As we near the Zero-Hour with no budget in hand, John Mauldin analyzes what the budget battle means to the country going forward. Incredulous that we're at an impasse over cutting $60 billion when we really need to be cutting $150 billion, he points out that the markets will begin imposing discipline on the U.S. in the next two years if we don't do it ourselves.
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I haven't got a chance to watch it yet, but I can't understand why although everyone is focused on reducing the deficit, no one seems to be mentioned we can't pay back any debt until we get a surplus. Instead of showing how much debt we rack up each year, we just view pretty graphs showing the spending getting closer to the collections in year 2080 or whenever. All the US does is create more debt every second and people don't realize there is very hard choices ahead, more than just overspending a little less than we have been. I lose my shit when the President talks about "paying our bills", we pay everything on a credit card. Not exactly the picture of responsibility. But, this has went back much further than our current President.
Well, I got that out for the day.
"no one seems to be mentioned we can't pay back any debt until we get a surplus" Actually you can.Both Debt and Deficit are calculates as % of GDP.So once US growth is bigger than its deficit,the % Debt will decrease.I think that a deficit of1-2% would be fine if achieved in a few years.
Yes this is true, but the payback period is much, much shorter if you run a short surplus on top of that economic growth. Also, I would argue that economic growth (in real terms) will be very hard to come by, for a lot of fundamental reasons that the Fed or the government can't easily solve. I believe we will soon realize that infinite economic growth on a finite planet, with limited resources, is impossible. It's just a question of when we hit that wall. I think we hit it sometime this decade. Buy commodities, short debt.
Can u talk a little bit more about those fundamental reasons, what you mean by infinite resources, and why we "hit the wall" this decade?
I'm assuming this is tongue in cheek/sarcastic? lol :)
or leverage during low interest times...but i'm not intelligent enough to understand their strategy.
People are overreacting. Congress is probably going to pass the Paul Ryan budget with a 35% tax rate instead of 25%. With the Paul Ryan budget, we can get to nearly balanced budgets, then hike tax rates up to the Clinton tax schedule the start getting surpluses.
In five years, people will probably not be looking back to 2011 and ruing the day they stuck money into Roth IRAs.
Could you explain why they'd regret doing so?
Being an understated Midwesterner, I put the negative (probably not) very far away from the verb (ruing). So people will probably not regret sticking money into Roths. Reason being is that tax rates are going up.
You have a lot more faith in our citizens and politicians than I do. I hope you are right.
My personal prediction? I think we will do nothing. We will continue to fund our deficit spending through borrowing from abroad. We might be able to keep ourselves afloat a bit longer with sin taxes, tariffs, adding a new tax bracket for billionaires, and maybe even a (small) national sales tax. Another major tech development like the internet could also give us more time.
While we will never default, I would not put a devaluation out of the question a few decades from now. I honestly doubt anybody is even seriously concerned about anything that far into the future. Politicians are too concerned about the next election to care; they will all be retired by the time the shit hits the fan.
I like Paul Ryan because he is combining immediate deficit reduction and long term entitlement control. We have all heard about how Obamacare will save us money in the long run, but those predictions tend to be wrong; isn't medicare costing several times its original projected cost? Likewise, the few billion dollars Republicans are trying to cut from the current year budget is inconsequential.
It's going to happen sooner or later--sometimes things have to get worse before they get better. Although many will argue that too much debt is bad for the country (which it is), it tends not to affect the stock market that much. Statistically, the S&P is just as likely to grow during years of surplus as it is during years of deficit. We can still make a ton of money investing even in this climate.
The guest wasnt refering to the S&P, altho it will be negatively affected. He was talking about the bond markets, more specificly the US government bond market. Basicly what he was saying is that the US wont be getting to pay near zero interest rates for much longer and that a big spike in debt cost will force the government to cut massively or implode.
I hope you're right IP.
http://money.cnn.com/2011/02/28/news/economy/personal_income_spending/i…
Voters are saving money and exercising thrift; I think they are going to demand that the federal government does so as well. Maybe it will involve hiking taxes. Maybe it will involve cutting spending. But the US worker and US consumer is now more self-sufficient and more competitive than he/she has been in 40 years on the basis of savings and productivity. We can take the hit of higher taxes and reduced spending in the US.
Right now, the Ryan Budget is the only serious attempt at fixing our long-term budget issues.
boehner is acting like a child
Bravo dzx162, great post.
Like it dzx162. I was mainly saying that we don't need surpluses and the ideal would be a completely balanced budget. Debt goes down, and people aren't being robbed. That said, at this level of national debt I'd rather run surpluses than deficits- in contrast to the 80's where the reverse was true. That's why we need a balanced budget amendment- stop all this BS and get to a fair and sustainable system.
I like it dzx162. Your screen name is weak sauce though.
Good post dzx162
Man, i like this guy...great post.
Great Post & Great info!!!
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