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Thread: Foreign demand falls for Treasuries

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    Re: Foreign demand falls for Treasuries

    Quote Originally Posted by samsmart View Post
    Getting out of Iraq and Afghanistan would go a long way towards that.
    Iraq and Afghanistan's costs, even assuming a decade longer involvement at current levels, which is inconsistent with U.S. policy) are still relatively small compared to the fiscal imbalances associated with Medicare. There is really no way around it. Medicare is unsustainable in its present form.

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    Re: Foreign demand falls for Treasuries

    Quote Originally Posted by donsutherland1 View Post
    Iraq and Afghanistan's costs, even assuming a decade longer involvement at current levels, which is inconsistent with U.S. policy) are still relatively small compared to the fiscal imbalances associated with Medicare. There is really no way around it. Medicare is unsustainable in its present form.
    Do you believe the health reform was an appropriate cost cutting tool?
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
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    Re: Foreign demand falls for Treasuries

    Quote Originally Posted by Goldenboy219 View Post
    Do you believe the health reform was an appropriate cost cutting tool?
    Goldenboy219,

    Health care reform could provide such an impact if it is designed properly. However, political efforts were made to gut even modest cost-savings tools e.g., existing physician payments schemes.

    Overall, from having read the various CBO analyses on the health care legislation as it evolved, I saw little evidence that the legislation tamed overall increases in health costs. In the out years, one still saw increases in health expenditures of approximately 7%-8% per year. IMO, it is that shortcoming, more than anything that was in the various iterations of the legislation, that was a fatal defect. In its absence, budget neutrality could only be maintained from increasingly onerous tax hikes to cover those rising costs.

    My criteria for judging health care reform was and remains:

    1. Does the proposed reform significantly reduce the incidence of uninsured persons? CBO said the bills did that

    2. Is it budget neutral? CBO suggested that within the timeframe it analyzed that it was. Some concerns existed about years beyond that timeframe

    3. Does it address the chronic imbalance whereby national health expenditures persistently rise in excess of nominal economic growth? CBO projections showed no appreciable change in that area.

    Ultimately, national health expenditures cannot continue to rise faster than nominal GDP growth indefinitely. Otherwise, the excess would need to be made up from foreign financing, once the nation's economic base becomes increasingly insufficient to cover health costs. By that, I mean it cannot provide sufficient financing without the financial burden's adversely impacting the economy's overall growth trajectory. Foreigners are not likely to do so forever. Otherwise, they would be assuming unlimited risk.

    In sum, at least in my view, effective health reform needs to address the issue of chronic growth of health expenditures in excess of GDP, in addition to the other two criteria. Doing so will almost certainly require comprehensive entitlement reform, elimination of industry protections e.g., the bar on drug reimportation that essentially uses the law to preserve an arbitrage situation, comprehensive medical liability reform, permitting interstate competition in insurance, permitting foreign medical institutions to compete in the domestic health market (transparent and consistent licensing standards for domestic and foreign practioners should apply), and putting in place incentives/payment practices/tax code changes that allow for a large-scale restructuring of the hospital industry (from which the largest share of health inflation arises), increasing portability and counter-cyclicality, etc. I believe Harvard University Business School professor Michael Porter put it best when a few years ago he observed that the health industry (industry practices, regulatory standards, laws, payment practices) is so dysfunctional that the normal rules of supply and demand are irrelevant.
    Last edited by donsutherland1; 02-18-10 at 10:33 AM.

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    Re: Foreign demand falls for Treasuries

    Quote Originally Posted by Hatuey View Post
    You commented on Obama's "out of control spending". I pointed out you're a partisan hack who doesn't care about how the money is being spent unless there is a Democrat is in power.



    So it was okay when Bush was doing it. Not okay when Obama does it. Your selective outrage is quite obvious.



    There are no questions in your OP. Just silly rhetoric.
    Why don't you show us a chart that goes past 2005. Of course our monitors may not be tall enough to show all of the bars.
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    Re: Foreign demand falls for Treasuries

    Quote Originally Posted by donsutherland1 View Post
    The U.S. fiscal position is beyond the point where a few tweaks can fix things. Everything needs to be on the table. Entitlement programs, particularly Medicare, need to be reformed to make them fiscally sustainable. The tax structure needs to be changed so as to provide sufficient revenue to meet the nation's priorities. All discretionary programs need to be reviewed and every department needs to improve its productivity to do more with each dollar expended. No department should be exempt. Regular independent audits of the major departments should be undertaken to verify that they are achieving productivity gains, have adequate systems for measuring their financial performance relative to their departmental objectives, etc.

    Sadly, at this stage of the game, the implied political consensus is to do nothing substantive. On one end, political leaders want to treat certain mandatory spending and discretionary programs as almost sacred cows exempt from serious changes. On the other, some want to leave in place a tax structure that chronically provides inadequate revenue, even wanting to cut revenue further. Relying on foreigners to essentially finance a growing share of the nation's costs--from national security to health care--is not sustainable indefinitely.
    I could agree with all of that if we include the areas where we are most out of whack with the rest of the industrialized world such as our military spending, where we spend as much as the rest of the world combined, as opposed to some areas where we fall behind all the rest if the industrialized world, such as providing affordable health care for all of our citizens.
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    Re: Foreign demand falls for Treasuries

    Quote Originally Posted by donsutherland1 View Post
    Iraq and Afghanistan's costs, even assuming a decade longer involvement at current levels, which is inconsistent with U.S. policy) are still relatively small compared to the fiscal imbalances associated with Medicare. There is really no way around it. Medicare is unsustainable in its present form.
    I agree the out of control medical costs are the biggest hurdle but the price tag for our wars in Iraq and Afghanistan are hardly insignificant. The bill in December 2008 was $1 trillion dollars.

    The $1 Trillion Bill for Bush's War on Terror - TIME
    Treat the earth well: it was not given to you by your parents, it was loaned to you by your children. We do not inherit the Earth from our Ancestors, we borrow it from our Children. ~ Ancient American Indian Proverb

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    Re: Foreign demand falls for Treasuries

    Quote Originally Posted by Catawba View Post
    I could agree with all of that if we include the areas where we are most out of whack with the rest of the industrialized world such as our military spending, where we spend as much as the rest of the world combined, as opposed to some areas where we fall behind all the rest if the industrialized world, such as providing affordable health care for all of our citizens.
    DOD should not be immune to being asked to become more productive, though one should not lose sight of the fact that the U.S. has a need for a larger and more effective military capability than many other countries do given its myriad critical interests. In fact, if DOD were exempted, such a move could actually undermine long-term U.S. national security capabilities. For example, if the operating costs associated with U.S. military operations grew sufficiently execessive relative to those of its enemies, that would increase the likelihood of success of relatively low-level attrition-driven campaigns conducted against the U.S. and its interests. The key for enemies would merely be to exploit U.S. financial challenges/inefficiencies until the U.S. operation became unsustainable from a budgetary or political standpoint.

    Doing so would likely require a robust and comprehensive examination and, afterward, regular "audits" so to speak. Such an examination would need to encompass, among other areas, military doctrine, financial/information/Intelligence systems, improved procurement practices, assessment of tradeoffs/opportunity costs associated with technology vs. manpower (lack of adequate manpower was exposed as a problem in both Iraq and Afghanistan, hence the need for troop surges in both cases), a framework that provides for greater flexibility in responding to immediate national security issues, development of a more robust strategic and tactical planning process, etc.

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    Re: Foreign demand falls for Treasuries

    Quote Originally Posted by Catawba View Post
    I agree the out of control medical costs are the biggest hurdle but the price tag for our wars in Iraq and Afghanistan are hardly insignificant. The bill in December 2008 was $1 trillion dollars.

    The $1 Trillion Bill for Bush's War on Terror - TIME
    To be sure, I didn't state that the costs were insignificant. I stated that they were small relative to those associated with the perpetual horizon mandatory spending programs.

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    Re: Foreign demand falls for Treasuries

    China by selling a percentage of their substantial holdings of US Treasuries should be seen as sending the message to the US 'Get your spending under control'.

    Attempting to bring Left or right Politics into this discussion is merely a distraction.

    Simply put China is saying what every other holder of US debt is saying.

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    Re: Foreign demand falls for Treasuries

    Quote Originally Posted by jujuman13 View Post
    China by selling a percentage of their substantial holdings of US Treasuries should be seen as sending the message to the US 'Get your spending under control'.

    Attempting to bring Left or right Politics into this discussion is merely a distraction.

    Simply put China is saying what every other holder of US debt is saying.
    I just heard in my "Political Economy of Iraq" class from my professor that China is actually still buying the same amount of our treasury bills but it is just through more intermediaries in London and France. He use to work for the American government in Iraq, he knows his stuff.

    So as much as debt is a huge problem for the US, China isn't giving us any different signals now. but I do have no idea why they are buying our debt in a much more hidden way now, maybe that is the signal. idk

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