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Why is America in debt and how can we fix it?

  1. Oct 3, 2015 #126

    PeterDonis

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    When the US has "installed" bases, in every case that I can think of, it was as a result of a war that had already taken place, so while there certainly might have been something that could be seen as an aggressive move, it wasn't the bases being installed.
     
  2. Oct 4, 2015 #127

    m k

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    Has anybody asked where is the corresponding wealth?

    China has built much and added billions of population have eaten some.

    I remember reading that yearly money exchange for real economy is done in days, yet exchange continues thrue the year.

    How much of it is thin air?
     
  3. Oct 4, 2015 #128

    Right. And when the Philippines decided to deny the US the big Subic Bay naval base, it happened. I think that most of those bases are there because the host countries want them there.

    The bases in Germany are no longer necessary, but the Germans make money off of them. I lived in Bavaria in 1963 and the US military was more visible there than it was in the USA.
     
  4. Oct 4, 2015 #129

    mheslep

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    Deficit: $400B (real dollars) and increasing, out past 2020.

    1_462.03_1412.69_1278.75_1257.94_1033.56_636.68_447.51_531.78_426.21_408.60_414.76_439.52_461.24.png
     
  5. Oct 5, 2015 #130

    m k

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    I tried to understand things deeper but failed.

    Quite difficult to find what is eaten and what is invested.
    And what seems to be invested but is actually wasted.

    Is global budget somewhere?

    If majority is eaten and economy of reals to debt is topping the planet simply don't have assets.
    That, of course, is not a problem for the economy but humans have, or at least have had, limited life span.
     
  6. Oct 5, 2015 #131

    russ_watters

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    The same can be said about pretty much any expenditure of money by anyone, anywhere. That is a criticism largely devoid of meaning.
    Absolutely: I think the dozens of foreign military "bases" in and around Washgington DC are essential to our relations with most countries.
    Again, a broad statement that may or may not have any relation to reality. Of course (per the first part of the post) a cost-benefit analysis should be ongoing for all of our expenditures, but the circumstances behind our actual foreign bases existence is often beneficial and desirable to foreign nations. For example, though the US installed bases in Germany and Japan after WWII, for the most part these were essential to peacekeeping and defense during the Cold War for Germany and against China (even today) for Japan. I believe we've reduced our presence in Germany due to the end of the Cold War, but our presence in Japan is essential, what with them only acquiring a full-function military just last month.
     
  7. Oct 5, 2015 #132

    WWGD

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    Not so, given I watched a presentation and went over the evidence, all suggesting that there is substance to the claim. I did not decide to just randomly splatter it in here for the fun of it.
     
  8. Oct 26, 2015 #133
    North Korea has no debt by keeping its citizens so poor they will eat grass soup. No credit cards, no consumer debt, no vacations abroad, poor infrastructure. Most of the money goes to support the military and the ruling class, excuse me, Vanguard of the Proletariat. People don't have mortgages but they do pay rent. Other communist countries had/have debt, including USSR/Russia and China.
     
  9. Nov 2, 2015 #134
    There are far more variables in calculating the benefits and negatives of a government operating with a deficit. Obviously it would be optimal to have no debt, but there are so many factors which override this simple idea. There is inflation, there is the fluctuating value of the currency, there are trade deficits, there is the cost of debt, whether the economy is growing or contracting (that has it's own cycles). Operating a budget without debt is nearly impossible because everything is a moving target. There is so much more. This information is easily verified with a little research. It is basic macro economics.

    I agree with Choppy though that the 'question' smells of a troll. Unfortunately many people are unwilling to do the work to understand the economy, and would rather parrot cheap dogma peddled by politicians to people who don't know better.
     
  10. Nov 2, 2015 #135

    phyzguy

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    It's not at all obvious that the optimum strategy is for the government to have no debt. If the government can borrow money cheaply, as is the case today, and invest in infrastructure that increases the rate of economic growth, then it may be that the overall welfare of the people in a country will be higher if the government goes into debt than if it stays debt-free. This should be studied using macroeconomic theory and models.
     
  11. Nov 3, 2015 #136
    "It's not at all obvious ..."

    Well, I'm your huckleberry. The only thing cheaper that borrowing money cheaply - is not borrowing money at all. I am not at all disputing the assertion that investing in infrastructure can increase economic growth, and improve the overall welfare of the people. PoliSci 101 - the health or condition of a country's infrastructure is an indicator of the health of the country as a whole.

    I did not pose my statement as an either or. My statement still stands that it is optimal - if possible - for a government to have no debt. For example, if it were possible to invest in infrastructure without having to incur debt, that would be optimal. However, as I stated, there are other factors. And it is highly unusual in the entire history of civilization for governments to have no debt. Even with the ability of modern governments to print money, there are still limits on resources.
     
  12. Nov 4, 2015 #137
    Infrastructure does not have to be built or financed by government. We are so used to government doing it today that we forget that. Governments don't build parking lots or factories or warehouses; they don't have to build roads or water systems. The best thing governments can do is provide a tax and regulatory environment conducive to safe construction of infrastructure. I can attest from personal experience that government financed and supervised infrastructure construction is not usually the best in terms of quality and cost.
     
  13. Nov 4, 2015 #138

    phyzguy

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    I disagree. Name a country where the fundamental infrastructure (roads, water supply, sewage removal and treatment, ...) has been built and financed by private companies.
     
  14. Nov 4, 2015 #139

    PeterDonis

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    It's pointless to look at countries, because they are run by governments; that's what a country is.

    Instead, you should be looking for examples of communities where the people living there, instead of expecting the government to build fundamental infrastructure, have private companies do it. There are plenty of them out there, and there would be more if governments didn't stomp on such efforts wherever they can.
     
  15. Nov 4, 2015 #140

    BWV

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    No, its absurd - just think about your local school district - say that a new factory opens in your town and a lot of new families move in so new schools are needed. The funds come from local property taxes. Does it really make sense for the district to wait and put aside property taxes each year to 'save up' to buy the new school? Is it supposed to have raised property taxes in the past so it could build up savings so it could build new schools for cash if they were needed? No, this is absurd - instead the district issues bonds backed by future property tax revenues to build the school. Sure there is an interest cost in the bonds, but what about the drain on the local economy of higher tax rates so schools can be purchased for cash?

    A good rule of thumb is that any macro economic argument that appeals to 'common household financial sense' is crap because aggregation leads to issues that don't apply to individual households and businesses. A business using debt to finance a productive asset is not inherently a bad thing and neither is government borrowing. Investment is the deployment of savings into productive uses, whether it comes from the private or public sector. A school district issuing a bond to build a school puts the savings of people into a productive investment for society. Sure there are all sorts of public choice issues regarding government spending, but they are only indirectly related into how governments choose to finance that spending.
     
  16. Nov 4, 2015 #141
    One of the reasons people get confused is that they think the economics of government are similar to the economics of individuals. Hence, they think that if the US has a large amount of debt it's something to be worried about, as you would if you had a large personal debt. The crucial difference is that the debt of the US is denominated in US dollars, which is a currency that the US can create with the push of a keystroke at the Federal Reserve. Hence, the US can never be forced into bankruptcy, since it can create dollars in any quantity it pleases. Once that is understood, it's easy to see that it's possible to run a permanent, growing deficit (for example, one that keeps total debt to GDP at a constant percentage).

    The consequence of running an excessive debt (at an ever increasing percent of gdp say), is that ultimately the US may be forced to create more dollars to repay holders of the debt such as foreign creditors, Social security recipients etc. This potentially creates inflation whereby the value of dollars versus everything else decreases. The decision to do that is essentially a political one, since inflation causes a transfer of value between classes of people (from lenders to borrowers of fixed rate debt).

    But my main point is that this is NOT like the economics of an individual person, a company or even a State. Those entities can't print dollars.
     
  17. Nov 4, 2015 #142

    phyzguy

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    Can you give me an example of a community where the infrastructure is privately owned and financed? Note that having a private company do the building is not the same as the infrastructure being privately owned. The interstate highways were primarily built by private companies, but they were financed and are owned by the federal government.
     
  18. Nov 4, 2015 #143

    Maylis

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    All I know is that the airports in the USA look like garbage compared to China (at least the major Chinese cities). We are woefully behind in our city metro rail systems as well, far far behind China. How did this happen??
     
  19. Nov 4, 2015 #144

    phyzguy

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    I agree. Somehow we have gotten the idea in the US (as expressed by PeterDonis and AgentSmith in this thread) that we don't need the government to invest in basic infrastructure, like roads, railroads, airports, etc. In my opinion, this is crazy. As a consequence, our infrastructure is falling apart. The solution is simple and obvious. We need to pay more taxes, so that the government can invest in these things, like we did in the past.
     
  20. Nov 4, 2015 #145

    PeterDonis

    Staff: Mentor

    Because we expect governments to manage these things, but unlike China, we don't allow our government to treat the population of the country as expendable labor.

    Um, you do realize that airports, for example, are almost always owned by a government? Same for roads, railroads, etc. That's why they so often suck.

    I'm not saying that investment in basic infrastructure is not needed. Of course it is. I'm saying that we should not want governments to do it, because the only way for governments to do it efficiently is for them to be like the government of China: as above, they have to be able to treat the population of the country as expendable labor. Governments have been doing that to build large infrastructure since Cheops was a little boy.

    But in the US, we have this idea that the government is supposed to serve the people, not the other way around. That means our government can't be the kind of authoritarian entity that it is in China. And that means our government will never be able to manage infrastructure as efficiently as private entities in our society.

    Btw, this does not mean I'm a fan of China's government either. I'm not. That should be evident from the language I used to describe how they treat their country's population. But even apart from that, the problem with the China model, like any model of authoritarian central planning, is that it fails miserably as soon as the central authority makes a wrong decision about what to build--"wrong" in terms of the actual value it will provide, as opposed to something useless like the prestige of the ruler. (How much value did ordinary Egyptians get from the pyramids?) And that will always happen; it's just a matter of time.
     
  21. Nov 4, 2015 #146

    PeterDonis

    Staff: Mentor

    Any gated community. Also, historically, company-owned towns were fairly common at one time in the US.

    Furthermore, when you get down to the size of a town, the divide between a "government" and a "private community" owning infrastructure is not as clear. Towns themselves are a sort of hybrid between private communities and governments. Historically, in the US, they were more like private communities; they built and managed their own infrastructure based on decisions made at town meetings and with funds voluntarily contributed by the residents, and did not rely on forced taxation or on grants or other sources of funds from governments at higher levels. That model is less common now only because governments at higher levels have aggressively expanded their power.
     
  22. Nov 4, 2015 #147

    Maylis

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    I think part of the skepticism comes from the fact that the money seems to keep going into new wars instead of infrastructure
     
  23. Nov 4, 2015 #148

    Maylis

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    By the way, my comment doesn't apply only to China. The same thing goes for Hong Kong, their airport and metro is way better than a US major city. And they don't have an authoritarian government

    Sorry for comparing with the Jones
     
    Last edited: Nov 4, 2015
  24. Nov 4, 2015 #149

    mheslep

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  25. Nov 4, 2015 #150

    phyzguy

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    Your mention of gated communities is where I have a fundamental problem with the whole concept of privatizing basic infrastructure. If you follow it to its logical conclusion, you end up with a country where the wealthy live in gated communities with exceptional infrastructure, and the poor live in the rest of the country, with its crumbling, decaying infrastructure. If you happen to be born into a wealthy family, things are great, but if you have the misfortune to be born poor, there is no hope to rise out of poverty, because you don't have access to education, health care, and all of the many other things that you need to develop. This is fundamentally opposed to the idea on which America was built - that anyone who works hard can become successful. I certainly don't want to live in the country that will result if we continue along this path. In addition to the gates you will require to keep out the people that haven't paid for your infrastructure, you will probably need bodyguards if you venture outside your gates.
     
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