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» The Ornery American Forum » General Comments » Europe Warns Obama That the US Government is Spending Too Much

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Author Topic: Europe Warns Obama That the US Government is Spending Too Much
JWatts
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Europe Warns Obama: This Relationship Is Not Working

quote:
Europe’s disappointment with President Barack Obama’s presidency was laid bare Thursday as the EU’s most senior figure called for a dramatic effort to revive transatlantic relations.

The President of the European Commission said the new era at the White House was in danger of becoming a “missed opportunity” for Europe.

José Manuel Barroso said the EU-U.S. relationship was not living up to its potential. The criticism follows a series of fundamental disagreements on how to deal with the economic crisis, climate change and trade reform.

quote:
It has been a fractious few months for EU-U.S. relations, culminating in a fundamental clash of ideas at the G20 summit between Europe’s austerity strategy for ending the economic crisis and Obama’s call to maintain fiscal stimulus.

Speaking days before U.K. Prime Minister David Cameron visits the White House, Barroso said: “The transatlantic relationship is not living up to its potential. I think we should do much more together. We have conditions like we have never had before and it would be a pity if we missed the opportunity.

Source

I think it's a pretty bad sign when Socialist Europe is complaining that your country is spending too much money.

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TommySama
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Well yeah, we burn through hundreds of billions of dollars every year on the military (NSFW, probably). Get a job!

[ July 15, 2010, 03:59 PM: Message edited by: TommySama ]

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Lobo
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Did Tommy wake up on the left side of the bed again?
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TommySama
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I've been on the left side of the bed since... 2007, I think
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Pete at Home
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Then you must get around. Since you've been posting here, you've gon and forth between side of Trotsky's bed to the left side of Ghengis Khan's bed. [Razz]

[ July 15, 2010, 08:30 PM: Message edited by: Pete at Home ]

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Greg Davidson
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Obama is right in this instance and Europe is wrong. And, unfortunately, their wrongness will pull the global economy down for years. There is no valid economic theory that I am aware of that prescribes reducing government spending as a cure for a recession driven by inadequate aggregate demand. This strategy has been tried (most famously circa 1930) and it does not turn out well.
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Pyrtolin
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Germany, especially, is really one to talk here.

http://www.npr.org/templates/story/story.php?storyId=128546325

It doesn't have to spend nearly as much, because it's allowed it's regions to print up their own money to fill the gap and provide the lubrication needed to keep going without having to draw directly on a currency that they can't directly control.

It's good to see that the Worgel Shilling's lesson hasn't been completely forgotten here, and the States would do well to pay attention as far as their own budgets go.

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JWatts
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quote:
Originally posted by TommySama:
Well yeah, we burn through hundreds of billions of dollars every year on the military (NSFW, probably). Get a job!

We're certainly spending too much money on military expenditures, but since the US averages 4% of GDP on the military and has averaged deficits higher than this over the last 8 years it's hardly the only department in need of cutting.

Across the board cuts of 10% or greater in Federal spending will be needed within the next 5 years to deal with the rapidly deteriorating budget situation.

This year the very earliest baby boomers are turning 65. As the baby boomers go from tax payers to tax recipients in ever larger numbers the US Federal budget will come under enormous pressure.

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Pyrtolin
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quote:
Across the board cuts of 10% or greater in Federal spending will be needed within the next 5 years to deal with the rapidly deteriorating budget situation.
Or increases in revenue. Or reduction in costs, rather than spending itself.

Inflation of health prices is probably the biggest element at play here- if they can be kept in line with general economic growth, the budget shortfalls become pretty trivial.

There are lots of ways to approach the problem, but direct spending cuts in most areas are probably one of the worst, because they'll generally lead to larger drops in revenue than they save in spending. Take $1 out of unemployment, and you effectively lose $2.60 in GDP- both the dollar in government spending and the $1.60 of GDP growth that it would have resulted in as it moved from hand to hand. It would take a pretty high tax rate to compensate for the corresponding loss of revenue.

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JWatts
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quote:
Originally posted by Pyrtolin:
quote:
Across the board cuts of 10% or greater in Federal spending will be needed within the next 5 years to deal with the rapidly deteriorating budget situation.
Or increases in revenue.
Just to be clear, I wasn't precluding large tax raises. I believe we'll see large tax increases and still need large spending cuts. I expect there is probably enough political will to repeal the Bush tax cuts and add some additional minor ones on top of those.

At that point in time, we'll have no reasonable choice but to start cutting spending. Capping SS, raising the retirement age, etc.


quote:
Originally posted by Pyrtolin:
Or reduction in costs, rather than spending itself.

I'm not sure what you mean by this, could you explain, please?

quote:
Originally posted by Pyrtolin:
Inflation of health prices is probably the biggest element at play here- if they can be kept in line with general economic growth, the budget shortfalls become pretty trivial.

Yes, this is certainly true. Indeed, I suspect that the economy hasn't even fully adjusted to the current percentage of health care cost to GDP and the actual percentage will probably need to come down.

quote:
Originally posted by Pyrtolin:
There are lots of ways to approach the problem, but direct spending cuts in most areas are probably one of the worst, because they'll generally lead to larger drops in revenue than they save in spending. Take $1 out of unemployment, and you effectively lose $2.60 in GDP- both the dollar in government spending and the $1.60 of GDP growth that it would have resulted in as it moved from hand to hand.

That completely ignores the fact that the government had to tax someone $1.20 to get $1 to pass out in goodies and the amount of growth that would have resulted from that $1.20. It's entirely possible there is no net growth or that it's even negative.

I don't subscribe to the philosophy that the US government can spend itself out of debt.

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