Bush is leaving a fiscal train wreck for the next president

[fourier jr]

Maybe the US government has a "no-bad-news-allowed" policy just like the Enron execs had. Or maybe the Bush government is leaving a huge fiscal train wreck (I think that's actually a technical term) for the next president on purpose. I think everyone knows how partisan they are. Check it out:

White House sees record budget gap in 2009

Mon Jul 28, 2008 6:39pm EDT
By Jeremy Pelofsky and David Lawder

WASHINGTON (Reuters) - The Bush administration on Monday projected the U.S. budget deficit will soar to a record of nearly half a trillion dollars in fiscal 2009 as a housing-led economic slowdown cuts into government revenues.

The economic and fiscal deterioration will complicate efforts to bring the budget to balance and pose challenges for whoever takes over the White House in January, either Republican Sen. John McCain or Democratic Sen. Barack Obama.

"I believe whoever becomes the next president will have a very, very sobering first week in office," predicted Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat.

Reacting to the White House's new prediction that the budget deficit will hit $482 billion in the fiscal year that starts October 1, Conrad said that number easily could rise by an additional $80 billion when the full costs of the Iraq war are tallied next year.

The economy has been hobbled by the housing market collapse and soaring food and energy prices. In February, the Democratic-controlled Congress and President George W. Bush approved a $168 billion, two-year stimulus plan to ward off recession.

With the slowing economy and the cost of the economic stimulus plan, the White House said it thinks the deficit will hit a record $482 billion in fiscal 2009. However, it cut its forecast for the current fiscal year to $389 billion.

White House budget chief Jim Nussle cited the government stimulus checks and slower economic growth as primary reasons for larger deficits in 2008 and 2009. "The determination was made that getting the economy back on track was a higher priority than immediate deficit reduction," he told reporters.

In February, the administration forecast the deficit would hit $410 billion this year and drop to $407 billion in 2009.

http://www.reuters.com/article/topNews/idUSN2847371220080728

 

[mgb_phys]

But it's a lower proportion of the economy than the deficits in the 70s and 80s.

 

[Gokul43201]

Or maybe the Bush government is leaving a huge fiscal train wreck (I think that's actually a technical term) for the next president on purpose. I think everyone knows how partisan they are.

This is essentially the same premise that another recent thread was based upon, and is flawed for the same reason.

How surprised are you going to be if McCain inherits this debt as the next President?

 

[fourier jr]

This is essentially the same premise that another recent thread was based upon, and is flawed for the same reason.

How surprised are you going to be if McCain inherits this debt as the next President?

I only said the next president would inherit a fiscal train wreck, which is what will happen anyway. Assuming they're doing it on purpose for partisan reasons then McCain will just get a smaller fiscal train wreck. I think they've got an Enron-style "no-bad-news-allowed" rule though.

 

[sketchtrack]

They certainly have a no bad war news rule. At least a no showing negative images of it rule, and no speaking of specific Iraqi civilian deaths rule, unless it is due to the actions of insurgencies or terrorists.

I would think that they might, or should might have a policy of no real bad stock market news. The reason is that if everyone abandons the market in fear of losing their money, then the market would fall.

 

[fourier jr]

The Christian Science Monitor must have thought this would be a good time to point out the US' enormous debt:

Americans are now tasting the sour fruits of unaffordable mortgages: foreclosure, bankruptcy, falling markets. The nation, too, is staring at overwhelming debt, made worse by this week's forecast of a whopper federal deficit. Washington mustn't let this burden rise, for the sake of global financial markets and future US generations.

It's true that the $482 billion deficit chasm estimated for fiscal year 2009 doesn't look so deep when taken as a percentage of the overall economy – 3.3 percent of gross domestic product compared to the 1983 nadir of about 6 percent.

But this is just one "mortgage" that the federal government (i.e., taxpayers) must meet. It owes on all the deficits it has accumulated over the years (the national debt), and it has jumbo liabilities to come in the form of Social Security, Medicare, and Medicaid.

Adding all those liabilities together, the government has dug itself into a $53 trillion fiscal hole – the equivalent of $175,000 per person living in the United States. If the White House and Congress continue to follow the do-nothing plan, in another 30 years or so the federal government will spend more than twice as much as it raises in taxes.

That sounds like a long way off, perhaps, but the time to fix it is now – before it develops into a red-ink tidal wave that makes the current home-lending crisis look like a puddle.

It can be done, but how?

First, when in a hole, stop digging. Republican presidential candidate John McCain says he'll balance the budget by the end of his first term, but he's vague on many details. Whoever wins will have to resist financial pressures to keep borrowing – to dig an even bigger hole to China and other countries, which already hold nearly half of US debt.

http://www.csmonitor.com/2008/0801/p08s01-comv.html

(I think it's the Congressional Budget Office that came up with the $53,000,000,000,000)

 

[mheslep]

http://www.reuters.com/article/topNews/idUSN2847371220080728

..."I believe whoever becomes the next president will have a very, very sobering first week in office," predicted Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat...

How convenient. Don't ask me, I'm just the BUDGET COMMITTEE CHAIRMAN, Conrad the Magnificent Bloviator.

 

[WarPhalange]

I don't get what you're upset about. Are you saying he will F up the budget on purpose?

 

[mheslep]

Conrad, as Chairman, shares responsibility for the very thing for which he is pointing fingers, ala the recent rebate checks, the acceptance of responsibility for the several trillion in Fannie/Freddie debt, opposition to budget offsets for new spending, etc, etc, etc.

 

[WarPhalange]

He pointed fingers? Where?

 

[fourier jr]

Meanwhile, China's budget surplus for the first half of this year is ~$172 billion! Makes me wonder what the US's excuse is:

BEIJING, Aug. 8 (UPI) -- China's fiscal surplus in the first half of this year, spurred by rising revenues, totaled nearly $174 billion, the finance ministry said.

First half fiscal revenues, mostly from higher corporate income tax and import turnover tax, soared 33.27 percent to $507 billion over the same period last year, the state-run Xinhua news agency reported. Expenditures during the period were up 59.52 percent to $332.2 billion.

"Rising imports also drove up corporate income tax," said one economist.

While some experts proposed a tax cut in view of the surplus, Chinese Academy of Social Sciences analyst Yang Zhiyong said second half fiscal expenditure was expected to increase, the report said.

Yang said much of the expenditure would go to finance reconstruction in the wake of the May 12 earthquake devastation.

http://www.upi.com/Business_News/2008/08/08/China_first_half_fiscal_surplus_173B/UPI-33401218170203/

 

[WarPhalange]

Makes me wonder what the US's excuse is:

Probably something along the lines of "we don't use slave prison labor" and "we value worker and consumer safety over profit".

Although the first point isn't entirely accurate...
http://www.wpi.edu/News/TechNews/010327/prisonlabor.shtml

But it's still better than China.

 

[russ_watters]

Meanwhile, China's budget surplus for the first half of this year is ~$172 billion! Makes me wonder what the US's excuse is.

In addition to the no slave labor thing, there is also the lack of 12% annual GDP growth.

 

[wildman]

I don't get what you're upset about. Are you saying he will F up the budget on purpose?

Hmmm, maybe. There is a neocon theory that running up a huge deficit is good because it will later force the government to decease in size.

 

[fourier jr]

Someone made a documentary called IOUSA which covers this exact subject. Looks like it will be worth a look:

Billionaires aim for a reckoning on U.S. federal debt
Josh Funk, The Associated Press
August 20, 2008 - 10:20 p.m.

OMAHA, Neb. - The catastrophe looming in the documentary "I.O.U.S.A." isn't romantic like the doomed young love in "Titanic," but billionaires Warren Buffett and Pete Peterson warn it could break many more hearts.

The disaster they warn of could be bigger than any we've ever seen - bigger than an iceberg, bigger even than the current mortgage crisis.

If the U.S. doesn't do something, and fast, to tame the federal government's debts - now more than $50 trillion - the two Nebraska natives warn we will saddle coming generations with economic problems that will make this year's financial turbulence look like a trip to the debt counselor's office.

Premiering Thursday at 358 theatres U.S.-wide, "I.O.U.S.A." is part of Peterson's campaign to give the ballooning debt a central role in the presidential campaign.

A live panel discussion after the first showings - tape delayed for moviegoers in the West - will include Buffett, Peterson and other experts. Despite ticket prices much higher than for a feature, at $11.50 to $20, Thursday's showings had sold out at some theatres by Wednesday, organizers said.

The two prominent investors don't share a political philosophy: Peterson endorses Republican John McCain for president while Buffett favours Democrat Barack Obama. But they say the nation's budget and trade deficits aren't really partisan issues.

"Our situation is a lot worse than advertised, and we need to start making some tough choices if we want our future to be better than our past," former U.S. Comptroller David Walker, one of the movie's stars, said Wednesday.

Peterson - who co-founded the Blackstone Group LP private equity firm and served as commerce secretary under President Nixon - is financing the movie and the discussion in Omaha to advance the goals of his foundation, created in February, which Walker runs.

Peterson pledged $1 billion to help raise the alarm about the nation's budget deficit, the projected shortfalls in Medicare and Social Security funding, the trade deficit and the meager savings rate for most Americans.

http://www.canadianbusiness.com/markets/headline_news/article.jsp?content=b0820194A

 

[WarPhalange]

Hmmm, maybe. There is a neocon theory that running up a huge deficit is good because it will later force the government to decease in size.

Okay, but they are the ones who are increasing the government's size like never before.

 

[Astronuc]

A look into mounting national debt

http://marketplace.publicradio.org/display/web/2008/08/20/iousa

The country's national debt is on its way to hitting $9 trillion next year. How did we get here? Stacey Vanek-Smith talks to Christine O'Malley and Patrick Creadon, who produced and directed the documentary IOUSA.

Stacey Vanek-Smith: Earlier in the program, we talked about Fannie Mae and Freddie Mac selling debt to raise more money. Uncle Sam does that, too, in the form of treasury securities. In spite of those sales, This country's deficit is on track to hit $9 trillion next year, and many say that's threatening our country's stability.

Christine O'Malley and Patrick Creadon Produced and Directed IOUSA. The documentary follows former U.S. Comptroller General David Walker around the country as he tries to warn people about our deficit. Patrick, when you started making this documentary, the housing bubble was still going strong.

Patrick Creadon: Basically a year ago this week, we were nearing the completion of the film, the subprime crisis exploded. And our film was no longer what might happen, it was what is happening.

Vanek-Smith: Well getting into the story where the film begins, I mean, literally, our deficit is as old as we are. National debt is nothing new for the U.S.

Creadon: No it's not, and there's nothing wrong with debt. In fact debt can be a very good tool -- if you want to buy a house, if you want to start a company. However, you can reach a point where you have so much debt that it becomes very dangerous.

. . . .

Are we there yet?

 

[AhmedEzz]

...This country's deficit is on track to hit $9 trillion next year, and many say that's threatening our country's stability...

How is that figure even possible? What caused this astonishing number?

 

[mgb_phys]

How is that figure even possible? What caused this astonishing number?

Goverments don't have to pay for things if they don't want to!

A fair chunk of it isn't real. It's hard to measure GDP for modern economies with lots of service business.
Imports tend to be accurately tracked becuase you pay tax on them. But exports, especially if a lot of what you export is things like movie rights and financial services, are a lot harder to track than shiploads of iron ore - so tend to get under reported.

Then everything you import is added to the debt, all that oil, all those chinese DVD players. This isn't necessarily bad - it makes a lot more sense to have highly paid americans selling movies/software and have cheap chinese building the DVD player. But if you are carefull to add up all the DVD players coming in but hide the movie rights in clever accounting - it looks bad.

Then there is the fact that the dollar is used as a safe currency. Every $5 bill that a 3rd world taxi driver is keeping under his mattress is part of this free loan to the USA.

 

[Gokul43201]

To be clear that's the debt, not the deficit. The US debt is about two-thirds of the GDP, which is pretty bad, but not as scary as some other countries: http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

Also, this fraction today is a lot less than it used to be around the time of WWII: http://zfacts.com/metaPage/lib/National-Debt-GDP-L.gif

How is it possible? Keep in mind that the Govt. spends about 3 trillion each year. A little bit of overspending and a little bit of under-earning can easily build up over the years (and don't forget to include interest).

 

[HallsofIvy]

I've noticed that John McCain's TV spots talk about how the "current administration" has left us "worse off than 4 years ago" and refers to him as "outsider"- not even mentioning that his is a Republican. let alone that he has sided with Bush in 95% of votes.

 

[Gokul43201]

I've noticed that John McCain's TV spots talk about how the "current administration" has left us "worse off than 4 years ago" and refers to him as "outsider"- not even mentioning that his is a Republican. let alone that he has sided with Bush in 95% of votes.

Or that he believed we were better off, only as recently as a few months ago, during the primary season...but that's for a different thread.

 

[fourier jr]

here's the website for I.O.U.S.A. including the trailer:
http://www.iousathemovie.com

 

[Alfi]

I'm naive about money. My only budget is that it comes in and goes out and if there is any left over then I'm ok.

I always thought debt meant you owe someone.
Who does the government owe to the tune of 9 Billion?

 

[mgb_phys]

I'm naive about money. My only budget is that it comes in and goes out and if there is any left over then I'm ok.

If only some of our politicians were niave enough to understand that!

I always thought debt meant you owe someone. Who does the government owe to the tune of 9 Billion?

1, Everybody who has dollar bills in their pocket, each dollar bill is really a free loan to the government of that number of dollars.

2, Anyone with government bonds, treasury bills etc. Some level of government debt is good, it gives investors a safe place to put their money.

3, Foreign countires that hold $US either as an investment, because they think in the future the $US will be worth more of their own currency than it is now. Or because they want to buy US goods in the future or because they sold goods to the US and were paid in $US (china's problem).

It's 9 trillion by the way!

 

[Alfi]

It's 9 trillion by the way!

Billion Trillion

What's a few zero's among friends.

 

[mgb_phys]

What's a few zero's among friends.

Well you know, a few billion here a few trillion there - pretty soon it adds up to real money!

 

[sketchtrack]

Where does the federal reserve fit into the picture?