NationStates Jolt Archive

Okay, first off I would like to thank the people who responded in my last thread.

But there is one unanswered question about the economy...

America's debt and deficit is very high at the moment. But no matter where I look, I always hear that tax cuts are good for the economy. What is a way to defend President Bush's tax cuts while explaining the debt and deficit?

Thx

Cause when you cut taxes and keep on spending, it causes you to go into debt. The economy is doing fine. The governments budget is not.

It's indefensible. The debt will bite us in the ass as soon as nations like China realize that they're buying bonds from a country who's financial situation is similar to GM's. It loses more money every year. GM's bonds were recently downgraded to Junk status. The US' bonds will meet a similar fate if the deficit is not elliminated and the debt paid down. Then we'll be up shit's creek with a turd for a paddle.

The deficit is a bad thing. The reason tax cuts are believed to be a good thing (I'll let you decide your view on it outside this forum) is that it is believed that if you let people keep more of their money they will spend it and pump it back into the economy. The way this works for business is that if the business has more money to invest in employees and equipment you'll find there is lower unemployment and that more money is being spent. If government were to tax people too highly all the money would go to corporations that were able to win gov't contracts and not get spread around the way it does if you have 250M people spending money every day. When corportations can afford to hire more people that also puts money in the pockets of the people. I realize there isn't a 100% trickle down in the business case, in fact there is a fair amount of profit taking but a good amount of the savings does get invested in the business, and even if it is taken as profit that reserve allows the business to continue operating in tough times. This is a simplistic explanation and does nothing to deal with > $1M payouts to execs et al but is meant as an overview. If you're still interested check out some macroeconomics textbooks/classes as that branch of economics focuses on taxation and how gov't spends money

its defenseable because the money belongs to the citizens, taking it as 'tax' is a way for the government to run itself effectively without having to do business for itself. The government is NOT running itself effectively an until it wisens up it is valid that the citizens demand they stop wasting their money. lowering taxes is a step in the right direction. the government has more than enough money to 'balance the budget' if it acted like every responsible citizen of that government must to live. When the government starts using my money for good with logic and responsibility I will be happy to pay the tax burden i currently do, or even a slightly larger one, until then I will fight for every penny back and strive to elect leaders who promise that. And this is coming from a hard core conservative.

Separate problems. The debt was a problem long before Bush came along, and there wasn't an actual surplus in place when clinton left, rather it was a projected surplus based on the numbers from near the height of the dot-com era. Realistically, expecting that sort of growth to continue for any length of time was absurd. The best way to stop the deficit and clean up the debt would be to slash medicare and soc sec which when combing account for somewhere upwards of 50% of the american governments budget. Then rip apart most of the ATF, FCC, FDA and other alphabet agencies where needed. Cut the military budget where it's needed, like say cutting funding for research on psychics and the like. Easy enough to do if enough people(about 2/3) in the US would pull their heads out of their asses, but it ain't gonna happen anytime soon.

its defenseable because the money belongs to the citizens, taking it as 'tax' is a way for the government to run itself effectively without having to do business for itself. The government is NOT running itself effectively an until it wisens up it is valid that the citizens demand they stop wasting their money. lowering taxes is a step in the right direction. the government has more than enough money to 'balance the budget' if it acted like every responsible citizen of that government must to live. When the government starts using my money for good with logic and responsibility I will be happy to pay the tax burden i currently do, or even a slightly larger one, until then I will fight for every penny back and strive to elect leaders who promise that. And this is coming from a hard core conservative.
This is coming from a true RINO. I'm only registered as a Republican because I've been too lazy to go down to the election board office and change it.

The government services that are paid for by taxes are actually a boon to business. Because government builds and maintains roads, provides port and airport security, covers the healthcare bills of Walmart employee's children, etc. many companies have the infrastructure they need to do business here. Taxes pay for that. It's possible to cut pork out of the budget, and not going into Iraq would have saved a shitload of money, but taxes would still be neccessary to keep the American economy humming along.

I'd rather that the government got the cash it needs from taxation than from selling bonds to nations who expect a good interest rate and who may become political, military and economic rivals of ours.

Warren Buffet was against the last round of tax cuts, and so am I.

It's indefensible. The debt will bite us in the ass as soon as nations like China realize that they're buying bonds from a country who's financial situation is similar to GM's. It loses more money every year. GM's bonds were recently downgraded to Junk status. The US' bonds will meet a similar fate if the deficit is not elliminated and the debt paid down. Then we'll be up shit's creek with a turd for a paddle.

No, our debt is the best in the world. Nations are not like companies in the sense that political stability and economic growth more or less guarantee that the national debt is never going to be less then top line. It's nowhere near junk status; that's why China is buying so much of it because it is so good compared to any other nation's. It offers the highest return for the least risk, and is the highest ROI in the OECD. Debt doesn't mean anything as long as you can afford to finance it. We are able to finance it without any problem as long as:

Our economy grows too much and too quickly for the debt to be a real problem as long as the deficit is smaller than the rate of GDP growth. However, the trade deficit can be problematic because it stokes inflation and slows GDP growth, thereby reducing the "comfort zone" for our budget deficit.

Furthermore, the US's budget deficit as a %GDP is one of the smallest in the OECD. Japan, Italy, Germany, and France all run deficits around a percent higher than us and their interest rates are much lower, but their debt is still of top-line quality. This is an excellent example of the effect geopolitical stability has on bond status; until these countries are junked, the US will never even come close to it.

No, our debt is the best in the world. Nations are not like companies in the sense that political stability and economic growth more or less guarantee that the national debt is never going to be less then top line. It's nowhere near junk status; that's why China is buying so much of it because it is so good compared to any other nation's. It offers the highest return for the least risk, and is the highest ROI in the OECD. Debt doesn't mean anything as long as you can afford to finance it. We are able to finance it without any problem as long as:

Our economy grows too much and too quickly for the debt to be a real problem as long as the deficit is smaller than the rate of GDP growth. However, the trade deficit can be problematic because it stokes inflation and slows GDP growth, thereby reducing the "comfort zone" for our budget deficit.

Furthermore, the US's budget deficit as a %GDP is one of the smallest in the OECD. Japan, Italy, Germany, and France all run deficits around a percent higher than us and their interest rates are much lower, but their debt is still of top-line quality. This is an excellent example of the effect geopolitical stability has on bond status; until these countries are junked, the US will never even come close to it.
Yet the trade deficit still nibbles away at GDP. A few bad years in a row, or perhaps the aftermath of nuclear terrorism, and that comfort zone could become too small. It's just not wise to allow the debt to get so high. It's not wise to run deficits year in and year out with no thought to the potential repercussions.

Yet the trade deficit still nibbles away at GDP. A few bad years in a row, or perhaps the aftermath of nuclear terrorism, and that comfort zone could become too small. It's just not wise to allow the debt to get so high. It's not wise to run deficits year in and year out with no thought to the potential repercussions.

Exactly. Debt is fine for short periods of time to stimulate the economy, or when it's needed (like during WWII), but habitual running of large deficits makes it difficult to be ready for economic slowdowns and/or disasters. At the same time, running constant deficits also makes them less effective at stimulating the economy. Overall, a balanced budget is best since it provides flex room and any surpluses can be used to shore up for the future.

If we can keep spending restrained and perhaps tighten some taxes, it should not be hard to reduce the deficit. If we bring back the pay-as-you-go system, we should be able to balance it fairly quickly. This is especially important now, when the trade deficit is so large.

Exactly. Debt is fine for short periods of time to stimulate the economy, or when it's needed (like during WWII), but habitual running of large deficits makes it difficult to be ready for economic slowdowns and/or disasters. At the same time, running constant deficits also makes them less effective at stimulating the economy. Overall, a balanced budget is best since it provides flex room and any surpluses can be used to shore up for the future.

If we can keep spending restrained and perhaps tighten some taxes, it should not be hard to reduce the deficit. If we bring back the pay-as-you-go system, we should be able to balance it fairly quickly. This is especially important now, when the trade deficit is so large.
My bad. I misunderstood you. I thought you were saying that the debt doesn't mean a thing.

My bad. I misunderstood you. I thought you were saying that the debt doesn't mean a thing.

Only on a very short term basis it doesn't. After 2 or 3 years it becomes increasingly problematic, especially if it isn't shrinking in size.

According to my macro professor, the national debt is not necessarily a bad thing. 75% of it is owned by US citizens (or companies I guess), and only 25% of it is owned internationally. So basically, we owe ourselves money. As someone else stated, the ratio of debt to GDP is very low (about 65%). Other nations have a public debt (which i believe is the same as national debt, please tell me if I misinterpretted this) which is over a hundred percent of their GDP. Someone stated Germany Italy France and Japan all had GDPs about one percent higher than ours. According to the 2004 stats in the CIA World Fact Book, its actually much higher than that. Japan's public debt is 164.3% of GDP and Italy's is 105.6% of GDP. (France is 2.7 percentage points higher, and Germany's is only .8 of a percentage point higher than our national debt.)

Thats not to say I dont want a surplus, of course I do. But not at the expense of social security, government spending on research, student loans, and so forth. I'd rather it come from economic growth.

Okay, first off I would like to thank the people who responded in my last thread.

But there is one unanswered question about the economy...

America's debt and deficit is very high at the moment. But no matter where I look, I always hear that tax cuts are good for the economy. What is a way to defend President Bush's tax cuts while explaining the debt and deficit?

Thx

o0o0o0o that's so cute, a little Republican in the making..lol :D