I.M.F. Report Says U.S. Deficits Threaten World Economy

[zimv20]

link (http://nytimes.com/2004/01/07/politics/07CND-FUND.html?hp)


With its rising budget deficit and ballooning trade imbalance, the United States is running up a foreign debt of such record-breaking proportions that it threatens the financial stability of the global economy, according to a report made public today bythe International Monetary Fund.

In nearly 60 pages of carefully worded analysis, the report sounded a loud alarm about the shaky fiscal foundation of the United States, questioning the wisdom of the Bush administration's tax cuts and warning that large budget deficits posed "significant risks" not just for the United States but for the rest of the world.

The report warned that the net financial obligations of the United States to the rest of the world could equal 40 percent of its total economy within a few years — "an unprecedented level of external debt for a large industrial country" that it said could play havoc with the value of the dollar and international exchange rates.


Fund officials warned that the long-term fiscal outlook was far grimmer, predicting that underfinancing of Social Security and Medicare would lead to shortages as high as $47 trillion over the next several decades, or nearly 500 percent of the current gross domestic product in the coming decades.


The dollar has lost nearly one-fifth of its value against the euro in the past 18 months, and the dollar hit new lows against the euro this week.

[Desertrat]

What was the annual reduction in governmental income from Tax Cut I? Tax Cut II was roughly $40 billion per year, IIRC.

The deficit is running in the $500 billion range, as is the trade deficit.

To worry about the tax cuts as ruining the U.S. economy and thus the world economy is a tailwagdog deal.

At the rate China and India are expanding their ability to buy imports, they're gonna replace the U.S. as a major world market. Not "tomorrow", of course, but it seems to moving that way. Right now, of course, it's the U.S. consumer that's keeping the world's trade engine moving...

'Rat

[wwworry]

I have heard the tax cuts are responsible for 60% of the deficit. Also a lot of the tax cuts are not even in place as of yet.

Also there is a new book out that documents the way the tax burden has shifted mostly to people who make between $50,000 and $500,000 /year.

The top 400 wealthiest people in America are paying ridiculously small amounts of taxes now. I don't get the way people refuse to see the simple mathmatics of this. If the super rich pay less, the rest of us pay more. All of my income is subject to federal taxation vs. only 17% of their income is subject to federal taxation - THAT'S REAL FAIR not. We wage earners can't buy political access.

I am sorry my figures are not linked. I have to go to work soon. no time.

[Desertrat]

"I have heard the tax cuts are responsible for 60% of the deficit."

That would mean the cuts reduced the federal income by some $300 billion per year. SFAIK, Bush Tax Cuts I & II total less than $100 billion per year.

"Also a lot of the tax cuts are not even in place as of yet."

The laws have been passed and signed. The cuts are spread out over a ten-year period. Those which are not yet in effect can not, then, reduce federal income. Remember that a "400-billion tax cut" when spread over ten years is only $40 billion per year. Keep the annual separated from the cumulative.

:), 'Rat

[Dont Hurt Me]

all i can say is blame George, what should have cost 50 cents cost 87 billion and counting. Did the very Rich really need a tax break? and where are those WMD's? The Republicans have become the big spendors and the Democratic party is looking better and better but would rather see Lieberman,Clark or Kucinich then Dean.

[Desertrat]

DHM, most of the tax breaks go to those who work for salaries. Sure, there are highly-paid and too-highly-paid folks, but the "very rich" don't work for salaries.

The very rich are invested in stocks and bonds and real estate, mostly interested in creating future wealth. For income, they clip coupons on dividend-paying stocks or tax-free municipal bonds. Their tax accountants already have them financially structured such that they have always paid a minimum amount of tax. These people aren't stupid. (For instance, they don't go out and buy a corporate jet. They fly in a jet which belongs to--or is leased by--a corporation in which they have a large interest.)

The people most impacted by our tax structure, aside from small corporations' owners, are those earning an annual $50,000 to $60,000 and up. Approximately, $50,000 is about entry level to be considered "economic middle class"; this is, for example, average UAW pay, less overtime but including benefits. (The way many prices have risen in the last five years, the entry level for middle class rating could be higher than $60K.)

'Rat