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Professor Paul Krugman discussed the Federal debt and GDP ratio in his blog. He compared the debt after the World War II and the debt in Ragan’s era with the debt ratio today. He concluded that Federal debt ratio go up to 70% of GDP should still manage. His opinion seriously misled people. My commends about his terrible concepts in his blog was deleted.

The major mistake he made was that he just talks about ratio we once had after the Second World and ignore the changing of environment. After the Second World War, 50% of the exported products in the world were made in the United States. Our steel, motor companies made good profit at that golden age. It helped us to pay off our debt that was above 80% of our GDP. Another thing is that GDP in those days must be much lower than today’s GDP as well as the dollar amount of debt. Lower GDP give us protencial to increase our products and lower debt amount can be handled easily. We ccn handle things then doesn’t mean that we are fine today. Ignoring the actual dollars amount and talk about the ratio is another mislead our economicists created.
We can not even compare Ragan’s era and now because China and India were still weak 20 years ago. Today, countries from all over the world export their production to the United States. Our trade deficit can go up to half trillion dollars annual. Many of our businesses move to over sea to avoid the high salary rate and high health insurance premiums.Companies that stay in America are hardly make money. The GDP they contribute have no meaning because their profit is Zero. Yet our economists still ignore the profit range and talk about GDP and debt ratio.
They said GDP and debt ratio up to 70% is OK also because Japan’s debt ratio is in that range. They forget that Japan is holding almost 700 billion dollars bonds that issued by American Government. Beside most of Japan government debt are hold by Japanses who have good savings. Unfortuntly, most of our debt are hold by foreiners.
More or less GDP reflects government’s income that can be used to pay off debts. However, we still have to know 1. How do we compose GDP? 2. How many percent of GDP is profit? Those profit belongs to whom. 3. How many percent of government’s income from GDP can be used for paying off national debt?

How do we compose GDP?  All these years, our financial institutes have no products except for making bubbles. We count their earning on the book into GDP and ignor the deficiency they created. Our agriculture products being supported by our government and create little bit profits for this country yet they have contribution to GDP. Our legal companies, insurance companies and healthy care field created unnecessary expenses for the public and their profit of cause are a part of GDP. Except military industry and some high-tech companies I don’t see that many American businesses have real profit. Warmongers will not use their income to pay off our national debt. GDP just reflacts the the economic activities and doesn’t reflact the profit range and profit distribution.
Even though we accept that 5% of our GDP is our profit and can be used to pay off our debt we are still in deep trap. Our debt is 70% of our GDP and if the interest rate of our debt is 5% it means 70% of our income will be used to pay for just interest ( debt will be still there). In another word, we have only 30% income leave for our food and shelters. This will be the picture of our children’s live in the future.

Some one may said government’s tax income in GDP obviously is higher than 5%. No matter how much government might get through tax, theoritically only government’s suplus are used to pay off government debt. The fact is that all the governments tax income have already budgeted for certain expenses. In 2010  Federal government has 140.4 billion deficit and in 2009 their tax decrease 25%. Under this kind situation, how can we pay off our debt? How can we say that National debt go up to 70% of GDP is still good to be handle?
Our economists mislead publics in a very horrible way. Being influenced by this kind of concepts, no wonder our economic collapse. When things collapse economists are the first people who run away. They will say politicians destroy people’s faith and it has nothing to do with economists’ calculation. Politicians will not run away but jump up and down. They will promise that they can solve the problem. When they can not meet their goal they step down and let the other party try. They simply fool the public by turns. Talking about GDP and debt ratio is a way they fool us at the moment.

President Obama hopes to save our economic by stimulating consumption. He is going to the wrong direction because he doesn’t even know what causes the mess. All these years Americans are mislead by our consumption philosophy. Over-consumption has created all those bad debts for our banks. Over-consumption must be back up by high salary and that forced our business to move oversea. Both our banks, our government and individual have huge debts. Yet Obama hopes to save our economic by increasing consumption. He is living in his dream and lead us to a wrong direction.

I presented my opinions about how to deal with the mess in my book “ Why Life Events are Predestined and How Our Universe Originated”. Method one is a plan that turns expenditure “multipliers” to greater than one. Basically government should turn their fund to be properties. The process will create job and the properties can turn to be income or substitute income in long term.
1) In the places where have high unemployment rate, the government can build factory facility. Let unemployed people work and receive training there. having those facilities, government can charge low rent and low tax to help manufacturers to settle down. Government can also provide minimum pay labors to work there. With low rent and low salary paid our manufacturers will have higher chance to beat the products make in foreign countries . Government later can charge rent base on the profit that the businesses make.

2) Build retirement homes provide that free to the people who willing to retire early. The projects can create jobs immediately. People who live in there can leave jobs open because they retire early. We have 100 million people over 55 years old, an age arrange that the Chinese retire at. If two percent of them willing to retire early they can provide two million jobs for the society.
Base on my research the 4.5 billion dollars we spent on ” cash for clunkers” just created a few thousand jobs for motor companies temporary. However the same amount of money can build 1000 retire home with 100 units each. It will help 100,000 people retire and leave their jobs open. It also can create 100,000 construction jobs immediately. The major point is that government didn’t lost any funds in the projects but turn their fund to be properties and became the permanent landlord. Government can provide free housing instead of pay social security checks to people.
We can improve those people’s life quality by setting up dancing, cooking, gardening course. Their income maybe reduced however with the leisure time they can chatting on line, playing chess, Poker and watching TV ect. This idea is practical because people need companies more than need money particular when they get old.
Method three can increase jobs by spending nothing.
3) We can let two people share one government jobs. Tax payer’s money should be used to benefit as many people with this kind of economic situation. New York City’s employees are taking average $100,000 salary and benefit per year. That money can support two families. Today government’s hiring are the sum of our construction and manufacture jobs. That means sharing government jobs can easily create a few million jobs for the market. It is said that decreasing one working day per week can decrease at least 10% unemployment.

It is truth that reducing our working hours will decrease our salary and result in reducing our consumption. However, it can help us to save resources on earth. Consumption philosophy is not practical because our globe does not have resources to support that kind of waist. If people in the whole world have American’s living standers resources in the earth has to increase 500%. The practical way is to encourage people learn how to live well with low cost. Reducing working hours can increasing our leisure time and that allow us to have free entertainment from Internet today.

We have to find out the reason why our government spent trillion dollars and still can not create jobs. If we go to the wrong direction it could be too late to fix the mess.  Look what we are doing now:

Our government spent 3 billion dollars encouraging people to throw away their cars. It just created about 1,000 jobs in one of the three big motor companies. The two motor companies that sold the most cars during that period were Japanese companies. Car selling dropped 17% in the month after the refund stopped.

Our government gave money to the banks hoping that they loan to business and let the business create jobs. Most of the banks have more liabilities than asset. They need money to pay for their deficiency and their huge bonus payments The banks also notice that many businesses actually have lost the function of making profit. Their loans will simply cover debt, such as what happen in Ford and GM. Banks therefor refuse to take risks.

The publics might simply save tax return from the government’s stimulus spending. Businesses that are benefited from the stimulus spending might continue to place orders in the overseas instead of create jobs in the United States where higher salary and health insurance make profit impossible.

Unfortunately, the government’s expenditure multipliers are less than one. Their plans simply hire people to repair roads and bridges and maintain green revolution. People who get jobs from these projects might spend some money, but their jobs don’t create new jobs. These projects may not even create profit. Government is the only party that carries the expense all the way down. All these stimulus spending have nothing to do with changing our investment environment. Our manufactories still stay in oversea. The businesses that stay in the United States have to face bankruptcy.  How far cans our government when itself has no money to spend?