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fellside

The US Debt

102 posts in this topic

don't necessarily agree with this, but Social Security's insolvency is a long-term (50+ year) problem rather than an immediate one anyway. incidentally, Obama's healthcare plan was centered around bringing healthcare costs down across the board, over time. i trust that you are a supporter of that program?

I'm not sure. It seems part of the way Obama will bring healthcare costs down is by taxing people's health costs that were once un-taxed. Don't know how I feel about that.

However, if it is true that the healthcare plan brings costs down as drastically as the GED (did I get that acronym right?) says, then yes I support the bill.

Edit: I think it's the money that people set aside for health costs that used to not be taxed. Now if you set a side a certain amount and do not use it all, the government takes it. Could be wrong.

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I'm not anti-Clinton. I think he was a very good president and it was one of the best examples of a conservative congress and liberal president using moderation as a means to get things done.

Clinton was not a liberal, but sure, if you say so. He was also a banker's best friend. Him and the Republicans teaming up to repeal Glass-Steagal helped create the basis for the current economic crisis, but you sure wouldn't know that by talking to the guy ;)

As for debt effecting the dollar, I don't know how to prove it (as I'm not an economist) but I simply thought this was a matter-of-fact thing. I could be wrong, but again I don't claim to be an expert.

It's just not true. I have seen no credible arguments that a high national debt affects the dollar. And again, even if that were true, which it isn't, a weak dollar relative to other currencies is OK. That's actually quite good for American exporters. I know you're not an economist, I'm not either, but I'm pretty confident we both grasp this concept.

If the debt has negative impacts on our economy (which seems logical) then the national debt will have long term negative impacts on unemployment in this country. Both are problems that have to be solved and I think being short-sighted is the very thing that got us into this debt mess.

Wait wait. I want to push you further once more. What do you mean "seems logical"? How on earth can you say that our national debt, which is nominally high but in real terms, is not, has negative affects on the economy? That's mis-information and you should evaluate where you get these beliefs. If it is so logical, even on the surface, show me cause and effect.

But again, let's say it did have a negative effect. Is it more of a negative effect than the highest unemployment since the Great Depression? Do you understand at the very least that unemployment is the single greatest negative "effect" in our economy? And, high unemployment only drives up the annual deficit, and drives up the national debt.

There is no debt mess. There's an unemployment mess that helps feed the debt mess.

The only way someone could say Social Security is fine is if they've become so used to solving our problems by throwing more money that we don't have at it.

A billion experts, not politicians, not pundits on msnbc or fox, but people with brains, even Republican Michael Gerson, acknowledge that Social Security can continue paying out all benefits for the next 26 years. That is why Social Security is fine. We have 26 years to work out a way to tweak the system, whereas many politicians on both sides of the aisle, with their own agendas, are trying to gut it.

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i agree with this. notwithstanding the effect of catering to the owners of our debt on our foreign policy, we're actually spending (according to fellside's graph from Post #7) 4.6% of our entire yearly budget on interest for that debt; that's billions and billions of dollars being thrown out the window. yes, that shouldn't be our absolute #1 priority and obviously getting a handle on unemployment should be, but we can't lose sight of the fact that simply by virtue of having so high a debt we're losing huge amounts of money.

Debt-to-GDP ratio is the key indicator when you try to measure the size of the debt. A high nominal number, 13 trillion, 14 trillion, is meaningless without context. As you see often, conservatives and "deficit hawks" like to quote the high nominal number just to frighten people. Our current debt-to-GDP ratio is about 60-70% of GDP, which is a recent high, but in no way comparable to the debt-to-GDP ratio after World War II, which was about 120% of GDP. Yet, what happened after World War II? We had an economic boom in this country. A national debt is sustainable, so long as the economy has a sustainable growth path.

Or, in other words, grow the denominator:

National debt/ GDP = _____%

(We prefer this to be a smaller percentage)

Anyways, I'm glad you see that the debt isn't as important as the unemployment crisis in this country.

And as far as the interest burden goes, yes, that's a large nominal amount of money, but in real terms we are actually talking about something relatively small and, actually a bargain. Why?

Again, you have to look at the context of the mechanism that finances our debt: the selling of US Treasury bonds, that are available in short term amounts (as quick as a few months), known as "fast maturity", to 10, 20, and 30 year Treasury Bonds. Any of this new to you? So, when China lends us money, or Japan lends us money, they purchase vast amounts of US Treasury bonds at a market rate of interest.

What happened in Greece and Ireland, is that foreign creditors, wary of the Greek and Irish ability to pay back the money on Irish and Greek bonds when the bonds reached maturity, started jacking up the interest rates on bonds to astronomical levels (double-digit yields). This reflected a lack of market confidence.

Now, with global attention now being paid to the debt levels of major countries, what has happened to the US bond market? Are China, Japan, and others ratcheting up interest rates when they buy US Treasuries? NO. The interest rates for US Treasuries are at historical post-war lows. There is no significant interest burden, because in the overall accounting, it is quite low.

Treasury+Interest+Rate+History.jpg

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so are you telling me we're paying 4.6% of our annual budget towards interest on our debt held by the Chinese and others... who are in turn paying us interest on U.S. Treasury bonds they're purchased?

that doesn't seem to make any sense at all, though, that would hardly be the first time for this subject. are you saying that, in effect, we're taking short-term losses (interest on the debt to foreign countries) but looking at a long-term payoff (maturation of U.S. treasury bonds to foreign countries)?

either way, it seems as though the inescapable fact that we're paying out hundreds of billions of dollars a year that we wouldn't have to spend if we had a more sound fiscal policy is a pressing one. perhaps, again, not the most pressing but certainly one that deserves some attention.

And as far as the interest burden goes, yes, that's a large nominal amount of money, but in real terms we are actually talking about something relatively small and, actually a bargain. Why?

in 2009, interest on our debt was about $187,000,000,000. the context that you mentioned in relation to our GDP should also include relation to an even more important number: 0. the amount of money we're spending is hardly a small amount, even in terms of our total budget, when you consider that it is neither an expenditure that brings us any net benefit nor necessary at all.

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so are you telling me we're paying 4.6% of our annual budget towards interest on our debt held by the Chinese and others... who are in turn paying us interest on U.S. Treasury bonds they're purchased?

No, they aren't paying interest to us, we pay it to them when the bonds mature, as I said, there are different timeframes on different bonds. Foreign and domestic creditors buy US Treasury bonds with the promise of repayment at a rate of interest when the bond matures.

Let's not confuse the rate of interest on Treasury bonds (about 3.5-4%, which is incredibly low) with the amount of our budget being utilized to pay down interest on the debt. My point was to show that we weren't cowering to our lenders, that they don't use the debt to bully us, and that foreign creditors seem to have full faith that we are capable of paying our debts, or, in operational terms, paying them full yield on their bonds upon maturation.

either way, it seems as though the inescapable fact that we're paying out hundreds of billions of dollars a year that we wouldn't have to spend if we had a more sound fiscal policy is a pressing one. perhaps, again, not the most pressing but certainly one that deserves some attention.

Agreed, we need sound fiscal policy, more progressive, less giveaways to the wealthy and Wall Street. I will always agree with you on that.

But my argument all along is that we can address the debt issue long term with fixing health care costs, and near term by addressing unemployment. Tougher taxes on the rich, less defense spending, etc., pales in comparison to fixing the cost of health care. Anyone concerned with the annual budget deficits ought to be concerned with containing health care costs.

in 2009, interest on our debt was about $187,000,000,000. the context that you mentioned in relation to our GDP should also include relation to an even more important number: 0. the amount of money we're spending is hardly a small amount, even in terms of our total budget,

Actually it is a small number in terms of the total budget, because you are talking about approximately 5% of a multi-trillion dollar budget which itself is part of a multi-trillion dollar economy. If you focus on the nominal amount, that is, the distance from 0, then you'd have something there. We must maintain context. We are saying that for every dollar the US spends on other things, it forks over a nickel to pay off interest.

If this was a private firm, a private household, or a college graduate, we would kill for that light of a burden.

when you consider that it is neither an expenditure that brings us any net benefit nor necessary at all.

Yes it is necessary and provides benefits because our government continues to pay all current obligations.

I would hate to have been around you and Fellside after World War II, when our national debt was 120% of GDP, more than double the size of the whole economy. You guys would've said "Oh my god, President Truman, [then later] President Eisenhower, look at our debt! We've gotta gut the New Deal Programs of your predecessor, forget that Social Security thing that was started, raise taxes taxes, don't pay a nickel to rebuild Europe, we've got the greatest national debt percentage and debt interest burden in American history!!! [/sarcasm]

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But my argument all along is that we can address the debt issue long term with fixing health care costs, and near term by addressing unemployment. Tougher taxes on the rich, less defense spending, etc., pales in comparison to fixing the cost of health care. Anyone concerned with the annual budget deficits ought to be concerned with containing health care costs.

health care costs need to be brought under control, certainly, but that's a far longer and more involved process which will pay fiscal dividends 20 years from now, rather than having an immediate impact on our budget. the most readily available short-term sources of income for the country are increased taxes on the wealthiest and cutting defense spending for a 5-10 year horizon. you'd at least agree with me on that?

so while i agree with you broadly on this point, the concern is about emphasis; what can be done relatively quickly and painlessly to help alleviate this problem.

We are saying that for every dollar the US spends on other things, it forks over a nickel to pay off interest.

If this was a private firm, a private household, or a college graduate, we would kill for that light of a burden.

there's a larger criticism here, from me anyway (not sure about fellside), to wit: that is there is a risky culture of debt accrual in our society that renders us all too vulnerable to economic turbulence. yes, sometimes everyone from an individual through a start-up company to the U.S. government, must take on debt. but to accrue enough debt that we're paying hundreds of billions a year simply in interest to other, competing nations seems deeply counterproductive. we have to always aim for surpluses, rather than accept debt and it's accompanying interest as a fact of life or something to be put off for a later date. when it arises it needs to be dealt with expediently, and i don't think we're taking as many steps as are possible to do so (because they're politically unpalatable).

would hate to have been around you and Fellside after World War II, when our national debt was 120% of GDP, more than double the size of the whole economy. You guys would've said "Oh my god, President Truman, [then later] President Eisenhower, look at our debt! We've gotta gut the New Deal Programs of your predecessor, forget that Social Security thing that was started, raise taxes taxes, don't pay a nickel to rebuild Europe, we've got the greatest national debt percentage and debt interest burden in American history!!! [/sarcasm]

except we live in a markedly different America than that of Truman. our economy is stagnant, not surging; our means of production is declining, not still humming from mobilization; our investments are longer-term and less assured than a handout to nation-state peers; and on and on and on. this isn't 1944. furthermore, i for one am not saying that we should cut social welfare programs or fudge on our commitments towards rebuilding the Afghanistan or Iraq that we broke. nor am i demanding that all the policies and proposals of the U.S. government come to a grinding halt until we're square on the debt (though it seems as though some conservatives would cynically make that claim), i'm simply saying that 1. the debt is a real issue and 2. not enough steps are being taken to address it, and as a result we're losing money needlessly.

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health care costs need to be brought under control, certainly, but that's a far longer and more involved process which will pay fiscal dividends 20 years from now, rather than having an immediate impact on our budget. the most readily available short-term sources of income for the country are increased taxes on the wealthiest and cutting defense spending for a 5-10 year horizon. you'd at least agree with me on that?

Of course I say we could lower the debt through defense budget savings, but I would take the money that would be saved through defense cuts and use it to pay for infrastructure projects and direct job creation. So actually that money is not leaving the overall federal budget but instead being redirected. And when you talk about "readily available sources of income", there's an assumption in there that I would like to challenge but that probably would take another thread. ;)

there's a larger criticism here, from me anyway (not sure about fellside), to wit: that is there is a risky culture of debt accrual in our society that renders us all too vulnerable to economic turbulence.

I'm sure you would agree that financialization (pro Wall Street anti-Labor policies) created this economic mess and that our cancer spread to the rest of the world.

yes, sometimes everyone from an individual through a start-up company to the U.S. government, must take on debt. but to accrue enough debt that we're paying hundreds of billions a year simply in interest to other, competing nations seems deeply counterproductive. we have to always aim for surpluses, rather than accept debt and it's accompanying interest as a fact of life or something to be put off for a later date. when it arises it needs to be dealt with expediently, and i don't think we're taking as many steps as are possible to do so (because they're politically unpalatable).

We are open to economic turbulence for many many reasons. But having a budget deficit and national debt that, relative to GDP, is smaller than most of the advanced countries of the world, is not one of them.

I'll be blunt. We agree that all debt is not necessarily harmful, or hurtful. The main question, I argue, is whether you go into debt to increase your productive capacity, and economic competitiveness, or do you go into debt to speculate on the stock markets, or go into debt to finance illegal foreign wars, or pay for tax cuts for the wealthy? I fully support a bigger economic stimulus and jobs program to rebuild our infrastructure even if it drives up near-term deficits. The point is to fight unemployment and invest in sustainable economic growth, not bubbles. The debts accrued are sustainable and eventually pay for themselves.

except we live in a markedly different America than that of Truman. our economy is stagnant, not surging; our means of production is declining, not still humming from mobilization; our investments are longer-term and less assured than a handout to nation-state peers; and on and on and on. this isn't 1944.

Not quite, my friend. We are humming from mobilization in that a housing bubble drove our economy for almost 8 years. The housing bubble and Wall Street speculation artificially stimulated the construction industry, electrical industry, home and appliance industry, transportation industry, and raw materials industry. It created increased "capacity" and mobilized capital and labor resources. This "capacity" of capital and labor is now woefully underutilized. In common language, we have workers and machines and factories sitting idle. Unemployed. Labor and capital can be employed rapidly and easily if we commit to infrastructure investments and renewable energy in a comprehensive, national effort.

furthermore, i for one am not saying that we should cut social welfare programs or fudge on our commitments towards rebuilding the Afghanistan or Iraq that we broke. nor am i demanding that all the policies and proposals of the U.S. government come to a grinding halt until we're square on the debt (though it seems as though some conservatives would cynically make that claim), i'm simply saying that 1. the debt is a real issue and 2. not enough steps are being taken to address it, and as a result we're losing money needlessly.

The debt is a real issue insofar as we do everything we can to fight unemployment. You fix the near-term debt by fixing unemployment and, as you like, ending Wall Street and defense giveaways. If we do nothing on the vast unemployment, the debt only gets worse.

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simply put, it's time to get a lot of that back. some in taxes to ease the debt, some in a redistribution of taxes away from the lower-and middle classes onto the wealthiest. tax loopholes that allow major businesses in the U.S. to keep offshore havens and avoid paying the intended amount; the U.S. government paying billions in subsidies to, say, oil companies while they make billions in profit each quarter; it goes on and on and on. billions being paid or uncollected that permit the inequality of wealth to grow and grow and our national debt is no less a victim than the middle class.

late arrival to thread.... my two cents.

in my mind this is the chief issue. i am not very knowledgeable about the economy or politics so i don't feel like i can really offer a valid opinion on how our nation should tackle large complicated issues like defense, but anyone can stand behind something as simple as closing tax loopholes. the things blackstar mentions here are things i feel both parties would/should stand behind. the wealth gap in this country is ridiculous. when corporations are funneling even more money away from the government, and ultimately the lower and middle class, they are sandbagging the entire country for a quick buck.

edit: also, blackstar, you piqued my interest when you mentioned that china was taking a different approach to defense. care to share a link on the subject?

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also, blackstar, you piqued my interest when you mentioned that china was taking a different approach to defense. care to share a link on the subject?

certainly. here's an example of a broader strategy based around China's increasing usage of information technology, in particular the ability to disrupt infrastructure, communication and guidance systems, as a deterrent and a means of leveling the playing field in any potential conflict. the Chinese understand that they can't compete with U.S. military might in any conventional sense without an immense buildup and upgrade of their own existing forces, which A. would take a long time and a lot of money, B. would leave it open to criticism from the international community, and C. is not guaranteed to work in any case; so they are looking to use their "natural" advantages in computers (namely sophisticated hacking, information theft and ability to interfere with vital systems) to undercut the U.S. and it's allies' at their increasing reliance on computerized weapons systems and communications, the one area where China has expertise. they've already likely penetrated numerous sensitive systems in hacking probes, looking for weaknesses and useful information.

there's a great more to this issue, but since this is technically a thread about the U.S. debt we should probably discuss it in another forum where/when it's relevant. on topic though, it should be noted that this strategy of China's regarding defense costs a fraction of ours, and is in response to our overwhelming conventional advantage in sheer military force, which we procured at great cost.

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I watched a documentary on Marijuana, and it stated that California spends 7.5 billion a year on 'DEA and related drug activities' (can't remember specifics), but that somewhere like 80-90% of this is on weed. Legalize it already dudes. Possession should not be a crime, and you save (let's be generous) 50% of that figure yearly, in california.

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if that's true, i'm Kermit the Frog.

This includes production, importation, selling, possession (the killer in my mind), paraphernalia busts etc...

There were quite a few credible sources in this doc... it's called 'The Union'... check it out

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saupload_who_owns_us_national_debt_30_sept_2010.png

Just wanted to continue the discussion with more context. China does not have some massive leverage over us. The relationship is far more symbiotic than the myths that get spread around.

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Just wanted to point out that in doing some research I'm seeing I may have overstated some things.

I think some of the hysteria from both parties and the media leads to misleading conclusions.

If you watch Bill Maher, Glenn Bech or really anyone on the TV, you're led to believe that America is in major decline and we're on our way to not being a world power anymore. That China is going to take over. These are shortsighted opinions.

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i am very surprised to see how small (relatively) our debt is to china, what with all the talk of china buying the US. maybe there is credence to the fact, in that china is buying up, or loaning money to, american businesses. so our federal government isn't the one who stands to lose, so much as our economy in general?

fellside: the way i see it, the fear that america is in decline is a legitimate concern, though maybe not as immediate or drastic as the media would have us think. though the US might not be a 3rd world country in 50 years, it is becoming apparent that we need to change our paradigm on quite a large number of things. i think blackstar's point about military supremacy is a good one. in many ways we still rely on a mid-century strategy in very different times. in the general sense, i see this in many areas in the US: infrastructure and the environment, the economy, medicine, education, etc.

though the US may not crumble, other nations may be changing their opinion of us as forerunners, and see us more as dinosaurs.

these are just my observations.

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My point is that it will take much, much worse than the previous economic recession to turn things around.

- Our economy is larger than the next four largest economies in the world combined. (Japan, China, Germany, United Kingdom)

- Industrial output is larger than Japan and China combined.

- We control all of the ocean's of the world.

- If we wanted to beat China in a currency war, we easily could. Their economy depends on exports far too much. They have an inflation problem far worse than ours.

While we have serious problems in the United States, it's going to take a long time to make the fall that so many are predicting. But of course eventually we will fall. Every world power in the history of the world has fallen.

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a showcase of "conservative" or libertarian policies applied to budget cuts, by Rand Paul.

and here's why much of it is psychopathic:

http://andrewsullivan.theatlantic.com/the_daily_dish/2011/01/rand-pauls-plan-to-save-500-billion-ctd.html

Defense gets a 6.5% cut, and education 83%? Can I be reading this right? Education gets the largest single cut? (other than Energy, which goes to Defense, for some reason). How can this be justified? We'll have a balanced budget on the backs of our uneducated children?

Just like to point out that the suggestion that DOD take over the nuclear function from DOE is illegal. Nukes are to be administered by civilians, that's the law, Truman's Atomic Energy act of 1946.

4. Food and Drug Administration—a proposed 62% cut! This will, in effect, gut the FDA. That’s alright with Paul, since he views the FDA’s actions as government “intrusion into the nation’s food supply.” I view it as government protection of the public from unsafe food and drugs. In a similar vein, Paul wants to get rid entirely of the Consumer Product Safety Commission, which oversees product safety; thanks but no thanks.

What struck me most about the Rand Paul’s budget proposals were the extremely deep cuts to the National Science Foundation (62% !?). This is in addition to significant cuts to the National Institute of Health, the Centers for Disease Control, abolition of the Department of Energy. The Rand Paul budget would be a devastating blow to the sciences in the United States of America.

What is striking (and some of this may be due to omissions in the Washington Examiner article) are the choices of things that are not touched: Agriculture subsidies (direct farm payments are about $20B annually versus $7B for the entire NSF budgets), subsidies for oil, gas or coal, etc. These are things that Paul apparently feels are more important ways to spend money than basic sciences.

I'll just focus on the federal department I know most about, HUD, which is completely eliminated in Paul's plan. Who takes these hits?

* Seniors -- whose low-income housing through Section 202 programs is eliminated. Find it distasteful to see a young homeless man sleeping on a park bench? Wait till it's Grandma there!

* The Disabled -- whose Section 811 housing is eliminated.

* The poor -- who lose BOTH Section 8 vouchers and facility-based housing programs.

after Katrina, who needs the Corps of Engineers? or, in light of the events in Egypt, international diplomacy via the State Department? or passenger rail at all (Amtrak completely defunded)? or the EPA, i mean it's not like they're in charge of making sure we don't all choke to death on smog or are poised by industrial runoff into our water supply, but those pesky regulations they enforce "hurt business", right? or the Department of Education, because all the best kids go to private school and who gives a fuck about the rest of them?

pay attention: these are the conservative, Teabagging solutions for America. which, incidentally, would also have the delightful side effect of destroying the country (and that's not hyperbole). letting business, "the free market" run rampant but not investing in education or alleviating poverty; sounds alot like his namesake and her Randroid army.

this is insanity. there is no excusing it. hard to believe this psychopathic clown is a United States Senator.

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If the thing the conservatives are running on is reduce deficits and less spending, and this is the kind of plan they try to implement, then Obama could snort cocaine on national television right now and he'd still get re-elected. The conservatives are clueless right now and it'd be so easy for them to gain popularity right now if they had any leadership or vision.

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in related libertarian crazyperson news, Megan Mcardle thinks getting Sudafed is too hard, and therefore we should legalize meth.

Let me start by saying two things: first, that meth addiction is very bad, and the world would be a better place without it; and second, that home meth synthesis is obviously very dangerous.

But it is not actually so bad that we shouldn't count the costs of suppression. Which are considerable.

obviously, these people's brains have been removed. trying to view serious drug addiction, especially methamphetamine (one of the absolute worst, most addictive, most dangerous, most debilitating drugs used by people), primarily through the lens of economics is not just misguided, but truly crazy. the ideological inflexibility of libertarian "conservatives" who's entire worldview is predicated on economics (much of it baseless economics), is truly crazy. these people must not be allowed anywhere near the levers of power.

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meanwhile, U.S. companies make swiss cheese of our corporate tax code and we lose hundreds of billions annually as a result.

i believe some dumb sod in this thread has already said:

tax loopholes that allow major businesses in the U.S. to keep offshore havens and avoid paying the intended amount; the U.S. government paying billions in subsidies to, say, oil companies while they make billions in profit each quarter; it goes on and on and on. billions being paid or uncollected that permit the inequality of wealth to grow and grow and our national debt is no less a victim than the middle class.

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The only positive thing I liked to hear from Obama's speech last week was that he would fight tax giveaways to oil companies, and that he would let the Bush tax cuts expire for reals this time.

The rest of what I heard might as well have been said by a Republican. The freezing of government spending for non-defense completely ties our hands on a second stimulus package, and completely ties our hands to actually pay for "investments" that he kept repeating endlessly, investments in green energy, infrastructure, all that has a price tag and by freezing non-defense spending...

He ensures that the scale of all the initiatives he's pushing now will be small...like the stimulus...and therefore do nothing substantial about unemployment.

Lastly, I was appalled that he completely ignored the people who can't afford their mortgages and, to date, has refused to revise his completely dysfunctional foreclosure prevention program.

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vaguely related, but an indicator of how far we're falling behind by not investing in infrastructure, or rather being held back forcibly by the greed and cowardice of our corporate providers.

HONG KONG residents can enjoy astoundingly fast broadband at an astoundingly low price. It became available last year, when a scrappy company called Hong Kong Broadband Network introduced a new option for its fiber-to-the-home service: a speed of 1,000 megabits a second — known as a “gig” — for less than $26 a month. ....

Verizon, the nation’s leading provider of fiber-to-the-home service, doesn’t offer a gig, or even half that speed. Instead, it markets a “fastest” service that is only 50 megabits a second for downloading and 20 megabits a second for uploading. It costs $144.99 a month. That’s one-twentieth the speed of Hong Kong Broadband’s service for downloading, for more than five times the price.

Dane Jasper, the chief executive of Sonic.net, an Internet provider based in Santa Rosa, Calif., says that most broadband markets in the United States today are dominated by one phone company and one cable company.

“Why doesn’t Verizon offer gigabit service?” Mr. Jasper asks. “Because it doesn’t have to.”

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