U.S. Debt - Too Much, Too Late?

Discussion about the U.S. debt and perennial budget deficit have been simmering for some time. But the U.S. debt is not simply a crisis of the last few decades. For most of the history of the country, the U.S. has had a public-sector debt. The last time we were debt free? Under the administration of Andrew Jackson, in 1835.

Public sector debt is practically a given of modern economies. Germany, often hailed for its robust domestic industrial sector and exports, has a 72 percent debt/GDP ratio. Japan, once though of as an unstoppable juggernaut producer of modern consumer goods, has a staggering 189.3% debt/GDP ratio. As of 2009, the debt/GDP ratio of the U.S. is 54.6 percent. Although factoring in intra-governmental obligations, the percentage increases to 86.1 percent. Although final figures aren't in yet for 2010, estimates are gross debt will rise to 94 percent, and public debt to 63.1.
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Is it realistic that the U.S. will ever be debt-free again? Perhaps not, given the way modern economies are now structured. But what's not up for debate is that our overall debt level is approaching dangerous levels, made even more ominous by the the fact that the U.S. dollar is still the world's largest reserve currency, although its status and percentage has declined in the last few years, from 70.9 percent in 1999 to 62.2 percent as of 2009. The biggest gainer? The Euro, which has gone from 17.9 percent to 27.3. But considering all the drama and turmoil in Greece and other distressed Euro-zone economies, is the Euro really an attractive and viable alternative to the Dollar?

What needs to happen, as unpopular as it may be, is massive cuts in government expenditures, and increased tax receipts. This is essentially what has been proposed by the debt commissions, Domenici/Rivlin and Simpson/Bowles. The left is unhappy at the prospect of lower taxes on business and cuts to key entitlements like Medicare and Social Security, and the right is incensed at the elimination of popular deductions such as the mortgage interest deduction, and hikes in the capital gains and dividends rates to the same level as regular income.

If we had been more judicious and less entitled over the past few decades, we may have been able to avert the crisis we're now facing. But the fact is, we're here, and we're going to have to deal with the mess we've made for ourselves. Although I'm admittedly not thrilled at the prospect of paying higher taxes, if the government makes good on its promises of drastic, structural spending reductions, it's a small price to pay for the U.S. to retain its overall economic health and future stability.

What do you think? Are we headed toward the inevitable abyss to permanent decline, or can the U.S. turn itself around before it becomes relegated to second-tier status in a world dominated by Asia and Europe?

Chevy Volt - Progress or Pork?

The seeds of this story were planted about two years ago as General Motors came hat in hand to Washington D.C. and asked for a bailout from Uncle Sam. GM, along with Chrysler, were unable to turn the ship around using conventional means. The sole holdout from direct Federal money and oversight, Ford, has since rallied strongly, and has gained untold goodwill from Americans that respect their ability to slog through the tough times without government help.

But well before bankruptcy was imminent for GM, the Volt plug-in concept was unveiled in 2007, and public reception was overwhelming. This concept promised the best of both electric vehicles, and conventional gasoline-powered cars. Up to 40 miles of gas-free driving if plugged in every night, but the ability to travel more than 300 miles on a tank of gas in "range-extended" mode.

There was a lot of symbolic and emotional baggage hanging on the development of the Volt, considering the (literally) crushing end to the EV1 program in the late 90s. There were a lot of doubters that GM would actually come through, and if they did, it would be a tightly-managed program of lease-only vehicles that would have to be returned after a given time. Thankfully, this time around, it appears as thought the Volt lease and purchase programs will be comfortingly conventional.
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The Volt has just garnered three significant automotive awards. Motor Trend's Car of the Year, Automobile Magazine's Automobile of the Year, as well as Green Car Journal's Green Car of the Year.

Of course, those of the conservative persuasion are generally immediately suspicious of this car's credentials, or the impetus behind its creation. Some are calling it the "Obama-mobile" or other pejorative terms.

The fact of the matter is, the research and development process on the Volt started well before the Obama administration, and GM's bankruptcy. The fact that development continued on this vehicle through the midst of GM's financial travails carries either negative or positive connotations depending on how you view the logic behind the concept.

Angus MacKenzie, editor of Motor Trend, in a video interview on the Fox Business channel, frankly stated that the combined appetite for new cars from the BRIC bloc of nations (Brazil, Russia, India and China, in case you didn't know) will almost assuredly drive up the price of oil in the years to come. Likely pushing the per-gallon cost of gasoline well beyond the peak of $5 we saw a few years ago. So although the logic and value equation of the Volt seems a little dubious with gas at $3 a gallon, it will probably start making a lot more sense at $8 or $10 a gallon.

Personally, I'm willing to set aside the philosophical objections to GM's bailout, and giving them credit for having the foresight and courage to produce such an advanced vehicle before the need for it is considered critical. Not to play in to the fears of the environmentalist Cassandras, but I feel the time is coming soon when China and India's appetite for middle-class amenities (namely, cars) will have a profound impact on the price of oil, and the United States will find itself in an era of forced frugality. Those with fuel-efficient vehicles will motor through largely unaffected, and those stubbornly hanging onto large-displacement full-size cars and trucks as their primary transportation will have to confront some serious decisions. For everyone's sake, I hope the predictions of astronomical fuel prices turn out not to be as dramatic as some expect. But in the meantime, I'm taking a serious look at putting a Volt in my garage.

After 4 Months with the iPad

Hello. Me again. Yes, it's been a while since I've posted. For all five of you that read my posts, I apologize for the excessive gap in my postings. I really have no excuse, and the reason I'm posting once again is that I looked in my bank account and realized that the auto-renew for my domain had come up again, so I rationalized, "I'm paying for it, I might as well do something with it."
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At any rate. Just to update you guys, I did end up buying an iPad 3G. The big-daddy 64GB. Yep, top-of-the-line. I figured the better I get now, the longer it will be until it's obsolete. At least that's the rationale I told myself when I shelled out the nearly $900 for it. Well, after having lived with it for almost five months, and traveling with it, I have a few observations.

At first, I thought the form factor was too small. Ironically enough, it seems most of the tablet computer competitors coming out are smaller than the current iPad, so perhaps I'm in the minority in my opinion. I guess it's because I come from the publishing industry, and it's a smaller form factor than the standard 8x10"-ish magazine. But with the pinch-and-zoom feature of the iPad, I think the size is just about right for magazine reading. I've subscribed to four periodicals through Zinio, and I think the iPad finally makes the concept of online magazines make sense. Frankly, reading a magazine on a laptop felt needlessly contrived and wonky to me. Reading magazines on the iPad seems much more intuitive and natural.

Some have complained that the iPad seems too heavy. I can't say I disagree with them. It definitely has a heft to it that surpassed my expectations from its modest form factor. But compared to a netbook or laptop, it's quite trim, in both form and weight. It probably didn't help that I also got one of the heavier, bulkier cases on the market for it, the Quirky Cloak. However, I bought the Cloak specifically for it's ability to stand upright in a portrait (vertical) orientation. I don't regret my purchase of it, but combined with the beefy heft of the iPad itself, it is a somewhat heavy combination.

I have downloaded some movies that I've watched on a plane, and it's a surprisingly immersive experience from the 9.7-inch screen. However, I would recommend some ear-covering or noise-canceling headphones for the best airplane movie experience. I've tried it with both foam-padded earphones and earbuds with silicone covers, and neither were particularly effective at blocking out the ambient plane noise.

I downloaded the now-ubiquitous game Angry Birds, and found it to live up to its addictive reputation. I have not played the game on an iPhone or iPod touch, but the iPad makes for a comfortable form factor for this game.

I used the Skype app on my trip to Europe, and it saved us quite a bit on long-distance fees. However, call quality is dependent on the strength of the available WiFi signal, and can sometimes cut out and give a robotic-sounding voice signal. Also, some hotels' in-room WiFi service require that you physically connect an ethernet cable to your computer to configure it, which is obviously not an option on the iPad. Particularly in France, where the device was not yet very common at the time of my trip, the hotel staff seemed somewhat puzzled on what to tell me to get service on it. In retrospect, I probably could have configured the WiFi without a physical connection, but I was too busy out doing the usual touristy things to bother with it.

In terms of some of real or perceived shortcomings of the device. Many have lamented the lack of any kind of camera on the first-generation iPads. I can't say this was a dealbreaker for me one way or the other. Would it be a nifty feature to have? Sure. It would definitely facilitate teleconferencing and video-chatting.

The other biggie is the lack of multi-tasking, at least with the 3.2 OS. The coming iOS 4.2 upgrade promises to allow multi-tasking, and should address that specific criticism. That said, you can listen to iTunes while reading books or magazines, since it's a native app. However, you cannot simultaneously run two third-party apps currently. I am eagerly awaiting this update, as it will allow further listening options beyond iTunes while reading.

So…to answer your inevitable question…Should you buy one? I would say at this point, if you've lived without one up to now, and haven't had a burning, insatiable desire to have one right away, I would hold out for the almost-inevitable second-generation model, likely due sometime in the first quarter of 2011. This model will likely have front and rear-facing cameras, as well as iOS 4.2 installed natively. More memory is probably a given as well. But if the idea of a multi-application device that can easily replace a laptop while traveling appeals to you, then it's probably worth it to get one. Finally, between the 3G and WiFi models…if you're frequently on the road in remote areas (away from WiFi hotspots) the added convenience of 3G is probably worth it. If not, save the money and get the WiFi.

Although I am an admitted fan of Apple products in general, I hope you found this review at least somewhat objective and helpful. Until next time...

Illegal Immigration - A Different Take

With the passing of Arizona SB1070, the issue of illegal immigration has once again been thrust to the forefront of the national discussion. With an estimated 10 million-plus undocumented immigrants in the United States, despite the wishes of politicians on both parties, the issue is certainly not going away anytime soon. The poor economic conditions of the last two years, and the increasing drug-related violence near the border has exacerbated the issue.
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The political solutions offered in the U.S. are predictable on both sides. On the left, calls for "comprehensive immigration reform" largely consist of large-scale amnesty of illegals currently residing in the states. On the right, large-scale deportation, and reinforcement of the border wall are the primary solutions offered. Of course, these are over-simplified generalizations for the sake of brevity.

However, the one proposal I have not heard from either side, is large-scale aid to Mexico, to help improve economic and living conditions south of the border. Now, I can hear the critics already..."Trust the Mexican government with billions in aid? Ha!" Admittedly, the Mexican government does not have the best track record of prudent fiscal management. The nationalization of the oil industry in 1938 could have potentially made the modern Mexican state a model of prosperity and development in Latin America. Instead, Pemex has become the honeypot of the political elite.

Some would say that giving aid to Mexico for internal self-improvement is tantamount to rewarding bad behavior, as the Mexican government has openly flouted U.S. immigration policy, and has in fact encouraged its citizens to migrate northward, whether by legal or illegal means. Remittances from the U.S. represent 3 percent of the entire Mexican GDP, and surpass direct foreign investment by nearly 30 percent.

Clearly, this is a dysfunctional relationship. Improvement of living conditions in Mexico would likely reduce the influx of illegal immigration. But simply giving Mexico a carte blanche with no strings attached would not accomplish anything substantive, other than increasing Mexico's dependency on the U.S. either directly or indirectly.

The aid would need to be supervised, as well as multi-faceted. The key areas I would direct the aid would be infrastructure, security/defense, and education. I am not enough of a scholar of global economics or diplomacy to make any definitive recommendations in terms of which domestic or international agencies should be in charge of meting out the aid. But supervision and direction would be key to making these initiatives effective.

I want to hear your thoughts. Are my proposals too far-fetched? Long overdue? Hopelessly naïve? Please leave your comments below.