Asymmetrical Information

Not that I'm in favour of the budget deficit; I'm not. There is no reason that we should be running deficits at this point in the business cycle, except that our yet-to-be-born grandchildren can't vote.

Awesome.

Very good.

But can we finally agree that fiscal conservatives have no influence in today's GOP?

This is weird, I was just looking up these sorts of stats last night.

I do wonder at what exclusions make up the difference between these figures and the CIA-provided ones. But even then, the G-7 countries work out (2005 estimates):

1 _158.0% Japan
2 _108.8% Italy
3 _ 69.6% Canada
4 _ 67.3% Germany
5 _ 66.2% France
6 _ 64.7% United States
7 _ 43.1% United Kingdom

OECD is using market debt, i.e. the actual outside debt, rather than internal debt (those Social Security IOUs that are supposedly going to magically pay retirement benefits). I can't find any methodological methods for the CIA, but they could be including debt from one branch of the government to the other. Other problems can crop up in using Purchasing Power Parity vs $ conversions.

The CIA numbers are beyond suspect as the usual suspects of the Highly Indebted Poor Countries list were nowhere to bee seen. Japan's accounts seem to be the only ones that match on the two lists. Canada's motion from the OECD list looks right and it's too bad that we don't have a timeseries to better investigate what's going on.

Given the CIA's usual standard of competence in providing economic analysis and predictions, I'm going to go with the OECD as the better source of numbers.

For useful comparisons, it does seem that the OECD numbers are better. In commmenting on the latest federal fiscal year end, the Canadian Institute of Chartered Accountants (Cdn version of CPAs) uses a 35% version: http://www.cica.ca/index.cfm/ci_id/34045/la_id/1.htm

One other issue is total Government debt versus national government debt, which can confuse the issues, especially given the massive variety in how accounts could be consolidated. Further, it makes much more sense to discuss National government debts outside of total government debts, as for most places there is too much independence in lower tiers for useful co-ordinated effort to change the picture, while concerted effort at a national level can have much more effect.

Small data point, the Cordoba came out in the end of 1975 as a 1976 model. They weren't a bad car for the time.

--Stephen

...we will need a tax increase approximately five times the size of the Bush tax cuts to fund our Medicare/Medicaid budget gap.

Of course, Bush made that problem worse as well.

Actually I don't think that the percentage of GDP really means a darn thing when the only goal of the current government is to reduce taxes without a concurrent reduction in spending. Percentage of government income would be meaningful, but not GDP.

How can our fiscal position be bad? I mean, just look at all the wealth the house building boom has generated...Cramer and Kudlow agree it's great...Countrywide and other lenders are in super shape...Fannie Mae's books are clean as a whistle...how can we be in a bad fiscal position?

JG,

I thought the topic was: '73 v. Today(~2006), Are we better off?

Not, as you frame your response by obfuscating: "Often they boil down to "Why haven't you commented on the appalling fiscal position the Bush administration has left us in, you Republican shill, you?"

Nixon, not GWBush, was the White House occupant in '73, yes?

My question simple: How can you continue(and you still do) to try to compare '73 with ~'06, without giving any thought to the massive change in our, respective, Fiscal positions?

You credit: "Mr (Ezra)Klein has very sensibly opted to debate whether an 86% insurance rate for native-born Americans constitutes a job well done, or a terrible failure, rather than how it compares to 1820's Birmingham, or the the modern-day Ibo of Nigeria." Fair enough. Yet, your own 1000+ word reply more readily conforms to: "how it compares to 1820's Birmingham, or the the modern-day Ibo of Nigeria."

Was the original topic discussing our current Fiscal position to that of the OECD?
Was it discussing how our relative position in the OECD rankings was better or worse than some other country?

Were we "discussing" the 2000-2005 era or comparing 1973 to ~2006?

It's poetic that you brought up: "the Laffer Curve", for surely, the Curve you're trying to throw past your Readers, with your attempt at riposte, Is a Laugher--or, rather, would be if you were intent was something other than to be Serious.

You couldn't have proved this comment: "She is a perfect emblem of cheap-shot Republicans masquerading under the banner of Libertarianism. No solutions, only wise cracks, and the annoying tendancy to use facts in the same way whores use lampposts: not for illumination, but for support."--that you took issue with--any better, if you had tried.

Please, petards are scarce, as there are Wars on, use them sparingly.

For those that may want to actually get clued in on some of the differences, in Fiscal standing, from pre-'73, inclusive, to ~2005...this homemade website: http://mwhodges.home.att.net/ is not a bad place to start.

This is a trick question. The real net present value of the unfunded Social Security liability was exactly the same in 1973 as it is today. That's just what happens when you start a pay-as-you-go pension scheme.

"...a disaster born of prosperity..."

Well said.

WTF are Government Administrative Efficencies? Hasn't Paul ever worked for the government?

And I hope that advocates of expanding medicare etc. realize that the people administering it will be the same goverment contractors they complain about getting big payouts in the Iraq war. They are the people who know government bureaucracy and will simply follow the money.

In some cases, we should be running a deficit that our grandchildren should pay for. The cases: infrastructure that they will still be using and benefitting from in 20 or 40 years time.
Things like post office buildings, national parks,
bridges, interstate highways, airports, aircraft carriers, medical research. (I'm not arguing that all such should be provided by government, but they are right now.) Elements of the national budget that are consumed in one year should be balanced by receipts.

Mr. Hoffer, are you so thoroughly small and ill-bred that you cannot engage in an honest debate without setting forth a snippy temper-tantrum?

Whatever your personal opinions of the economy might be, Ms. Galt has already demonstrated that the comparison of the mid-1970s to the present as evidence of Past Good is fraught with peril, in part because all things objectively measurable are either notably better now than in that period, or skewed by immigration; beyond that, she has expressed a desire to leave that kind of comparison behind and focus on looking into the future; and moreover in the current post, she demonstrates that our present debt position, while large in absolute numbers, is not large in scale or by comparison to other national economies.

As a nice gesture, she even elevated your fifteen seconds of pissy hissing from the previous thread into fifteen minutes of fame with a new thread addressing some interesting point you raised. What more should she 'give' you in order to make the point? A yacht?

Based on your latest round of useless aspersions toward our hostess, it is becoming increasingly apparent that what you possibly need is not more evidence, but either (depending on your age) a warm bottle and a lullaby, or a swift kick in the pants and reduced Internet access.

"...cannot engage in an honest debate..."

"...without setting forth a snippy temper-tantrum?"

v.

MEH:"How can you continue to avoid the Trillions we are now in the hole v. 30 years ago??"

JG:"I am confronted with this interrogatory frequently, in some form or another. Often they boil down to "Why haven't you commented on the appalling fiscal position the Bush administration has left us in, you Republican shill, you?""

Sure...

This: "in part because all things objectively measurable are either notably better now than in that period, or skewed by immigration;" Debt is a matter "personal opinion", not able to be objectively measured? Curious.

LRF your post is devoid of sense, common or otherwise. Though it does make me recall Pets.com and think that you have a career-calling @ the Cineplex.

Mark, you might have wanted to read the rest of the post. In which I answer your question--or at least the question I took you to be asking, to wit "Aren't we much worse off because of the huge amount of debt we've accumulated since 1973?"

This was my answer:

That is why it doesn't make much sense to me to ask about the "trillions worth of debt" we have accumulated. I mean, I've accumulated a substantial amount of debt since I was 4. This doesn't mean I was richer when my income was 25 cents a week. According to the Office of Management and Budget, the amount of debt held by the public has gone from 26% in 1973 to roughly 40% of GDP in 2005--a big increase, but not as big as that implied by "trillions and trillions!"

The possibly more relevant figure, however, is "net interest", which is to say what percentage of GDP our government pays its creditors. In 1973, that figure was 1.3%; by 2005 it had soared to a whopping . . . 1.5%.

America's fiscal problems right now just aren't very big.

Our retirement/retiree health problems are very big . . . but any future problems we are accumulating were essentially accumulated by the end of 1973, when congress had passed the last of the big benefit increases that threw the system permanently out of whack in a big way.

The debt isn't hurting us now; net interest payments are roughly the same share of GDP that they were in 1973. And as I pointed out, economic growth and inflation will erode the value of the current debt still further. It is the future debt, the unfunded liabilities, that can hurt us, and those haven't increased all that much since 1973.

And as I also pointed out, when they eventually do bite us in the ass they will do so only because we're living longer, more affluent, healthier lives than we were in 1973, a bargain I will take any day.

Megan,

I was asking the simple Q: How can one compare two different eras without regard to those era's respective Fiscal positions(?).

This Q: "Aren't we much worse off because of the huge amount of debt we've accumulated since 1973?"-- really wasn't even in my mind.

I was trying to illuminate our current Fiscal position because 1.) it's germane to any conversation in re: "better or worse", and 2.) no one else was.

As far as the various statistics you choose to site, I'm not sure they're very useful in gathering an accurate picture of the change in Fiscal position ('73-~'06).

This: "It is the future debt, the unfunded liabilities, that can hurt us,..."-- I fully agree with.

Those unfunded liabilities, throughout the Economy, are simply Huge. Many are going to reach for something that is not there. Worse, many continue to act as if those Resources will magically manifest themselves from thin air. Were it only to be so...

Tax increases(to "solve" the problem), as you suggest, have long been predicted to be much higher than you give rise to.

Personally, I don't see the Day where Gens X & Y are complacent in the face of the massive confiscation, of even more of their earnings, to fund a deal(SSA/MediCare/Caid) they had nothing to do with.

Are the issues insurmountable? Hardly. But, there is no doubt that we cannot conquer that which we know not of.

Take no comfort because other countries are in worse shape that the U.S., i.e. " France, the UK, Germany, and Japan." If you are 300 lbs overweight, should you console yourself with the knowledge that there are people who are 400 lbs overweight?

France, the UK

The United States of America appears like a strong, healthy country. Our GDP is so big, our military can drop bombs anywhere on the globe, and our population is increasing (300 million as of now). But appearances can deceive.

The United States of America is also a country in decline. Our national debt is increasing, our unfunded liabilities are increasing, our military is losing a war in Iraq, our economy is excessively dependent upon imports and billions of dollars loaned from China every day, and there are substantial risks of either a recession or depression in our future.

In other words: If the United States of America is running hundreds of billions in fiscal deficit right now while we our prosperity, we could easily suffer deficits of half a trillion to a trillion dollars a year during a severe recession/depression.

Because it is important to remember that we are living right now in the good times. The Housing Bubble brought a lot of paper prosperity and generated a lot of consumerism. The Housing Bubble was the engine that allowed to U.S. to escape the recession generated from the Tech stock bubble collapse.

Unless the Federal government can generate a new bubble, we just might get a recession in the near future. Combined with the escalating costs of losing a war in Iraq, there is little reason to doubt that America will add a trillion dollars to our debt in the next several years. How much longer can this continue? Only as long as China tolerates our indebtedness.

Finally, the United States of America is the world's #3 producer of oil and the world's #1 consumer of oil. We import massive amounts of oil every day. We burn up 20+ million barrels of oil a day. What would happen if our supplies of oil dwindled?

Our GDP would shrink immediately without the oil drug. If our supply of Middle Eastern and Venezuelan oil were cut off suddenly -- cold turkey -- there's a pretty good chance that our economy would die.

The United States of America has a massive economy right now, but several decades from now we won't. America is transforming from the world's only Hyperpower into a nuclear-armed militarized fascist nation intent upon perpetual war at all costs. We're going to become poor because all of these futile global military adventures.

Iraq is the new Vietnam. How many wars can we afford to lose? Not any.

David,

Re; "The United States of America is also a country in decline."

I think you're reaching considerably to use the term "decline" - a term generally used in association with the downfall of empires.

The worst case scenario that I would predict is that our social support systems may have reached their objective limits. I'm certain that the average progessive imagines this to be a disaster of epic proportions, but few of us would classify a failure to achieve a welfare state as a "decline".

It is also possible that we've gotten in over our heads in our efforts to shape the world in our own image. Worst case, we'll have to stop doing that - but again, hardly evidence of a "decline". The truth is that we are still very much in control of our own destiny and our own prosperity. Our civil structure is solid - with any sense of perspective, more solid than at any point in our history.

Hello Randy,

You do understand my use of "decline" and have explained its meaning as I would. Yes, we are in the era of America's downfall as an empire, an era which will reach its end only when the United States of America ceases to exist as a nation.

But I am speaking in the long term -- which in this case involves several decades at least -- and not making any prediction about what will happen next week, next month or next year.

I suspect that America's collapse will occur suddenly and unexpectedly. Out of the blue, in the same fashion that the Soviet Union collapsed. Except that our collapse will be accompanied by terrible violence both abroad and within the "homeland".

The readers should keep in mind that although Iraq seems like a violent place -- and it is -- that sort of violence is mild compared to what will happen when anarchy comes to the United States of America. Americans are better armed than the Iraqis, and we are a violent nation.

Peace is maintained in the United States only by virtue of our powerful government, well-funded and well-equipped FBI and police forces. A day will come in which these no longer function and all the violent and armed Americans will take matters into their own hands.

Katrina's New Orleans was just an appetizer. The main course is coming, it is best to hope that it won't get here until all of us are gone. No one wants to live to see the end of the United States of America.

All empires die. The United States of America is not exempt. All nations come to an end. The United States of America will cease to exist.

But the DOW reaches a new high today, maybe we'll enjoy peace & safety forever. Too bad for the Iraqis, though, because they are going to just keep on dying because of the terrible mess that we made of their country.

I cannot celebrate America's successes while so many people are dying on our behalf. If we were a great nation we would never have killed so many people throughout our history.

What's the point of having an empire if you already have a solid economy?

I don't understand all the facination with empire.

Agreed Aaron. The US certainly does have significant influence throughout the world, but the term empire doesn't really apply. Nor do the classical weaknesses of traditional empires apply. Most of our international relationships are entirely voluntary. Venezuala is a great example. Chavez likes to talk trash, but our relationship is entirely voluntary - Venezuala sells oil and we buy it. If Venezuala decides to "overthrow American hegemony" or some such nonsense, it will hurt them at least as much as it hurts us. Same with most of the Middle East. Same with China.

Hello Randy,

Agreed Aaron. The US certainly does have significant influence throughout the world, but the term empire doesn't really apply. Nor do the classical weaknesses of traditional empires apply. Most of our international relationships are entirely voluntary. Venezuala is a great example. Chavez likes to talk trash, but our relationship is entirely voluntary - Venezuala sells oil and we buy it. If Venezuala decides to "overthrow American hegemony" or some such nonsense, it will hurt them at least as much as it hurts us. Same with most of the Middle East. Same with China.

Are you serious? Have you completely forgotten America's history.

America's relationship with Latin America is not voluntary. The Monroe Doctrine implies that the American military has hegemony over the New World. We have invaded numerous countries on behalf of maintaining our imperial hegemony over the Western Hemisphere.

Venezuela, likewise, is technically not a voluntary trading partner with the United States. If Venezuela decided to cease exporting oil to the United States we certainly would attack that country and assassinate Hugo Chavez. We've already tried to kill him once, but failed, this is one of the reasons why Mr. Chavez hates America's government so much.

Regarding the Middle East, America's military presence there indicates that this region is not a voluntary partner. The United States has already explicitly declared its willingness to attack any nation depriving us of their oil.

To see an expression of this philosophy dating from the 1970's, read:

http://www.harpers.org/SeizingArabOil.html

To see the same theory in action today, watch the news or read the paper. America isn't in Iraq for the sake of the Iraqis. America must control the world's oil supplies because should our trading "partners" ever deprive us of our oil addiction the economy would die and our Superpower military would cease functioning.

The United States of America is not an empire in the traditional sense, but we certainly are an empire. And our empire is declining and threatening to collapse. The United States of America is presently losing two wars, should we start another we'll lost it as well.

America's economy is also sick for numerous reasons. Our government has reached the point of diminishing returns.

We've amassed a mountain of debts and an even greater mountain of unfunded liabilities. When these mountains collapse they will bury us in a depression-inducing depression.

And our oil supplies are by no means guaranteed. America is addicted to oil, there is a substantial risk of America experiencing a cold turkey-style deprivation of the oil drug. Should that occur this economy will collapse in a fashion which might preclude any sort of recovery.

In other words: The End is Coming! Thank God for the End!

Venezuela, likewise, is technically not a voluntary trading partner with the United States. If Venezuela decided to cease exporting oil to the United States we certainly would attack that country and assassinate Hugo Chavez.

David Matthews: Utter nonsense. Venezuela doesn't sell oil to America. Rather, Venezuela sells oil to something called "the global energy market". If Chavez decided to sell oil only to, say, China, that's less oil the Chinese will now be buying from Indonesia or Iran. After a brief period of adjustment, US refineries would simply receive shipments from other sources. There's just one big well of oil called "the world oil supply" and one big user of oil called "the economy of planet Earth".

The fugibility of oil shreds the Club Rome-like fantasies of "resource war" prophets.

Hello 99,

Is it nonsense that the United States has implicitly threatened Venezuela and explicitly threatened the Middle East in order to guarantee that this fungible oil finds its way to America instead of remaining in the ground or going somewhere else?

The United States of America consumes 25% of the world's oil supply. That's a mighty big chunk of the pie, 300 million people consuming one fourth of the world's production of a nonrenewable resources. There are six and a half billion people living on this planet, billions are deprived so that we might prosper.

If the average Muslim consumed oil at the same gluttonous rate as the average obese American the Middle East would consume all of its oil and have nothing left to export to the United States. Perpetual poverty is the price that millions of Muslims pay in order for Americans to enjoy all the benefits and curses of the automotive lifestyle.

If the average Nigerian consumed oil at the same reckless rate as the average obese American, that country would consume all of its own oil and it would have nothing to export to the United States. Millions of Nigerians are impoverished on our behalf. Plenty of Nigerians are dying, too, not that should matter to anyone who might complain if gasoline is $3 a gallon at the pump.

If the average Mexican consumed oil at the same greedy rate as the average obese American, Mexico's oil would never flow North to the United States. Mexico is a poor country becoming poorer every day. Do you suppose that the Americans appreciate Mexico's great gift to the United States? No, of course not. Americans are prejudiced against the Mexicans. Americans hate their presence in this country and cannot stand to hear the language. So we abuse the Mexicans while their imports make the American Way of Life possible.

The Oil industry is one great big cosmic-scale crime against humanity. Billions of humans are left to suffer while Americans shop, eat and drive. Thousands of Iraqi children are dying on behalf of our SUVs.

Doesn't that make you proud to be an American?

I am still confused as to where Jane Galt gets her numbers from. Here are my sources of data:

http://www.publicdebt.treas.gov/opd/opdhisto4.htm
http://bea.gov/bea/dn/nipaweb/TableView.asp

Using numbers from those sources, I get these results for Debt as % of GDP:

1975 -> 35%
1983 -> 45%
1991 -> 61%
1998 -> 63.2%
2005 -> 63.6%

What have I missed? I would e-mail Jane directly to ask her to clarify, but I cannot locate her private e-mail address.. not that I blame her from not posting it.

The best I can gather by looking at the oecd.org site.. is that they're just using "Debt Held by the Public" and completely ignoring "Intragovernmental Holdings". This.. in so many words.. is total bullshit. Of course the government is shifting a lot of the debt burden to little honey holes like Social Security.. Need a little money? Just sell some bonds to the SS Trust fund and use the money to buy guns and butter. It is still debt.

It's cheesy to pretend that money owed to taxpayers doesn't count as debt if it's in owed to some government trust fund.

Look at the debt schedules.. you'll see how more and more of the debt gets shifted to intragovermenal holdings every year.

It makes me angry because I had assumed Jane did due diligence and that.. somehow I'd overlooked something and.. oh things really hadn't changed since the '70s as far as the national debt was concerned. (she just clicked some buttons on the OECD site and copy/pasted some numbers)

In the least, you could note how you were simply ignoring the massive amounts of money shifted to government trust funds..

Go here to see how the debt has been loaded to intragovernmental holdings from '97 to '06:

http://www.publicdebt.treas.gov/opd/opdpdodt.htm

"Intragovernmental holdings" have increased ~2.26 times and "debt held by the public" has increased ~1.28 times since 1997. It's all being stuffed into that black hole... everything's fine.

e

PS Obviously, by these statistics, George W. Bush hasn't really done much damage as far as debt/gdp is concerned. But, that's not the point, our national debt/gdp is almost twice as high as this post suggests.

David,

Re; "The End is Coming! Thank God for the End!"

Well, I can see where you're coming from. You're not alone. But you might want to review the history of insurrection before mounting the barricades - just take a moment to evaluate the risk.

Hello Randy,

What sort of insurrection are you talking about?

What I see when looking at this world is: collapse.

But this is an argument that time itself will resolve. No action on my own part is needed. Nature will take its own course.

No one expects the end. I am certain that there were many Soviets circa 1987 who thought that the Soviet Union would last forever, no matter what. Who ever imagined that a superpower could collapse -- essentially peacefully -- in a day?

The United States of America is the world's hyperpower, but our status is guaranteed to last foever? Nothing last forever. Everyone knows this intuitively.

Patriotism or nationalism or fear of change might blind your eyes to the reality of decline, but plenty of Americans are beginning to notice that the empire's toes are composed of clay. Our enemies also know it, too.

Do you remember how long it took for the Soviet Union to lose the Afghan war? Ten years.

Does anyone really believe that the United States can endure in Afghanistan and Iraq for another five years? In these wars we have already lost. We've lost in such a terrible fashion that we cannot stay and we cannot leave.

In other words: President Bush's perpetual warfare policy has created a catastrophe which will destroy our military and drive our country to bankruptcy. These are the consequences of our foolish choice to declare war on an individual representing an extreme minority viewpoint and then enlarge the war so that it became a culture struggle between the West and Islam.

A war against an unpopular radical extremist is winnable, a perpetual war between civilizations is not.

eli,

"...because I had assumed Jane did due diligence and that.. somehow I'd overlooked something and.. oh things really hadn't changed."

Two things: never assume, and, as you learned, do your own Homework.

Her thesis, v. '73-~'06 Fiscal position comparisions, and her statistics, are both specious.

David,

Your sense of perspective seems a bit off to me. You seem to think that Iraq is a major nation threatening operation along the lines of Napolean or Hitler invading Russia. First, from a historical perspective, Iraq and Afghanistan are minor operations. We haven't even mobilized for war - we haven't had to. We sent in 150,000 troops on the chance that they could change the world. If they succeed, great. And if not, no big deal. The idea that we are somehow trapped in Iraq is absurd. We will be there as long as there is hope of success, and if that hope of success should vanish, we will leave. Second, remember that both France and Germany survived. As bad as Napolean's and Hitler's disasters were, the nations survived - and both are stonger now than they were at the time of the disasters. With a bit of historical perspective, its quite easy to see that the United States has a lot more going for it than against it. I can only assume that those who predict its imminent demise are either lacking in perspective, or have some reason to wish for the demise - and not to be taken seriously in either case.

Comments are Closed.