For U.S. Economy, Short-Term Good News Is Bad News

TIME:

It is now conventional wisdom that the U.S. faces an acute fiscal calamity. America's problems are severe: a deficit that is more than 10% of GDP and total debt that is more than 70% of GDP. But all evidence suggests that the U.S. does not face an immediate crisis. Take a look at the simplest indicator: the day that Standard & Poor's raised its now famous warnings, the markets decided to lower America's borrowing costs, and the dollar rose against its principal alternative, the euro. In fact, the real problem for America may well be that it does not face a short-term crisis.

Read the whole story: TIME

Comments

[E4B32787]

12:56 AM on 04/23/2011

It seems to me that this isn't rocket science. When Clinton left office, we had projections of surpluses until at least 2040.
http://www.epi.org/publications/entry/issuebriefs_ib159/
"OMB (2000) projects that the federal budget will show a surplus until 2075 if discretionary expenditures grow with inflation, and until 2040 if discretionary spending grows with GDP".

Bush II enacted his tax cuts and deficits ensued. He raided the Social Security Trust to make up part of the difference.

When the Congress approved the extension of the Bush tax cuts, they essentially approved a continuation of the deficits, absent a change in spending.

In this farce that constituted a "debate" on the budget, we were treated to two different flavors of big war budgets. I don't think for a moment that any of this debate was genuine at all, it was a charade, and the deal was cut when the Bush tax cuts were extended.

Left out of the dialogue was the fact that Reagan enacted Social Security reform, and raised Social Security taxes to pre-fund the baby boomers retirements. The money has been paid.

This whole exercise is class warfare, a conversion of FICA taxes on earned income to reduce taxes on unearned taxes. The whole point of "deficit reduction" is to not pay back the money to Social Security.

We need hundreds of billions of spending reductions, and that should start with big war.

[STUPIDgit]

12:27 PM on 04/22/2011

Liberals who cling to Zakaria as if he has merit in his ideas are sadly naive. Zakaria was an early supporter of the idea to invade Iraq, he is a pro-corporate/anti-worker zealot and only placates liberal ideas while on the Daily Show to get fans.

It's sad when we on the left actually think Fareed is worth a damn.

Secret Iraq Meeting Included Journalists (Zakaria)
http://www.nytimes.com/2006/10/09/business/media/09zakaria.html?ex=1318046400&en=ab43603ab31201e7&ei=5090&partner=rssuserland&emc=rss

“It is time to get real about Afghanistan. Withdrawal is not a serious option.”
http://www.washingtonpost.com/wp-dyn/content/article/2009/09/13/AR2009091302249.html

"The potential benefits of a war in Iraq"
http://www.war-in-iraq.org/political/war-benefits-260103.html

[GCurry]

12:24 PM on 04/22/2011

Beg to differ with Fareed Zakaria.

He glosses over the issue that there is a REAL crisis, and suggests that the problem is the disinclination of Washington to deal with it, given short term good news. He suggests Washington's AVOIDANCE is the issue.

I'd offer that he is, in fact, correct that there is a REAL crisis, but that Washington is completely INCAPABLE of dealing with it, whether facing it or not.

The notion that free market principles, applied worldwide, will bring worldwide prosperity is fallacious. We live in a FINITE world, where the investor's need/expectation for COMPOUNDED growth will deplete global resources in the search for short term returns. That will concentrate wealth. Couple that with compounding population growth and you have a formula for global instability, then chaos.

The US government is fundamentally incapable of dealing with this. It has neither the brainpower, nor desire, nor political system to confront change so fundamental.

Prediction: There will be plenty who see the coming crisis, but a small percent of the bell curve, and they will be able to do nothing to change that fate. After the chaos, in retrospect, perhaps we will have learned enough to fix the problem.

[leorangerie]

11:44 AM on 04/22/2011

Cut...spending. Argue about taxes all you want. But cut SPENDING.

[DavidET]

11:11 AM on 04/22/2011

Here is the PLAN: Keep borrowing from Chinese and others by issuing more bonds and then go bankrupt and when they want to sell US to claim part of their assets, show them the guns and say tough luck, but it won't work, because by then they already have bought the Washington too. Politicians have always been the first that go for sale.

For now America is for sale to the highest bidders from anywhere by devaluation of dollar, printing more money and issuing more treasuries.

[Mensch99]

10:28 AM on 04/22/2011

“Democrats are still clinging to entitlement programs with no talk of real cost cutting, though the current system is clearly unaffordable.”

The only entitlement programs that are clearly unaffordable are the loopholes and tax cuts for the rich and the obscene expenditures on war and the military-industrial-complex.

End the wars and tax the rich!

[STUPIDgit]

12:51 PM on 04/22/2011

I love the framing of SS as an entitlement. It's like if AT&T had budget problems and said, "Our customers cling to entitlement programs with no talk of real cost cutting." We pay the bill for SS, why is it wrong to expect the product? If it's an entitlement that I am not guaranteed can I have a refund?

It makes you wonder what goes on in these people's minds - the one's who fall for this anti-worker garbage.

[Mr MOTO]

09:50 AM on 04/22/2011

QE 2 and Bernanke should be brought before a Military Commission.

[floater]

09:49 AM on 04/22/2011

I think a lot of people who are Democratically inclined want to support the President but I do not think supporting the President necessarily means supporting the Democratic party. All the republicans supported Bush and they all went down with him. We have something like 1.6 trillion in debt this year and I am sure this is the figure O is starting with as far as reducing the deficit. In twelve years this is about a 19 trillion dollar deficit. O is proposing to cut 4, (And my guess is all the cuts will be scheduled to take place starting in the year 2017.) This is still going to leave us with an increase of 15 trillion, more than double what we have now.

[Henri101]

09:15 AM on 04/22/2011

Fareed seems to have the solutions to every problem except improving his viewing ratings.

[jtabs]

08:52 AM on 04/22/2011

This country has been short sighted for thirty plus years and I agree that there is no indication that out approach to problems will change in the near future.

[Uhgg]

08:31 AM on 04/22/2011

i remember Three lessons from my Grandparents when I was little thy both were around in the Great Depression
1 If you do not have the Cash for something you do not need it at this time
2 If you do have to get a loan for something big make sure you can pay it off in half of the time the loan is for
3 Save and Invest 40% of your money you will need it when you retire or for and emergency the Government will not help you

[YoBear]

09:00 AM on 04/22/2011

Greta points and a wise grandma. I never understand why politicians tell us to spend our money to boost the economy. We should be saving money.

[Alexander DeWolf]

09:13 AM on 04/22/2011

My German wife lives by these rules, except 3. Most people are making less than they were 6 years ago and can barely keep head above water much less save 40%. These days it's more like 5%-10% maybe.

[MaxBob]

08:11 AM on 04/22/2011

The U3 rate will be 7-8% by the end of the year. 100's of thousands of Americans are losing EUC and EB handouts this year in many, many cash strapped states. Don't worry, be happy.

[Abdul Nabi]

05:34 AM on 04/22/2011

It's also a fundamental problem that not only bankers, but politicians as well only have an incentive for the short term. Their cash out is immediate and the problems are left to others (primarily the American people). Until that changes nothing else does (and that won't change without a huge mindset change of the American people which clearly will take an even larger crash than we just had... and probably even then the sheeple will fall for simple slogans).

[Lovin Colorado]

11:27 AM on 04/22/2011

Currently the AVERAGE length of service in the House is 10 yrs, in the Senate it's nearly 13 years.

I think the problem is US. We are letting legislators stay in Washington even when they do not perform as we need them to. And we don't use our voices to get fundamental changes made that will put better people in Congress.

For instance, we don't need term limits if we vote smart...we need campaign finance reform so everyone has an opportunity to contemplate service to our country (not just the rich or those with rich friends). The best and brightest who can make a difference for us...currently there's not much chance for them.

And we need to elect those who will work across the aisle. Currently this is seen as traitorous...how did we get to this point? It's insane. Until the proverbial "aisle" is a blurr, instead of the electric fence it is right now....NOTHING will get done in Congress.

You make an excellent point AN...maybe it's going to take an even larger crash than the one we just experienced.

My friends have been giving me a lot of grief for continuing to support our President. I don't see anyone else even beginning to work with others as he tries to do. He takes a lot of heat for it but in the long run I think it serves us best. Now if that attitude would just "trickle down" to Congress...and the electorate.

[MelvinMonroe]

02:31 AM on 04/22/2011

Yes, Easter. Lets not forget it was the bankers who nailed Jesus to the cross because he chased them out of the temple and blasted them for usury.

[HankTheMoose]

10:16 AM on 04/22/2011

Usury = lending of money with an interest charge for its use. Basically, the foundation of any banking system. Don't like it? Don't borrow.

This article has nothing to do with Easter.

[MelvinMonroe]

10:45 AM on 04/22/2011

Not compound interest usury.

I guess you don't know that when you borrow from a bank there is NO money there. They just create a loan.

[Milo40]

12:58 AM on 04/22/2011

An annual increase in the debt ceiling should help.

Whenever I reach my credit limit, I just ask for it to be bumped up. It's worked out so far.

[MelvinMonroe]

01:39 AM on 04/22/2011

Sure but eventually everyone has to pay the piper.

[Milo40]

01:59 AM on 04/22/2011

Not me, I'll just keep borrowing until I go bankrupt.

If I'm lucky maybe obama will bail me out cause I'm too big to fail.

[YoBear]

09:02 AM on 04/22/2011

You have the luxury of declaring bankruptcy. Image China's reaction if we declare bankruptcy.

[Milo40]

12:33 AM on 04/23/2011

Imagine their reaction if the US keeps spending to the point of bancruptcy