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

To: Neocon who wrote (140762)	7/17/2004 3:18:23 PM
From: Sig	Read Replies (1) \| Respond to of 281500

<<<We are neither in danger of defaulting, nor of having deficits be driven by the need to pay interest alone, even supposing the 19%. >> So a default could not be called an imminent threat and if it does become one the next President can declare a war on spending (with full authorization of Congress) Sig@miraclescanhappen.com

To: Neocon who wrote (140762)	7/17/2004 4:12:14 PM
From: Dennis O'Bell	Read Replies (1) \| Respond to of 281500

The main point is that the growth in debt is only important in relationship to GDP growth, and if GDP growth is greater in the long run, there is no problem. "Past performance predicting future results" is one of the pernicious aspects of examining "rates of growth" and then feeling comfortable about things. One is always on less sure ground than in looking more conservatively at non extrapolated data, and here the increase in debt as a percentage of GDP has been enormous, to the point where we are at about double the national debt as percentage of GDP that we enjoyed during the Nixon, Ford, Carter years not so long ago. And something not taken into account above is daily inflow of foreign capital being parked in US dollars, because at the moment the dollar is still the most attractive and sure place to put capital. If this situation ever changes we in the US will be in serious trouble. But I have absolutely no idea of the time frame where such a change could take place, or I'd be making concrete plans right now. It's one of those subjective/belief things that is hard to quantify.

To: Neocon who wrote (140762)	7/17/2004 6:41:36 PM
From: jttmab	Read Replies (1) \| Respond to of 281500

The numbers are more recent. The last year mentioned in the text is 2002, but I do not know the precise provenance. Actually, they are not. While somewhere in the text it may mention 2002, the numbers quoted are clearly stated to be for the year 2000. But that doesn't matter, because every number that is quoted is wrong. gpoaccess.gov [See tables 6.1 and 7.1] Indeed, we have carried far more relative debt (over 100% of GDP) and still had a flourishing economy. WWII was a great stimulus to the economy. How far are you going to carry the 1945 circumstance as some sort of validation? In 1945, WWII defense spending peaked at $83M; by 1948, defense spending was $9.1M. Are you anticipating that defense spending is going to drop to 11% of current levels in the next 3-4 years? [not adjusted for inflation]. How much debt was owed to the US in 1945; vs. how much debt is owed the US today? Compare mandatory expenditures of the federal budget in 1945 vs. 2005. The main point is that the growth in debt is only important in relationship to GDP growth, and if GDP growth is greater in the long run, there is no problem. There is no linear correlation between GDP and debt/federal revenues. GDP is spending, which includes government spending. A significant increase in the GDP has been the result of increased Federal spending, whereas post 1945 the GDP increased while Federal spending decreased. A pie chart I found for fiscal year 2005 had it at 8%. I can't tell what that is, but I suspect it's net interest which is substantially less than the interest on the debt. [See table 6.1, line 11] and publicdebt.treas.gov jttmab