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Business Browser Date published: 3/14/2010 By Bill Freehling FEW DISAGREE that America's debt is unsustainable, which is why a March 15 column in Time magazine was so interesting. Zachary Karabell's "In Defense of Debt" makes the case that the country's $12.5 trillion national debt, which is costing the U.S. close to $500 billion a year in interest payments, isn't as problematic as most make it out to be. Karabell's argument is a tough one to buy, due purely to common sense. Much of the current recession is due to individuals, investors and corporations taking on more debt than they could manage. If excessive debt isn't good for an individual, surely it's not for a government. The current situation in Greece is showing that to be the case. Greece's national debt Given that situation, many wonder how long the United States, whose debt is rapidly approaching GDP, can avoid a similar fate, particularly if higher interest rates increase the cost of servicing the national debt. Therefore it's not easy to make an effective case that the debt isn't as much of a problem as most make it out to be. Yet Karabell makes a pretty convincing argument in his recent column. First, he writes, though the debt has grown tremendously, servicing it costs about the same today as it did 20 years ago when adjusted for inflation, especially relative to GDP. That's true mostly because interest rates are so low now. The U.S. government currently borrows money at less than 2.5 percent, meaning it can get nearly three times the money at the same cost compared with when rates were near 7 percent in 2000. The global demand for the U.S. dollar, which is still seen as a safe haven, should keep rates low for a long time, Karabell writes. That makes the debt manageable and allows the U.S. to borrow more than most countries. Karabell argues that what we should be really be worried about is improving our crumbling roads, bridges and other infrastructure to remain competitive with China and others, which are spending at a breakneck pace. "The problem isn't how much debt we're carrying; it's whether the economy of tomorrow will be able to justify it," he wrote. His conclusion: "Obsessing about the debt is a distraction we can't afford." Again, it's not an easy argument to swallow. But it's always nice to read something that goes against the conventional wisdom and makes a good case. Staff reporter Bill Freehling writes this weekly column on business, personal finance and investing. He can be reached at 540/374-5405 or bfreehling@freelance star.com.
trying to stir the sh*t up.
the "deficits don't matter idea" was apparently A-OK with Bush
Lovers but now with Obama it's bad Karma - right?
and it is both a financial disaster and a funeral for the USA we love and cherish. It looks like Germany, Russia, Italy and the other rogue nations who went off track when the exteremists were welcomed with open arms by the proletariat to save their country from the (pick your own scapegoat...the jews, the industrialists,the speculators, the rich, the intelligentsia) in the early 20th century. Our Country is in danger of bending over for the sweet talking communist-socialist nazis etc pick your own label
It's the $12.3T debt itself, coupled with $107T in unfunded obligations and the debt service they require, that prevents the USA, in part, from creating the economy that can sustain a *healthy* level of debt over the long term. We are currently headed for a fiscal cliff unless corrective action is taken. You are wrong to state "it is not the debt itself." Individuals or businesses with such debt levels would have been in bankruptcy long ago. P.S. How well do you speak Chinese?
this article made it into the newspaper! It's not the debt itself, it's whether we're creating the economy that can sustain it!
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