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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: epicure who wrote (135106)	5/31/2004 3:46:22 PM
From: carranza2	Read Replies (1) \| Respond to of 281500

Good on you, X, for posting that link! Now ya talkin'. I frankly believe that we have a hidden inflation factor which does not show up on the official statistics. Inflation is going to get worse as the costs associated with higher oil prices weave themselves into the economy. The Economist article suggested that about $8 of the current price of oil can be said to constitute the "terror premium," i.e., the higher amount that oil costs because of insurance, increased security costs, and the general notion that we ought to pay more for things that may be more scarce in the future. Thus, a valid case can be made for the proposition that without lifting a finger, by simply being a threat, the terrorists have already succeeded in hurting us economically. Unlike you, I think it is very unwise to keep the two issues--terror and the economy--separate, and to assign different relative levels of importance to them. They both feed and affect each other. It really is a fascinating isssue.

To: epicure who wrote (135106)	5/31/2004 6:39:55 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 281500

Between tax cuts, the war in Iraq and surging costs for Medicare and Medicaid, the deficit this year will likely top $400 billion, a record in dollar terms though not as a percentage of gross domestic product. It could be bigger if the price tag of stabilizing Iraq goes up even more. At least they mentioned that it is not a record in percetage terms. Nor do they mention that both Japan and Europe (on average) face far higher unfunded social liabilities, as well as higher national debt relative to GDP. Japan's national debt is currently 140% of annual GDP, and I don't believe counts unfunded liabilities that will likely arise from private pension fund insolvence. The US public debt is about 40% of GDP. It should shrink in the next few years as a recovering economy boosts tax revenue, but then start to grow again as retired baby boomers stop contributing to Social Security and Medicare and start to draw on them. The US population increases by about 3 million people per year, primarily via immigration (legal and illegal). Within 60 years, that will equate to a near doubling of the US population. Heck, there are many groups who are concerned about excessive POPULATION GROWTH, not reduction. balance.org diversityalliance.org And all of these people will pay taxes to some degree, and their children will hopefully pay higher taxes based upon higher salaries. These are a few factors that the WSJ writer seemed to omit.. But does that mean there's not some reason for concern? Absolutely not.. But we MUST ALWAYS take into account the US position relative to our major economic competition with regard to how such demographic trends impact our economy. As for inflation, like alcohol, drinking a little is alright since it indicates pricing power for corporations. Too much and, like a drunk driver, we're eventually heading for big trouble and a potential economic "cold shower" ala Fed Policy under Paul Volker during the '80s. Hawk