projections:

Federal Debt expectations as a percentage of GDP driven by mandatory programs like SS/Medicare/Medicade:
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Look at a more granular level and you see why the debt limit is such a hot topic this year...
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CBO Estimates that Entitlement spending based on current obligations will consume more 100% of annual tax revenues by 2049...
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And of course, another reason why debt size matters apart from impacting credit re: 10yr bonds... (in $B)
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Good posts Kraft.

[vaylorie]

Also.. something that will probably garner disagreement but should be said re: raising the taxes on the highest end....

We already have a very progressive tax structure in which the top 10% of Income earners pay 70%+ of the revenue and bottom 50% (income between $0 and $33K) literally paid less than 3% overall.

Top 1% Income @ $380K+ (38% of total income taxes paid)
2%-5% Income @ $159K - $380K (20% of total income taxes paid)
6%-10% Income @ $113K - $159K (11% of total income taxes paid)
11%-25% Income @ $67K - $113K (16% of total income taxes paid)
26%-50% Income @ $33K - $66K (10% of total income taxes paid)
Bottom 50% Income @ < 3$3K (3% of total income taxes paid)

Again.. how much is enough is an opinion but 1) we already have a very progressive tax structure and 2) our problem is a spending problem and not a income problem.


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[vaylorie]

Last one...

This may better illustrate my last point as it relates to income % vs. tax %.

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[Hasbinbad]

Originally Posted by Kraftwerk [You must be logged in to view images. Log in or Register.]

Obamacare. Medicare/Medicaid

Dude. Your talk show agenda is cool and everything, but it doesn't deal with reality.

The fact of the matter is that hospitals in this country (as a microcosm of corporatism in this country) (and when I say hospitals, what I mean is pharmaceutical corporations, and their various subsidiaries) are virtually unregulated.

What that means is $15,000 toilets.

It's evident at every level.

The policy of the United States of America is to serve the needs of the corporate interests which operate within her borders. This is accomplished through lobbying, and is quite evident at every level, from flip-flopping presidents to corrupt local officials. In this system, where money is law, after all the lobbying middlemen and the kickbacks, it is impossible - even when they try to economize - for the hospital to buy a toilet for less than $10,000.

Wake the fuck up.

[Hasbinbad]

While we're posting so many fancy pictures, here's one.

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Now shut the fuck up (vay).