I have a theory (mind you I will post no links and I am at best an amateur economist) about our economy. I think our economy is in the dumps in large part because investors see that the present American system is unsound. The government has a bunch of former CEOs (many still getting deferred money from corporations while in appointed or elected office) in charge of regulating industry. This gives a feeling of a fixed game and if you don't know the details of the fix why plunk down money into the game?

We are peddling tax cuts without spending cuts in the name of stimulating the economy. The cuts are reshaping the tax structure to reduce the percentage of taxes paid by the very wealthy even though the very wealthy increased their income at a phenomenal percentage in the 1990s.

We lost an opportunity to deal with some major problems that will be arriving soon by passing a tax cut instead of trying to pat off our debt. This virtually ensures that Social Security will run huge deficits that will overburden the next generation's ability to pay for the system effectively.

We are instead running up a new round of debts and we are creating an unstable environment around the world with an aggressive and uncooperative foreign policy.

So I say that investors will look for their next best options and start moving their capital to other markets until things change in the US. The Euro is presently passing its launch value of $1.20.

The debate?

OK, the last thing we need is a tax cut. We need to balance our budget and set ourselves on an even keel to deal with Social Security and our crisis in medical care. The democratic leaders are characteristically focusing their criticism on the wrong issue. The tax cut is not bad because is benefits the wealthy. This is a rigged argument. Any tax cut will favor the wealthy because the wealthy pay most of the taxes. The tax cut is bad because we are in the process of dramatically expanding government expenses and every extra dollar of the budget that has to go to interest is a dollar we have to pay in the future without getting anything in value in terms of services.

I once spoke to the undergraduate dean of Economics at the University of Houston who claimed connections with insiders in the Reagan Administration. He stated they never truly believed that tax cuts would pay for themselves. What they did believe was that deficits were needed to insure less government spending, in the long-run.

It would be much better, as Greenspan has recently pointed out, to cut government programs (spending cuts) along with tax cuts. Unfortunately, Reagan would not spend political capital by actually cutting government. I believe both the Reagan and current Bush administration have the same basic premise, cut taxes now, let another administration cut government, or hope that deficits do slow the growth of government.

The doom and gloomers should remember our Debt to GDP ratio was at it's highest after WWII, what followed was arguably 50+ years of relative prosperity. The hang up this time is Social Securityx, this Ponzi scheme needs a radical overhaul, or we better open up our borders to new contributors.

I find social security to be a valuable program and I do believe that this is a system that is designed to force program cuts in the future. But this Bush president seems to not only avoid the cuts in programs that would be needed to pay for tax cuts, but his administration seems quite comfortable expanding the size of the government.

And Hugo, remember that those years of prosperity (1945-1970) were fueled by the government programs that you seem to despise.
GI Bill, Interstate Highways Construction, Defense Spending (I would guess you were okay with this aspect), and assistance for housing construction/purchasing.

The GI Bill was the most expansive piece of social welfare that we have had to date. It also gave us an educated class that was capable of leading the transition from an industrial economy to a service economy.

Social Security can be fixed by privatization, the government could even force individuals to keep 80% of their investments in bonds, to avoid the naysayers who claim the stockmarket is too risky. (It probably is for those within 10 years of retirement)

Actually I also support public roads, their are functions of government. We have even more government programs today if the economy is fueled by government programs. There is no question an educated workforce is a requirement for a successful economy. Studies have shown that college aid programs are usually regressive in nature; the middle class and wealthy reap most of the benefits. The economy then, as now, is fueled by private enterprise; government when fulfilling it's proper duties can assist private enterprise

It is correct that this administration is on a credit card binge. The biggest problem we face is SS, it can be solved.