Thursday, October 08, 2009

US Govt Debt


UPDATE: Going through the comments, I see many taking issue with our defense spending. It looks high because it is roughly the combined amount of our 2 biggest neighbors and one-third of our budget. Politically it is extremely unwise for any opposition to take up this issue because they are not defense experts and all male citizens are part of defense force and it can be argued that deserve the best equipment/weaponry to win if the need arises. Unless the reasons are clear and compelling, the opposition should try to win on other issues. My opinion? My main worry is the ex-general politicians of which we have many which will bias us to a hawkish stance and spend more than we need on defense - but there is opacity in this area so we won't know and will never know. In the long run, spending too much on defense will weaken us instead of strengthen our defense. While we spend billions on weapons, we have also brought in so many foreigners who now form 36% of our population (more if you count newly minted citizens). The first thing that will happen is we will see the population hollowed out at the 1st sign of trouble - the negative psychological impact of this is tremendous - the other 60% are suppose to stay on risk their life and fight? The Kuwaiti experience tells us at the end of the day what matters is that people and psychology plays a more important role than weapons - the Kuwaiti defense force on seeing the foreign population hollowed out and leaving put up only token resistance against the invading Iraqi forces.


During Bill Clinton's presidency, the US govt debt shrunk relative to GDP and it was projected to go down in the coming years. When Bush took office, he cut the taxes of rich and allowed the debt to grow. The unnecessary Iraq war added an extra $1T to the debt. The crisis forced the US govt to borrow somemore to bailout the banks to avoid economic disaster.
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If I am an American, I will be damn angry. Little of recent increase in debt was used to help the ordinary folks. Most of it went to wars, bank bailouts and tax cuts for people who didn't need it. Now they are debating vigorously over a healthcare bill costing $900B over ten years that will help millions of Americans.....
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The growth of the public debt accelerated after 80s when the US govt started cutting down on welfare so welfare was not the cause of this debt. If the US sinks because of this massive debt, it because they spent on unnecessary tax cuts, defence and bank bailouts.
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Countries rarely (never?) go bust helping its citizens - name me one state that has gone bust due to welfare spending. Iceland went bust because of its banks and many went bust spending on defence. In an article in the SPIEGEL, "Can Countries Really Go Bankrupt?" most common reasons for state bankruptcy has been fighting wars and banking system failures as in the Asian crisis. The lesson for us is this - continue to regulate our banks closely, strengthen our financial system, keep defense spending down, maintain good relations with our neighbors and understand that tax cuts are not always beneficial in the long run...these are things that are important. Scrutinising the nickels and dimes given out to the poor while taking big risks with state reserves and taking huge losses, simply makes no sense....

27 comments:

Anonymous said...

" Scrutinising the nickels and dimes given out to the poor while taking big risks with state reserves simply makes no sense...."

Then how come some govts did just that?

Don't tell me they are senseless?

Anonymous said...

To cut tax for the Rich, is a form of gratitude. Well, just like USA president, they need big $$$ to support their advertisement during election campaign. And of course, no free lunch, they'll need to pay back ;).

Anonymous said...

Re debt, Obama is outdoing Mr Bush.
din think that was possible.
while rest of world is raising taxes, its seems like Mr Obama is looking at ...

The stock markets believes Obamacare to be a red herring.

//
Scrutinising the nickels and dimes given out to the poor while taking big risks with state reserves and taking huge losses, simply makes ..
//

perfect sense.

In US, election (Presidential, congress) is an expensive business.

In SG .. u are familiar with SG.

PS: I believe SDP and WP could use some spare change.

Anonymous said...

"Scrutinising the nickels and dimes given out to the poor while taking big risks with state reserves simply makes no sense...."

Hi Lucky, I'm relatively new to your blog(started reading up your blog only some mths ago). From you blog, i became concern with politics and the gahmen's choice of methods. A lot of times i agree with you and the hordes of anons who are "not so" gahmen supportive. But other times it is really a irritating dilemma to agree or disagree on what the gahmen has done is wrong.

Eg. regarding your above quote, i assume you are referring to singapore's T.Holdings. So far, T. Holdings overall performance has been really good even according to foreign articles, despite her recent setbacks. Maybe T.Holdings is a good idea, just that not enough of her profits goes to help the average and the poor.

karim said...

Good one and it helps a lot.Thank you for your great post.

Karim - Positive thinking

Anonymous said...

The NS slavery system is really a good idea. I hope for more Chinese from China come in to Singapore.
I know there are many foreign born bonded scholars at Temasek. Hope that they invested like there's no tomorrow.
Rojak all these for something interesting :-)

Anonymous said...

War is a big business for the USA. The biggest US investment is in companies engaged in the production of military hardware to sell to others. But when others do so, they objected. Different standards.

How to reduce all the debts? Start another big war perhaps?

Kojakbt said...

Lucky,

Am glad that you have noticed our skyhigh spending in defence in Singapore too. 1/3 of our SG Govt expenditure is in defence. The way we spend our money on defence is like we are about to go to war with our neighbours!

Don't get me wrong. I do not doubt the need for any sovereign country to arm itself for defence. But as always, there is a limit to everything and there are tradeoffs. In my view, I think Singapore has been "over-defending" ourselves...

Kojakbt said...

Following is the Military Expenditures of Singapore and its neighbours for the last 10 years:

Military Expenditure (1999 - 2008):
in US$ Billion
Singapore $52.1
Malaysia $27.0
Indonesia $31.1
Thailand $21.9

That is, in the last 10 years, our military expenditure is 1.9x of Malaysia's, 1.7x of Indonesia's and 2.4x of Thailand's.
You decide if we have been "over-spending" on defence and perhaps it's time to shift our resources back from Guns to Butter.

Graph of Military Expenditures over last 21 years: http://i37.tinypic.com/207rhg2.jpg

Source: http://www.sipri.org
Stockholm International Peace Research Institute

LuckySingaporean said...

Kojakbt,

For defense, US spends more than the rest of the world combined...Singapore spends more than our neighbors combined.

Kojakbt said...

Lucky,

Yes, if we look at the military expenditures of our 2 closest neighbours, MY and ID, they have a combined expenditure of US$58.1B over the last 10 years. Our US$52.1B is almost equal to our 2 neighbours'....

Are our esteemed Generals think that we are going to fight on 2 fronts tomorrow?

HAHA!

Oushi2005 said...

Dear both,

Although i can't agree more that it is kind of painful seeing us tax payers money goes into this kind of investment. But i guess we have no choice. Sg is so small, one way to stop an invasion is to show that we are more properly equiped.

Kojakbt said...

Hi Oushi2005,

The million dollar question is always, how much more is required to show our "strength"? We are already spending about 5% of our GDP on defence, more than anyone else in the region. Do we want to increase to 10%?

Remember, defence spending tend to spiral because if you spend more, your neighbours are bound to follow. In the end, it's the US defence makers who win. All of us lose. Why not increase diplomacy among our neighbours and decrease our defence spendings together? That way, all of us can channel these budgets to other areas which are more pressing and of more immediate relevance. Everyone wins...

Onlooker said...

At least the USA soldiers are well taken care of but most of our defense go to the officer mess tiger beer while our conscript receive lesser pay than a bangla leh.
And how much is actually spent on Soldier care and training?
Why spend so much on the arm race when there is already an ongoing foreign invasion?

And I digressed....

BTW, Bush removing the tax for the rich is the reason why USA economy Tank == True.

Anonymous said...

You know why defence spending is so high for Singapore?

1. We are short of young soldiers due to the "Stop at 2" campaign of the 70s and 80s. Also cannot take in PRs for NS due to LHL don't like over 30 year old soldiers but not local reservists! Hence to compensate for all these must need the best weapons, experts and systems money can buy. So of course these cost a lot of money although untested in a real war yet.

2. Other countries are big so unlikely to have an invasion, hence defence spending lower. Singapore, however is very small. The strategy is to attack others more fiercely when they attack us. That's why the need for 1st class weapons to do it, not soldiers or else we will be wiped out.

3. Singapore is very small. No good and enough terrain for training. Eg how to fly a fighter jet without intruding others' airspace? So need to go overseas to friendly countries like the US or Taiwan to do it. Again these cost money.

4. To attract "talents" into the SAF, especially the top brass, you need top pay for top talent, just like the ministers. Otherwise the talents will not want to be generals or ministers. Again these cost money. NSmen poorly paid never mind since they "bo pian".

5. Ok this one I make it up for it may not be true. That is maybe Singapore needs to pay "protection money" to "big brothers" to protect us in a sometimes unfriendly region. Again this cost money.

Anonymous said...

Mollycoddling the rich, aka tricke-down economics, has made ordinary Americans poorer, and is now making ordinary Singaporeans poorer. Thanks to LHL, the firm believer in trickle-down econimics, and the PAP.

Anonymous said...

aiya, the main bulk of defense spending is on the salary for example on overpaid millionaire platoon commanders like Lee Hsien Loong who is plotting where to hide his stash when PAP falls,
and also on the cheebye officers, warrant officers who make their living on fucking young men. They ain't no soldier like the US soldiers lah. The SAF regulars are just there for the easy buck.

Honestly, as a Singaporean Pink IC holder, I do wish for an invasion from MY or ID.

Anonymous said...

BRillant advice. Let's wait and i think it will happen in ten years. sg will be lucky if less than ten.

Anonymous said...

'one way to stop an invasion is to show that we are more properly equiped.'

Equiped with Foreign Talents?

Anonymous said...

'But other times it is really a irritating dilemma to agree or disagree on what the gahmen has done is wrong....So far, T. Holdings overall performance has been really good even according to foreign articles, despite her recent setbacks. '

Another lky regime supporter is here to distract us!

Anonymous said...

Singapore's defence strategy is more of a deterrent nature. It's telling anyone who entertains the idea of attacking us that it will be as painful for them if not more than it is for us if they try.

With no strategic depth, Singapore is not defensible. A few lucky shots will destroy our vital infrastructure. How then are we going to feed the population. Furthermore with such high saturation, the enemies only need to land the same few lucky shots to cause catastrophic casualties. When people start to die in big numbers, morale will be affected. The first Iraq War ended soon after the bunker buster bomb took out the air raid shelter of the Iraqi elite. Almost immediately, the nation lost the will to fight.

But long before the first shot is fired, if there is any sign of hostility, trade and investment will dessert the region (not just Singapore). Everyone will suffer but our neighbours can still live off their lands, what are we going to eat? The mere threat of hostility is enough to damage Singapore badly.

So it does pay in invest in diplomacy and investments to make everyone a stakeholder in the region's prosperity. Most rational people are unlikely to shoot their own foot. It is enough that the defence force and arsenal is a deterrent to any potential belligerent. We should not go overboard to spook our neighbours leading to an arms race. It's like the US today, when all your neighbours starting walking around their frontyards with guns, you feel the need to arm yourself too.

Kojakbt said...

"We should not go overboard to spook our neighbours leading to an arms race. It's like the US today, when all your neighbours starting walking around their frontyards with guns, you feel the need to arm yourself too."

Well said. Now both our neighbour in the north and us have submarines. What's next? Nuclear weapons?

Anonymous said...

" Scrutinising the nickels and dimes given out to the poor while taking big risks with state reserves simply makes no sense...."

Penny wise Pound Foolish it is.

Anonymous said...

I suggest we do away with conscription and start developing a regular Tri-force comprising 35,000 army double as peace time police and SCDF, 5,000 Navy and 2,500 air force double as coast guards and airport marshals and a 100-member diplomatic and intelligence team to safe guard our sovereign rights and gather information on imminent threats.

Anonymous said...

Look at our geographical location. Cut off water and foods supplied through blockage and we will be dead. How to feast on rifles, ammunitions, tanks and airplanes?

How to have good relationship with your neighbours when your neighbours knew that you have so much weapons in your backyard?

How to have peace when everyday you are preparing for and to war?

Does our pinkie general and his paper generals have basic common sense?

Kojakbt said...

A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death.

- Martin Luther King, Jr., 1967.

Anonymous said...

On defense,

Can we pay China $1 billions per year for people liberation army to protect us?

Since this type of thing already happens, and national service is meaningless.

http://img522.imageshack.us/img522/8976/prcchineseonly.jpg