How often do people write this article? I would be really interested to see how many articles in a similar spirit were written during the 1930s or 1980s. For one, based on the 'smart money' investments from China and Russia they still seem to believe in the future of the US.
I think this article has a good summary of cutbacks that are happening due to the recession. However, the article makes no attempt to tease apart what effects might be due to the recession, and what effects might be permanent. The long series of stories about local governments is interesting - I'm intrigued by what people cut back on when they run out of money. There is no question that this is the most serious recession in living memory, in the US. As such, the recession deserves a lot of attention. But it is a leap to go from "Some town in Ohio had to layoff several police officiers" to "This means the US is finished forever." (I am making up exaggerated quotes, which I think summarize the gist of the article.)
It is possible that the US is finished forever, but there is nothing in this article that convinces me.
How many of these cutbacks SHOULD have been done before hand and are now forced to happen because of the recession.
Laying off police officers.. Good idea - They probably don't provide enough to be worth their pay over a certain point.
Maybe being forced to fill less pot holes will encourage us to come up with cheaper ways to do the job.
Perhaps if we cut back on teachers and educational spending we'll be able to do more with less... Money isn't the problem in education... if it was then we wouldn't have this data mashup: http://www.datamasher.org/mash-ups/spent-student-and-sat-sco... - It looks like spending more money per student isn't working.
Thinking that cutting back = massive failure is why most American's have massive amounts of personal debt that they will never get out of.
Lol... ok so... at what point---oh wise one---do police pay become worth? Because the article speak of basically few officers and no detectives. And what happens if we don't find a better way to fill the holes?
The reason why USA has no money is because you keep cutting the taxes for the richest people and going to wars that you've got no money for... and when finally the shit hit the fan you had to throw money after bankers and companies.
This process usually takes two phases:
phase 1, during a boom: "We've got plenty of money, let's cut some taxes"
phase 2, during the crisis: "We've got no money left, let's cut some services"
I don't think you get the point. We haven't even experimented or tried to do more with less. The U.S. philosophy has been so based around throwing money at a problem that we never consider whether we are spending to much until now.
When we have some states and local governments getting tot he point where they must shut down nearly all services the problem isn't money. The problem is they didn't reduce expenditures sooner. The problem is they run fiscally irresponsibly budgets with massive debts.
Bailing out banks and companies - A terrible idea. Cutting taxes - I'm pretty much in favor of this for everyone - especially since those top 5% of earners end up paying 70+ % of the total income tax. But that's not the point here. The point is that we HAVE to figure out how to spend less. Spending the same amount of money when you make half isn't an acceptable strategy.
Obviously it's not a good idea. But I would imagine that the answer if you can't fill your pot holes is to raise taxes, not hope that the future will bring something better.
If during a boom you've cut taxes, why now that money is needed shouldn't you raise them again? Didn't Clinton leave office with a surplus? So if at that time you had a balanced budget, and now you can't even pay to fill your pot holes, and one of the reason is because of your massive cuts in taxes... wouldn't that suggest that to fix you books you need to raise them again?
Could it be because you sent data for gross change in debt? Or maybe because those numbers include the extra interest rate paid by the debt (i.e. the government started saving, but the debt was so huge that the extra interests from the previous year compensated for it?).
Dunno, I am just trying to put the two pictures together.
That's debt held by the public, i.e. bonds. A lot of the debt is owed to old people through the SS system rather than to bondholders through the treasury.
Obviously one can debate the exact definitions of what should constitute debt, but I'm using the following definition: promises to pay out money in the future which will be politically very difficult to renege on.
If you want to look at debt held by the public, Bush had surpluses too (though not as large).
The mood of this thread suggests I will be modded down but:
1) How much is the real tax on the top 5%?
2) How much of the national income do the top 5% of earners make?
3) How much of the income do they make because of the unique situation they find themselves in the USA?
A wiki-search revealed the following:
In 2007, the top 5% of income earners paid over half of the federal income tax revenue.[36] However, as of 2004, the top 5% hold 59.2% of wealth. The top 1% of income earners paid 25% of the total income tax revenue.[37] Again however, the top 1% hold 23.5% of wealth. Forty seven percent of Americans pay no federal income tax.
(The 47% thing includes children / housewives / househusbands / etc.., hence it holds no interest to me as a figure. That said, you're welcome to try to change my mind).
The rich are paying a fair share, especially considering how difficult it is to accomplish the same task outside the US.
It's also not even clear they need to cut back on services.
Take Flint, for example. Instead of cutting 23 of 88 firefighters, why not keep them all but reduce their compensation by 26%? It's Flint Michigan, they don't exactly have other employment options. Besides, it's unlikely Flint even needs that many firefighters - their population dropped by about 10% since 2000.
The same could be done for teachers - NYC pays entry level teachers roughly the same salary as entry level engineers (total comp per month worked, not per calendar year). Rather than laying them off, why not cut their comp down to liberal arts grad entry level?
[edit: replaced word "pay" in second paragraph with "compensation". Thanks chrisbolt.]
The answer to your rhetorical questions is politically powerful public employee unions. Only a small minority of the members of the union got laid off, so they'd have to be okay with making the sacrifice to keep those people employed. They could fill those jobs at significantly lower salaries, but that factor never enters the equation.
I've been thinking along these same lines for years now. Much of America's civic and business institutions are/were built and financed assuming eternal growth economics to support them.
It isn't the recession itself destroying these budgets. It's the recession causing an honest assessment of recent and future growth and calling into question the feasibility of old debts, old promises, ways of life taken for granted, assumptions that drive the very basis of our society. (growth=success, bigger=better)
Granted, I live in Michigan, where we've been given a free preview of waking up to the cold realities of sprawl economics juxtaposed with a debt load based on eternal-growth expectations.
So I can understand why most people will experience a few years of denial, cherry-picking 'evidence' from an ever-shrinking number of still-growing cities to prop up their pre-existing world view. I did the same thing. I get it.
But when the evidence is finally at your door-step, utterly unavoidable, you'll realize it isn't a left vs right issue, or a government vs business issue. But an American lifestyle vs reality issue.
Yesterday, there was a news coverage on the 2 year aftermath from Lehman Brothers collapse. The New York Time reporter Andrew Ross Sorkin predicted in the interview the next wave of collapse will be governments, like Greece and possibly states like California.
I was a little bit surprised to hear such a strong opinion. It is clear the federal reserves do have now better tools to avoid private institution collapse which could have severe impact on the economy. On a bigger scale, like states it seems not all that clear what regulation mechanism are available. But reading repeatedly the warning signs from several known analysts about the debt issue and upcoming correction I am wondering if such collapse scenarios will take place.
There's a certain irony in hearing someone from the Reagan government talking about China's fast train. If you so much as suggested something like that in the USA you'd be billed as a socialist and the program will be immediately scrapped.
Once the USA wasn't like this. Once it had a big government who looked after its citizens and did what no private investor could or would do.
In Australia the government is building fiber optics to all houses. In Europe governments are building a network of fast trains. In China government is building pretty much everything.
Are the Americans sure that they are backing the right politics?
Yep. I surely had high hopes on Obama. What's worrying me is how much opposition he has found and how much power he lost.
It was enough to talk about socialism and having a bigger governmental role, and people (on both parties) seemed to start distancing themselves from Obama.
If he doesn't succeed, I am not sure there will really be another chance in time to make a real difference (i.e. to keep USA as no.1... I have no doubt USA will continue being a rich country for a long time to come).
It is no more true that Obama is unpopular because people call him a "socialist" than it was true that Bush was unpopular because people called him a "fascist." You are confusing cause and effect.
I think foreign observers think that the American public is atavistically motivated by invocations of "socialism" because they view the US through the lens of their own politics. In reality, Obama is unpopular because the economy is in the shitter and unemployment is running near 10%. It doesn't matter whether that's fair or not.
My impression of cause and effect was that it started pretty much from the beginning, when Obama tried to push for economic stimulus first and universal health service later.
And now the teaparty are a force to be reckoned... and their whole point is to have a small government, and they don't want stimuli or similar (as well as no health service).
But please tell me more. American politics is quite interesting. :)
Why are SS and Medicare the biggest drivers? Didn't Clinton leave you with a surplus? And didn't he have to pay for SS and Medicare too? What's changed since then and now?
Anyway I am not arguing that big government are always the best. I am arguing that big government sometimes are. Or to put it another way I am arguing that SMALL government isn't always the best.
I'm confused, what does Clinton have to do with these programs? Worth noting that Bush Jr. signed a prescription drug bill that will cost $550 billion between 2006 and 2015 [1].
SS and Medicare are programs intended for older people which are funded by current workers. As time has passed and SS/Medicare eligibility has increased, more SS/Medicare taxes from current workers are paying for fewer people's benefits. This problem has worsened as baby boomers have reached retirement age--we've never seen SS/Medicare enrollment like this before.
Point being: my generation is paying a large chunk of taxes that it will probably never benefit from, as SS/Medicare will likely occupy too large a portion of the budget and would thus need to be scaled back (or closed down).
That suggests his successors weren't very good at finishing the job he started. It's only natural for governments to become more and more corrupt as decades pass. When someone like that appears on the scene and reboots the system, their work should be acknowledged and refined before the corruption kicks in again.
This isn't a matter of corruption--it's an issue of public choice (or public economics, whichever you prefer).
What politician would scale back SS/Medicare when retirees are one of the largest voting blocks in America?
Governments also don't necessarily experience more corruption over time. Just look at overthrown dictatorships. If you said democratic governments, like the US, I'd agree with you, since the accumulation of wealth shifts power around.
Well, the US is richer (PPP adjusted) than nearly every single one one of those countries (the sole exceptions being Norway and a couple of city states). In the one case where I've seen good data (US vs Sweden), the disparity gets even bigger if you compare Swedes to Swedish Americans.
Nobody is arguing that American companies can't compete, or that America isn't a great country. But the UK was an innovator once, and so was Italy before it.
That said you could very well end up with a future with very powerful and very competitive american companies... in a country with no middle-class and a strong divide between managers and those with money, and the labour force with little privileges.
Edit: I think USA got to where it is for a certain pragmatism that it seems to have lost. Now ideologies (free market, socialism, God, etc...) seem to be all that matter, and society is suffering for it. GDP is not a good indicator of the society's wellbeing and even less is current GDP for tomorrow's society's. At the end of the day the richest man in the world is Mexican, but Mexico is hardly a first world country.
I agree the problems you're referring to are real, but it seems to me Americans are more aware of them than you might think (BTW, I live in NYC but I'm not American).
They elected a president who's decidedly a pragmatist (I think McCain would have been one as well, though not his VP candidate..), and one of the most talked about issues here is the disappearing middle class. My view is that they ultimately do have a good system in place to discuss and hopefully improve on these problems.
Their core strength is flexibility. I still remember talk of Japan overtaking the US in the 80s, and Japanese companies are still strong in the markets they dominated at the time - but the Americans have moved on to lead in software/Internet industries. That's not coincidence, in my opinion.
> In July, a group of farmers removed the safeties from their shotgun triggers and surrounded a trailer in which a suspected house robber was hiding while they waited for the county’s last, lone squad car to arrive.
Hah, that's certainly something you wouldn't see in Canada (and I say this as a Canadian). Go Team America?! :)
I never could understand the logic of Americans who demand public services like police, fire, hospitals, roads, traffic lights, internet, water, sewage, parks, etc., and then turn right around and vote leaders out of office the second they whisper the words "raise" and "taxes" in the same sentence. Where does everyone think the money will come from?
Of course it's always more complicated than that, but this country strikes me as one that demands to have its cake and eat it too. It's too bad that it could take a slide into "third world" status (whatever that might be) before the masses realize how entitled and illogical they often seem to act.
I live in an European country and I think especially since the eighties Europe have much more changed than America did. We had a very deep transformations of our society towards the American life style and we copied the American way to put 'market' everywhere. Good ol' European counter-capitalistic socialism is nearly dead.
So I think the main thing that has changed for America is the number and the power of it competitors.
The US reminds me of a company that's suffered from stagnant revenue and decreasing profit margins for years, yet whose profits continue to grow through a combination of cost cutting and underinvestment in research and infrastructure. Meanwhile, the shareholders demand an ever-growing dividend...
In relative terms, the US has been in decline since the early 1960s. It benefitted from an unprecedented situation after WWII when all it's competitors were reduced to bankruptcy and physical ruin, not to mention political turmoil and the yoke of Communism. America had a growing population and the best infrastructure in the world. Americans became accustomed to effortless growth and weak competition, while the rest of the world learned to compete with tooth and claw while rebuilding their economies and infrastructure from scratch.
The current recession is a shock, but it's hardly the cause of America's decline. The decline was inevitable--as other countries become more competitive, the US becomes less so by definition. What's almost unique about America is the refusal to face that fact and address it. I honestly don't think that American society as a whole is capable of acknowledging that other countries can be superior in certain ways. At best, there's always a nebulous suspicion that foreign systems must possess some fatal flaw that will ultimately tell against them. Hence, there's this obsession about which jobs Americans are naturally advantaged at. There aren't any. Those are exactly the jobs non-Americans covet and are working to acquire.
Those of us outside the US are privileged in a sense, because we can never delude ourselves that success is possible without determined competition among equals. If nothing else, we're always in competition with the US--whether you know it or not.
40 comments
[ 3.4 ms ] story [ 105 ms ] threadIt is possible that the US is finished forever, but there is nothing in this article that convinces me.
Laying off police officers.. Good idea - They probably don't provide enough to be worth their pay over a certain point.
Maybe being forced to fill less pot holes will encourage us to come up with cheaper ways to do the job.
Perhaps if we cut back on teachers and educational spending we'll be able to do more with less... Money isn't the problem in education... if it was then we wouldn't have this data mashup: http://www.datamasher.org/mash-ups/spent-student-and-sat-sco... - It looks like spending more money per student isn't working.
Thinking that cutting back = massive failure is why most American's have massive amounts of personal debt that they will never get out of.
The reason why USA has no money is because you keep cutting the taxes for the richest people and going to wars that you've got no money for... and when finally the shit hit the fan you had to throw money after bankers and companies.
This process usually takes two phases: phase 1, during a boom: "We've got plenty of money, let's cut some taxes" phase 2, during the crisis: "We've got no money left, let's cut some services"
When we have some states and local governments getting tot he point where they must shut down nearly all services the problem isn't money. The problem is they didn't reduce expenditures sooner. The problem is they run fiscally irresponsibly budgets with massive debts.
Bailing out banks and companies - A terrible idea. Cutting taxes - I'm pretty much in favor of this for everyone - especially since those top 5% of earners end up paying 70+ % of the total income tax. But that's not the point here. The point is that we HAVE to figure out how to spend less. Spending the same amount of money when you make half isn't an acceptable strategy.
If during a boom you've cut taxes, why now that money is needed shouldn't you raise them again? Didn't Clinton leave office with a surplus? So if at that time you had a balanced budget, and now you can't even pay to fill your pot holes, and one of the reason is because of your massive cuts in taxes... wouldn't that suggest that to fix you books you need to raise them again?
No.
http://research.stlouisfed.org/fred2/graph/?chart_type=line&...
which is based on this: http://www.cbo.gov/budget/data/historical.pdf
as confirmed by factcheck.org: http://www.factcheck.org/askfactcheck/during_the_clinton_adm...
Actually this was (from the site you linked) show positive saving too (though I am not sure if it's relevant): http://research.stlouisfed.org/fred2/graph/?chart_type=line&...
Could it be because you sent data for gross change in debt? Or maybe because those numbers include the extra interest rate paid by the debt (i.e. the government started saving, but the debt was so huge that the extra interests from the previous year compensated for it?).
Dunno, I am just trying to put the two pictures together.
Obviously one can debate the exact definitions of what should constitute debt, but I'm using the following definition: promises to pay out money in the future which will be politically very difficult to renege on.
If you want to look at debt held by the public, Bush had surpluses too (though not as large).
http://research.stlouisfed.org/fred2/graph/?chart_type=line&...
The mood of this thread suggests I will be modded down but: 1) How much is the real tax on the top 5%? 2) How much of the national income do the top 5% of earners make? 3) How much of the income do they make because of the unique situation they find themselves in the USA?
A wiki-search revealed the following: In 2007, the top 5% of income earners paid over half of the federal income tax revenue.[36] However, as of 2004, the top 5% hold 59.2% of wealth. The top 1% of income earners paid 25% of the total income tax revenue.[37] Again however, the top 1% hold 23.5% of wealth. Forty seven percent of Americans pay no federal income tax.
(The 47% thing includes children / housewives / househusbands / etc.., hence it holds no interest to me as a figure. That said, you're welcome to try to change my mind).
The rich are paying a fair share, especially considering how difficult it is to accomplish the same task outside the US.
Take Flint, for example. Instead of cutting 23 of 88 firefighters, why not keep them all but reduce their compensation by 26%? It's Flint Michigan, they don't exactly have other employment options. Besides, it's unlikely Flint even needs that many firefighters - their population dropped by about 10% since 2000.
The same could be done for teachers - NYC pays entry level teachers roughly the same salary as entry level engineers (total comp per month worked, not per calendar year). Rather than laying them off, why not cut their comp down to liberal arts grad entry level?
[edit: replaced word "pay" in second paragraph with "compensation". Thanks chrisbolt.]
It isn't the recession itself destroying these budgets. It's the recession causing an honest assessment of recent and future growth and calling into question the feasibility of old debts, old promises, ways of life taken for granted, assumptions that drive the very basis of our society. (growth=success, bigger=better)
Granted, I live in Michigan, where we've been given a free preview of waking up to the cold realities of sprawl economics juxtaposed with a debt load based on eternal-growth expectations.
So I can understand why most people will experience a few years of denial, cherry-picking 'evidence' from an ever-shrinking number of still-growing cities to prop up their pre-existing world view. I did the same thing. I get it.
But when the evidence is finally at your door-step, utterly unavoidable, you'll realize it isn't a left vs right issue, or a government vs business issue. But an American lifestyle vs reality issue.
I was a little bit surprised to hear such a strong opinion. It is clear the federal reserves do have now better tools to avoid private institution collapse which could have severe impact on the economy. On a bigger scale, like states it seems not all that clear what regulation mechanism are available. But reading repeatedly the warning signs from several known analysts about the debt issue and upcoming correction I am wondering if such collapse scenarios will take place.
As a retort, here's Hans Rosling on narrowing GDP/capita and the first world's role in this 'new economy':
http://www.ted.com/talks/view/id/912
Secondly, stop giving MBAs a bad name.
Once the USA wasn't like this. Once it had a big government who looked after its citizens and did what no private investor could or would do.
In Australia the government is building fiber optics to all houses. In Europe governments are building a network of fast trains. In China government is building pretty much everything.
Are the Americans sure that they are backing the right politics?
The program has surely been billed as socialist by one of America's 300 million plus citizens, but it has not as of yet been scrapped.
I do not know whether we are backing the right politics.
It was enough to talk about socialism and having a bigger governmental role, and people (on both parties) seemed to start distancing themselves from Obama.
If he doesn't succeed, I am not sure there will really be another chance in time to make a real difference (i.e. to keep USA as no.1... I have no doubt USA will continue being a rich country for a long time to come).
I think foreign observers think that the American public is atavistically motivated by invocations of "socialism" because they view the US through the lens of their own politics. In reality, Obama is unpopular because the economy is in the shitter and unemployment is running near 10%. It doesn't matter whether that's fair or not.
My impression of cause and effect was that it started pretty much from the beginning, when Obama tried to push for economic stimulus first and universal health service later.
And now the teaparty are a force to be reckoned... and their whole point is to have a small government, and they don't want stimuli or similar (as well as no health service).
But please tell me more. American politics is quite interesting. :)
When?
He also stuck us with Social Security and Medicare, which are the main drivers behind the intergenerational debt we're facing now.
So, I mean, big government isn't always the best.
Anyway I am not arguing that big government are always the best. I am arguing that big government sometimes are. Or to put it another way I am arguing that SMALL government isn't always the best.
SS and Medicare are programs intended for older people which are funded by current workers. As time has passed and SS/Medicare eligibility has increased, more SS/Medicare taxes from current workers are paying for fewer people's benefits. This problem has worsened as baby boomers have reached retirement age--we've never seen SS/Medicare enrollment like this before.
Point being: my generation is paying a large chunk of taxes that it will probably never benefit from, as SS/Medicare will likely occupy too large a portion of the budget and would thus need to be scaled back (or closed down).
[1] http://www.cms.gov/ReportsTrustFunds/downloads/tr2009.pdf
What politician would scale back SS/Medicare when retirees are one of the largest voting blocks in America?
Governments also don't necessarily experience more corruption over time. Just look at overthrown dictatorships. If you said democratic governments, like the US, I'd agree with you, since the accumulation of wealth shifts power around.
http://super-economy.blogspot.com/2010/03/super-economy-in-o...
So maybe the US is doing something right after all.
By that meter then Nokia is doing things right too.
That said you could very well end up with a future with very powerful and very competitive american companies... in a country with no middle-class and a strong divide between managers and those with money, and the labour force with little privileges.
Edit: I think USA got to where it is for a certain pragmatism that it seems to have lost. Now ideologies (free market, socialism, God, etc...) seem to be all that matter, and society is suffering for it. GDP is not a good indicator of the society's wellbeing and even less is current GDP for tomorrow's society's. At the end of the day the richest man in the world is Mexican, but Mexico is hardly a first world country.
They elected a president who's decidedly a pragmatist (I think McCain would have been one as well, though not his VP candidate..), and one of the most talked about issues here is the disappearing middle class. My view is that they ultimately do have a good system in place to discuss and hopefully improve on these problems.
Their core strength is flexibility. I still remember talk of Japan overtaking the US in the 80s, and Japanese companies are still strong in the markets they dominated at the time - but the Americans have moved on to lead in software/Internet industries. That's not coincidence, in my opinion.
Hah, that's certainly something you wouldn't see in Canada (and I say this as a Canadian). Go Team America?! :)
Of course it's always more complicated than that, but this country strikes me as one that demands to have its cake and eat it too. It's too bad that it could take a slide into "third world" status (whatever that might be) before the masses realize how entitled and illogical they often seem to act.
In relative terms, the US has been in decline since the early 1960s. It benefitted from an unprecedented situation after WWII when all it's competitors were reduced to bankruptcy and physical ruin, not to mention political turmoil and the yoke of Communism. America had a growing population and the best infrastructure in the world. Americans became accustomed to effortless growth and weak competition, while the rest of the world learned to compete with tooth and claw while rebuilding their economies and infrastructure from scratch.
The current recession is a shock, but it's hardly the cause of America's decline. The decline was inevitable--as other countries become more competitive, the US becomes less so by definition. What's almost unique about America is the refusal to face that fact and address it. I honestly don't think that American society as a whole is capable of acknowledging that other countries can be superior in certain ways. At best, there's always a nebulous suspicion that foreign systems must possess some fatal flaw that will ultimately tell against them. Hence, there's this obsession about which jobs Americans are naturally advantaged at. There aren't any. Those are exactly the jobs non-Americans covet and are working to acquire.
Those of us outside the US are privileged in a sense, because we can never delude ourselves that success is possible without determined competition among equals. If nothing else, we're always in competition with the US--whether you know it or not.