We are the world's largest debtor nation. No economy in history has long maintained a leading position in the economies of the world as a perpetual debtor. Therefore we must reverse the trend and become a creditor nation again. If we do not, over time all our wealth will simply drain away and we will be reduced to banana republic status.

There are two sources of our debt, one well known, one less so:
1. Trillion dollar a year federal budget deficit (well known)
2. Trillion dollar a year foreign trade deficit (less well known)

This is made worse because
1. Americans have one of the lowest savings rates in the world, so a disproportionate part of both deficits has to be financed overseas
2. The overseas places that we go to finance our debt include countries who are connected to terrorism (Arab world) or whose interests across the board simply do not agree with ourse (China).

Basically, we are dying unless we can reverse the deficits.

The trade deficit can be reversed by either reducing imports or increasing exports. What attention has been given to this issue has focused strictly on protectionist tactics to limit imports. The problem is that we can only go so low with imports, and protectionist tactics harm export sales, historically more so than they decrease imports. The threshhold on imports is set largely by imported oil, which makes up half the net trade deficit. We need to reduce oil imports. Unfortunately, the Obama energy "plan" will inevitably result in our importing more oil in 2015 than we do today. That may be a shocking conclusion, but I've run the numbers and that's where they lead.

As far as increasing exports, there is nothing on the table that will help that. Ross Perot had some good ideas in this regard (and a bad one about NAFTA, but that was more because of the impact on his own wallet than on concern for Americans' well-being). If China can pay factory workers a dollar a day and blow off environmental protection, then we have to meet them on those terms (which I would oppose), or come up with advantages elsewhere (which I favor), or lose. As Perot correctly stated, the best ways to improve exports would be lower taxes, streamlined and focused regulations, and an approach to environmental issues based on results (actually improving the environment) rather than process (see how many lawyers and consultants and bureaucrats we can keep employed).

The government deficit can obviously be reversed by either raising taxes or cutting government spending. If we raise taxes, then we shoot our export sales in the foot. What we need is to balance the books through a combination of reduced spending and a more rational tax structure. I would favor what I'll call the 15-15-15 approach that most eastern Europe countries have taken a they move from communism to capitalism. 15% consumption tax, 15% tax on busines profits, 15% payroll tax (like current social security with no upper income limit), no personal income tax, and a version of the Boortz-Linder fair tax prefund (at a 30% rate) would raise sufficient revnues to balance the pre-bailout, pre-stimulus budget. Do that and cut spending back to that level, primarily by offsetting any new programs by cancelling old and outdated ones (as Reagan said, there is nothing on earth closer to eternal life than a federal bureaucracy).

That's my view. I think the US is doomed without a major change in direction that I don't see coming. Where am I wrong?

(10-07-2009 05:39 PM)Owl 69/70/75 Wrote:  Where am I wrong?

Didn't you predict Rice would beat Oklahoma State, or am I just making that up?

edit: outside of the unlikely possibility that you in fact made that prediction, I don't see any flaw in you logic.

I have one reply to the Trade Deficit problem: Drill Here, Drill Now!

but yeah, not happening since the country is insane with half of it atleast worshiping mother gaia

(10-07-2009 06:39 PM)GGniner Wrote:  I have one reply to the Trade Deficit problem: Drill Here, Drill Now!

but yeah, not happening since the country is insane with half of it atleast worshiping mother gaia

Not growing food here as well. Well, at least in many areas of the San Joaquin Valley.

Liberals, you just don't understand the impact of not unleashing the full potential of that valley. ...and we're doing it to, what, save a GDamn minnow? "I" don't hate California. I do, however, loathe (if that's even harsh enough of a word) the damn liberals in San Fran, Berkeley, LA, and Sacramento who know NOTHING about the real world and middle America. Like "dry" Washington, east California isn't on board with you loons.

(10-07-2009 06:02 PM)I45owl Wrote:  

(10-07-2009 05:39 PM)Owl 69/70/75 Wrote:  Where am I wrong?

Didn't you predict Rice would beat Oklahoma State, or am I just making that up?

edit: outside of the unlikely possibility that you in fact made that prediction, I don't see any flaw in you logic.

Actually I didn't. Unfortunately, we are right where I thought we'd be at this point.

That could apply equally to Rice or the economy.

One thing I've started to consider though is the effect of people having our dollars in their banks. We are taxing the world. Everyone who is holding our dollars is paying us a tax. That's a pretty good deal for us, now the quadrillionfrazillion dollar question! How long does this last? We are in a unique scenario unlike any other country. When people try to tie us to a South American country whose currency went belly up. That currency was tied to a "the dollar". We are the dollar. I totally agree we need to do something about balancing our budget. I propose a carbon tax. You guys propose cutting spending.

It's a damn shame it's gotten this far.................

(10-07-2009 05:39 PM)Owl 69/70/75 Wrote:  That's my view. I think the US is doomed without a major change in direction that I don't see coming. Where am I wrong?

Not everyone agrees with you re: the trade deficit.

http://www.coyoteblog.com/coyote_blog/20...ficit.html

Everyone who is holding our dollars is paying us a tax? Explanation?

I do agree that some sort of carbon tax would be good. But it has to be offset with tax relief elsewhere or the effect on the economy would be harmful and could be disastrous.

(10-08-2009 07:36 AM)Owl 69/70/75 Wrote:  I do agree that some sort of carbon tax would be good.

Ok, why?

(10-08-2009 07:27 AM)DrTorch Wrote:  

(10-07-2009 05:39 PM)Owl 69/70/75 Wrote:  That's my view. I think the US is doomed without a major change in direction that I don't see coming. Where am I wrong?

Not everyone agrees with you re: the trade deficit.
http://www.coyoteblog.com/coyote_blog/20...ficit.html

His basic arguments are familiar--and flawed.

The basic argument is essentially that we send money overseas and it comes back as investment. We've been doing this for a long time with no harm. So, no harm no foul.

The big mistake is assuming a bi-polar world, the same conceptual mistake that's inherent in protectionist arguments for tariffs. The money we send overseas has to go somewhere, but that somewhere doesn't have to be here. If it goes elsewhere (and I believe Obama has done some things, and is threatening to do others, to alter the calculus in that direction) then there is a wealth drain.

If it continues to come here, it does so as equity or debt. If it comes as equity, then we are not accumulating debt--but we are becoming a banana republic. If it comes as debt, then we are accumulating foreign debt as a direct consequence of our trade deficit. You can't split the two transactions (money goes out, money comes back) and pretend they aren't linked.

As for the argument that we've done it for years with no problem, two counterpoints. One, the conclusion does not follow from the premise. If I said that I've been smoking for 20 years without having lung cancer, therefore there's no reason not to keep smoking, is that a logical argument? Two, the premise itself is flawed. I wouldn't describe what has happened as "no problem." We are losing our manufacturing base and with it a lot of high-paying jobs. The guy who would have worked in a steel mill a generation ago is now delivering pizzas because there is no steel mill. As Perot noted in 1992, this is the real reason for the "rich get richer, poor get poorer" phenomenon. Note the date--this didn't start with Shrub's tax cuts, no matter what the dems try to say. The smoking analogy is particularly apt because like the smoker, we are building up damage that will erupt someday if we don't stop it.

Americans are greedy, and our greed will destroy us if we don't turn things around.

(10-08-2009 07:42 AM)Rebel Wrote:  

(10-08-2009 07:36 AM)Owl 69/70/75 Wrote:  I do agree that some sort of carbon tax would be good.

Ok, why?

If--and only if--it's offset with tax relief elsewhere.

That way you minimize the harm to the economy. And it's one way to start reducing the oil import number, which is probably the only real part of imports that we can cut significantly.

Any net revenue should be fairly small and should be spent on infrastructure to reduce future fossil fuel consumption. I'm skeptical about man-made global warming--but either way, our dependence on foreign oil is an economic, diplomatic, and environmental nightmare.

Paris Hilton has a better energy strategy than either major party--drill here, drill now, tax it, and use the taxes to build a more conservationist future. Paris f'ing Hilton. How bad is that?

(10-08-2009 08:25 AM)Owl 69/70/75 Wrote:  

(10-08-2009 07:27 AM)DrTorch Wrote:  

(10-07-2009 05:39 PM)Owl 69/70/75 Wrote:  That's my view. I think the US is doomed without a major change in direction that I don't see coming. Where am I wrong?

Not everyone agrees with you re: the trade deficit.
http://www.coyoteblog.com/coyote_blog/20...ficit.html

His basic arguments are familiar--and flawed.

The basic argument is essentially that we send money overseas and it comes back as investment. We've been doing this for a long time with no harm. So, no harm no foul.

The big mistake is assuming a bi-polar world, the same conceptual mistake that's inherent in protectionist arguments for tariffs. The money we send overseas has to go somewhere, but that somewhere doesn't have to be here. If it goes elsewhere (and I believe Obama has done some things, and is threatening to do others, to alter the calculus in that direction) then there is a wealth drain.

If it continues to come here, it does so as equity or debt. If it comes as equity, then we are not accumulating debt--but we are becoming a banana republic. If it comes as debt, then we are accumulating foreign debt as a direct consequence of our trade deficit. You can't split the two transactions (money goes out, money comes back) and pretend they aren't linked.

As for the argument that we've done it for years with no problem, two counterpoints. One, the conclusion does not follow from the premise. If I said that I've been smoking for 20 years without having lung cancer, therefore there's no reason not to keep smoking, is that a logical argument? Two, the premise itself is flawed. I wouldn't describe what has happened as "no problem." We are losing our manufacturing base and with it a lot of high-paying jobs. The guy who would have worked in a steel mill a generation ago is now delivering pizzas because there is no steel mill.

But some of that has come back in terms of foreign investment. Look at the auto industry. It exists, it is even thriving. But not in Detroit. It's at non-UAW shops.

That's not to say you aren't right about some of the pieces. But not all of these problems are due to the trade deficit. Moreover, you have to address the fundamental premise: wealth can be created, and if it's created quickly enough in the US, a trade "deficit" is not harmful, it's simply a consequence of entropy with good and bad consequences for citizens.

Quote:The Note the date--this didn't start with Shrub's tax cuts, no matter what the dems try to say. The smoking analogy is particularly apt because like the smoker, we are building up damage that will erupt someday if we don't stop it.

You're cigarette smoking analogy is good. We got a break w/ Japanese investment/ownership in the 70s-80s. Several years ago BusinessWeek had a graphic that showed the Japanese economy in relation to US IT firms (Intel, some others). The difference between c.1985 and 2000 was staggering. They could have owned all of it for a song in 1985, but by 2000, US IT was larger than the Japanese economy (something to that effect).

However, this "break" was not a fluke. With reduced regulation and taxes, US business can thrive and generate wealth. That wealth will seep into other countries, which is good for them, and which has some pros as well as cons for us.

Quote: As Perot noted in 1992, this is the real reason for the "rich get richer, poor get poorer" phenomenon.

I haven't seen that phenomenon in the US. The poor get richer here too, we just get new poor, b/c immigrants reconginze this. And it will continue to be this way, as long as gov't does its job and only it's job:
Cut the regulations and taxes, and enforce the good laws.

Oh, and stop the handouts b/c people need motivation to innovate and produce.

Quote:Americans are greedy, and our greed will destroy us if we don't turn things around.

I'm not sure what you mean by this. Avarice is a bad thing, I think we agree here. Expecting reward for hard, productive work is not greed, and it's not a bad thing.

We have had the view, from rich, middle class and poor, that wealth can be created from nothing. Whether it be Enron just re-packaging companies and selling them for a profit, people flipping houses, or the guy collecting unemployment while he goes fishing, there is a belief that wealth can be generated spontaneously.

That's obviously absurd. That's what causes bubbles. That's what harms the economy. In fact I believe that every economics program ought to require a course in Thermodynamics and include the Carnot cycle.

But that's not the trade deficit.

I'll look for the source but when people hold our dollars it's the equavilent of a 4-5% tax. It was a site that when into the reasons we went into Iraq. Supposedly they were trying to set up an oil bourse which would affect this scenario. As long as oil is priced in dollars we keep the tax. I'll take the time and find it because you're such a good guy Owl.

It's related to the trade deficit in that we want the cheap stuff from China but we don't want to do the work to build a value-added economy. We just move pieces of paper around (Enron being the perfect example).

The problem is not that we import more from China than we export to China. The problem is that there's not somewhere ELSE that we export more than we import to make up the difference.

I find your thermodynamics/Carnot cycle analogy to be particularly apt. Methinks we're saying the same thing different ways rather than truly disagreeing.

(10-08-2009 09:27 AM)Owl 69/70/75 Wrote:  It's related to the trade deficit in that we want the cheap stuff from China but we don't want to do the work to build a value-added economy. We just move pieces of paper around (Enron being the perfect example).

I find your thermodynamics/Carnot cycle analogy to be particularly apt. Methinks we're saying the same thing different ways rather than truly disagreeing.

Seems that way, b/c I agree wholeheartedly w/ your first paragraph here.

(10-08-2009 09:17 AM)Machiavelli Wrote:  I'll look for the source but when people hold our dollars it's the equavilent of a 4-5% tax. It was a site that when into the reasons we went into Iraq. Supposedly they were trying to set up an oil bourse which would affect this scenario. As long as oil is priced in dollars we keep the tax. I'll take the time and find it because you're such a good guy Owl.

I'd like to know.

International tax is my field--or one of them, anyway--and has been for 30-odd years, and I have no idea what you're talking about.

http://www.independent.co.uk/news/busine...98175.html

(10-08-2009 11:47 AM)Machiavelli Wrote:  http://www.independent.co.uk/news/busine...98175.html

Is that supposed to be in response to my question? If so, I don't know how.

I think the article is just one more manifestation of the problem. We're not going to be a debtor nation and keep the dollar as the world's number one currency. Wish I had a better handle on the timing. I am still trying to decide whether to stay or go. Obama has heightened the urgency of that decision, but the driving factors were in place long before him.

here's something from 1997.

However, in the past 7 years, the US dollar has lost 67% of its value to the Euro. In the past month, the US dollar is worth less than the Canadian dollar. All the while, Condoleezza Rice stated that the US dollars needs to loose another third of its value. The US dollar is being devalued by design.


So everybody who holds our dollars was taxed 67% from 2000-2007.

and as long as we have inflation we have a tax on the world. They are holding an uncashed check while the value of that check decreases.

and as long as they stay ok with that we are ok, but it's a situation that SHOUTS disaster.