Borrowing $2 billion a day -- how long can we sustain it?

[techweenie]

Article excerpt:
----------------------------
"The American economy is going to have to inevitably make a structural adjustment (with regard to lack of consumer savings and the budget deficit), or the entire world is going to suffer," Reich, an economist who is currently a professor at the Goldman School of Public Policy at the University of California at Berkeley, said during a keynote at the IDC Directions conference here.

While the country is recovering from a recession in 2001 with decent overall economic growth and a return of information technology business, there are three storm clouds on the horizon in the next year or two, he said. They are high oil prices, a $400 billion U.S. budget deficit, and record high levels of consumer spending and record low levels of consumer savings.

Oil prices will not drop, Reich predicted, because India and China "are growing so fast that energy demands are exceeding the world's ability to supply enough oil to meet demand." Oil prices "will stay high--it's like a tax on the whole economy."

Meanwhile, Americans are living beyond their means. "We're going into hock to the rest of the world," at the rate of about $2 billion a day, mostly to Asia, he said.
----------------------end excerpt-----------------

Ful article:
http://news.com.com/2102-1022_3-6047237.html?tag=st.util.print

[RallyJon]

It would be very interesting to compare these sorts of articles with the same sorts of articles from the past. Business journalists seem to be completely oblivious to history. Or maybe at the foot of every article there should be a disclaimer: "[Journalist] also predicted the end of the world in 1987, 1991 and 2001."

I'd especially like to dig up old articles from the '80s on the Japanese buying up America.

Oh I know, THIS time it's different. Fear sells.

[Shaun @ Tru6]

The latest news is that Snow is figuring out what to do now that we are close to our borrowing cap. Congress will have to authorize the Country to go deeper into debt to keep it going.

[Shaun @ Tru6]

Originally posted by RallyJon

Oh I know, THIS time it's different. Fear sells.

You know it Jon. If fear didn't sell, bush would never have been re-elected.

[techweenie]

If the majority of Americans are unable or unwilling to see any significant danger in running up $8 trillion in debt, I suppose we'll get what we deserve.

This guy has been kind of a voice in the wilderness for the last 5-6 years: http://mwhodges.home.att.net/

I find it interesting that "conservatives" are shrugging off the debt and borrowing as irrelevant and that "liberals" are trying to sound the alarm.

[Mulhollanddose]

Originally posted by Shaun 84 Targa
You know it Jon. If fear didn't sell, bush would never have been re-elected.

I know, America is now more dangerous and Bush and his neo-con cabal are rolling back civil rights 50 years. They are also planning on triple green-house gas emissions (oil cronies) and strategerically orchestrating hurricaines and other cat-5 type disasters to dessimate areas populated by po' folk (do you think Katrina was an accident?...pfff).

BUSH STOLE THE ELECTION!...BUSH LIED!!!...HALLIBURTON!!!

[Superman]

Originally posted by RallyJon
It would be very interesting to compare these sorts of articles with the same sorts of articles from the past. Business journalists seem to be completely oblivious to history. Or maybe at the foot of every article there should be a disclaimer: "[Journalist] also predicted the end of the world in 1987, 1991 and 2001."

I'd especially like to dig up old articles from the '80s on the Japanese buying up America.

Oh I know, THIS time it's different. Fear sells.

Journalists are fun to bash, along with gubmint workers, etc. Hope you're enjoying it.

But journalists are not in charge of making adjustments in econometric models based on the histories and track records of various economic indicators. That's what economists do.

So I guess there is only one thing left for you to do. Add economists to the list of people who don't know as much as you do. Then bash them too.

[kach22i]

Originally posted by Superman
So I guess there is only one thing left for you to do. Add economists to the list of people who don't know as much as you do. Then bash them too.

And he can do it too.

[techweenie]

Isn't it odd that the former Secretary of Labor is transmogrified into a "journalist" when he states uncomfortable facts?

All journalists should have these credentials:

Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written ten books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Reason. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s "Marketplace" are heard by nearly five million people.

[chuckw951]

None of this will change unless we vote out the incumbents (of both parties) and demand action.

[EdT82SC]

I think it goes both ways. The dumb masses see the government borrowing $8T, and figure so what if I'm in debt $20-30K on credit cards. That's chump change, right? I've talked to people that feel this way. They plan to keep on borrowing until the day they die. These people are in for a rude shock when it is time to retire.

[chuckw951]

Originally posted by EdT82SC
They plan to keep on borrowing until the day they die. These people are in for a rude shock when it is time to retire.

They are counting on social security and home equity to save the day.

In my last response I pointed a finger at politicians. But really if we want to change things like saving rates (and level of indebtedness) we also need a cultural change.

Certainly policies can be created to impact people's behavior but I believe that ultimately people are going to do what they want.

And as far as I know there is no debtor's prison.

[Groesbeck Hurricane]

How much money does china have???

Vote Libertarian, vote Green, vote Independant, just get people out who have been there for centuries.

Of course, I like the pattern where one party has The Presidency and The Senate, the other party has 2/3 of The House!!! Nothing gets done that should be getting done!

[vash]

two words: minimum payment!

[cegerer]

Reich has Napolean's Syndrome. And Bush is taller than him (well, actually EVERYONE is taller than him ..... ). That's the answer.

[RallyJon]

Originally posted by techweenie
Robert B. Reich is Professor ... administrations...secretary of labor ...ten books...best-sellers...New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. ...founding editor ...weekly commentaries.

Need to add his gross bias and complete lack of credibility to that c.v.

Look, this is the same old story. Far greater economic minds than my own think Reich is full of crap most of the time.

99% of the political posts on PPOT would at least be the basis of a good discussion if we limited it to opinions that go against bias. When Rodeo posts that Bush did something good, I'll listen. When Mul posts that the administration really blew one, it'll be worth noting.

When Robert Reich writes an article saying that the [Republican] sky is falling, why is this even worth looking at?

[RKC]

A billion here, a billion there, pretty soon it adds up to real money! - Senator Everett Dirksen

[gaijindabe]

Originally posted by Groesbeck Hurricane
How much money does china have???

China? With one child per family as iron-clad policy, they had better have plenty saved up to save from the coming demographic implosion.

The fact is most of the federal government does not go for Iraq, pork projects or even the military. It goes for medicade, medicare and social security.

Want to wipe out the deficit AND lower taxes???

Raise the retirement age by five years.

[RallyJon]

Raise the retirement age by five years.

Acutally, that's one the few things Robert Reich and I agree on, raising the retirement age to 70+ to correspond to increasing lifespan.

In the cited article, he seems to have backpedaled from that position, though.

[turbo6bar]

Originally posted by chuckw951
In my last response I pointed a finger at politicians. But really if we want to change things like saving rates (and level of indebtedness) we also need a cultural change.

Alan Greenspan was certainly an enabler. What better way to stoke unfettered spending than lower the Fed rates to negative real rates. The percentage of GDP produced via consumer spending is growing each year. The necessary cultural change would cause a lot of pain. I'm not implying it should not happen.

Originally posted by chuckw951
And as far as I know there is no debtor's prison.

Bankruptcy legislation passed in Oct 05 brings us closer to that debtor's prison.

While Greenspan did lower rates to record lows for a long period of time (bringing consumer debt to staggering new highs), he has also openly criticized the federal government for running large deficits. There seems to be no move towards running balanced budgets, so the only way to avert problems ahead is via inflation.