Media

The Economist: U.S. Debt Is "Perfectly Affordable" … Except When it's Neither "Healthy" nor "Pretty"

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Shame. On. Them.

The self-described "newspaper" goes high dudgeon against Republican debt-ceiling negotiators, in a July 7 piece headlined "Shame on them":

In three weeks, if there is no political deal, the American government will go into default. Not, one must pray, on its sovereign debt. But the country will have to stop paying someone: perhaps pensioners, or government suppliers, or soldiers. That would be damaging enough at a time of economic fragility. And the longer such a default went on, the greater the risk of provoking a genuine bond crisis would become.

There is no good economic reason why this should be happening. America's net indebtedness is a perfectly affordable 65% of GDP, and throughout the past three years of recession and tepid recovery investors have been more than happy to go on lending to the federal government. The current problems, rather, are political. […]

The sticking-point is not on the spending side. It is because the vast majority of Republicans, driven on by the wilder-eyed members of their party and the cacophony of conservative media, are clinging to the position that not a single cent of deficit reduction must come from a higher tax take. This is economically illiterate and disgracefully cynical. […]

This newspaper has a strong dislike of big government; we have long argued that the main way to right America's finances is through spending cuts. But you cannot get there without any tax rises.

Bold bit mine, to take your attention away from that "one must pray"-style drama queenery, and also to focus your attention on an altogether different-sounding Economist piece from just nine days prior:

Many other rich countries have big debt burdens and are facing similar problems [to Greece]. The chart below shows OECD calculations of what it would take governments to reduce gross debt to 60% of GDP by 2026. This is around the level considered healthy and is also the ratio set by the widely ignored Maastricht agreement, which is meant to govern debt in the European Union. It is not pretty.

Shall we see who's the second-worst looking OECD country in this nifty Economist debt/death chart?

Perfectly affordable

Thanks to Scott Ross for the second link.

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  1. Wait, why don’t those socialist countries towards the bottom have out-of-control spending?

    Hey, Michael Moore. What’s the fuck? You said, we needed more government…like Norway!

    1. Actually Norway has huge oil reserves so it can blow through a lot of cash.

      1. AlmightyJB, you’re the last man on earth…except for_______________
        Good luck 😉

        1. Hmmm….Why is the figment of billions of people’s imagination talking to me me through the blogoshere?

          1. AlmightyJB, I thought we were related. I banged a hooker once is Vegas, and she yelled Almighty Jesus’ brother.
            It happens

            1. You banged our mom? lol

              1. Luke AlmightyJB, I am your father

                1. That’s what Joseph thought too but you know how mom is? 🙂

      2. “Actually Norway has huge oil reserves so it can blow through a lot of cash.”

        It’s not just Norway.

        Sweden is in more or less in the same boat–despite the rich social benefits, they’re fiscal conservatives.

        Two years before the downturn, Sweden had a 3% of GDP surplus.

        You know what they did when the economy went south?

        They cut tax rates!

        Which gives Barack Obama a rather remarkable distinction…

        Barack Obama expanded social services–to be more like Sweden. But Sweden dumb enough to run deficits like Barack Obama wants to do…

        Sweden isn’t dumb enough to raise taxes to try to jump start a flat economy either!

        As I type, Barack Obama is holding up fiscal responsibility (dumber than Sweden) to raise taxes (dumber than Sweden) amid a weak economy.

        The question isn’t whether Barack Obama is dumber than socialist Sweden anymore–the only question left is whether Obama is dumber than Lou Ferrigno.

        1. Don’t make me angry. You wouldn’t like me when I’m angry.

          1. No offense Lou, it was meant as a compliment really…

            I suggested you were smarter than Barack Obama.

            Actually, given the fact that Obama is trying to RAISE taxes amid a slow economy–that’s not really saying much. Still, I’d rather be dumb the way you are than dumb the way Obama is.

            And I’d vote for Lou Ferrigno over Barack Obama any day.

        2. “Barack Obama expanded social services–to be more like Sweden. But Sweden [isn’t] dumb enough to run deficits like Barack Obama wants to do…”

          But you guys knew what I meant.

      3. And the US Federal Government owns vast resources, including 50% or better of all real estate in most of the Western States (almost 50% in California). We could sell assets, still have vast resources left over, and get ourselves out of the worst of our problems — but the root problem of profligates in charge of government would remain.

    2. Where do people get this idea that Sweden’s a socialist country even though our government is conservative?

      1. The hate speech laws probably.

        1. Hate speech laws aren’t inherently socialist, they’re just inherently fucktarded.

  2. Why did that article have a snotty british accent when I read it? Maybe it was the picture. Anyway, I’m getting pretty bored of the stupidity.

  3. This newspaper has a strong dislike of big government

    HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!

  4. But you cannot get there without any tax rises.

    Watch me, Percy.

  5. “Now, the Japanese are #1 on the list and have a man who can bend his leg back over his head and back again with every single step.”

    1. Do you really think our leaders are going to allow Japan to bankrupt their country before we bankrupt ours? Not gonna happen. USA! USA! USA!

      1. Now, Mr AlmightyJB, I’m not going to mince words with you. I’m going to offer you a Research Fellowship on the American silly walk silly spending practices.

    2. Why is it we don’t have a Ministry of Silly Walks? I guess we’d call it the Department of Silly Walks, but still.

  6. Oh, and I’m taking issue with some of the stats in those two pieces–it doesn’t sound like they can both be true…

    Quote 1: “America’s net indebtedness is a perfectly affordable 65% of GDP…”

    Quote 2: “The chart below shows OECD calculations of what it would take governments to reduce gross debt to 60% of GDP by 2026.”

    Somebody please chime in if I’m reading that wrong–but I don’t see how both of those statistics can be true.

    I linked to a chart in an earlier thread today that shows the U.S. debt level going to 100% of GDP by the end of this year–so I think Quote 2 is probably closer to the truth.

    1. The first quote refers to ‘net indebtedness’, and the second to ‘gross debt’. So it is possible for them both to be true.
      As to whether they actually are true, I can’t say. I don’t really know how gross and net debt are defined in these statistics.

      Of course, I wouldn’t consider 60% or 65% debt levels to be affordable under any circumstance, but maybe that’s just me.

      1. From my post below, I believe “net indebtedness” refers to how much of our debt is being held in private hands. And if you look at his quote in context, he’s trying to argue that there are still plenty of bidders for our debt, and there likely will be for some time given the amount of debt out there relative to GDP.

        That’s his take anyway. Mine goes something like, it always looks great just before we fall off a cliff. Where the edge of that cliff is, maybe nobody knows…but that doesn’t mean there’s no cliff out there!

        We won’t know for sure until we take one step too many. If Italy had seen this coming three days ago, they’d have done what they’re doing now–three days ago.

        The end of the party comes like a thief in the night–always.

    2. Note that the chart below shows, on the right, the US gross debt being 93.6%.

      The Economist is being schizophrenic here. But they don’t assign bylines, so it could well be different people using the editorial voice.

      1. See my response below–I think I got it nailed down.

        That 93.6% number is how much we have to slash in order to get our debt down to 60% of GDP by 2026!

        Our government debt is way over 93.6% of GDP already. We’re over 100% of our GDP now. Check the chart I linked below too.

        1. I’m not clear on what the 93.6% indicates – the amount of debt relative to GDP we’d have to slash over 15 years to get to 60%?

          1. No, the length of the bar indicates the amount of debt we’d have to slash over 15 years to get to 60%. The number, as the caption at the bottom of it indicates, is the current gross public debt in 2010.

            Greece and Italy have higher debt right now, so a larger number, but their bars are shorter because we’re actually running a worse deficit.

            1. Thank you!

              I can see that now.

              They’re definitely saying that 93.6% number is the percentage of our gross debt relative to our GDP in 2010.

              In 2011, we still definitely go over 100% though. …and the amount we need to slash is between 15% and 20%–of our outstanding principal.

        2. That 93.6% number is how much we have to slash in order to get our debt down to 60% of GDP by 2026!

          Not according to the chart. The caption clearly claims that the 93.6% is the gross debt as a percentage of GDP in 2010.

          The bar, unlike the number, indicates how much we’d have to cut in order to get to 60% by 2026. Our bar is longer than some countries with higher debt because our current deficit is higher. In other words, we haven’t accumulated as much debt yet, but we’re heading there quickly.

          1. It may say that–but I wouldn’t say it says it “clearly”.

            For whatever reason, I didn’t see that last night.

        3. See my response below–I think I got it nailed down.

          No, you’re way off. The chart means exactly what it says and what I said.

          That 93.6% number is how much we have to slash in order to get our debt down to 60% of GDP by 2026!

          No, that’s the size of the bar. The 93.6% is the gross government debt in 2010.

          Our government debt is way over 93.6% of GDP already. We’re over 100% of our GDP now.

          Sure, but since the Economist chart clearly says that the numbers are government debt from 2010, that doesn’t contradict that we went over 100% during 2011.

    3. I guess the question is the net to gross?

      Then I want to see the math on how slashing our gross debt by 93.6% gets us to 60% of GDP by 2026–which equals 65% of “net indebtedness”?!

      Is that 65% number talking about private debt? I think that’s it! I think that 65% number he’s talking about is how much of our debt is being held by private entities–not how much debt we have outstanding relative to GDP.

      He’s suggesting that private holders of our debt have plenty of room in their pockets relative to GDP to buy more of our debt.

      Anyway–here’s a chart showing where we are in terms of Gross Debt relative to GDP–how much the government owes relative to GDP.

      http://www.usgovernmentspendin…..chart.html

      You’ll see we go over 100% in…2011.

      1. You’ll see we go over 100% in…2011.<?blockquote>

        Yes, and if you look at the Economist chart, you’ll clearly see that the 93.6% number is labeled “Gross government debt, 2010, percentage of GDP.”

        The chart you link to also shows that we were around 95% in 2010, so that agrees with the Economist chart.

        The number on the right is debt in 2010. The bar is the amount of cuts needed to get the country to 60% by 2026.

        1. I think we can all agree that it’s a fucktarded chart in that it doesn’t flatly lay out what the numbers are.

          And I would go so far as to say that the economist is a fucktarded magazine for using inconsistent interpretations of the word “debt” in reference to a nations debt. i.e. publicly held? unfunded pension obgligations included? debt owned by the fed included?

          1. It’s easier to read when I’m not so tired…

            But it would have been better if they had ranked the countries relative to how much their outstanding debt is relative to GDP–rather than by how much they need to cut to get to 60% of GDP in 15 years.

            1. The U.S. isn’t really #2 on the list of countries with the highest gross debt relative to GDP, for instance…

              By my count, we’re #9 on that list.

              We’re #2 in terms of how much we need to cut to get to 60% in 15 years–but we’re not #2 in terms of percentage of gross debt relative to GDP.

  7. Where’s China on this list? Oh! Creditors don’t really have to worry about Debt Management.

    Except when you are a bank funded by TARP funds-which most likely was borrowed from China.

    Were screwed!

    1. We can sell our politicians and MBAs to China for slave labor. It won’t get us out of the hole, but every little bit helps and it comes at no cost to our society.

      1. Pretty soon I may not mind being sold to China – they will be more free-enterprise than USA.

  8. “In three weeks, if there is no political deal, the American government will go into default.”

    Well, admitting you have a problem is the first step in curing that problem.

  9. Oh I see. So the 65% doesn’t include debt held by the Social Security Trust Fund or the Federal Reserve.

    That’s convenient!

    1. The SocSec debt is purely fictional anyway. It can’t be sold, and is nothing more than an accounting of how much SocSec tax revenue was unnecessarily collected and diverted over the years. It wouldn’t make the slightest difference if those notes were just torn up.

      The Fed’s debt, now, that is a different story. I believe that debt is all marketable, and merely cancelling it would definitely be a default, and would more than definitely destroy our banking system.

  10. you cannot get there without any tax rises.

    Why not?

    This is economically illiterate and disgracefully cynical.

    Why?

    you cannot get there without any tax rises.

    mmmkay….

    1. I think The Economist 9000 is in an infinite loop.

  11. But the country will have to stop paying someone: perhaps pensioners, or government suppliers, or soldiers. That would be damaging enough at a time of economic fragility. And the longer such a default went on, the greater the risk of provoking a genuine bond crisis would become.

    Why do they keep calling laying people off default?

    If a business cannot get any more credit to pay its employees it simply goes without. It does not default on its debt…it just spends less and does not borrow more.

    The misuse of the term is fucking annoying.

    1. Orwell was fucking brilliant.

    2. At any rate, it’s a bit absurd to say that when the government stops a program because legislators eliminate it, that’s a “cut”, but when the government stops the same program because they ran out of money, that’s a “default”. There may be a procedural difference, but from the perspective of those outside of government, the impact is the same — if anything, the former is worse, since at least with the latter you can hope to get money once the government gets money.

  12. “In three weeks, if there is no political deal, the American government will go into default.”

    Only in the sense that someone with a million bucks in the bank goes into default because he simply stops paying the bills.

    The US Federal government owns vast resources. True default is not necessary. The current situation is the result of a choice made by political leaders who are hoping to score points with their constituencies going into an election year, OR are trying to herd the crowd in a particular direction that will prove profitable for the leaders.

    1. And, by the way, shame on the Economist for not pointing out the above. I thought they had better sense, though I long ago quit believing that they had any courage.

      1. And double-shame for raising the spectre of starving grannies and brave unpaid soldiers.

        1. And triple shame for daring to say, in the same column, that they oppose large government.

          1. We have to raise taxes in order to lower taxes!

    2. In three weeks, if there is no political deal, the American government will go into default.

      This is an outright lie, and I am getting good and sick of the bien pensant mainstream Total State fellators parroting it.

  13. I’ve long since cancelled my subscription to the Economist. The last time I attempted to read it, a month or so back, they were cheerleading Obama and his kinetic military action in Libya, had to stop right there.

    1. Did not renew my subscription when the ‘free-trade bastion’ endorsed Obama over McCain because Obama was such great campainer or something….
      A bitter end to a long lasting love affair…

      1. Damn you Micklethwait, you ruined the last decent mainstream (sorry Reason) magazine on the planet!

        It was their endorsement of more regulations, ‘stimulas’ and bailouts in the latter Bush years (under the stewardship of Micklethwait) that led to my disenfranchisement.

        On the plus side, Micklethwait was much less of war cheerleader, initially, but that’s turned around since Obama took power. Go TEAM BLUE!

    2. Wait, are we still supposed to drink?

  14. –> I paid $32.67 for a XBOX 360 and my mom got a 17 inch Toshibalaptop for $94.83 being delivered to our house tomorrow by fedex. I will never again pay expensive retail prices at stores.I even sold a 46 inch HDTV to my boss for $650 and it only cost me $52.78 to get. Here is the website we using to get all this stuff,
    BuzzSave.com

    1. Tell me more about your Mom.

  15. The Economist is not against big government as it claims, check out the jobs section in the magazine, there tons of ads for government positions.

    They support all wars, the Euro, the US democratic party, those are all BIG government things.

  16. It’s official. I’m moving to Switzerland.

  17. RE: Not, one must pray, on its sovereign debt. But the country will have to stop paying someone: perhaps pensioners, or government suppliers, or soldiers.

    If by pensioners they mean Social Security recipients then I must point out that the Social Security trusts funds are part of our national debt. If they actually existed, they and current OASDI “premiums” are more than sufficient to pay current benefits. It appears as if Obama has decided to treat us seniors as he did the GM bond holders.

    Obama has actually done a great service: he was the first major politician to announce that the whole trust fund charade is really an empty sham. At our current spending levels, our seniors can only trust that the Chinese continue to fund their “entitlements.”

  18. The economist publishing political hack piece disguised as an economic discussion that contradicts something it published just days before?

    Well slap my ass and color me surprised and shocked. I just can’t believe it…

  19. I think they write these pieces under the editorial banner so that no one person can be called out for their stupidity.

  20. The Economist used to be a great classically liberal magazine.

    Now, it’s just another left-wing rag.

    But then again, The Nation also was once a classically liberal publication. One that once loved Grover Cleveland!

  21. The debt is completely affordable. As long as we can borrow more to pay it off!

  22. At least Japan owns it debt. US debt is owned by China and Japan.

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