Economic Considerations

It seems to me…

The International Monetary Fund (IMF) has criticized the U.S. for our failure to have a “creditable strategy” to stabilize our national debt.  Even the credit-rating agency Standard & Poors has questioned whether we will be able to service our current debt load.  History provides numerous examples of a dominant nation’s decline from power as a result of promiscuous spending: Egypt in 1875, Britain following World War II …

Our national deficit is more than 10 percent of our GDP; our total debt exceeds 70 percent of GDP.  It is obvious we need to do something – and do it quickly.  Part of the problem is while interest rates remain low, politicians not wishing to incur voters wrath have been willing to repeatedly increase out national debt limit without correcting the basic problem of unsustainable expenditures.  At some point, we will lose the world’s trust and investors, primarily China but also many others, will cash-out even if it entails some loss.  If that were to happen – and it eventually will – we definitely will suffer that economic crash far in excess of any recently seen.

Yes, our economy currently is in fairly good shape regardless of relatively high unemployment rates and little sign of recovery in the housing market.  Our GDP actually exceeds pre-recession levels.  Consumer’s saving rates are higher than they have been in a decade.  Businesses are profitable.  The U.S. is forecast to have the world’s fastest growing economy after India and China.  While we do not currently have a high incentive to correct our budget imbalance, now, prior to the next crisis which in all probability will be worse than the past recession, is the best opportunity to get our economic house in order.

The U.S. is the world’s largest debtor nation other than for Japan.  If not corrected, the Congressional Budget Office projects our national debt could reach 100 percent of our Gross Disposable Product (GDP) within twelve years: the U.S. then would be in a worse position than the currently bankrupt economies of Greece, Ireland, or Portugal.

There isn’t any denying that much of the current budget debate is politically motivated.  While American voters in many ways have the government we elected (and deserve), all of us would like an end to the unproductive politically-motivated partisan wrangling and a fair equitable solution to our current national budget/debt imbroglio.

The current congressional impasse, while real, actually constitutes a future threat rather than a possible immediate catastrophe.  It must be remedied but the medicine should be appropriate to the illness and not kill the patient.  Elimination of unnecessary subsidies and tax loopholes, rescinding the unwise tax reduction for the wealthy, scaling back unnecessary defense appropriations … would sufficiently resolve the current deficit to provide time for gradual restructuring of entitlement programs.  It is unfortunate that some members of congress equate repeal of tax breaks with tax increases.

The primary threat from our current debt is we are vulnerable to negative financial policies of other countries (such as China) that now control such a large percentage of our debt that if they stopped purchasing or decided to sell their investment in U.S. Treasury Notes, interest rates would rapidly escalate, U.S. currency values would plummet, and we could enter that recession far worse than the one from which we still are recovering I alluded to above.

That’s what I think, what about you?

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About lewbornmann

Lewis J. Bornmann has his doctorate in Computer Science. He became a volunteer for the American Red Cross following his retirement from teaching Computer Science, Mathematics, and Information Systems, at Mesa State College in Grand Junction, CO. He previously was on the staff at the University of Wisconsin-Madison campus, Stanford University, and several other universities. Dr. Bornmann has provided emergency assistance in areas devastated by hurricanes, floods, and wildfires. He has responded to emergencies on local Disaster Action Teams (DAT), assisted with Services to Armed Forces (SAF), and taught Disaster Services classes and Health & Safety classes. He and his wife, Barb, are certified operators of the American Red Cross Emergency Communications Response Vehicle (ECRV), a self-contained unit capable of providing satellite-based communications and technology-related assistance at disaster sites. He served on the governing board of a large international professional organization (ACM), was chair of a committee overseeing several hundred worldwide volunteer chapters, helped organize large international conferences, served on numerous technical committees, and presented technical papers at numerous symposiums and conferences. He has numerous Who’s Who citations for his technical and professional contributions and many years of management experience with major corporations including General Electric, Boeing, and as an independent contractor. He was a principal contributor on numerous large technology-related development projects, including having written the Systems Concepts for NASA’s largest supercomputing system at the Ames Research Center in Silicon Valley. With over 40 years of experience in scientific and commercial computer systems management and development, he worked on a wide variety of computer-related systems from small single embedded microprocessor based applications to some of the largest distributed heterogeneous supercomputing systems ever planned.
This entry was posted in Budget, Congress, Deficit, Economy, Employment, Jobs, Problems, Recession and tagged , , , , , , , . Bookmark the permalink.

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