2011 U.S. Budget Cut in Perspective

[John Roberts]

Re: 2011 U.S. Budget Cut in Perspective

Perhaps, but I'd settle for politicians that pay more attention to the voters they are supposed to represent than party leaders. See also: false dichotomy.

Represent is the magic word...

The larger issue as I see it, and perhaps this is what people mean by leadership, is we need to be more responsible to long term consequences of near term actions. The central point of Langston's post is that the negotiated debt agreement only cut something like 1% in the first year, with most of the cuts in later years, a popular legislative technique, since those out year cuts rarely happen. OTOH, there are fair arguments against austerity in a time of almost double digit unemployment. However the counter argument is that this reduction is from already ramped up spending levels.

This current issue as I see it distills down to wether reducing spending or raising taxes is the correct remedy for our ballooning debt. The answer to that seems painfully obvious to me. At $40k+ of debt for every american, there aren't enough millionaires and billionaires to tax to cover the rest of us.

The current sovereign debt crisis in Euro zone also appears to be from kicking the can down the road to deal with at some later date... that tomorrow has come around. Arguably we are getting a similar wake up call as our debt just got downgraded from AAA to AA+. We are still the least ugly girl at the dance, but we just got a little uglier.

You already know what I think, what do you think (hopefully explain with math if you think we can tax our way out of this)?

JR

PS: Hammer, I know you think cutting the military is one easy button, but the debt agencies were looking for a $3-4T cut. Iraq and Afghanistan was like $1T over a decade. The real elephant in this budget room is social program spending, while I agree we should cut everything (and close tax loopholes).

 

[John Roberts]

Re: 2011 U.S. Budget Cut in Perspective

I agree...
The problem with attaining honest politicians that vote the choices of their constituents is that:

We could realize a simple democracy with a big ass computer... like they do for those lame TV shows. Our government is better than that, or perhaps worse than that. Our founders went out of their way to make it hard to pass laws, and the politicians have distorted the system to make it a little too easy (for them).

These Bills are too long, and include too many other added nonsense articles. (The Politicians don't read the Bills they're voting on)

amen brother

Their next term is too dependent on Corporate and Special Interest Campaign contributions. Corporations should NOT have a vote... Screw the Supreme Court. It is "by the People, for the People"...not,..... for Corporate interests.

I wish the corporations were the only special interest group with a hand grabbing for the levers of power.

Consider instead that we shine a little more sunlight on the actual levers of power that these elected representatives wield. We won't get better governance from campaign finance, this is just one more power struggle. We need to look at the real flaw which is spending without proper accountability.

The Political parties spend too much time posture-ing and Marketing for their next Candidates for the next Elections

That is what parties do, always have and always will. If holding office becomes less of a license to steal, there will be less commercial interest in the pursuit of office.

The terms of office need to be lengthed to six years for both the House and the Senate.

Perhaps.. I could see a return to the former system where senators were appointed by state legislatures. The apparent problem is that the power in office is corrosive to moral behavior, lets work on reducing that power with more visibility and accountability.

There should be dollar limits to Campaign spending.

IMO not the problem, lets address the reason they find office so desirable. It is reported that our chief executive is raising a $1B campaign chest.. maybe we should tax campaign spending .

JR

Hammer

 

[Charlie Zureki]

Re: 2011 U.S. Budget Cut in Perspective

PS: Hammer, I know you think cutting the military is one easy button, but the debt agencies were looking for a $3-4T cut. Iraq and Afghanistan was like $1T over a decade. The real elephant in this budget room is social program spending, while I agree we should cut everything.

Hello..

That 1 Trillion dollar amount has been held up by some as the unquestionable and absolute truth...

It has been shown to be nonsense, and according to a Report by Brown University, the Cost of War in Afghanistan, Iraq and Pakastan is currently 3.2 to 4 Trillion Dollars. The Nobel Prize winner of Economics ....Joseph Stigliz says that according to his studies "the cost is close to 3 Trillion." Which of course does not take into account the cost of financing this 3 Trillion Dollar Expenditures.

Social program spending is the Elephant?? What ya got? Social Security? OK...throw all of the drunks, fakers, and cripples off and make them find a job. Do you have any studies that would indicate exactly how much this would save? Because I don't...nobody does. But, I'm guessing that while it would be worth persuing....it won't save the kind of amounts that some would have us believe.

To the retired recipients of Social Security...cut their money? Bullshit...they already paid into the system...for better or worse, the Country NEEDS to HONOR this agreement. How about those with over some dollar amount in assets, be denied collecting Social Security Retirement payments?

Let's limit Medicaid to only those working poor CITIZENS, that cannot afford high Medical Bills..not office visits, but more serious health problems.

Don't touch medicare for the retires, again, unless they have over a specific amount in assets, then, they'd either be denied or they would pay a share of their Medical costs.

Scrap this "Health Plan", because some Large Corporations have already been exempted and the only REAL winners are the Insurance Companies. Better yet, tie-in the individuals Medical Expenses to their Retirement Benefits....the more you've used in Medical Expenses...the less your Social Security or Pension Benefits.

Government Pensions...let's limit those pensions to ONE PAYOUT per customer. End the double, triple, or quadruple dipping.

The Government should desolve the USPS and utilize Private Business. The USPS is one of a few " American Government owned Corporations", it is not an Agency of the Government.

Reform the Tax CODE. Lay off Hundreds of thousands of IRS workers.

There's plenty of ways to cut the budget... without hurting those that need it most.

Hammer

 

[John Roberts]

Re: 2011 U.S. Budget Cut in Perspective

Hello..

That 1 Trillion dollar amount has been held up by some as the unquestionable and absolute truth...

I didn't call my number absolute or complete. I even mentioned aid to Pakistan and others. If you want 3 opinions ask two economists, (we must count all the camels who were displaced). Do we at least agree it was over 10 years?

It has been shown to be nonsense, and according to a Report by Brown University, the Cost of War in Afghanistan, Iraq and Pakastan is currently 3.2 to 4 Trillion Dollars. The Nobel Prize winner of Economics ....Joseph Stigliz says that according to his studies "the cost is close to 3 Trillion." Which of course does not take into account the cost of financing this 3 Trillion Dollar Expenditures.

OK use whatever number you want.. That is a sunk cost, as in already spent, we can only change the future. I'm (pretty) sure it's all in the total debt number.

Social program spending is the Elephant?? What ya got? Social Security? OK...throw all of the drunks, fakers, and cripples off and make them find a job. Do you have any studies that would indicate exactly how much this would save? Because I don't...nobody does. But, I'm guessing that while it would be worth persuing....it won't save the kind of amounts that some would have us believe.

To the retired recipients of Social Security...cut their money? Bullshit...they already paid into the system...for better or worse, the Country NEEDS to HONOR this agreement. How about those with over some dollar amount in assets, be denied collecting Social Security Retirement payments?

Let's limit Medicaid to only those working poor CITIZENS, that cannot afford high Medical Bills..not office visits, but more serious health problems.

Don't touch medicare for the retires, again, unless they have over a specific amount in assets, then, they'd either be denied or they would pay a share of their Medical costs.

Social programs are considered the third rail of politics and most career politicians are afraid to address this seriously.

I would be willing to forgo all this government largess, despite the fact that I paid into it for several decades, but this isn't about what I am willing to do. Warren Buffet say's he would be willing to pay more taxes.. good for him.

Realistically old people vote, so they will be the last people cut... Bush expanded the program a bunch with prescription plans, and since then this just keeps expanding. I look at how many medicines my 82 YO neighbor takes chronically.. I know for a fact if he was paying with his own money he would be taking a lot less medicine... Not because he couldn't afford it, but now he has no reason to question the merit of spending the marginal extra money because he isn't..

Some simple things we can do that reflect modern longevity is increase the threshold age for receiving pay out. Long term we need to put this on a self sustaining actuarial basis where it is actually paid for by those receiving the benefit...boomers like me get to ride on the backs of younger workers. We can't keep kicking the can down the road, but the politicians are trying.

Scrap this "Health Plan", because some Large Corporations have already been exempted and the only REAL winners are the Insurance Companies. Better yet, tie-in the individuals Medical Expenses to their Retirement Benefits....the more you've used in Medical Expenses...the less your Social Security or Pension Benefits.

While I agree, that is wishful thinking. I fear a great deal of damage has already been done as business adapts to the new paradigm. The number of exemptions that have been granted should be grounds for repeal or at least a re-write. And where are all these doctors and health professionals going to come from? Any Dr with half a clue is taking early retirement or leaving dodge...

I don't see any simple answer for this, we have already blown a huge ass hole in the bottom of the boat... and we're taking in water.

I hope I'm wrong about this.

Government Pensions...let's limit those pensions to ONE PAYOUT per customer. End the double, triple, or quadruple dipping.

this is just one of several abuses.

The Government should desolve the USPS and utilize Private Business. The USPS is one of a few " American Government owned Corporations", it is not an Agency of the Government.

The PO is already crumbling under the weight of email and e-pay erosion of their cash cow, first class mail business.. the end is in sight and it will be ugly.

Reform the Tax CODE. Lay off Hundreds of thousands of IRS workers.

I don't mind more compliance efforts, as long as it is productive, but simplify simplify simplify. There is too much financial engineering in the code. These old exemptions and deductions (more properly called tax expenditures) need to be sunsetted and/or periodically reviewed. The tax code has become a way for special interests to manipulate the system for personal gain through lobbying. At the risk of shocking you, how about reducing the mortgage and children's deduction?

Home ownership was considered some wonderful panacea that solved all problems, until they rode that pony too hard and killed it. You haven't mentioned Fannie and Freddie, surely we need to euthanize them too?

There's plenty of ways to cut the budget... without hurting those that need it most.

Hammer

We are a charitable people but simply taking wealth from the productive sector of our economy and transferring to the nonproductive will kill the golden goose that was america.

Note: I am not accusing you of that, but our congress who is responsible for spending and budgets IS NOT DOING THEIR JOB. It will take a few more election cycles to get more adults in the senate. The house turns over quicker.

JR

 

[Charlie Zureki]

Re: 2011 U.S. Budget Cut in Perspective

I didn't call my number absolute or complete. I even mentioned aid to Pakistan and others. If you want 3 opinions ask two economists, (we must count all the camels who were displaced). Do we at least agree it was over 10 years?

OK use whatever number you want.. That is a sunk cost, as in already spent, we can only change the future.

Warren Buffet say's he would be willing to pay more taxes.. good for him At the risk of shocking you, how about reducing the mortgage and children's deduction?

JR

Hello Jr.

That 1 Trillion number was the official amount Cheney kept throwing out and the press kept pushing ( of course you can't believe the Press, because * they were paid over 1 Billion dollars for spinning stories regarding War, Economics, Terrorists, etc...) * Wall Street Journal, & BBC And yes, I know the money has been spent....my point is...it should HAVE NEVER BEEN SPENT REGARDLESS. Just as the US Government has acknowledged that the Vietnam War was a waste of American, Vietnamese, Cambodian, and lives from Laos, the Billions and Billions of Dollars, and our National shame ....this last ten years of nonsense will be admitted in ten, or twenty years.

Warren Buffet may have changed his tune in regards to paying his "fair share of taxes" because of his recent losses in the market. ;o)

And...doing away with Mortgage deductions and children's deductions wouldn't have made any difference to me...being divorced...I never got to claim the kids as a deduction and haven't paid a Mortgage in 15 years.

Hammer

 

[Tim McCulloch]

Re: Another First

Standard & Poor's is convinced that the children will continue to party for the next two years at least and unconvinced the parents are going to do anything about it.

From the report card sent home yesterday with little Johnny:

"The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case."

And that statement comes from a firm that rated Collateralized Debt Obligations as investment-grade for widows and orphans. Economist Paul Krugman essentially says "they're making stuff up."

Oh, and the Chinese are joining the deficit dog pile. If they "lose confidence" in our political will to pay our bills I see further currency manipulation ahead. Among other things.

Interesting times, indeed.

Not having fun, needing good luck.

Tim Mc

 

[John Roberts]

Re: Another First

And that statement comes from a firm that rated Collateralized Debt Obligations as investment-grade for widows and orphans. Economist Paul Krugman essentially says "they're making stuff up."

Paul who..

Actually a fair criticism.. of that earlier very bad call, but perhaps in the years since they have got religion and become a little more diligent about ratings. At this point and looking at this situation, this appears more like casting aspersion on the bearer of the bad news, than a fair inspection of the news. In defense of the rating agency they said "do this, or we do that". We didn't do "this", so they did "that". Congress called their bluff and they weren't bluffing.

While this only means we are slightly more ugly in the eyes of one rating agency it doesn't change much in the relative scheme of things. Other major countries have lost their AAA rating before and regained it, but this is not about them, or even about the rating. it's about us doing what is responsible.

Oh, and the Chinese are joining the deficit dog pile. If they "lose confidence" in our political will to pay our bills I see further currency manipulation ahead. Among other things.

The Chinese have at least two (or three) motives for their comments, The obvious one is the value of all the US debt they already own. If we devalue the dollar even more, they lose value in their holdings.

The equally obvious reason #2 is they are trying to gain influence by expanding their military presence outside their "great" wall. Any decrease in our military presence is an automatic increase for them (Putin was taking cheap shots too, but this is expected). I don't play close attention to Chinese adventurism, but at the moment I think there's an open dispute with Viet Nam about some oil or gas in the So. China sea, and the recent withholding of rare earth metals from japan was over another incident related to disputed sea/land territory. Taiwan is currently trying to purchase some military aircraft from us and China does not look favorably upon this (they still claim Taiwan as theirs).

A third motive for the Chinese is the desire for a new world reserve currency, other than the dollar, something like a basket of multiple national currencies (including the yuan obviously). I think we are more than a little arrogant about the persistence of the dollar's reserve status, and we could lose that if we don't clean up our act.

The bottom line is not how many 'A's are in our debt quality rating, but how many people and nations want to own our debt. This is not a given and we could screw that up.

Interesting times, indeed.

Not having fun, needing good luck.

Tim Mc

I appreciate that some feel Langston's posted reduction of this to a proforma family budget was somehow partisan. The partisan difference of opinion is whether to raise taxes or reduce spending. Perhaps to some this seems like six of one half dozen another. Just like family units have limited ability to arbitrarily raise their income, for governments there are practical limits in how much revenue can be raised by simply increasing taxes. Many states governments have already learned that wealthy people can easily move to another state. I will concede that there is a somewhat higher pain threshold to get people and businesses to move to another country, but that doesn't mean it isn't already happening.

JR

 

[Bennett Prescott]

Re: 2011 U.S. Budget Cut in Perspective

...I agree we should cut everything (and close tax loopholes).

There is no such thing as a tax loophole. There is the tax code, and there is illegal. Any company that didn't fully research what write-offs were available to them in the tax code should be sued by their shareholders for dereliction of duty. Any company not following the tax code will surely be caught sooner or later by the IRS and made to pay what they should have in the first place.

If you don't like the tax code, change it. Don't go complaining that some company pays no income tax when all they're doing is following the law to the letter. Trust me, if there was a legal way to pay no income tax, I'd be on it like flies on shit... but I guess since I'm in a relatively low tax bracket one wouldn't go calling me greedy. I wonder at what point I'm poor enough that I deserve to keep my money? I mean, I do all right for myself, but nowhere near as well as I could be doing if I didn't like this business. Perhaps I am in fact doing a disservice by not living up to my revenue potential, so I could contribute more tax dollars to the government.

 

[Christian Tepfer]

Re: 2011 U.S. Budget Cut in Perspective

There is no such thing as a tax loophole. There is the tax code, and there is illegal. Any company that didn't fully research what write-offs were available to them in the tax code should be sued by their shareholders for dereliction of duty. Any company not following the tax code will surely be caught sooner or later by the IRS and made to pay what they should have in the first place.

If you don't like the tax code, change it. Don't go complaining that some company pays no income tax when all they're doing is following the law to the letter. Trust me, if there was a legal way to pay no income tax, I'd be on it like flies on shit... but I guess since I'm in a relatively low tax bracket one wouldn't go calling me greedy. I wonder at what point I'm poor enough that I deserve to keep my money? I mean, I do all right for myself, but nowhere near as well as I could be doing if I didn't like this business. Perhaps I am in fact doing a disservice by not living up to my revenue potential, so I could contribute more tax dollars to the government.

Don't feel too bad, your missing revenue is a missing deduction on the other side. So it doesn't matter too much if you are at 80, 90 or 100% of your revenue potential.

Over here with a steep tax progression every Euro I earn more steals taxes as my business partners usually have higher tax rates than me, so when they deduct the amount I get from them they can cut more taxes than I pay more.

 

[Charlie Zureki]

Re: 2011 U.S. Budget Cut in Perspective

Perhaps I am in fact doing a disservice by not living up to my revenue potential, so I could contribute more tax dollars to the government.

Hello,

Does this fall under "Tax Avoidance" ? If not....the way things in this Country are going...someone that "knows what's good for us" may try to get some law passed, making it so.

Of course, I'm being a wise-ass...but, ???

Did you hear of the Soldier that was awarded the Purple Heart for sustaining "combat injuries" in Iraq? Yeah, he got his medal, but he had to pay for the postage. They didn't even have the courtesy to Award him the Medal personally.

Cheers,
Hammer

 

[John Roberts]

Re: 2011 U.S. Budget Cut in Perspective

There is no such thing as a tax loophole. There is the tax code, and there is illegal. Any company that didn't fully research what write-offs were available to them in the tax code should be sued by their shareholders for dereliction of duty. Any company not following the tax code will surely be caught sooner or later by the IRS and made to pay what they should have in the first place.

Yes it's our right to take advantage of legal tax breaks, and blatant cheaters will get caught, but the whole reason for the 1099 brouhaha, that we luckily dodged, was to set up a mechanism to find unreported revenue. My private suspicion was this was laying a ground work for a future VAT. While small numbers of blatant cheating can be rooted out, wide scale cheating occurs when taxes become so high that people don't think they are fair. This is the situation in some other countries where underground cash and barter economies operate in parallel to avoid VAT transactions. The increasing movement to computer based payment systems seems to me to make tax cheating harder but we'll see.

If you don't like the tax code, change it. Don't go complaining that some company pays no income tax when all they're doing is following the law to the letter. Trust me, if there was a legal way to pay no income tax, I'd be on it like flies on shit... but I guess since I'm in a relatively low tax bracket one wouldn't go calling me greedy.

I make a distinction between taking advantage of tax law as written, and the popular big business practice of lobbying for tax rules changes, for either bottom line benefits, or in some cases competitive advantage against other companies. IMO tax breaks that only help a small handful of companies is not tax law but industrial policy picking winners and losers that should be broadly inspected and only used for some (real) greater good.

The "raise taxes" debate seems overly fixated on examples like GE paying no taxes one year. I don't even have to google that, GE has a finance division that lost beaucoup dollars in the recent derivatives collapse. They probably have enough real losses to carry forward for several years.

There seems to be some confusion between the nominal tax rate and the effective tax rate actually paid. Big companies are more capable of taking advantage of obscure tax breaks because they can afford the legal machinations often involved. So many large companies pay so little that the average effective rate is probably in the low 20% range, vs a nominal 35% or so rate. What I really don't like about this, is that this is yet another advantage held by big business over small business. Almost like big business is in partnership with government against small business (AKA "crony capitalism").

My suggestion is not to raise revenue by increasing the top line tax rate even higher, that will discourage business activity by those outside the crony tent, but instead raise revenue by closing (some) tax breaks and perhaps lowering the nominal rate, while increasing the effective tax revenue received. It should not be disputed that small business is a better vehicle for job creation than big business (Like Hon Hai announcing it will buy 1 million robot arms).

I wonder at what point I'm poor enough that I deserve to keep my money? I mean, I do all right for myself, but nowhere near as well as I could be doing if I didn't like this business. Perhaps I am in fact doing a disservice by not living up to my revenue potential, so I could contribute more tax dollars to the government.

When we reach the point that the tax bite discourages earning more money that is a different and much better problem to have (however some argue that the dole does discourage job seeking). Right now I don't see the tax rate as the major impediment to growth and business activity. It has a macro effect on big business decision like "where" to expand, but for smaller domestic companies not considering leaving the country the problem is fear and uncertainty over ongoing regulatory expansion (over reach?). Unlike government, business can budget and plan for future ways to make lemonade from whatever lemons it is dealt (and business has the capital to do it). What business does not have is clear picture of what the future business climate will look like, with lots of evidence pointing to future higher costs and higher regulatory burden (health care bill is just one obvious example but there's more).

JR

 

[Christian Tepfer]

Re: 2011 U.S. Budget Cut in Perspective

The REAL question here is... what are the rest of the Countries in the World going to do? I really don't want to know the answer to that question.

I feel a bit "short" in regards to my share of the debt.....I wonder if one of the Wall Street Bankers will lend me some of their bonus money?

Hammer

"Turn the lights out when you're done."

The Euro masters are willing to accept the challenge to weaken the Euro just as much as the Dollar is weakened. It's a shame, really.

 

[John Roberts]

Re: 2011 U.S. Budget Cut in Perspective

The Euro masters are willing to accept the challenge to weaken the Euro just as much as the Dollar is weakened. It's a shame, really.

http://mysouth.su/2011/08/berlusconi-wants-to-change-the-constitution-of-italy/

I thought this was an interesting response. While not the first time he called to change his constitution for other reasons.

He called for a balanced budget and

but also offer a range of measures to liberalize the economy by giving businesses more freedom on the principle that "everything not forbidden by law – permitted.

Does sound familiar... and not business as usual for Italy.

A common world currency (or gold standard) would seem to solve the conversion rate issue, but as the EU is seeing without consistent budgetary constraint from all member states the imbalances will pop up elsewhere like the current sovereign debt issues demonstrate.

No easy answers for anybody, we must learn to live within our means, and not impede the wealth creators from doing what they do better than government.

JR

PS: In another example that words have consequences, all the politicians who made public statements supporting default of our debt obligations should not now be surprised by a debt quality downgrade... duh.

 

[Bennett Prescott]

Re: 2011 U.S. Budget Cut in Perspective

I watched this conversation between Gates & Buffet and some sort of public panel the other day and thought it was interesting. Buffet has a really excellent understanding of the basics as well as utility, and obviously a very deep understanding of US tax law. Obviously he (and Gates, but Bill isn't who makes this video interesting) is correct that the middle class bears the brunt of the tax burden percentage wise... they make enough to be taxed heavily, but not so much that they can afford to hire someone to come up with clever ways to reduce their tax burden.

As I think I have made clear in the past, while I applaud Buffet and Gates philanthropism (and agree strongly with Buffet's decision to give away the vast majority of his wealth so his children are not ruined by it), I do not want it to be mandatory (as Buffet seems to espouse for his own wealthy class). I believe taxing more heavily to make distribution more "fair" is both a zero sum game and unfair.

 

[John Roberts]

Re: 2011 U.S. Budget Cut in Perspective

The operative lesson from watching (not listening to**) these obviously very smart guys is what they do with their own money. They clearly believe they can spend it more wisely and productively than the government or they would just give it all to the government.

Middle America is taxed because like Willie Sutton said, "that's where the money is..." The class warfare screed is either horribly misinformed or a diversionary smokescreen for getting their fingers in more honey pots. Or something else, I'll leave that for others to opine.

JR

** Buffet is widely quoted for saying his secretary is taxed at a higher "rate" then he is. Ignoring how much more than her he actually pays, and the little detail that so much of his income is passive.. He even pays himself in Berkshire stock. He's clever too.

PS: Government redistribution is less than zero sum since they destroy wealth in the process, and discourage the pursuit of more. LOSE-LOSE-LOSE-win

 

[Bennett Prescott]

Re: 2011 U.S. Budget Cut in Perspective

PS: Government redistribution is less than zero sum since they destroy wealth in the process, and discourage the pursuit of more. LOSE-LOSE-LOSE-win

JR, I meant to say "at best" a zero sum game. I think it is clear that the more the government spends the less it gets back in GDP.

 

[kristianjohnsen]

Re: 2011 U.S. Budget Cut in Perspective

Could some of you gentlement give your opinion as to the accuracy of the information in this video clip?

 

[John Roberts]

Re: 2011 U.S. Budget Cut in Perspective

Do you have a written list ?

JR

 

[kristianjohnsen]

Re: 2011 U.S. Budget Cut in Perspective

Do you have a written list ?

JR

Sorry, I don't follow.

I was merely hoping people with a better understanding of large-scale economics than me could evaluate the video. It's only 6 minutes long.

 

[John Roberts]

Re: 2011 U.S. Budget Cut in Perspective

a lot more than 6 minutes to watch it for accuracy and comment.

here's my specific notes.

Ok "armageddon is inflammatory or trying to scare the viewer.

#1 the claim that most americans borrow to spend more than they earn routinely is not accurate or possible (only governments get away with that nonsense). Most families cut back spending when they run out of money.

#2 the amount of debt is accurate $14T but in fact we are not running out of people who want to buy our debt (we are one of least ugly girls at the prom). After the S&P downgrade our debt sold better not worse, due to fear/safety trade. S&P scared people so they bought more not less US debt. It could happen if we were to keep doing what we are doing though. I have faith in the American public, to make congress behave more responsibly in the future.

#3 yes, while we have historically run budget deficits before, the last couple years of spending, and falling revenue due to soft employment is worst imbalance ever.

#4 good point about distribution of who pays taxes, even more telling would a spread of personal tax payments vs income levels, and perhaps large business vs small.

#5 simplistic but correct correlation between inflation and commodity prices. This also applies to all fixed assets like homes, which the government would love to inflate to bail out underwater buyers.

#6 I don't accept that a foreign government lending us money makes us appear wealthier and them poorer.. Their balance sheet is still the same. However High interests rates or higher return on investment attracts capital and deposits so it make a currency more valuable. So yes there is a relationship between interest rates "that attract capital" and currency value. Perhaps a semantic argument on my part. Capital is attracted to investment return pure and simple.

#7 their explanation for recession is wrong. Yes, globalization and free flow of capital causes capital to find more productive uses elsewhere. While the nationalistic viewpoint is that moving to third world manufacturing is simply a home market issue, any global manufacturer is trying to be competitive in all world markets. Once you tool up a product in China for the rest of the world, the math to build for home consumption there too becomes trivial and obvious. Of course more small business activity is less efficient and results in more local economic activity.

Recessions are historically caused by business cycles that are underdamped (economic growth overshoots and undershoots, above and below the sustainable levels. Pauses occur to let everything catch up and equalize). Central governments try to moderate the pain of these natural business cycles by tweaking interests rates up/down to heat up or cool marginal business activity… but it isn't nice to fool mother nature and there are limits to what can be accomplished. You can't drop interest below 0%, but they have engineered other ways to stimulate (quantitative easing etc).., Some purist (like me) argue that this manipulation of cycles and direct intervention prevents a natural turnover (creative destruction) of weaker businesses.

#8 The end of the video suggestion that worldwide economic collapse never happened before is ignoring the great depression of the 1930s. While not apparent that we learned all our lessons, from the derivatives meltdown that precipitated this economic contraction, our international bankers have the benefit of studying history. We may make new mistakes but hopefully not the same old ones. One mistake we made coming out of that great depression in the '30s was to tighten money supply (raise interest rates) too soon. The EU has recently reversed an apparently "too soon" interest rate increase (explained by their simple inflation single mandate).

This is not trivial, easy, or without pain, but we appear to be very very slowly coming out of this, however we can still screw this up pretty easily. i wouldn't buy gold and ammo just yet (maybe a little gold). In fact stocks and housing looks pretty cheap right now if you have a strong stomach.

=====
That video was mostly factual but IMO loses it's way from the cause of recession and most factoids presented after that. If I had to guess an agenda it looks intended to make people more fearful than inform them. Not sure why. If the simple stuff is correct, the conclusions must be correct... bzzt.

JR