Obama Warns: Deficit Will Increase Significantly
The already out of control deficit of the United States federal government will become even worse in the coming years, President-Elect warned Americans this week. He said they face ““trillion-dollar deficits for years to come” and that Americans should prepare for it.
One of the main reasons for the stark assessment is that Obama wants to invest heavily in the U.S. economy during his years in office. The most sober plans anticipate $700 billion in extra investments while many believe the investments will end up in the trillions of dollars.
Although preparing the American people for major investments and deficits, Obama emphasizes that he plans to spend responsibly. “When the American people spoke last November, they were demanding change — change in policies that helped deliver the worst economic crisis that we’ve see since the Great Depression,” Mr. Obama told reporters at his transition offices. He added, “They were demanding that we restore a sense of responsibility and prudence to how we run our government.”
Many believe government spending to be necessary in the coming years to help the U.S. economy recover. Experts charge that the problems with the economy are structural. This means that the economy will need drastic and structural changes if America wants to be able to compete with Asia in the coming years and decades. “Changes” often cost money.
Republicans and fiscally conservative Democrats are nonetheless worried that Obama’s grand plans mean that government spending will run completely out of hand. They argue that the plans will result in an even less healthy spend-receive balance than at present (which is quite terrible).
Spending may be considered necessary, but unwise spending is just that: unwise. If history is any guide, and it usually is, major deficits will end up weakening the U.S. economy in the long run rather than improving it. The U.S. economy is in trouble today precisely because it was kept artificially high. Pumping more money in the system in order to once again create a bubble and artificial growth will cause tremendous blowback – if one thinks the situation is bad now, one should look at what one’s children will face if Obama’s plans are put into action.
In the end, the only way for the American economy to truly recover is by letting it go down slowly, after which it will rebuild itself in an improved version. The goal should be to create an American economy 2.0, not a remake of 1.0.
The major structural problem is the looming massive growth of entitlement program spending, namely SS and Medicare/Medicaid. Outside of defense, discretionary spending has been fairly moderate by historical standards (as measured by the proper metric of %GDP).
If Obama wants to change the conditions that created the current recession (which is not as bad as made out) the place to start is in Congress and the budget. Calling profligate government deficit spending “investments” is for the most part hilarious. Some of it will no doubt be needed and worthwhile, but odds are good that most of it will simply be flushed to keep the balance sheets of the favored in shape.
Re “Pumping more money in the system in order to once again create a bubble and artificial growth”, I think you are absolutely right. It’s essential that people understand that much of the growth we think we’ve experienced in the last decade and a half is just that – artificial. Only by accepting our true position can we consolidate it and move ahead. Grandiose spending plans are the wrong approach.
It’s absurd to keep spending in deficits. The US is the richest nation the world has ever seen, and Uncle Sam takes at least 25% of it, and they can’t stay in budget?
We are 3000 miles from the nearest power… do you think we could spend a little less on “defense”? Like maybe only 3 times as much as the next highest spender?