Nat'l debt makes U.S. vulnerable - Lender nations could wage 'financial warfare'

[WhiskeyGirl]

National debt makes U.S. vulnerable, experts say

Lender nations could wage 'financial warfare'
By JOHN SCHMID

jschmid@journalsentinel.com

Posted: June 29, 2008

Tax rates could double. Spending on education, research, health and even Social Security could be squeezed tighter than ever. ...

(snip)

All because the U.S. national debt - which is being financed on a daily basis by the governments of China and a host of oil-exporting states, among others - has made this country far more vulnerable than its elected leaders let on, says David Walker, who recently finished a 10-year stint as U.S. comptroller general and head of the Government Accountability Office.

The nation's former auditor-in-chief will outline this crisis scenario today in Milwaukee, when he and an entourage of like-minded Washington policy analysts make their latest stop on Walker's Fiscal Wake-Up Tour.

Foreign governments and investors now hold fully half of the United States' total outstanding debt, making Washington susceptible to a new form of geopolitical conflict that Walker calls "financial warfare."

(snip)

"I believe we will wake up and make tough choices," Walker said. "The question is when. Will it be before, or after, a crisis?"

Walker and his group span a wide ideological spectrum. Appearing with him in Milwaukee are:

• Stuart Butler, vice president of the conservative Heritage Foundation, which has close ties to the Bush Administration.

• Alice Rivlin, former director of the Office of Management and Budget under President Clinton and now with the center-left Brookings Institution.

• Robert Bixby, director of the centrist Concord Coalition, which focuses solely on national budget policy. Its board includes former Federal Reserve chairman Paul Volcker, former Clinton Treasury Secretary Robert Rubin, and former senators Sam Nunn, a Democrat, and Warren Rudman, a Republican.

Since March, Walker has been working as founding president and chief executive of the Peter G. Peterson Foundation. Peterson, a billionaire co-founder of the Blackstone Group private equity firm and commerce secretary under Richard Nixon, launched the foundation to lead a fiscal reform movement.

In congressional testimony last week, Peterson called the nation's borrow-and-spend practices "undeniable, unsustainable and yet politically untouchable." He said if policies remain unchanged, federal commitments including debt service over the next 75 years will total $53 trillion - which comes to $175,000 for every man, woman and child in the U.S. today.

"A lot of politicians know we have this problem and don't do anything about it," Bixby said. "What gets us on the road is a shared concern that we're dumping a huge - and some argue an immoral - burden on future generations. The immoral part is that we know we're doing it and we don't care."

Shadowing candidates
As the 2008 presidential campaign began, Walker's tour began shadowing the primaries. Stops have included New Hampshire, Ohio, Michigan, Iowa and a February visit to Madison.

Bixby follows the spending and tax pledges of both party's candidates. Without quibbling about what he calls the questionable budget math of John McCain and Barack Obama, Bixby arrives at a different point: Even if either candidate is able to finance his campaign pledges in a budget-neutral way, the nation's fiscal imbalances will continue to worsen.

"We cannot afford the fiscal policy that we already have," Bixby said.

Even before the baby boomer generation has begun to retire, Social Security, Medicare and Medicaid constitute 42% of the federal budget, he said. In the next 30 years, the share of population that's older than 65 will hit 20%, from 13% currently, which commensurately inflates the cost of those programs. At the same time, inflation in health care costs far outstrips economic growth, meaning that Medicare and Medicaid in 40 years will be as big as the entire federal budget today.

In less than 20 years, those three programs, plus interest payments on America's debt, will consume all the tax revenue the nation can expect by then, Bixby said.

"You'd get a crisis long before this," Bixby said.

And then there's what Walker calls financial warfare. Japan and China are America's two biggest lenders. Great Britain is third, followed by a bloc of oil-producing states including Iran, Kuwait, Saudi Arabia and Libya.

(snip)

Foreign lenders, Bixby notes, can demand conditions - or threaten to stop buying U.S. Treasury securities, or even dump their existing holdings outright. To lure other buyers of Washington's debt, U.S. interest rates would then have to rise sharply, throttling the nation's economy.

"It means foreigners have more leverage on us and we have less leverage on them," Walker said. "You have to pay attention to your bankers."

(snip)

All on the tour agree it's a fantasy to argue that the U.S. can grow its way out of its debt, Bixby said. "The economy would have to grow at an implausible rate forever," Bixby said.

(snip)

But the next president and Congress cannot duck the issue entirely. For instance, a large portion of President Bush's tax cuts are scheduled to expire in 2010, and many want to extend them.

Walker and the Peterson Foundation are pressing the issue in several other ways.

The foundation recently acquired distribution rights to a documentary film, "I.O.U.S.A.," to be released in 13 cities in August. Walker calls it an "economic 'Inconvenient Truth.' "

The foundation has published "A Citizen's Guide to the Financial Condition of the U.S. Government" on its Web site, www.pgpf.org.

As for the tour, Walker said the biggest audience response comes from the slide he reserves until the end - his three grandchildren.

"We are not only putting ourselves in debt and expecting our kids to pay for it," he said, "we're cutting back on investments in the future."

http://www.jsonline.com/story/index.aspx?id=767295

Does anyone remember when interest rates for new home purchases were @ 18%?

Does anyone think the price of gas could double every year?

When does the U.S. start looking out for the people at home? 

[caesu]

War Costing $720 Million Each Day, Group Says

By Kari Lydersen
Washington Post Staff Writer

Saturday, September 22, 2007; Page A11

CHICAGO, Sept. 21 -- The money spent on one day of the Iraq war could buy homes for almost 6,500 families or health care for 423,529 children, or could outfit 1.27 million homes with renewable electricity, according to the American Friends Service Committee, which displayed those statistics on large banners in cities nationwide Thursday and Friday.

The war is costing $720 million a day or $500,000 a minute, according to the group's analysis of the work of Nobel Prize-winning economist Joseph E. Stiglitz and Harvard public finance lecturer Linda J. Bilmes.

http://www.washingtonpost.com/wp-dyn/content/article/2007/09/21/AR2007092102074.html

[Tylergal]

The cost of the war is nothing compared to the loss of major economies such as that of New York City.  We no longer live in a glass house and the rock throwers are out there.  We must got there and intercept them or let them come here as they want to do.  We either keep the bastiges occupied in the ME or they come here and kill us in our streets and homes.

[caesu]

right, so 720 million dollars a day is well spend on that illegal war which created a terrorist breeding ground and a islamist state.
but if there is a bill for healthcare for kids, better veto it.

how is that pro-life.
spending money enabling the destruction of hundreds of thousands of lives.
are all those men, women and children terrorists / al-qaida now?
but not wanting to spend money to give low-income american kids healthcare.

[Tylergal]

right, so 720 million dollars a day is well spend on that illegal war which created a terrorist breeding ground and a islamist state.
but if there is a bill for healthcare for kids, better veto it.

how is that pro-life.
spending money enabling the destruction of hundreds of thousands of lives.
are all those men, women and children terrorists / al-qaida now?
but not wanting to spend money to give low-income american kids healthcare.

If your country is destroyed by militant islamofascists, what the hell do you need healthcare for, mental midget?

[caesu]

right, so 720 million dollars a day is well spend on that illegal war which created a terrorist breeding ground and a islamist state.
but if there is a bill for healthcare for kids, better veto it.

how is that pro-life.
spending money enabling the destruction of hundreds of thousands of lives.
are all those men, women and children terrorists / al-qaida now?
but not wanting to spend money to give low-income american kids healthcare.

If your country is destroyed by militant islamofascists, what the hell do you need healthcare for, mental midget?

why do you feel the need to call people with such names when making a point?
is that your way to back up your fictional view on reality?

and to respond to you: that war in iraq only created and strengthened militant islamo-facist regimes in that region.
anyone with some knowledge of the middle-east can see that.
and cruel thing on top of all this is that the returning wounded americans are getting sub-standard healthcare.

i am ready for your response, probably filled with more kind words.