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#1 User is offline   MTP Reggie 

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Posted 03 December 2018 - 07:55 AM

Our deficits may finally be coming home to roost
BY SCOTT SUMNER, OPINION CONTRIBUTOR
12/02/18 02:00 PM EST
The Hill

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With a new Congress set to take office, the most recent projections have the U.S. budget deficit reaching nearly $1 trillion in 2019, or more than double the level of 2015. The deficit is a perennial topic of discussion for politicians, reporters, pundits and economists, yet many people have difficulty understanding why it's a problem. Spending more than we take in sounds irresponsible, but how does the deficit actually impact the life of average Americans? The downside is especially hard to see when deficit spending generates immediate benefits, while the costs occur well into the future.

The recent debt default in Greece, along with the lingering deficit crisis in Italy, has highlighted the danger of excessive public borrowing. Those countries lack their own currency, however, which makes their situation very different from that of the United States. The fact that our government is able to print money means that outright default is extremely unlikely; rather, the cost of excessive borrowing shows up in more subtle ways. These costs can, for example, show up in the form of some combination of inflation, tax increases and spending cuts. Given the political difficulty of cutting popular entitlement programs, future tax increases are more likely than spending cuts. This option imposes a burden on the private sector of the economy.

Excessive budget deficits might also lead to higher future inflation ó itself a sort of tax. However, the Fed is committed to a 2-percent inflation target, thus future tax increases again seem the most likely outcome of deficit spending. Another danger is that of deficits leading to higher interest rates, which slow the rate of capital formation, a concept called the "crowding out" of investment.

Pundits have been complaining about deficits for decades, so why haven't we already paid the price in one form or another?

It turns out that the U.S. government has been a bit less irresponsible in the past than advertised. While we run deficits during most fiscal years, they have not been large enough to push the national debt to the sorts of levels seen in Greece, Italy and Japan, which have even larger public debts as a share of national income. As with the boy who cried wolf, the public is becoming numb to the constant warnings about a debt crisis. Today, however, there really is reason to be concerned about the budget deficit.

For the first time in history, America is seeing its budget deficit rise dramatically higher during a period of peace and prosperity. While there have been even bigger deficits on occasion ó measured as a share of GDP ó they were always associated with a temporary situation such as war or high unemployment. The deficit would then shrink sharply when the economy returned to normal. The current situation is unusual because the deficit has been soaring dramatically higher even as unemployment has fallen to the lowest level since the 1960s (3.7 percent).

Unsustainable budget deficits can be seen as a sign of political dysfunction. The United States last ran budget surpluses during 1998-2001. These surpluses created fiscal space for the politically popular tax cuts and spending increases of the George W. Bush administration. Because the costs are occurring long after most of that era's politicians left office, there is little incentive for today's leaders to make the less-popular decision to re-instill discipline.

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#2 User is offline   NH Populist 

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Posted 03 December 2018 - 09:12 AM

"Unsustainable budget deficits can be seen as a sign of political dysfunction."

I suppose that's what happens when the political climate is so ugly that good, qualified people refuse to run. We end up choosing the lesser of 2 evils at the polls...:rolleyes:
Current yearly interest on our debt.

This post has been edited by NH Populist: 03 December 2018 - 09:15 AM

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#3 User is offline   zurg 

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Posted 03 December 2018 - 09:42 AM

Obama prolongs depression, Trump recovers from it. Conclusion: Obama gets credit for the great economy.

Obama doubles US debt, running it up more than other presidents combined. Trump tries to force balancing of budget but Congress has no balls to do it. Conclusion: Trumpís fault.

Itís so friggin obvious itís laughable.
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#4 User is offline   Wag-a-Muffin (D) 

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Posted 03 December 2018 - 10:25 AM

View PostNH Populist, on 03 December 2018 - 09:12 AM, said:

"Unsustainable budget deficits can be seen as a sign of political dysfunction."

I suppose that's what happens when the political climate is so ugly that good, qualified people refuse to run. We end up choosing the lesser of 2 evils at the polls...:rolleyes:
Current yearly interest on our debt.

My opinion? Good, qualified people run. They just get hounded out by the press.
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#5 User is offline   ASE 

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Posted 06 December 2018 - 10:05 PM

View PostWag-a-Muffin (D), on 03 December 2018 - 10:25 AM, said:

My opinion? Good, qualified people run. They just get hounded out by the press.

Stifle the press.
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#6 User is online   AntonToo 

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Posted 08 December 2018 - 02:46 AM

 zurg, on 03 December 2018 - 09:42 AM, said:

Obama prolongs depression, Trump recovers from it. Conclusion: Obama gets credit for the great economy.

Obama doubles US debt, running it up more than other presidents combined. Trump tries to force balancing of budget but Congress has no balls to do it. Conclusion: Trumpís fault.

Itís so friggin obvious itís laughable.


As usual you got fantasies oozing out of your ears.

You are in the company of a candidate Trump who promised to not only take care of deficit but the entire debt in 8 short years :rolleyes:

https://www.politifa.../subjects/debt/

POTUS Trump now has a slightly different take:

https://www.google.c...-report-2018-12
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#7 User is offline   MontyPython 

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Posted 08 December 2018 - 10:12 AM

View PostAntonToo, on 08 December 2018 - 02:46 AM, said:

As usual you got fantasies oozing out of your ears.

You are in the company of a candidate Trump who promised to not only take care of deficit but the entire debt in 8 short years :rolleyes:

https://www.politifa.../subjects/debt/

POTUS Trump now has a slightly different take:

https://www.google.c...-report-2018-12


And unfortunately, he never got the chance - After only two years (you can tell the difference between two and eight, right mr math expert?) the democrats are going to take over the House purse-strings. You know, the Democrats: Who never met a dollar they couldn't waste...

:whistling:
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