No, it is not useful. As someone with an economics degree I can tell you with authority that comparing the finances of a city to the finances of a nation is absolutely and utterly asinine.
You see similar memes on the Internet, made by conservatives, comparing the national economy to a household budget. It's just laughable.
Regardless, there are certainly economists with more than an undergraduate degree in economics who have held out Detroit as a warning for the US debt problem. Do you have more authority than Rachel Greszler who has a masters in Economics from Georgetown? I know, you'll disregard her because she works for an conservative group. Just be honest and acknowledge that this is about a political difference, not an authoritative truth.
http://blog.heritage.org/2013/08/05/morning-bell-learning-fr...
No, but Paul Krugman does. He's a Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University and a Centenary Professor at the London School of Economics. Oh, he also won the Nobel Prize in Economics back in 2008. Suffice it to say, he has more than a simple Master's degree from Georgetown. Here's what he has to say on the subject.
http://www.nytimes.com/2012/01/02/opinion/krugman-nobody-und...
In light of your high-horse comment, I found this part especially funny.
"Perhaps most obviously, the economic “experts” on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!"
>>Edward L. Glaeser is a professor of economics at Harvard University, a City Journal contributing editor, and a Manhattan Institute senior fellow.
Ah, yes. The Manhattan Institute. Why am I not surprised?
http://en.wikipedia.org/wiki/Manhattan_Institute_for_Policy_...
It's kind of funny how both economists you have cited so far can have their ideologies traced to some economically ultra-conservative think-tank. These are people who believe strongly in small government (in other words, are strongly political) and write countless articles that are anti-government spending so that they can "starve the beast."
Other posters say Krugman is largely an opinion writer now and you reject the economists others mention as they hold political beliefs you don't like.
This is pretty much why most political and economic discussions are a waste of time, particularly on the internet.
I have to disagree. It was meandering and had little to offer in terms of evidence, facts or actual policy prescriptions and was instead filled with anecdotes that somehow ended up supporting policy positions already supported by the Manhattan Institute. The author jumps from charter schools to federally funded highways in a span of a sentence right at the end. Not a lot of evidence is offered that local regulation is somehow strangling entrepreneurship nor is his idea of denying federally supported bonds to over regulated entities ever elucidated in any fashion. (Maybe because sticking local communities with higher taxes is rather counterproductive in the first place). So basically he spends most of piece talking about the 'entrepreneur' as a mythical entity that deserves to be supported by a verifiable buffet of policies that aren't really explained. So the Think of the Children!! argument rehashed.
The article reads exactly like a lot of cookie cutter political writing these days that say absolutely nothing about anything of concrete importance but are just couched to ideological compatriots that enjoy light reading from authors who will appeal to their political vanity while safely holding all the 'bad' ideas at arms length by appealing to the most simplistic possible explanations of problems; while you the reader are serenaded for easily understanding what your political 'enemies' cannot.
Yeah, I was being sarcastic when I said it is "interesting." You're spot on in your analysis.
But he's correct. It's one of the most ridiculous arguments perpetuated. Comparing a city (or a household) with an entity with the capacity to print the currency in which its debts are denominated is nonsensical. Solvency and bankruptcy are a not an issue for the United States. The constraint is inflation.
The whole country can't stop spending at once. The sooner people realize that public deficits create private financial assets, and hence are necessary during recessions, the better we'll all be.
As far as your article, anyone who considers "unfunded obligations" to be debt is not worth listening to.
The goal is to avoid a debt crisis entirely. Detroit and the US are both spending themselves into a debt crisis. That different solutions apply once the crisis is reached is true, but the analogy holds when you are looking at the cause and hopefully avoiding the crisis.
Do you have any data that the US is on its way to a debt crisis?
It sounds to me you're just repeatedly and wrongly assuming that we're somewhere near a point where paying our bills is an issue. Like Detroit. Except Detroit is bankrupt, and the US is growing.
There is no similarity between "debt issues" of Detroit and the US. None.
$16,744,814,606,837.32
Or how about a quotations from our president:
The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.
That does not point to a crisis.
>>Or how about a quotations from our president:
When you grow older (snicker) you might learn how to distinguish rhetoric from fact.
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/11/w...
Many of the points distinguishing a household from the federal government also apply to the task of evaluating how much the later is like a municipality.
"Bankruptcy" is just the sovereign conditionally permitting a debtor to repudiate (some or all of) its existing debt, and is only relevant because, in the absence of bankruptcy, the sovereign would instead be enforcing the existing debts.
As a sovereign state, the US doesn't need bankruptcy; if it chooses to repudiate its debt, it just does so, it doesn't need to ask a higher sovereign for permission or terms (it might choose to negotiate with other creditors to maintain good relations, but that's something any debtor can do short of bankruptcy.)
However, it's worth pointing out that the idea of national-level bankruptcy isn't _entirely_ meaningless. The other thing the bankruptcy process does is provide an orderly means of distributing what funds are available amongst creditors, directed by a theoretically neutral third party.
There is sometimes discussion of creating an inter-national (ie, between nations) bankruptcy process, to make defaulting on national debt a more orderly (and, at least in rhetoric, a more fair and just) process.
They haven't gone anywhere for a variety of reasons, and even in proposal it would have to be a pretty different process from ordinary bankruptcy, because indeed sovereign entities are so different in their relationship to debt and financial equity than non-sovereign entities as you note.
(And possibly because the idea of the _liquidation_ of a nation state has rather terrifying implications for democracy, but I don't think that actually puts much pause in the those who run things.)
(And, then, as you mention, there's the fact that the US's debt is in it's own currency; AND most of our creditor's debts are in _our_ currency too. Which puts the U.S. in a unique class of it's own, even among sovereigns. And generally, means nobody anywhere actually wants the U.S. to 'pay its debt'.)
Default has rarely been considered an act of war except when the default was on debts incurred as part of a peace settlement, and its not like anyone is in a position to take much substantive action because they "consider" a US act to be an act of war.
> Things would have to be very, very bad for things to go that far.
Well, its not going to happen in practice in any case, because the US debt is dollar denominated, and if it was necessary, it could be monetized (not that it would have to be: creditors would probably prefer to allow the US to restructure debt rather than encouraging monetizing it, since many other debts are dollar denominated, and for most creditors it would be better for the US debt to be devalued through restructuring than for all USD-denominated debts to be devalued by monetization.) Sovereign default is mostly an issue with countries whose debts are denominated in something other than their own national fiat currency.
The US needs to run larger deficits until we are at full employment. A simple way to do that is to eliminate the payroll tax both on employer and employee side. This will stimulate demand, and demand is the name of the game in this era of high productivity.
if you're a debt/deficit hawk, please read this: http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
What does "escape" mean in this context? Bankruptcy means that bondholders and other investors get stiffed. That's a rather one-sided view of the outcome, and will itself have economic consequences beyond The City of Detroit.
There is no "escape". Bankruptcy, while necessary, picks the wrong winners.
Currently, Americans are renouncing their citizenship at record levels due to FATCA[1] and emigration from the US is at elevated levels since it spiked in 2009[2].
[1] - http://money.msn.com/now/post--more-americans-are-renouncing...
I don't know of a way around this.
But that would be an exponential increase, an increase without bound that would sweep past 100% as if it was standing still.
If a candidate won a substantial majority in one election, that rule might decrease his chances to be re-elected because the stakes would be raised in the following contest. So being popular would count as a handicap.
More to the point, he would have to be 5% more popular each time he ran. That's not likely. And eventually he would have to win more than 100% of the vote.