konfusion wrote:
Are you aware that the USA is 10+ trillion dollars in debt? And do you know that 1/3rd of that was spent over the last 5 years on the Iraq war? I'll give you that Clinton may not have done much to get the economy in that state, but he certainly helped it boom. Bush, on the other hand, did such over spending, it's ridiculous.
Clinton's diplomacy in the Middle East is what makes me prefer him to Bush so much.
-konfusion
I think you are confusing national debt with government debt. They are not the same thing and the government has no control on what the rest of the country is spending and sending overseas.
If you are maintaining a large regular army anyway, what is the additional cost of deploying it in the theatre of war?
The official (correct) figures.
Stiglitz and his co-author, in contrast, have looked at the wider costs of the war, not just the direct military costs but the social costs, the economic costs, even the effect on the world of higher oil prices, part of which he attributes to the war.
Total speculation and has nothing to do with GOVERNMENT DEBT.
I did 2 assignments for macro economics last year about US debt, I will admit some of the data was anything up to 3 years old, but the causes of todays current economic conditions have been building since 1982 (the last recession). I'll quote a few passages:
The US current account in 2004 hit a record of $666 billion deficit, amounting to 5.7% of GDP after more then a decade of increases in CAD as a percentage of GDP. Since 1982 there has only been 1 year where the US did not experience a CA deficit (figure 1) and in no time in the past 2 decades has it seen a merchandise trade surplus, and as of 2001 the US had a net negative international investment of $2 trillion equivalent to 20% of GDP.
Figure 1: Current Account Deficit as a Percentage of GDP,
1987-2004
Has since gone higher, but 16 years of debt can not be blamed on the current president because it only starts to go bad now.
Changes in macroeconomic policies and more flexibility in Asian currency exchange rates may help reduce the CAD, but savings and consumption imbalances are the real cause for the expanding trade deficit. In the long run, because of the shear Size and scale of the US current account deficit, should there be any external shocks to the system, it could leave a huge hole in both the US and Global economies. The amount of foreign capital that is needed to fund the CAD can not for ever go on increasing and at some point there must be a correction.
Although the CAD is at worrying high levels, at the current time it is sustainable because Asia is willing to finance the deficit to keep their currencies undervalued. But this form of monetary policy is not long term sustainable with South East Asian countries already holding $1.8 Trillion is US reserves.
High government spending has also seen the American fiscal savings to go negative 0.2% of GDP in 2002 after almost 2 decades of surpluses, but again can not account for the huge CAD of today, but is doing nothing to ease the problem either.
Spending may have increased, but it is still far overshadowed by private debt.
Should foreign investors see the large CAD as harmful to potential returns, they will stop buying US assets (or start selling them). The US needed over $800 billion in foreign investment during 2005 and that figure is growing annually. A fall in confidence and foreign investment would see the US exchange rate plummet... As the CAD grows, the interest and dividend payments for the soaring liabilities are going to have a real negative impact on potential GDP. This potential slow down could see loss of profits, national wealth and finally consumption
What is happening now.
The US CAD is held in place by investment from the emerging economies, most notably China who has their exchange rate pegged artificially low to encourage export earnings and higher GDP growth. This growth strategy while still accepted by the IMF is not long term sustainable for an economy of Chinas size and nature and only through a lesser regulated or floated exchange rate can we hope to see reduced US, China trade imbalances. The US needs to also make policy changes to counter their excessive spending on imports before the CAD grows to large to control.
Hmmmmm too late...
The economists have seen the warning signs for more then a decade (before Bush was president) and have predicted almost everything that has happened to date (bar the war). The war is a minor cost in the whole scheme of things and is blown completely out of proportion by the media. I am not arguing it has no effect, but to say it is the cause of todays problems is insane when you look at the last 2 decades of historical data. Yes the war and its cost has done nothing but compound the problem, but the problem already existed.
