Pakistan versus America | We are not all that different.

[Kompromat]

Pakistan versus America: We are not all that different

MURTAZA HAIDER

A poorly managed country is the one that runs deficits year after year. By that account, the US and Pakistan are not much different. Both have run deficits for years. So, why is the US the land of opportunity and Pakistan is labelled as a financial basket case?

The US federal government is facing default. The US Treasury’s borrowing authority needs to be extended to avoid default and to re-open the federal government, which save for the essential few services, has effectively been under a shutdown. The Democrats and Republicans are fighting over fiscal plans. The Republicans control the US Congress and are unwilling to extend the debt ceiling until they are able to limit the extent of President Obama’s healthcare plan. The result is a fiscal gridlock where credit rating agencies are threatening to downgrade the US credit rating.

It is an inescapable truth that Americans (businesses, households, and governments) are spending more than they earn. The indebtedness of American households has been on the rise as well. The American household debt stands at 95 per cent of the GDP. Their federal government is no different. The Federal Reserve estimated in 2009 that the total debt owed by US households, businesses, and governments equalled $50.7 trillion, which was roughly 3.5 times the annual US GDP. Despite the dismal state of fiscal affairs, the US is deemed a superpower. With a similar fiscal outlook, Pakistan though is considered to be in the dumps. What gives?

The recent shutdown of the federal government exposes the poor state of affairs in the US. Despite the repeated assertions by the American presidents, both Democrats and Republicans, that the State of the Union is strong, all has not been well for decades. The US budget deficit has been looming over the years and has reached alarming proportions. In fact, the US federal government has run annual budget deficits in 36 out of the past 40 years.

Last year, the US budget deficit stood at $1.1 trillion. The federal government raised $2.45 trillion in taxes, but spent $3.54 trillion. According to the Congressional Budget Office (CBO), public debt in 2012 totaled $11.3 trillion, whereas the total national debt stood at $16 trillion. In the business as usual scenario forecast, the national debt will expand to a whopping $25 trillion by 2022.

Debt levels in the US have been on the rise for over six decades. The total US debt in 1946 was 150 per cent of the GDP. Most of the debt then was held by the federal government. Today, the total US debt is 350 per cent of the GDP. The debt held by the financial sector stood at 109.5 per cent of the GDP in 2009. Again, in 1946 the financial sector debt amounted to only 1.35 per cent of the GDP.

The US credit binging has not gone unnoticed by the international regulating authorities. The IMF got spooked by the US insatiable appetite for credit. It accused the US of lacking a “credible strategy” to reign in its mounting public debt. According to the Financial Times, the IMF was of the view that, Pakistan’s fiscal outlook is no different. Year after year the amounts raised from taxes fell short of the total cash outlay planned for in the budgets. The result, the government ran budget deficits each year. The IMF and other lenders have been mindful of the rising debt levels in Pakistan and have therefore warned of dire consequences.

Why is it then, that the two countries have substantially different reputations?

The answer perhaps lies in the willingness of others to continue offering debt to cover one’s shortfalls. Globally, lenders remain willing to lend even more funds to the United States. China alone holds $1.2 trillion of the US debt, which is more than the US debt held by the US households ($959 billion).

So let me try to answer the riddle once again. A poorly managed country is not the one that runs fiscal deficits year after year. It's the one that others refuse to lend to. Otherwise, Pakistan and the US are not all that different.

__________________________________________________________________________

Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto.


Pakistan versus America: We are not all that different - DAWN.COM

 

[Panther 57]

Pakistan versus America: We are not all that different

MURTAZA HAIDER

A poorly managed country is the one that runs deficits year after year. By that account, the US and Pakistan are not much different. Both have run deficits for years. So, why is the US the land of opportunity and Pakistan is labelled as a financial basket case?

The US federal government is facing default. The US Treasury’s borrowing authority needs to be extended to avoid default and to re-open the federal government, which save for the essential few services, has effectively been under a shutdown. The Democrats and Republicans are fighting over fiscal plans. The Republicans control the US Congress and are unwilling to extend the debt ceiling until they are able to limit the extent of President Obama’s healthcare plan. The result is a fiscal gridlock where credit rating agencies are threatening to downgrade the US credit rating.

It is an inescapable truth that Americans (businesses, households, and governments) are spending more than they earn. The indebtedness of American households has been on the rise as well. The American household debt stands at 95 per cent of the GDP. Their federal government is no different. The Federal Reserve estimated in 2009 that the total debt owed by US households, businesses, and governments equalled $50.7 trillion, which was roughly 3.5 times the annual US GDP. Despite the dismal state of fiscal affairs, the US is deemed a superpower. With a similar fiscal outlook, Pakistan though is considered to be in the dumps. What gives?

The recent shutdown of the federal government exposes the poor state of affairs in the US. Despite the repeated assertions by the American presidents, both Democrats and Republicans, that the State of the Union is strong, all has not been well for decades. The US budget deficit has been looming over the years and has reached alarming proportions. In fact, the US federal government has run annual budget deficits in 36 out of the past 40 years.

Last year, the US budget deficit stood at $1.1 trillion. The federal government raised $2.45 trillion in taxes, but spent $3.54 trillion. According to the Congressional Budget Office (CBO), public debt in 2012 totaled $11.3 trillion, whereas the total national debt stood at $16 trillion. In the business as usual scenario forecast, the national debt will expand to a whopping $25 trillion by 2022.

Debt levels in the US have been on the rise for over six decades. The total US debt in 1946 was 150 per cent of the GDP. Most of the debt then was held by the federal government. Today, the total US debt is 350 per cent of the GDP. The debt held by the financial sector stood at 109.5 per cent of the GDP in 2009. Again, in 1946 the financial sector debt amounted to only 1.35 per cent of the GDP.

The US credit binging has not gone unnoticed by the international regulating authorities. The IMF got spooked by the US insatiable appetite for credit. It accused the US of lacking a “credible strategy” to reign in its mounting public debt. According to the Financial Times, the IMF was of the view that, Pakistan’s fiscal outlook is no different. Year after year the amounts raised from taxes fell short of the total cash outlay planned for in the budgets. The result, the government ran budget deficits each year. The IMF and other lenders have been mindful of the rising debt levels in Pakistan and have therefore warned of dire consequences.

Why is it then, that the two countries have substantially different reputations?

The answer perhaps lies in the willingness of others to continue offering debt to cover one’s shortfalls. Globally, lenders remain willing to lend even more funds to the United States. China alone holds $1.2 trillion of the US debt, which is more than the US debt held by the US households ($959 billion).

So let me try to answer the riddle once again. A poorly managed country is not the one that runs fiscal deficits year after year. It's the one that others refuse to lend to. Otherwise, Pakistan and the US are not all that different.

__________________________________________________________________________

Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto.


Pakistan versus America: We are not all that different - DAWN.COM

It is estimated the Arab world has a deposit of US$350 trillion in US banks. If that money is pulled out at this stage (which US will never let it happen) then USofA is doomed.

 

[Kompromat]

It is estimated the Arab world has a deposit of US$350 trillion in US banks. If that money is pulled out at this stage (which US will never let it happen) then USofA is doomed.

That seems a bit exaggerated.

 

[Chinese-Dragon]

Because America was running surpluses until at least the early 1990's.

Their recent record-breaking and chronic deficits are a fairly recent thing. Even up till 2011 they were still the number one biggest manufacturer in the world, only recently surpassed by China.

And a decade ago, in the year 2000, the USA had a budget surplus of $236.4 Billion. If you adjust for inflation, that was in fact a surplus of $320.76 Billion.

So until fairly recently, they were able to control budget spending and even had a surplus. Today though, they have an enormous budget deficit AND trade deficit. Their government revenues and exports are still massive of course, but their government spending and imports are higher.

 

[A1Kaid]

It is estimated the Arab world has a deposit of US$350 trillion in US banks. If that money is pulled out at this stage (which US will never let it happen) then USofA is doomed.

$350 trillion, I don't even think such a monetary value is even in existence, in fact it isn't. I think you must mean $350 billion, which is far more believable.

 

[AUz]

Just to put things in perspective...

TOTAL WORLD GDP output is around $70 trillion...

so I don't know how Arabs can have $350 trillion in U.S banks

Anyways, Arabs don't own anything...All their money, assets in West are at the behest of West...Arabs don't mean much..

 

[jhungary]

Actually America did better, a lot better than I imagine, don't forget we are fighting 2 wars in the whole 2000s and we recently finished one and the other one is concluding next year. And we only have a 16 trillion debt

After we got out of WW2 our debt to GDP ratio is at 110% compare to 68% now

I figure the figure of debt will drop in the years after we pull out of Afghanistan, of course, until the next war hits

 

[Panther 57]

Because America was running surpluses until at least the early 1990's.

Their recent record-breaking and chronic deficits are a fairly recent thing. Even up till 2011 they were still the number one biggest manufacturer in the world, only recently surpassed by China.

And a decade ago, in the year 2000, the USA had a budget surplus of $236.4 Billion. If you adjust for inflation, that was in fact a surplus of $320.76 Billion.

So until fairly recently, they were able to control budget spending and even had a surplus. Today though, they have an enormous budget deficit AND trade deficit. Their government revenues and exports are still massive of course, but their government spending and imports are higher.

My dear wars are enough to bring down anyone on their knees. Most of the perceived infallible empires perished because of wars.

 

[Panther 57]

$350 trillion, I don't even think such a monetary value is even in existence, in fact it isn't. I think you must mean $350 billion, which is far more believable.

Sometime in the heat of moment one does commit typographical errors.