| Would
you willingly go into debt forever to pay for more federal spending?
We should be very scared as the debt grows into trillions with no end in
sight, or evident concern about it. Despite our
past success, why should other countries still trust us to be a good
investment now? |
| As
they say in "forward-looking statement" legal disclaimers in financial
report, past performance is no guarantee of future success.
If foreign investors ever lose confidence in the US Treasury and the US
economy, then what will be "too big to fail"? |
|
Remember that the dollar has been going up recently, after getting
weaker for years. That has been reflected in the dramatic change
in oil prices. A dollar now buys more in the rest of the world,
but foreign money buys less here - such as less US exports, or less
investment in US assets. It increases the attractiveness for
American businesses to invest in lower cost, lower tax foreign markets.
This makes it less attractive for foreign businesses to
invest in the USA, because it costs more initially even though the
earnings potential may be attractive. Their dollars earned here
may become worth more to them - except that if the dollar declines
again, then they will lose up front and could lose more later.
Note that the foreign investors may face lower taxes at home, and
elsewhere, than in the USA. They may also face less competition in
other markets than here, plus attractive investment incentives up front. |
| That
may be great for helping other countries to get out of their own
recessions around the world and create good jobs there for them, but
it's not great for us. Our tax base shrinks while our social costs
go up. We are capable of making a fairly normal recession into an
economic disaster through the power of the federal government to
intervene in unproven ways. Despite good intentions, governments
screw up. |
| Our
rising federal debt may "crowd out" domestic business investment through
rising interest rates and higher inflation. We can't simply spend
more without limits, even if we naively assume that taxes will go up,
once the economy recovers somewhat, in an attempt to slow the growth of
the federal debt in a few years. The key is to not take on such a
crushing debt burden in the first place. We may not be in a
position to pay the debt back down through rising taxes in a few years. |
| The
country may be like a consumer who went into debt in the confident
belief that he would always have a rising income, with no costly
disruption of the cash flows. Government tax receipts will go down
while the spending goes up. A "stimulus" of more spending and
ineffective tax rebates, rather than significant and permanent tax cuts
on which individuals and businesses can plan ahead and change their
investment |
| We're
mortgaging our national economic future like a subprime NINJA loan - no
income, no jobs, no assets, and no accountability. What happens
when the rest of the world forecloses on this illusion? |
|
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