Obama’s and Bush’s effects on the deficit in one graph

[Danzig]

http://www.msnbc.msn.com/id/44061369...n_the_economy/


Slow economy is a worse problem than any downgrade
Growth would help reduce debt burden, but double-dip recession may be in cards


The real risk to holders of U.S. debt is not the government's heavy reliance on borrowing or the deep political divisions in Washington. It's the weakening U.S. economy.



Until very recently, most forecasters were expecting the pace of economic growth to pick up in the second half of the year. But despite a surprisingly strong showing from the job market in July, a string of disappointing data has prompted many economists to slash their growth targets.

“Whatever (economic) growth you thought you were going to get as of a month ago, it is quite reasonable to expect less as of today,” Credit Suisse chief econmist Neil Soss said in a weekend conference call with repoters and investors.

The central issue behind the Standard and Poor's decision late Friday to downgrade the government's AAA credit rating was the level of government debt, relative to the size of the U.S. economy.

A rapidly growing economy would help, by effectively shrinking the relative size of the debt without painful spending cuts. The effect is the same as when you get a raise, and it makes your credit card debt suddenly more manageable.

But instead of growing rapidly, the nation's economy is inching ahead so slowly that it has raised concerns about a second recession — the so-called "double-dip" after the recession of 2007-09.

That's one reason S&P has said there is a one in three chance of an additional downgrade over the next six months to two years. Restoring the Treasury's AAA borrowing status, which will not be easy, also would mean getting economic growth back on track.

"It would take a stabilization of the debt as a share of the economy and eventual decline," S&P managing director John Chambers told ABC Sunday. "And it would take, I think, more ability to reach consensus in Washington than what we're observing now."

So far, the government's main response to the downgrade has been to shoot the messenger.

[Riot]

Originally Posted by Danzig

that's the problem, conciliation hasn't gotten us anywhere...

Well, both sides have to give a little. There were several deals in the works, including the $4 billion in cuts with increased taxes (through loophole closures) that Obama and Boehner agreed to, but the Tea Party Republicans nixed that. (Hey! Thanks for the S&P downgrade!)

one way he tried to make everyone happy was by agreeing to extend the bush tax cuts-a huge mistake.

The economy was still tenuous then, so I don't know that it was a "huge" mistake. But we got billions more in stimulus for that, which was a very good deal. The GOP walked out of there, then realized they'd been had (regarding more stimulus).

But I agree I would have liked to have seen the Bush tax cuts for just the wealthy expire back then.

the problem i see with obamacare is that it still has too many questions-especially for potential employers. they are hesitant to hire, as they aren't quite sure what the cost of employing people will be here in the next couple years. if that is a hiring inhibitor, it needs to go

.

I think that's truly nonsense. There is only one reason for people to hire more employees- they have too much business demand to service with the number of employees they have now.

There is no "fear of the future" or "uncertainty" Nobody is "not hiring due to fear of Obamacare". That's just an excuse for trying to get more regulation removed. Capital gains and business profit have never been larger - they are hoarding 1.2 trillion and keeping it out of the economy.

But it's not because they are "worried" - they don't have any customers. Believe me, if that were true, if the demand was there, they'd be hiring to serve it, not worried about nonsensical excuses like "obamacare". They have destroyed the middle class. Wages over the past 40 years haven't risen. So the middle class sent the spouse to work, then borrowed on credit cards, then borrowed against the house, and now they have nothing.

Sorry, business world - nobody has any money to buy anything you have.

The problem is that there are no people with extra money to spend. Period. Business is slow. There is no demand. Nobody needs more employees now (and those few that do, are hiring).

anything that will grow jobs needs to be the #1 priority, as it supposedly was a couple years ago.

Right now all remains of the stimulus are ending, and QE2 is ending. Both at once.

We need a massive stimulus. We need to extend unemployment. We need to get quick turnover cash money into the economy. Money has never been cheaper - we can borrow money for 2 years at literally 1/2 of a percent. Our infrastructure is rated "C to D" - it's literally about to fall down (remember the MN bridge that collapsed? There's plenty more)

You can see what "cutting spending" just got us, a downgrade, and a sell off of stocks to get their cash into our (safe) Treasuries. Reaganomics and trickle down does not work. Period.

The question will be if the Fed allows inflation to rise a bit, or not. It's about all we have left, if the Repubs are going to continue block all stimulus and jobs programs, the only thing left is to allow inflation.

[Riot]

Originally Posted by Danzig

The central issue behind the Standard and Poor's decision late Friday to downgrade the government's AAA credit rating was the level of government debt, relative to the size of the U.S. economy.

That's not true. More than half the AAA rated countries have greater debt to their economy size than we do.

I think - judging by what S & P actually said in their statement, which wasn't the above - that it is the intransigence of the political climate, the refusal to consider raising taxes by some, etc.

It's not where we are, as much as it is what we are not doing about it.

And as far as S & P's worthiness as to rating our credit worthiness, notice that everyone flocked to US Government Treasuries today during the sell off.

[Danzig]

Originally Posted by Riot

That's not true. More than half the AAA rated countries have greater debt to their economy size than we do.

I think - judging by what S & P actually said in their statement, which wasn't the above - that it is the intransigence of the political climate, the refusal to consider raising taxes by some, etc.

It's not where we are, as much as it is what we are not doing about it.

And as far as S & P's worthiness as to rating our credit worthiness, notice that everyone flocked to US Government Treasuries today during the sell off.

well, you'll have to take that up with msnbc. i'm sure it had a lot to do with the fact that the big agreement we spent weeks waiting for, does nothing to curtail future spending. perhaps s&p was only issuing a wake-up call?


as for the other in your post above, i only know what i heard them saying on bloomberg this afternoon about jobs and hesitation, questions about cost. that too often anymore we're getting 'half laws' that we have to wait to see what the rest will entail-later. that doesn't do much for anxiety now.
i also read a day or two ago about our productivity being the highest in years. and of course companies save $ by paying overtime rather than by hiring.and with the current climate, not too many workers are going to complain.
you also have hesitation in that people won't invest, won't expand, won't add on, because they don't know what that cost will be in a few years-is it worth the pay out? and a lof of investors are sitting on cash in humongous amounts-and that does no one any good. banks can't invest it, it's not being used, it's just sitting there.

everyone's waiting....

for what?

[Riot]

Originally Posted by Danzig

i also read a day or two ago about our productivity being the highest in years. and of course companies save $ by paying overtime rather than by hiring.

True - but that "productivity" has all been gained by keep real wages low and making people work more for less.

you also have hesitation in that people won't invest, won't expand, won't add on, because they don't know what that cost will be in a few years-is it worth the pay out?

If they had customer demand, they would be rushing to fill it and make that money!

There is no customer demand.

and a lof of investors are sitting on cash in humongous amounts-and that does no one any good. banks can't invest it, it's not being used, it's just sitting there.

everyone's waiting....

for what?

For the vast majority of people to have money to spend, to buy cars, and donuts, and clothes, and electronics, and stuff at WalMart.

When WalMart sales fall, you know how bad it is.

There is no "consumer class" any more. There are no consumers, they don't have money. Only the wealthiest have any money. We have one of the greatest wealth disparities ever. And when the rich get more money, they don't spend more. They spend the same, and save the extra.