Budget deficit tops $1 trillion for first time - Page 2

I agree that most of what we have heard over the past few months from the Chinese government in regards to our debt shouldn't be taken seriously.

Still, I don't like the idea of us having trillions of dollars in debt. I can understand this trillion dollar budget deficit because we are "trying" to stimulate the economy, but the stimulus bill could have been better. It should have focused on transportation and repairing our infrastructure. Building a high speed rail system would have created tens of thousands of new jobs, brought communities closer together, and invested for the future of the country.

This highlights the problem with our politics and country today. We only seem to care about placating people in the present, and in the process we end up kicking important cans down the road. We have $54 trillion in unfunded liabilities. That is just ridiculous. People need to start living within their means or we are in for a pretty big decline in our quality of living in the next few decades. I seriously hope we tackle social security and health care in this adminstration or we are in for some trouble.

Even looking at the near term, we are in for some trouble. Unless the government has another "stimulus" to state governments in the next fiscal year, expect higher taxes and more spending cuts from your state. Since the prospects of our economy rebounding this year doesn't look too good, especially when it comes to employment, you have to wonder how America will look after this recession. Millions of lost jobs, more people working part time, pay cuts, high food and gas costs, more homeless families, etc. Things won't be pretty in 2010 -2011.

Going back to China, it seems we are headed for a slight decline in our quality of living compared to the last few decades, especially if the costs of goods and services continue to rise while wages stagnate or decline. This will obviously limit the amount of spending we can do. This coupled with the fact that China is starting to build up it's own middle class so they can "replace" American consumerism with an internal Chinese consumerism, doesn't make the idea of them "stirring" up trouble when it comes to our debt so impossible. Of course, that won't happen anytime soon, barring any sort major conflict.

I haven't taken an economic class in college, so maybe a economics major can give a more favorable outlook, but a year of watching pbs and cspan has allowed me to form that opinion. My advice is to live within your means, save, and educate yourself. Don't think things will be like they use to be.

Actually the massive deficit is just one side of stabilization policy. You see, when the going gets tough, such as in a recession, fiscal policy (i.e. tax cuts and federal spending) is supposed to stimulate the economy by running huge deficits. Once the economy gets better (and they have to be extra careful about judging this, or they run the risk of slipping back into a recession), those policies must be reversed (i.e. raise taxes and cut spending).

The thing is that the US is pretty good at cutting taxes and government spending, but not so good at cutting social programs and raising taxes. That’s because Republicans have been telling us that raising taxes is baaaaad no matter what the reason is (you know, such as paying back the money that got us out of a recession). You certainly won’t hear it from politicians, but the reality is that for every dollar spent during bad times, a dollar will have to be recovered during good times.

So I wouldn’t worry too much about the fiscal policy deficit — by the way, this does not include the net national debt which is NOT part of the stabilization process, and thus could go up or down regardless of fiscal policy. I do, however, share your concern about the shortcomings of the stimulus package. As it is clear to everyone now, Paul Krugman was right when he said that the stimulus was way too small. In order to get three Republican votes, Democrats were forced to water it down intensely and instead infuse it with political favors. In fact, only about 40% of the money is actually going towards stimulating programs. Hopefully now, with the help of Al Franken and Arlen Specter, they will either be able to pass a second stimulus (that works faster) or have the chance to include some of the infrastructure projects that you mentioned in other bills.

As for China, I also believe they’re still thinking that “things will be like they used to be” — or at least they hope so. As it happens, after they requested a new international currency, they came out essentially saying that the US should NOT be saving, that China was already doing that, thank you very much. It seems to me like they want to keep doing business as usual. Unfortunately.

Nice explanation Angelo

Yup, we all have bad habits that we have to let go of. What is that one saying about letting go of bad habits?

I don't have too much of a problem with social programs given that the money spent on most of them are bread crumbs in the big scheme of things. In addition, such programs can really help families throughout rough times. Tax cuts, on the other hand, are not so useful. They don't really stimulate the economy. They stimulate the wealthy (hehe) which do not really need the cash. Oh, and I don't buy the trickle down theory either. Finally, we need to let big companies and banks go bankrupt (restructuring and not failing) when they make bad decisions. Instead, we end up giving them a large amount of welfare.