Budget and Trade Deficits are killing U.S.

[bd]

Something has got to be done to stop this slide. We are heading towards recession in the United States now. If OPEC were to decide to switch from dollars to Euros as its currency of choice, terrorism would be one of the least of our worries.

U.S. Loses Ranking as Most Competitive Economy to Switzerland

By Simon Kennedy

Sept. 26 (Bloomberg) -- The U.S. lost its position as the world's most competitive economy to Switzerland as budget and trade deficits prompted a slide to sixth in the World Economic Forum's annual rankings.

Switzerland jumped from fourth place last year and Finland, Sweden, Denmark and Singapore all overtook the U.S. with Japan, Germany, the Netherlands and the U.K. rounding out the top ten in the study of 125 nations by the Geneva-based forum.

The decline in U.S. competitiveness adds to questions about the outlook for the world's largest economy as economists at JPMorgan Chase & Co. suggest its potential for growing without inflation is fading and as the expansion shows signs of slowing.

``The U.S. has now been running twin deficits for many years and there is an increasing concern that they are creating a vulnerability in the economy,'' Augusto Lopez-Claros, the forum's chief economist, said in an interview.

Switzerland, home to companies such as Nestle SA and Novartis AG, topped the table because of its reputation for innovation, research and development and its scientific infrastructure, the forum said, adding Scandinavian economies performed well for similar reasons.

While the U.S. remained the best country to do business in, it ranked 69th for its economic environment with the government set to post a fifth consecutive annual budget deficit and after its current account deficit widened more than forecast last quarter to the second-largest on record.

Public Confidence

The country's overall competitiveness was also undermined by increasing doubts about the effectiveness and trustworthiness of its political leaders with the government's delayed reaction to Hurricane Katrina likely damaging the public's confidence, the forum said. Weaknesses were also detected in primary education and healthcare, with infant mortality and HIV/AIDS more prevalent than in other rich economies.

The report is the latest to signal of concern with the fundamentals of the U.S. economy. JPMorgan economists led by Bruce Kasman last week published a study which concluded the economy's so-called potential growth rate has slowed to 2.7 percent from 3.5 percent at the start of the decade. The productivity of U.S. workers also faded last quarter, increasing at an annual rate of 1.6 percent after a 4.3 percent gain the prior three months.

Home Prices

Such deteriorations come as the economy starts to slow following a housing slump. Prices of existing homes in the U.S. fell last month for the first time in 11 years as sales declined to the lowest level since early 2004, the National Association of Realtors said two days ago.

``Raising productivity is the driving force behind the rates of return on investment which, in turn, determine the aggregate growth rates of an economy,'' Lopez-Claros said in the report. ``A more competitive economy will be one which will likely grow faster in the medium and long term.''

Falling prices will make it harder for consumers to tap the equity in their homes, a major source of cash in recent years. That may pose a risk to their spending, which makes up 70 percent of the economy.

The World Economic Forum, funded by more than 1,000 corporations and best known for its annual conference in the Swiss ski-resort of Davos, has published competitiveness reports since 1979. The rankings include grades for about 90 variables ranging from innovation to education as well as the results of a poll of 11,000 corporate executives.

Italy Slips

Among the Group of Seven industrial nations, Germany won points for its judicial system, with the U.K. excelling in the efficiency of its markets. Canada and France ranked 16th and 18th respectively, lower than last year, while Italy slipped four notches to 42nd because of its poor fiscal position.

Within the 25-member European Union, Poland was the worst performer at 48th. Asian economies led by Singapore were praised for their infrastructure, well-educated workforce and efficient markets. Japan was urged to improve its public finances and markets.

India climbed two places to 42nd because of the quality of its scientific research, while China fell to 54th from 48th because school enrollment remains low by international standards.

In Latin America, Chile had the highest position at 27th thanks to making policy-making more transparent. Brazil declined to 66th from 57th amid economic problems, including its budget deficit.

Middle East economies including Israel, Kuwait and Qatar all rose, while South Africa remained the best performer in its region by rising to 45th. Angola was ranked the least competitive economy of all those surveyed, with Burundi and Chad just above it.

To contact the reporter on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net .

[Son of Norway]

That Goddamn Clinton!!!!

[bd]

Originally Posted by Son of Norway

That Goddamn Clinton!!!!

No kidding, if he hadn't left that BIG-ASSED surplus we wouldn't be in this situation.

bd

[beardman2]

I don't know enough about this topic to comment. However, how many wars and major govermental overhalls did clinton oversee? Kinda hard not to be a big difference. Especially if you take into account the .com boom durring clinton and the bubble bursting after 9/11.

[tomk]

Originally Posted by beardman2

I don't know enough about this topic to comment. However, how many wars and major govermental overhalls did clinton oversee? Kinda hard not to be a big difference. Especially if you take into account the .com boom durring clinton and the bubble bursting after 9/11.

Doesn't matter why they exist, thet fact that they do is sufficient for potential economic problems ...

[boater1217]

Quit buying so much STUFF!

[KP Ling]

Originally Posted by beardman2

I don't know enough about this topic to comment. However, how many wars and major govermental overhalls did clinton oversee? Kinda hard not to be a big difference. Especially if you take into account the .com boom durring clinton and the bubble bursting after 9/11.

I think if these wars were really worth it then people would not mind paying more taxes to support them. The government, both current and former ones, know that the American people will buy bumper stickers and flags but will draw the line at more taxes. I saw Jon Stewart talk about Bush saying that this was a war for our survival and if so why do we not go WWII on this thing. Also, yesterday I saw former Major Generals Eaton and Batiste alongside former Colonel Hammes testify before Congress, they said the same thing. Soldiers and Marines hear the talk about this is a battle between good and evil and for our survival but know that the military is still being funded month to month by supplementals and basic equipment is not arriving to the troops who need it.

The Generals and Colonel all said that if this was really a war for survival, which they believe it is (but for full-disclosure I do not) and that we are losing it, they want to know why production is not ramped up, rationing enforced, and drafts instituted (though they said they are not in favor of the draft but such action would match the rhetoric). They wanted higher pay for troops and more bonuses for enlistment and re-enlistment. They said we are 60,000 troops short of fulfilling all our foreign policy requirements, including Iraq and Afghanistan. In short they wanted the DoD budget to double to pay for new troops, higher pay, refitting of equipment, and increased civilian production capacity. Units are still "handing-off" equipment as they leave Iraq to their replacements and units can not train here because the equipment shortage means that equipment they would train with is sent to replace worn-out/destroyed equipment there). MG Eaton made the remark that if we were serious about this war then, "the country that produced 4,000 aircraft a month during WWII can surely produce more than 48 armored vehicles and humvees a month today." I konw I do not want my taxes to go up but for every dollar we borrow now, regardless of whether it was by choice or we were forced to do so, we will have to pay back five. Raising taxes would be cheaper.

Anyway, to get back to deficits and spending, it is going to cost us (by us I mean our kids and grandkids) more than if we had just raised taxes, like a credit card purchase that $100 dollars turns into $200 pretty quickly when you only pay the minimum. Or worse, do like we do and transfer the balance to another card and do not pay any of it, only foreign lenders do not give "0% interest on balance transfers."

The way we are spending money would be like me taking my kid down to the bank and saying, "I want a $1 million loan and my kid will pay for it. You may go ahead and start charging interest as of this moment since I'm not paying for it." Only do this with your unborn kids and never spend the money on them but just yourself.

Remember that the business cycle (recession/depression) is caused by government policy and the more government tries to legislate fixes the more problems you have.

[NewXD40fun]

U.S. reports drop in budget deficit

The federal budget deficit, helped by a surge in government revenue, is running 14.1 percent below the pace of last year, the government reported Wednesday. The Treasury Department said that with one month to go in the budget year, the deficit totals $304.3 billion, down from $354.1 billion during the same period a year ago. The Congressional Budget Office is forecasting that the deficit for the entire year will be $260 billion, which would mean that September will see a sizable surplus.

- Associated Press

Thank God for the Bush tax cuts.......those same tax cuts that bd is spending right now.



Tom

[Old School]

Feast your gloomy eyes on this tidbit of great news, bd.

http://www.xdtalk.com/forums/showthr...d=1#post288669

[beardman2]

I wasn't trying to get into a debate on the wars. I was simply comparing things that have effected the economy durring two different administrations. IMO you can't compare the two directly. As mention before the stock market .com stocks tanking along with two wars and major changes in military and defense spending. Which includes first responders etc etc etc outside the military.

It is a wartime and I don't know any facts but I'm guessing and almost every war time the spending outweighs the income.

Also take into account that the government even with the tax breaks is bringing in more income than before.

Once we finish in Iraq and Afghanistan assuming no one has any dumb ideas either Forign or our leadership things will correct themselves at a quick rate.

I can't debate numbers or "how quickly" because that really gets into oppinion as there is no way to accuratly predict what will happen.