Big Picture Thinking

[Chaerophon]

I believe that you're 100% correct, and if I remember correctly, they are stationed in Qatar.

[Vandiablo]

there is a twist for your knickers

HEY! There's no good reason here for you to use the K-word!

-V

(It's too late in the evening for my brain to keep up...)

[tufchic]

Hi,

i don't think we would even be entertaining the idea of war in Iraq if the number one export was say oranges.

That notion has been destroyed so many times, it's past the glue stage.

i never said that oil was the entire motivation but it is a motivation. however, you believe what you want. just be aware of the propaganda machine.

_________________________________________

i have heard many folks around message boards and in the media woefully ignorant of their middle east history. Great Britain found themselves colonial conqueror of Iraq after the fall of the Ottoman Empire and broke their many promises for autonomy for you guessed, the oil. they even decided to throw some chemicals on an uprising in 1921 for again, the oil.

that oil temptation is hanging out there. GWB and Cheney certainly have oil connections and while the facts are not entirely in, it's there hanging. (i base my suspicion on the fact that the GWB admin. tends to favor their rich friends.)

the other alleged motivations (democracy, weapons of mass destruction, supporting terrorists, the evil actions of Saddam) are thin at best without solid proof. if there is an Iraqi 9-11 terrorists, please say his/her name. i happened to look at the FBI's most wanted for 9-11 terrorist activities and not one Iraqi citizen. the financing of the 9-11 operation was also mostly from Bin Laden because, well, he can. i think i've already touched on the bring democracy issue. as for the evil Saddam, I'll agree he be a bad dude. but i don't agree that we are the ones that should bring him down short of him invading another country. if so, then we have a long road to haul getting rid of all the evil dictators by applying that logic. we might even have to get rid of those dictators that are supposedly our friends.

many times, me thinks that GWB is going after Iraq because he can't find Bin Laden and thus this guilt by association is played out. they are both Arabs right? so why not? this reasoning is working for most of the country. so you see, i'm not entirely stuck on the oil motivation.

but the notion of the oil motivation is not past the "glue stage" for me. there remains outstanding issues re the many promises made. unless there are actual free elections in Iraq and we live with who the Iraqis choose as their leader, re-build the place, let them reap their own oil profits, then I'll believe that oil was not the strong motivator. in the meantime, i remain a skeptic.

i respectfully submit this post in the fairness of open debate and intend no personal hurt, harm or criticism. everyone is certainly entitled to believe what they wish on this subject as am i.

[--Pete]

Hi,

I am not totally ignorant of Mideast history. The Mideast, being at the junction of three continents, has been a region fought over throughout recorded history. And from all indications was that way in pre-history. The English supported the Arabs against the Turks in WW I for two primary reasons, to protect their interest in the Suez canal and to force the Turks to fight on a second front in order to reduce their effectiveness. Oil was of some interest, but since the British navy was still mostly coal fired and the other branches were not highly mobilized, the importance of oil was not that great at that time. However, England did have plans to convert to an oil powered Navy, and a source of oil close to the "center" of the Empire did become more important to the post WW I British policy. Fine, that shows the beginning of the importance of *Mideast* oil. However, that does not translate to the need for US intervention in that region. Iraq is not the only oil producing nation, and a flood of Iraqi oil would probably be offset by an almost complete shut down by the rest of OPEC. A much larger action would need to be taken to make enough of a difference to justify (and I use that in economic terms) the cost of the involvement. Further, the situation in regards to the need for oil is not substantively different now than it was in '91. With a largely US coalition in power and control of Kuwait and a large portion of Iraq, had the US any intention (I will not say "desire" for many in the USA - and elsewhere - desire to be the controllers of Mideast oil) of a military take over, that would have been the time to do so, not now with a large part of the world against us.

the other alleged motivations (democracy, weapons of mass destruction, supporting terrorists, the evil actions of Saddam) are thin at best without solid proof.

I have made my opinions on many of those clear in the past:

- democracy -- I do not believe that democracy can be imposed on a population. As a reason for invading Iraq, this is pure nonsense. So, I agree with you.

- weapons of mass destruction -- this is a serious threat. And is a legitimate international concern. Combined with the provisions of the peace accord of 1991, the actions of the Iraqi government since then, the findings of the inspectors (this week's Science has a good summary on their work and findings up until the breakout of war), the reports of the intelligence communities, and the personal instability and history of Saddam this is a justification for the war. And, IMO, the only real justification. The need for rapid action is a combination of the weather (the need to avoid summer) and the fact that next year is an election year. I do not defend the justifications, but they are the realities of the situation.

- supporting terrorists -- while Iraq might support terrorists (or may have in the past), those putative terrorist would not have much to do with OBL who is diametrically opposed to secular rulers like Saddam. Terrorism is a red herring that the administration has used to get many of its policies implemented. Eventually, in a just world, this will turn around and bite them in the ass. But, "there ain't no justice".

- the evil actions of Saddam -- except as this relates to his use of WMD and his propensity to do so again, this is an internal affair. In my opinion, internal affairs is *never* a sufficient reason for external military interference.

So, for the most part, I agree with you.

many times, me thinks that GWB is going after Iraq because he can't find Bin Laden and thus this guilt by association is played out. they are both Arabs right? so why not? this reasoning is working for most of the country. so you see, i'm not entirely stuck on the oil motivation.

Yes. As I've posted before, this administration's foolish and failed attempts to do anything substantive about terrorism is an embarrassment to them. A "successful" war in Iraq is one way they think they can "regain face". Which is why I have felt all along (EDIT, actually from Powell's address to the UN. I had opposed the war prior to that) that the Iraq war is the right thing but being done for the wrong reasons. And the reasons are transparent, I think, to many of the world's leaders.

--Pete

[Jester]

"10. Israel. With Iraq less bellicose (that assumes the risk up top pays off) then US can, and I would hope they would, use our action as leverage to strong arm them into moving forward with the Palestinians to find an acceptable solution to both parties. That pays dividends with all Arab states."

If they could somehow manage this, to use the Iraq war to pull that situation out of the 100 year crapper, this whole mess would be eminently worth it.

That one issue has almost singlehandedly torn the rift between the Arab world and the west from "a little rip" to "a gaping void of horrifying death". What do they say in the Middle East when they want to voice their discontent with US policy? Oh, yeah. Death to Israel.

To me, this is the biggie. That conflict is ample demonstration of why magnanimity and good faith matter far more than either war or peace. And if (somehow) either of those things come to Israel/Palestine out of this war, the Arabs might actually seriously consider the US' case about how wonderful life is going to be post-war.

Jester

[Chaerophon]

I think that the "it's better to let the debt go" arguments are based on an optimistically flawed model generated by people who *think* they are clever.

Just thought I'd chime in with the logistical basis of the argument for not paying down the debt load. Currently, the Canadian national debt stands at approximately 600 Billion dollars. With the government committed to "zero inflation" the inflation rate is actually holding stable somewhere around the 2% area (due in part to the inevitiabilities of unemployment due to frictional unemployment, unions, minimum wage laws and incentive wages). Now, using the 'rule of 70', we can see that in a matter of 35 years (70 / 2% inflation) the debt load will fall to a relative value of one half of that of the total, e.g. 300 Billion dollars. Under the same plan, and assuming that the Canadian government is using a realistic total of approximately 2 Billion dollars, per year, of their surplus to pay down the debt, in thirty-five years, we will arrive at a nominal debt of just 530 Billion dollars, but a real debt load of only 265 Billion. This would seem to be a sizable amount if it weren't for the fact that we currently pay somewhere in the neighbourhood of 45 Billion real dollars per year in interest on the national debt, a value that is and, in fact, will remain greater in real value than is the difference in the debt after 35 years of debt reduction. Granted, the interest payments will fall marginally with the gradual reduction of the debt; however, I think that it can be safely argued that in the long run, the capital growth and the aversion of deficit spending on necessary social support can better suplement the economy's financial interests due to the multiplicatory effects of the capitalist system than would the marginal (in terms of total reduction) reduction in the expense of interest rate payments.

[--Pete]

Hi,

Let me recap your premises:

Canadian debt 600 billion
Interest on debt 7.5% per year
Inflation 2% per year
Affordable principle reduction 2 billion per year

Did I get those figures right? If so, I did a few simple calculations and what I came up with were the following four scenarios:

EDIT, added a few points to clarify the scenarios.

1) No debt pay down, pay 45 billion a year in interest: At the end of 35 years, the debt still stands at 600 billion, but it is worth less because of inflation. Considering all the payments and the balance, correct to 2003 dollars the cost for this scenario is 1414 billion. Your expenditures have bought you nothing other than what 2 billion a year spent on programs could produce in the economy. Given that the cost of the debt is 45 billion a year, I would guess that the budget is of the order of 200 billion a year, so a one percent difference probably doesn't do much.

2) Pay debt down at the rate of 2 billion over interest (47 billion total first year, less each following year as the principle decreases): At the end of 35 years, the debt stands at 530 billion. The adjusted cost of the principle and payments is 1373 billion. Not that much better, but at least some progress is being made. And a bonus is that after year 12, the cost for paying down the debt (in uncorrected dollars) is less than the present cost of servicing the debt.

3) Pay the debt down at a constant expenditure of 47 billion per year (total of interest and pay down): After all, as time goes by, that 47 billion gets cheaper. At the end of the 35 years, the debt stands at 291 billion. The total expenditure in 2003 dollars is 1311 billion and that has more than halved your debt.

4) Pay the debt down by an annual amount of 47 billion adjusted for inflation (again, total of interest and pay down): After all, the income for the government, the GNP, the budget, etc. all are adjusted. This would keep the amount spent on the debt roughly a constant fraction of the budget. Now this one is a real kicker. It doesn't run out to 35 years, because the debt is totally retired in 23! And the total cost is 1059 billion in 2003 dollars.

So, explain to me again how keeping a debt puts a nation ahead? Saving 1% of its budget to do what? Stimulate the economy? That's like stimulating an elephant with a gnat.

--Pete

PS, If you want to play around with the numbers, e-mail me and I'll send you a simple XL spreadsheet.

[Chaerophon]

3) Pay the debt down at a constant expenditure of 47 billion per year: After all, as time goes by, that 47 billion gets cheaper. At the end of the 35 years, the debt stands at 291 billion. The total expenditure in 2003 dollars is 1311 billion and that has more than halved your debt.

4) Pay the debt down by an annual amount of 47 billion adjusted for inflation: After all, the income for the government, the GNP, the budget, etc. all are adjusted. This would keep the amount spent on the debt roughly a constant fraction of the budget. Now this one is a real kicker. It doesn't run out to 35 years, because the debt is totally retired in 23! And the total cost is 1059 billion in 2003 dollars.

Of course, you're aware that in order for your bottom two program to be enacted, we would require some monstrous and consistent surpluses! :P

However, I must agree: yes, if this was feasible in terms of the Canadian budget, I'm sure that it would be done to some comparable degree. Unfortunately, they've had to cut expenditures to social programs such as Medicare to a startling degree already (although they've reinvested a fair portion of recent surpluses back into the program). In a recent survey, a majority of Canadians actually identified Medicare (the Canadian health care system), of all things, as the primary "symbol" of what it means to be Canadian! I suppose that this can serve as evidence as to some of the marked ideological differences that exist between our two countries along with all of the similarities. In order to enact the sort of policy that you're suggesting (given the fact that 47 billion dollars (corrected or not) when added to the 45 billion dollars in real interest payments is a BIG expense for our smaller economy) we would have to give up an awful lot of benefits that I'm quite certain the majority of Canadians are not willing to part with. To my mind, of the options that you suggest, that leaves us with numbers one and two. The question is, is the marginal improvement in our financial lot after a period of 35 years really worth the expenditure? I don't really think so given the protestations of Canadians at the current reduction in services. While Albertans and, to a lesser extent, British Columbians may be willing to privatize some public health facilities, they are STILL crying out to the government for more money and it seems that the majority of the public is strongly opposed to the en masse privatization of Canada for precisely the reason mentioned in my above post - with privatization, all of a sudden our hydro, our telephones, and our health care will eventually come to be owned primarily by American interests.

I suppose that this, then, highlights the differences in our respective economies and robs some credence from my argument regarding American economics. (Sorry, I was born and raised here and am bound to have a different perspective on some of these things :) ). I am unaware as to whether the American government can afford to make the sort of drastic payments that you suggest in an effort to reduce the debt and I have no idea as to what sort of public outcry would be raised in such an event. However, whether these factors are in line with my theory or not, it still seems silly to me for the Bush administration, facing such an economic controversy, to lower taxes, from both an economic and political perspective. One, interest rate adjustments and the institution of monetary policy would seem likely to have more of an effect on the economy's GDP, etc. than will tax cuts. Two, from a political standpoint, using tax cuts to stimulate an economy is all fine and dandy - until the time comes that you need the money to be derived therefrom and you have to reinstate them. As we can see, America faces some important economic questions in the coming years - particularly if the military spending continues to increase, and somewhere along the line, debts must be paid while to a certain degree the social concerns of the country will continue to need to be met.

BTW, you've got mail :)

[--Pete]

Hi,

Of course, you're aware that in order for your bottom two program to be enacted, we would require some monstrous and consistent surpluses!

No, the third simply requires that the annual expenditure on the debt be 47 billion. That includes both the interest and the pay down. Since the principle is decreasing, the amount needed to cover the interest would also be decreasing. That means that the amount put to the principle is increasing.

The fourth is like the third, except that the amount paid per year is 47 billion adjusted for inflation. So"(given the fact that 47 billion dollars (corrected or not) when added to the 45 billion dollars in real interest payments is a BIG expense for our smaller economy)" is totally off the mark.

Since you missed the point on items 3 and 4, you missed the conclusions as well. By spending 4% more on the debt than you presently do (47 billion vs 45 billion), you could retire it in 23 years. If the debt is 25% of your economy (and I have no idea, but if it is less, my argument works even better) then the payback would make it 26% of your economy. Not that much bigger a bite.

EDIT: Sent you that spreadsheet.

--Pete

[Kevin]

Paying down the debt isn't that static.

My econ is rustier than it should be, and I don't have my sources with me but here are a few things to keep in mind. I will try to find some of the stuff this is based on and clarify some points, especially what happened when the Clinton admin actually started to reduce the debt instead of just maintaining it by not paying out the interest on it.

But this is a basic summary from one of my econ professors, who provided must of the source on it, but not all.

Most of the US debt is to itself, I can't speak on other countries, but this changes things. How do we owe the money to ourselves, well through bonds. These treasury bonds are traded on the market, albiet in a slightly different fashion. So, the US government starts to buy back these bonds (the only way to get rid of the debt to ourselves) and what happens? Well, pretty much whatever happens when a lot of stocks and bonds get bought on the market, they price starts to go up. What does that do? It starts to make the debt even larger. This actually happened when we were running such nice surpluses (some of which was simply caused by the markets being so happy joy joy do to the tech bubble that was bound to burst) and they started to actually pay the debt down.

I don't have the model for how to handle this, but I will try to dig it up. You can pay the debt down, but because of the nature of what the debt is (again at least in the US) the more you pay it down, the more it costs to pay it down, and it can actually be increased by paying it down.

Just something to consider. This is also a factor as to why economist say that it isn't such a bad thing to have a debt, at least of the nature of the US debt. In the case of the US with such strong world currency it becomes even less of an issue, but I am even fuzzier on the details and would need to review stuff. I finished my econ minor 2 years ago, and haven't used most of it since then so a lot of the details left me, though I did keep some of the big picture.

Hopefully I can find some of the details on this and get this post edited to include them.

[--Pete]

Hi,

Editing a post to correct minor errors or to add a trivial point is one thing. Editing it to actually put in the information for your argument is something else. Since your post will continue to show as read, how will we know when you've edited it? Much better to post a new post when you add that material.

As to the whole paying down the debt debate, I know that there are many factors to consider, including intangibles like how the market is behaving. Which is why economic models are both complex and notoriously incorrect.

The "we own a lot of debt to ourselves" argument is flawed. It is flawed because no matter how one looks at it, the interest is still paid. That interest amounts to a tax cut to the holders of those bonds, but it still means a reduction in revenue or increase in expenses (take your pick). It is true that if the government tried to pay back that portion of the debt in a short period it could increase the value of those bonds. However, that portion of the debt could be reduced by simply not issuing as many bonds as are retired. That would not have much of an impact on the market if the plan were spread over twenty to twenty five years.

And, even if what you say about the bond debt is valid, that still does not address the remainder of the debt. That remainder is still a considerable amount and servicing it (Why can't politicians just say "paying the interest" like the rest of us do?) represents a fair chunk of the annual budget.

The problem with a large debt (over 25% of the budget is simply to service that debt) supported by a strong currency is that the whole is a house of cards. If the perception of the American economy is lowered, or if enough nations take actions against the USA in retaliation for trade or other grievances (the Iraqi war comes to mind) then the strength of that currency can drop. That reduces the support for the debt, making the economy look even weaker. That can go into a spiral into recession and even depression. In either case, part of the recovery process would be increased government spending leading to a larger debt. Part of that would be offset by the accompanying inflation, but the overall effect would still be a worsening of the situation for all, government and individuals alike.

Again, the situation is complex. Much more complex than the simple models I used to refute an argument also based on simple models.

BTW, looking forward to what your textbooks have to say ;)

--Pete

[Chaerophon]

Ah, I see what exactly you're getting at. My apologies! I'll have to have a look at that spreadsheet.

I think that a number of my points regarding the costs of such a program remain valid to a certain degree as at least a portion of the money may be better spent from a social/economic perspective in (e.g.) tax cuts (once the funds are available ;) ), and social programs. However, the arguments you mention definitely have merit and warrant some attention.

A very interesting thread this has turned out to be :)

[Growler]

You make a good point, except that you decided to ignore the point I was making. :D A politically free readership/viewership would change the bias point of pan-Arab media such as Al-Jazeera. I don't know what the bias would change toward, but it would change to accomodate the market.

[kandrathe]

Yeah, I agree they are controversial and not so simple. My preference for zero business tax is due to what you alluded, that businesses are just moving to avoid the taxes, or influencing government to create loopholes.

Consumption taxes do burden the consumer, but businesses would be the largest consumers of goods. I like the idea of building efficiency and conservatism into the economy. I am tired of a world that produces "crap" consumables and encourages people to mortgage their futures for temporal luxury today. I see a consumption tax as a way to encourage environmentalism, and savings, while not punishing a person for increasing their income. One way to eliminate the problem of the "poor" being burdened would be to have some sort of exemption or rebate based on income.

Another problem is the establishment and reinforcement of a wealth based aristocracy. Those with higher income would have more disposable income to invest, which in turn would raise their income.

Maybe here is where the "death tax" comes into play. To me, it makes some sense to allow property in the form of a family business or a family farm to pass from one generation to the next, but when the property is cash, or public securities, then I think it should be subject to the highest of taxes. I'm much more Jeffersonian, in that I think each American should be allowed to be self made. Then again, a fool and his money are soon parted, so many foolish sons of the rich would soon find themselves poor anyway. Currently, the American wealth based aristocracy has found a way to maintain their privileged position, while mostly preventing any emergence of a noveau riche. Another way to look at that "problem" would be, "oh well". It could be that the more people who are wealthy would tend to create more opportunity and wealth for the middle, and the poor ultimately raising the standard for all. It is conceivable (but not likely) to have a society without the poor. But the fewer the better, and as a whole, a civilized society will need to accomodate some non-productive persons who are sustained by the wealth of the masses.

[Quark]

Okay, I'll admit ignorance on this topic completely because I'm sick of reading most of this stuff. However, I saw your topic title, and just have to laugh:

Who was Germany's biggest trade partner right before World War II? That's right, France.

[kandrathe]

Pete has beat me to the debt debate. Check out this link www.yourcongress.com - Top 10 things your taxes pay for. Seems like just over $200 billion per year to service our national debt. I would just add one thought; Whatever course we embark upon to repay the debt would eventually become normalized into the economy.

I wanted to address your second point about the market's fall. If you are suggesting that the ficticious high tech economy only succeeded in draining market capital from better ventures, then I agree. It had some dramatic effects within the high tech sector of the economy. But, IMHO, the real effect of the high tech bubble bursting was the loss of confidence by American businesses in the entire economy itself. Without confidence, business managers tend to retrench, and the retrenching results in recession. Add in 9/11 and a devastated travel and airlines industry, Enron, Anderson and similiar ilk, along with other uncertainties and you get to where we are today. For most of the latter half of the 90's, businesses were swept along with the leadership, promises and innovations suggested by the tech economy, but when it evaporated, all that was left was the odor of deception. I view the Enron syndrome a secondary effect of the economic downturn, as they would probably not have gotten caught except for their syphoning formula going awry once the trend lines went negative.

As for lowering taxes... It is one thing that the government can do, but probably not the best. I think the best thing that Washington could do would be to create a stable business climate that would encourage businesses to invest and spend their money again. War isn't a very good way to do that, but perhaps the peace that follows will. As long as we do not incur the wrath of 1000 Osama Bin Laden's as has been forcasted.

[kandrathe]

This is some very good thinking... All seem probable motivators from a geo-political POV. I would add that with Afghanistan and Iraq US friendly (or at least not hostile) gives the US more political options with almost every other nation in the middle east and Russia. I thought up a bunch of additional cool stuff, but then I found most of it better described by this interesting report from January 2002 which has predicted the last year fairly accurately;The Geopolitical Implications of the War Against Terrorism

[Chaerophon]

Well, okay, if that's the way you want to look at it... the contents of the post pretty much explain what was meant by the title.

Of course, the argument could quite easily be made that thanks to the Treaty of Versailles, the Germans were in no real position to extensively trade with anyone - they were broke. Were they not broke there is a pretty good chance that the Nazis would never have come to power, and that WWII may not have happened at all.

[Growler]

I am tired of a world that produces "crap" consumables and encourages people to mortgage their futures for temporal luxury today. I see a consumption tax as a way to encourage environmentalism, and savings, while not punishing a person for increasing their income.

What is your opinion on the 'flat tax'?

I personally do not want a tax system that makes those kinds of value judgements on my behalf. I like the tax system we have now (the idea of progressive income tax, not the particular rates) because it puts the burden of supporting the system on those who most benefit from that system and can afford to pay for it from their current cash flow. America's top 50% of taxpayers account for 95% of all income taxes paid. The IRS: Individual Income Tax Returns Each Tax Year 1986 - 2000 (Excel format)

Currently, the American wealth based aristocracy has found a way to maintain their privileged position, while mostly preventing any emergence of a noveau riche.

I challenge this statment. How is there such a thing as an aristocracy in America? What are their priviledges? In this american economy with its history of gold rushes, depressions, booms and busts, how could you possibly say there is no noveau riche? For example the computer industry is (still) filled with the noveau riche.

Urban Institute article on income mobility in America

[Occhidiangela]

Currently, the American wealth based aristocracy has found a way to maintain their privileged position, while mostly preventing any emergence of a noveau riche.

I challenge this statment.

I only challenge the second half. :) I am pretty certain that the rich do what they can to sustain that status (who wouldn't, being poor sucks) but charges that there is an active agenda to prevent a noveau rich are easily poo poohed by facts.

Little snippets, for example, such as "over half of American 'millionaires' are first generation wealthy."

Now, I suspect that some of that has to do with the last 20 years slowly but surely growing economy. If we have 10 years of less fertile ground, those figures may change. I for one am still irritated at how much lip service and how little substance is going into public school improvements on a national level. As I see it, investing in our future is all about raising the bar and the quality of our education, and not accepting social advancement as an acceptable norm. I realize I may be tarred and feathered for saying this, but the 'school voucher' system polarizes our society without addressing the root problem: our children, ALL of them, are the future of our country, and the grounding we give them in primary and secondary is an indispensible part of provinding for their, and our, future.

Enough on that.