Is America going broke?

[pritchke]

An interesting gloom and doom article that just ads to my current depressesd state.

Record deficits, colossal debt and no clear plan for digging itself out. If the U.S. sinks, it will take Canada down with it.

David Walker can see the future, and it scares the hell out of him.

That wouldn't be terribly unusual if he were one of the thousands of lobbyists, legislators and activists crawling all over Washington on any given day, pontificating about the urgency of their pet issues. There is a thriving industry here built on pushing policy prescriptions for every ailment, real or imagined. But Walker isn't a lobbyist or an activist, he's an accountant. His title is comptroller general of the United States, which makes him the head auditor for the most important and powerful government in the world. And he's desperately trying to get a message out to anyone who'll listen: the United States of America's public finances are a shambles. They're getting rapidly worse. And if something major isn't done soon to solve the country's intractable budget problems, the world will face an economic shakeup unlike anything ever seen before. more....

[ 03-08-2005, 02:45 PM: Message edited by: pritchke ]

[shamrock_uk]

Nice article.

Actually this was covered in a fiscal policy lecture I went to this very morning. Our lecturer is Chris Allsop, formerly of the Monetary Policy Committee (that's the 9 person committee that decides the UK interest rates, much as the Fed does in the US) and he had many similar points to make. As he's by all accounts 'in the know' it suggests that we should take this article seriously.

Ultimately America has been following a rather bizarre trend since Reagan for what I can only really describe as fiscal irresponsibility founded on the belief that fiscal policy simply doesn't matter and thus neither do debts. The problem is (and not surprising either IMO!) that the deficits are not self-financing as the likes of Laffer suggested and Reagan and Bush have assumed - therefore the US economy is certainly in trouble.

There just seems a complete lack of political will to deal with this - in the UK, a public sector debt target is one of the two central rules governing fiscal policy, yet in America people hardly seem to raise eyebrows about this issue or even to think about 'paying it off' in the future.


Perhaps one interesting way to think about it is to consider the huge cost of the wars in Iraq and Afghanistan along with the reconstruction and continuing troop presence. Then look at the US' balance of payments situation over this period and realise that actually America hasn't paid for any of it - the rest of the world has. It's only gonna be a matter of time before we all start calling that debt back in...


I really don't want to see all my friends in America hurt over this, not to mention the impact it would have on the British economy - please please kick Bush out next time. Despite the Republican rhetoric, recent history shows that its only the Democrats who are capable of running an economy responsibly and with an eye for the long-term.

[ 03-08-2005, 03:13 PM: Message edited by: shamrock_uk ]

[Timber Loftis]

Did you see what happened when S. Korea tried to sell of T-Bills recently? They changed their mind before the whole of asia began a large dumping of our worthless bonds. I bet my two front teeth Mr. President was on the phone with South Korea that day.

[Timber Loftis]

Originally posted by shamrock_uk: I really don't want to see all my friends in America hurt over this, not to mention the impact it would have on the British economy - please please kick Bush out next time. Despite the Republican rhetoric, recent history shows that its only the Democrats who are capable of running an economy responsibly and with an eye for the long-term.

One democrat -- for 1/3rd of his term -- who adopted the "balanced budget" issue after his aides told him the budget was getting ready to balance itself.

I think he's a gem of a man for shutting down the government and making congress balance the budget, but let's not give him too much credit -- the economy made it easily possible, all on its own.

I will of course agree that Bush is as bad as it gets when it comes to spending. He spent his early career running oil/gas companies bust by digging everywhere in Texas that there was NOT any oil, and then he helped run the Rangers into the ground, and then Harken barely got him out in time to avoid big financial problems. Our government will not be the first corporation this guy has poorly managed.

[shamrock_uk]

Heh, I knew it was a mistake to get political - was gonna remove that when I got back in but you beat me to it!

[Davros]

America in the poor house is not going to be good for the world economy. When they screw it up we all suffer, and when they get it right we all benefit. Our government has been making regular surpluses and retiring a lot of old debt over the past 8 years or so, but the effects of an American crash will be still a tough ride even in countries that are doing things "right".