Sunday 31 July 2011

US Political, Economic and Military disaster over Deb Ceiling

I know I am a nerd when I find myself constantly scouring the media for news from America about the progress of the debt ceiling bill. I must say I can rarely remember when the US President has had to go on TV 3 times in a week pleading for Congress and the Senate to get together.

What makes the situation all the worse is that now the Republicans and Democrats main point of difference is how much money to make available to the Country in order to make another vote necessary - the Republicans want the whole mess brought back again before the next election.

On the serious matters of deficit reduction they have found ways to cuts a big chunk off the budget.

What I had not realised was the way that the US has not paid a penny for either Iraq or Afghanistan - the $1.2 trillion cost of the wars has been paid for out of tax revenue, but purely by debt. In the future, if the debt crisis continues America is going to be forced in quick order to reduce massively its foreign engagements.

The Whitehouse have a great graphic too of the progress of the debt mountain under past administrations:


Budgie said...

"... main point of difference is how much money to make available to the Country ..."

Sorry, I may be pedantic but, no, no, no, it is not how much money - it is how much _debt_ to make available. Tax revenue continues to be a USA government income, and stays about the same now or under both Republican and Democrat proposals.

So USA government obligations can be paid out of ongoing tax receipts even without an agreement. All that would mean would be the USA government living within its means (for once).

The conclusion is inescapable: both Obama and Congress are posturing, just as Merkel did before the second Greek bailout.

Anonymous said...

CU it makes you wonder if that is the case, how is this country paying for all these wars that we have been sucked into, we tend to follow anything that the US does in econnomics and theory. I once worked for a bank many years ago, I was astounded by the reply I got from one clerk when I said I would not like to get into debt, he said more or less "I cannot wait to get into debt", the states has had this thing about living on debt for many, many years, the contagion has spread to this country over the past 40 years, during which time the value of money has dropped almost through the floor, it's just the value of money that dropped, that is why we have high prices, houses, land, cars, anything you can mention, and wages have to up otherwise people would be unable to feed themselves or clothe themselves. Maybe this increasing debt mountain caused MaggieT to quote "Victorian values"

Nick Drew said...

kinda makes you chuckle when you recall the neocons spouting about how this was going to be "America's century"

hubris or what ?

it will be back to fortress America within a decade & the Chinese will be able to do more or less whatever they like in ROTW, duff high-speed trains and all

CityUnslicker said...

Budgie, balancing the budget from this point would be impossoible without causing a major shock. even in the UK you can see how hard the Country is finding it to take even the very minimal reductions that the Coalition is trying to push through.

I am not against all debt like some, but am totally aginst unsustainable finance, as you would expect.

One thing Amercia has not considered is how this crisis is going to impact China, they are going to see how weak Amercia is now and will make the most of it.

Budgie said...

Well, yes and no, CU. I was not actually saying that they should produce a balanced budget right now, merely that an agreement is not necessary by the 'deadline' because the USA government has an income from taxes.

However, western governments do really have to balance their budgets. In good times they should save, using this sovereign wealth in the bad times to supplement government receipts.

Debt now = our children paying it back. That is not fair. Like I have said before, paring back departmental spending is next to impossible. The only way is for our governments to cut out some departments/functions altogether.

In the UK the obvious candidates to start with are (savings):
1. Leave the EU (£25 billion/year direct and about £80/yr billion indirect;
2. DfID (£10 billion/yr direct);
3. Sell off the BBC (£40 billion once)
4. Drop the CAGW hoax (£godknowshowmany billions/yr).

Old BE said...

Aren't wars nearly always paid for by debt? In all countries?

Out of interest, what proportion of US GDP has been spent on the wars? And what proportion of UK GDP have we spent on the same things?