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Strategies & Market Trends : Maximum Investing
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To: Howard Bennett who wrote (44)11/14/2002 6:12:13 AM
From: Robert Scott   of 81
 
At the outset, it is certainly better to be in a creditor situation than debtor but I think the way to view it is like a business or individual. Consider the GDP as the revenue or gross income and the national debt as the debt. GDP is around 40 trillion and the debt is around 4 trillion or about 10% of annual revenue. If the interest expense on the debt is around 200 billion, then you can see that the situation is not unmanagable. We saw how quickly the annual deficit can be erased - it took around 5 years in a fairly strong economy. If the govt had any discipline in spending, there would be a small deficit in times like this. The other thing to keep in mind is that we do not want the govt to run a surplus for long - it saps capital out of the economy. Greenspan discussed this in detail last year. Pay down the debt that makes sense to pay down, then cut taxes if you're still running surpluses. The capital is much better used by companies which will in turn create higher GDP.
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