France, under Nicholas Sarkozy, has a budget deficit of 8% of GDP this year. This is second only to that of Greece in Europe, according to The Economist in the text of an article in the issue of 19 - 25 June 2010. Unfortunately, a graph accompanying the article indicates that Spain has a deficit of just under 10% of GDP. Uhmmm....they can't get everything right, after all, The Economist endorsed Obama in the election of 2008, is a stout defender of catastrophic man-made global warming, and loves cap and trade legislation! It always pays to read things critically and carefully.
France's public debt is 84% of GDP. Despite the recent surge in U.S. public debt, our public debt is currently 57% of GDP. It is not expected to be long before our debt is as bad as that of France. But the Chairman of the Joint Chiefs of Staff is so worried about our debt that he is complaining about it, as is the Tea Party movement. We are likely to make some substantial decreases in spending when the new Congress starts in January 2011. The French do not seem to have the will to make substantial reductions in spending. It starts with Sarkozy.
France is making some minor cuts. It has raised the retirement age from 60 now to 62 in 2018. The state pension fund shortfall in 2020 will be the equivalent of $55 billion. It expects to save less than half that amount with the increase in the retirement age. The top income tax rate is being raised from 40% to 41% in 2011. In 2020, civil servants will have to contribute 10.5% of pay to their pension fund, rather than the present 8.1%. France hopes growth will be vigorous and that will spur additional tax revenues. Most observers believe the needed growth goal will not be reached. Euro-rules require France to reduce its deficit all the way down to 3% of GDP by 2013.
One of the factors making spending cuts hard and hurting growth is the fact that 20% of France's employees work for the government. France is currently spending 56% of GDP, which is more than any other Euro-zone country. Moody's has warned that France's rising debt may endanger its AAA credit rating. Of course, Obama wants to duplicate these factors in the U.S. How idiocentric is that?
Showing posts with label gross national debt. Show all posts
Showing posts with label gross national debt. Show all posts
08 April 2010
Fannie Mae and Freddie Mac and the Full Faith and Credit of the USA
Robert Romano posted an interesting article on the debt of Fannie Mae and Freddie Mac and the U.S. debt on 7 April 2010. Romano is the Senior Editor of the ALG News Bureau. ALG is Americans for Limited Government, which is an organization doing good work for the cause of American liberty. I will summarize the most interesting points in his article below.
Congress placed the government secured entities (GSEs) Fannie Mae and Freddie Mac under federal government conservatorship in 2008 because they were effectively bankrupt. Congress formed the Federal Housing Finance Agency to manage their sorry financial mess, which Congress had long worked hard to foster. In June 2008, their combined debt was $6.6 trillion, of which $4.7 trillion was mortgage-backed securities. Congressman Scott Garrett asked Treasury Secretary Timothy Geithner why this debt taken on by the federal government had not been added to the national debt. The U.S. debt of $12.6 trillion should really be $19.2 trillion and this would result in the downgrading of U.S. debt due to excessive risk. There is quite a song and dance going on here while trying to avoid this.
Geithner says this corporate debt is not the same as U.S. Treasuries and should not be considered sovereign debt. He says, "By statute, all obligations and securities issued by GSEs must include a statement that makes clear that such obligations and securities are not guaranteed by the United States and do not constitute a debt or obligation of the United States." But, he also says the "Treasury is committed to supporting the GSEs while in conservatorship and to ensuring that the GSEs have sufficient capital to meet their debt obligations and honor their guarantees." When Fannie Mae and Freddy Mac were nationalized, the FHFA director James Lockhart told Congress that "the conservatorship and the access to credit from the U. S. Treasury provide an explicit guarantee to existing and future debt holders of Fanny Mae and Freddy Mac." It seems clear that when Congress nationalized the GSEs, the earlier statute that their obligations were not guaranteed by the federal government, had to be superseded or inherently contradicted.
Foreign investors held $1.5 trillion of the $4.7 trillion in mortgage-backed securities. In June 2007, the last an accounting by nation was performed, China held $376 billion, Japan $228 billion, Russia $75 billion, Luxembourg held $39 billion, Belgium $33 billion, Britain $28 billion, and Middle Eastern national funds are also big holders. Many of these nations apparently said they would not buy Treasury bonds to support the U.S. national debt if the government did not rescue them from the bankrupt mortgage-backed securities they held. The federal government has since bought up $1.25 trillion of mortgage-backed toxic security debt. The Treasury will not say whose toxic securities they bought, but they only dealt with primary dealers who could directly deal with the Federal Reserve Bank of New York. When the TARP program was put together, the Treasury was forbidden to purchase the mortgage-backed securities of foreign central banks. But, it appears likely that Geithner has done just that with paper which is indeed backed by the explicit backing of the United States. What else could he have paid the primary dealers for the toxic securities with?
This is just me again: Our real national debt is clearly much greater than the $12.6 trillion figure we are told in a huge lie that it is. There is still much more hidden debt than just that of Fanny Mae and Freddy Mac also.
Congress placed the government secured entities (GSEs) Fannie Mae and Freddie Mac under federal government conservatorship in 2008 because they were effectively bankrupt. Congress formed the Federal Housing Finance Agency to manage their sorry financial mess, which Congress had long worked hard to foster. In June 2008, their combined debt was $6.6 trillion, of which $4.7 trillion was mortgage-backed securities. Congressman Scott Garrett asked Treasury Secretary Timothy Geithner why this debt taken on by the federal government had not been added to the national debt. The U.S. debt of $12.6 trillion should really be $19.2 trillion and this would result in the downgrading of U.S. debt due to excessive risk. There is quite a song and dance going on here while trying to avoid this.
Geithner says this corporate debt is not the same as U.S. Treasuries and should not be considered sovereign debt. He says, "By statute, all obligations and securities issued by GSEs must include a statement that makes clear that such obligations and securities are not guaranteed by the United States and do not constitute a debt or obligation of the United States." But, he also says the "Treasury is committed to supporting the GSEs while in conservatorship and to ensuring that the GSEs have sufficient capital to meet their debt obligations and honor their guarantees." When Fannie Mae and Freddy Mac were nationalized, the FHFA director James Lockhart told Congress that "the conservatorship and the access to credit from the U. S. Treasury provide an explicit guarantee to existing and future debt holders of Fanny Mae and Freddy Mac." It seems clear that when Congress nationalized the GSEs, the earlier statute that their obligations were not guaranteed by the federal government, had to be superseded or inherently contradicted.
Foreign investors held $1.5 trillion of the $4.7 trillion in mortgage-backed securities. In June 2007, the last an accounting by nation was performed, China held $376 billion, Japan $228 billion, Russia $75 billion, Luxembourg held $39 billion, Belgium $33 billion, Britain $28 billion, and Middle Eastern national funds are also big holders. Many of these nations apparently said they would not buy Treasury bonds to support the U.S. national debt if the government did not rescue them from the bankrupt mortgage-backed securities they held. The federal government has since bought up $1.25 trillion of mortgage-backed toxic security debt. The Treasury will not say whose toxic securities they bought, but they only dealt with primary dealers who could directly deal with the Federal Reserve Bank of New York. When the TARP program was put together, the Treasury was forbidden to purchase the mortgage-backed securities of foreign central banks. But, it appears likely that Geithner has done just that with paper which is indeed backed by the explicit backing of the United States. What else could he have paid the primary dealers for the toxic securities with?
This is just me again: Our real national debt is clearly much greater than the $12.6 trillion figure we are told in a huge lie that it is. There is still much more hidden debt than just that of Fanny Mae and Freddy Mac also.
09 February 2010
The Gross National Debt and Our Gross National Politicians
The Gross National Debt is the sum of the Public Debt and the money the government owes to itself, such as to Medicare and Social Security. The Public Debt is important in that the government has to find people willing to hold that debt in exchange for interest, but the real government debt is the Gross National Debt. This is because when the Social Security Fund starts requiring the government to make good on its IOUs to Social Security so that retired people can be paid their benefits, the government will have to come up with that money or default on the Social Security program. Coming up with the money may mean borrowing it from the public, finding additional tax revenues, or simply devaluing the money by printing it and paying the money back with less valuable dollars. The devalued dollars will dilute the benefits.
Let us look at the public debt and the gross debt through the year 2008 graphed in terms of the national Gross Domestic Product (GDP):
The y-axis is mislabeled. The plot is as a function of the percentage of the GDP, not the fraction. The reason for looking at it as a percentage of GDP is because as the economy grows, it is better able to support a given level of debt. In 2008, the gross debt (in black) was 1.72 times the public debt (in red). We already owed the Medicare and Social Security Funds a huge debt. As you can see, the ratio of gross debt to public debt has been increasing in recent decades.
In 2001, Bush's first year in office, the Congress was divided with the Democrats in control of the Senate. The gross debt was 57.4% of GDP. In 2003, the Republicans came to control both the House and the Senate. The 2007 budget was the last one enacted by the Republican controlled House and Senate and the gross debt at the end of 2007 was 65.6% of GDP. The increase in the gross debt from 2001 to 2007 was 8.2% ( an average yearly increase of 1.17%), which Democrats like to blame on the Bush tax cuts. Actually, government revenues went up by $576.8 billion a year in this time, so, as is so often the case, the reason for our expanding debt was clearly huge spending increases. In 2007, despite the increased revenue of $576.8 billion, the government increased its gross debt by $499.3 billion. That debt was caused by an increase of government expenditures since 2001 of $1.076 trillion! Many of us Republicans were furious with our party and became very unenthusiastic supporters and that only because we recognized the Democrats as even worse. The gross debt was, however, not quite as bad as it had been for a couple of years in the 1990s.
So, in 2007 the Democrats took over the House and the Senate. Their first real budget was in 2008 and it increased the gross national debt from 65.6% to 70.2% of GDP in one year for an increase of 4.6%! In 2009, with no worry that Obama would veto anything the Congress passed, they really went to town. The Gross national debt increased to 86.1% of GDP. In two years of Democrat control, the total increase in gross debt was 20.5%! According to the OMB, the 2010 gross national debt is estimated to be 98.1% of GDP, for a three year increase of 32.5%!!!!! This is an average of 10.83% increase per year under the Democrats, compared to the 1.17% yearly increase I used to think was awful between 2001 and 2007. Actually, I still do think that was awful, but now it is more than 9 times more awful. How do you express an order of magnitude more than awful? Does that make the present regime's growth of the gross national debt awesomely awful? The deficit this year may well be an underestimate, since it is also based on growth in the economy and in government tax receipts which many think are rosy projections, indeed.
Now, this is where reality falls off a cliff. Next, we enter a real fantasy world. In 2011, the new Obama budget submission to Congress hopes (it springs eternal) that the gross national debt will only increase to 101.0% of GDP. They have some very, very rosy projections on how well the economy will do, despite Obama's heavy new taxes. His proposed new taxes are expected to bring in $2 trillion more over the next 10 years. Yes, this madman actually thinks he can lower the boom on the economy with backbreaking taxes and it will thrive and throw increased tribute at the feet of the great leader. The leader will then be free to choose his friends and party lavishly with them, while most Americans carry some lazy and wrongheaded bureaucrat on their back to the feast.
Well, I have news for you kleptocrats. It is well proven that increasing the tax rate on capital gains results in so many fewer capital gains transactions that tax revenues will go down, not up. The expected increase in tax revenues of $105.4 billion from that source will never happen. If you really wanted more revenues in time, you would decrease the capital gains tax rate. But, if you want the People to think you are a socialist, redistributionist hero and you are trampling the necks of wealthy Capitalists, this sounds good. But, Capitalists will change their investment behavior to thwart your evil plans and you will get less. Way to shoot yourselves in the foot!
Obama plans to make the unemployment insurance surtax permanent. Great, so employers will hire fewer people since that will raise the cost of labor, as will the preferential treatment for labor union goons. He will increase taxes on oil and gas. Great, that will result in less oil and gas on the American market and higher prices. The economy will slow down everywhere. An increase in oil prices is what started the recession in the first place, even before the collapse of the sub-prime mortgage market.
He will increase taxes on companies with operations abroad. These companies already share the world's highest corporation taxes with Japan. This is one of the reasons they have been increasing their operations aboard so much. This is not rocket science. If you want corporations to hire more people and produce more in the U.S., lower the corporation tax rate. No, if you are wrongheaded socialist, you find a way to increase their taxes even more. The proper response is for these companies to reduce their American operations even more and move their headquarters abroad to countries with lower tax rates. This will happen in time, if these new taxes are not repealed and if the super-high corporation income tax is not lowered. Then there is the brilliant idea of putting a special tax on banks. Now how is that going to result in banks loaning more money to companies as they try to expand to grow us out of this recession? How much of this tax is going to be passed on to every customer of a bank? All, or almost all, of it!
Brilliant, Obama, just brilliant. You claim you could not find a credible economist who would back any other policy when you spoke to the Republican Congressmen. I will suggest two really good economists you might talk to: Dr. Thomas Sowell and Prof. Walter E. Williams. I could list numerous others as well, but I thought I would stick with two who would have been much better guardians of the Constitution and the economy than you are and who would have provided the American People a genuine pleasure in having a black American President. It really is unfortunate that our first one had to be such an incompetent fool.
Let us look at the public debt and the gross debt through the year 2008 graphed in terms of the national Gross Domestic Product (GDP):
The y-axis is mislabeled. The plot is as a function of the percentage of the GDP, not the fraction. The reason for looking at it as a percentage of GDP is because as the economy grows, it is better able to support a given level of debt. In 2008, the gross debt (in black) was 1.72 times the public debt (in red). We already owed the Medicare and Social Security Funds a huge debt. As you can see, the ratio of gross debt to public debt has been increasing in recent decades.
In 2001, Bush's first year in office, the Congress was divided with the Democrats in control of the Senate. The gross debt was 57.4% of GDP. In 2003, the Republicans came to control both the House and the Senate. The 2007 budget was the last one enacted by the Republican controlled House and Senate and the gross debt at the end of 2007 was 65.6% of GDP. The increase in the gross debt from 2001 to 2007 was 8.2% ( an average yearly increase of 1.17%), which Democrats like to blame on the Bush tax cuts. Actually, government revenues went up by $576.8 billion a year in this time, so, as is so often the case, the reason for our expanding debt was clearly huge spending increases. In 2007, despite the increased revenue of $576.8 billion, the government increased its gross debt by $499.3 billion. That debt was caused by an increase of government expenditures since 2001 of $1.076 trillion! Many of us Republicans were furious with our party and became very unenthusiastic supporters and that only because we recognized the Democrats as even worse. The gross debt was, however, not quite as bad as it had been for a couple of years in the 1990s.
So, in 2007 the Democrats took over the House and the Senate. Their first real budget was in 2008 and it increased the gross national debt from 65.6% to 70.2% of GDP in one year for an increase of 4.6%! In 2009, with no worry that Obama would veto anything the Congress passed, they really went to town. The Gross national debt increased to 86.1% of GDP. In two years of Democrat control, the total increase in gross debt was 20.5%! According to the OMB, the 2010 gross national debt is estimated to be 98.1% of GDP, for a three year increase of 32.5%!!!!! This is an average of 10.83% increase per year under the Democrats, compared to the 1.17% yearly increase I used to think was awful between 2001 and 2007. Actually, I still do think that was awful, but now it is more than 9 times more awful. How do you express an order of magnitude more than awful? Does that make the present regime's growth of the gross national debt awesomely awful? The deficit this year may well be an underestimate, since it is also based on growth in the economy and in government tax receipts which many think are rosy projections, indeed.
Now, this is where reality falls off a cliff. Next, we enter a real fantasy world. In 2011, the new Obama budget submission to Congress hopes (it springs eternal) that the gross national debt will only increase to 101.0% of GDP. They have some very, very rosy projections on how well the economy will do, despite Obama's heavy new taxes. His proposed new taxes are expected to bring in $2 trillion more over the next 10 years. Yes, this madman actually thinks he can lower the boom on the economy with backbreaking taxes and it will thrive and throw increased tribute at the feet of the great leader. The leader will then be free to choose his friends and party lavishly with them, while most Americans carry some lazy and wrongheaded bureaucrat on their back to the feast.
Well, I have news for you kleptocrats. It is well proven that increasing the tax rate on capital gains results in so many fewer capital gains transactions that tax revenues will go down, not up. The expected increase in tax revenues of $105.4 billion from that source will never happen. If you really wanted more revenues in time, you would decrease the capital gains tax rate. But, if you want the People to think you are a socialist, redistributionist hero and you are trampling the necks of wealthy Capitalists, this sounds good. But, Capitalists will change their investment behavior to thwart your evil plans and you will get less. Way to shoot yourselves in the foot!
Obama plans to make the unemployment insurance surtax permanent. Great, so employers will hire fewer people since that will raise the cost of labor, as will the preferential treatment for labor union goons. He will increase taxes on oil and gas. Great, that will result in less oil and gas on the American market and higher prices. The economy will slow down everywhere. An increase in oil prices is what started the recession in the first place, even before the collapse of the sub-prime mortgage market.
He will increase taxes on companies with operations abroad. These companies already share the world's highest corporation taxes with Japan. This is one of the reasons they have been increasing their operations aboard so much. This is not rocket science. If you want corporations to hire more people and produce more in the U.S., lower the corporation tax rate. No, if you are wrongheaded socialist, you find a way to increase their taxes even more. The proper response is for these companies to reduce their American operations even more and move their headquarters abroad to countries with lower tax rates. This will happen in time, if these new taxes are not repealed and if the super-high corporation income tax is not lowered. Then there is the brilliant idea of putting a special tax on banks. Now how is that going to result in banks loaning more money to companies as they try to expand to grow us out of this recession? How much of this tax is going to be passed on to every customer of a bank? All, or almost all, of it!
Brilliant, Obama, just brilliant. You claim you could not find a credible economist who would back any other policy when you spoke to the Republican Congressmen. I will suggest two really good economists you might talk to: Dr. Thomas Sowell and Prof. Walter E. Williams. I could list numerous others as well, but I thought I would stick with two who would have been much better guardians of the Constitution and the economy than you are and who would have provided the American People a genuine pleasure in having a black American President. It really is unfortunate that our first one had to be such an incompetent fool.
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