By Considering all the demonization lately of credit card companies, I find this factoid quite interesting:
The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new White House estimates. Budget office figures released Monday would add $89 billion to the 2009 red ink — increasing it to more than four times last year’s all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.
The unprecedented deficit figures flow from the deep recession, the Wall Street bailout and the cost of President Barack Obama‘s economic stimulus bill — as well as a seemingly embedded structural imbalance between what the government spends and what it takes in.
As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.
Just a few days ago, Obama touted an administration plan to cut $17 billion in wasteful or duplicative programs from the budget next year. The erosion in the deficit announced Monday is five times the size of those savings.
For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration’s plan. In 2010, it would borrow 35 cents for every dollar spent. [Associated Press]
Who would own a credit card that you have to pay 46 cents back on for every dollars spent? I’m not an economics major so can someone please explain to me how this makes good economic sense?
10:23 pm on May 11th, 2009 1
It doesn't.
I guess United States didn't learn the lesson that communism doesn't work.
9:27 am on May 12th, 2009 2
I don't think of it as credit card debt. I think of it as taking out a business loan. The country is going trough an economic overhaul comparable to restructuring a business. Almost all such efforts expect to operate in the red at first with plans to be in the black after a few years.
Opponents of the administration say they hope the business plan fails. Make of that what you will.
BTW. The old economy was financed largely by debt too, except it was a lot foreign debt. Especially to that still communist country; China, who we will still have to repay and with interest. However, most of our near future debt will be from American taxpayers until we become an attractive foreign investment again.
If the business plan succeeds, Americans will receive more of the dividends.
Think of that 46 cent as an investment in our own future.
10:44 am on May 12th, 2009 3
"Opponents of the administration say they hope the business plan fails. Make of that what you will."
I make that a lie. Some, and a very small number of opponents who have been heavily attacked for that position have made that claim. Others are concerned by a plan with little accountability that puts a heavy tax burden on future generations and is questioned by many prominent economists.
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Try this one on for size "supporters of the Administration paint anyone who is concerned with a plan that does not make economic sense as opponents as hoping the government will fail."
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I sincerely hope that the United States pulls itself out of the current fiscal debacle. However, hope is a feeling and state of mind not a method for success. I have concerns with a plan riddled with earmarks for a single party that wrote the plan in secret without public debate.
10:56 am on May 12th, 2009 4
Eventually there will be way too much money floating around and inflation will kick in big time. Ask Mugabe in Zimbabwa. I believe a billion in Zimbabwa now will by about 3 eggs. They just printed a new trillion dollar note.
3:14 pm on May 12th, 2009 5
And it was always the Americans who were giving Koreans how to run their economy, raving and whining why Koreans don't adopt western spending habits.
11:55 pm on May 12th, 2009 6
Not that I am a Rush Limbaugh fan because I can count on one hand how many times I have listened to him since I am at work all day, but he clearly said that if President Obama's economic plan was to implement socialism then he hoped it failed. His words have been intentionally misquoted over and over again to him wanting Obama or America to fail which isn't true.
6:21 pm on May 13th, 2009 7
In a recession/depression deficit spending makes very good economic sense under most mainstream economic models. It helps to make up the output shortfall and prevent an economy from getting trapped in a downward spiral (the "paradox of thrift"). When the economy is good, however, you want to run a balanced budget or surplus because that will help prevent the economy from overheating or developing bubbles and thus setting up the next recession to be worse than it has to be.
In other words fiscal policy can be somewhat effective at managing and moderating the business cycle. And right now it is one of the government's main tools since monetary policy measures are tapped out.
On balance I think Obama's proposed budget deserves to pass. Obviously piling up these huge deficits is risky, but slashing the budget or implementing a spending freeze would be even riskier. The current economic crisis is gigantic, complex, and very unpredictable and there are no guaranteed solutions. We can only choose the options that are more likely to work than not.
1:03 am on May 17th, 2009 8
"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money." – Alexis de Tocqueville
4:35 am on May 17th, 2009 9
I think Congress knows already. (ask Murtha).