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FACTS ON THE US DEFICIT

DEBT REDUCTION IS NOT US PROBLEM No 1

 

GET THE FACTS BEHIND THE NEWS  

Both political parties have their economic priorities mixed up.   The mere cutting back of large parts of the federal gov’t will not help the economy or increase employment.  The reason is that the economic problems are not caused by the size of gov’t or by the size of the debt.

 

 The size of the debt has to be watched but the debt now is not an imminent danger.  A study by the National Bureau of Economic Research found that public debt levels become dangerous when they reach 90% of GDP.  At the present time(2010 figures) the US debt level in the hands of the public is 63% of GDP according to the CIA World Factbook.

 

Recent figures for other countries are Japan, 192%,Italy 129% France 80%, Israel 75%, Canada 72%, UK 69%, India 60%, Saudi Arabia 20% China 18%.

 

Furthermore the gov’t is not having any trouble selling its financial bonds and other financial instruments.  In fact during the recent stock meltdown capital from all over the world came to this country to buy our bonds as the safest investment  they could find.  There is also no indication that gov’t borrowing is crowding out the private sector.  Money is plentiful.  Interest rates are low.  10 yr Treasuries are selling for less than 2%.  The US just sold 30 yr bonds at 4%.  Mortgage rates have dropped below 4%.  This is the lowest mortgage rates have been since the 1950’s.This is the exact opposite of what would happen if the deficit was seriously impacting the economy.

 

 Our primary economic problem is a poor economy.  In a recession DEMAND is the problem.  We must create an environment that encourages innovation and demand SO THAT INVESTORS AND BUSINESSES SEE PROFIT OPPORTUNITIES,