USA should significantly spend less
Debate Rounds (3)
only people like paul krugman argue it is not a big deal. he probably does this mostly to be a contrarian and get attention. he argues for keysian econonomics, that we can grow ourselves out by spending more.
while keynesian econ has some merit to it, it's not applicable now. that theory says when we are in a recession we should spend so as to stimulate. now, we are not in recession, and while we are not optimal, i would argue it's the new normal. employment won't go down more, cause our economic structure doesn't need that many people working. and similar arguments could be made about other economic indicators.
the measure of how much we should spend is often GDP v debt. we are about 75% debt to GDP, and the highest it has been was around WWII. what makes now different, is that the country was developing, and had a marked advanged over less developed and war torn counties. that allowed them to pull themselves out of the mire. now, we dont have things like that to pull us out.
also, probably a better measure, is that we should compare debt to national revenue. if we continue to grow in debt, we revenue won't increase in proportion.
also, within maybe thirty or so years, interest on the debt will eat out much of other spending, even to the detriment of entitlement spending.
i'm not saying we are beyond the point of no return. but we are getting there. things need to shape up. we can't keep spending like a drunken sailor.
The United States, still maintains a AAA rating (the highest) with Fitch and Moody's. The downgrade by S&P to AA+ was largely due to political gridlock and brinksmanship by a specific cadre of hyperpartisan members of the House, the same group responsible for the government shutdown. Not due to any fear by S&P or anyone else's fear that the United States could pay it's bills, but that they would refuse to by not raising debt ceiling, which is an artificial creation of Congress. To quote S&P: "More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011. Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon." Similarly, Fitch warned it could possibly downgrade the United States credit rating during the next debt ceiling fight on October 15, 2013. It recently upgraded it's outlook to positive on March 21, 2014, after yet another debt ceiling showdown was postponed.
Though the economic recovery in the United States has been sluggish, it is still better than that of Europe which chose to pursue austerity during the economic downturn. The IMF, in fact, has warned the United States during the sequester of cutting spending too fast and that it could be potentially harmful to the globally economy.
The "mom and pop" analogy doesn't really hold for the federal government. It's nice and folksy sound bite because everyone can relate to it. But Mom and Pop have a lifespan, they start off, get crappy jobs, maybe go to college, accrue debt, get entry level jobs, buy a home, change careers a few times, reach their peak earning years, and then retire. The government is perpetual, there is not a beginning or end. Retirement's not around the bend. Mom and Pop also dont' have a Federal Reserve that controls a fiat currency. You cited in round 1 that debt-to-GDP was around 75%, average household debt to income it currently at 100+% and that's down from it's peak a few years ago. The government actually seems to be a little more disciplined than the typical Mom and Pop. A lot of the recent economic downturn was due to second mortgages and home equity loans with people saving as little as 2% of their incomes on average. Wages were flat throughout the 2000's, but everyone felt good because their houses were going up and they could borrow against them. Everyone, especially the banks were over-leveraged.
it's not completely analogous the mom and pop analogy, but it's for the most part applicable. it doesn't matter if the government doesn't retire liek they do.... USA still needs to spend less. we may spend better than most families, but that doesn't say much cause most people spend too crazy. we shouldnt reach higher levels cause it will start ot get even more out of hand. bottomline is there's tons of stuff that couldbe cut, or reduced, and that would help the budget stay balanced and not out of control.
so, we should spend less.
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