This morning I heard that Obama 'promises' to (hopes to rather) cut the current 2 trillion dollar federal deficit in half by end of term (2013).
A trillion is, 1,000,000,000,000 (one million million; 1012; SI prefix: tera-).
That is not counting the economic booster package-which was close to a trillion. Let's say the overall federal deficit after spending is actually in the order of 3 trillion now.
Federal deficit is the money the Government is spending versus it's tax revenues.
This is not to be confused with America's National Debt. If you'll recall, New Yorks National Debt Clock had run out of room back in October because it crossed through ten trillion dollars. The keepers of the clock (the Durst organization) had to drop the dollar sign and make room for the “1″ in the tens of trillions column.
Ten trillion looks like this, by the way -
$10,000,000,000,000.00
- just so you know.
The national debt at this writing is actually 10,838,758,414,164.46. which is
10,838,758,414,164.46/(303,824,640)
(that is, Debt Held by the Public/population)
$35,674US debt held by each individual in the US today.
It was about half that in 2000. Hmmm...that's eerily close to when Bush was first elected isn't it?
Although, to make things more confusing, National deficit is defined as the total outstanding borrowings of a central government comprising of internal (owing to national creditors) and external (owing to foreign creditors) debt incurred in financing its expenditure.
So, whilst it's possible for Obama to cut the federal deficit-(only by increasing taxes). No amount of tax increase is going to adequately overcome the booming National Debt, unless something really radical happens. Is it purely coincidence that the very same morning (ie. this morning) Obama made this proclamation, the Dow Jones posted it's lowest average in 12 years? Clearly, stock holding capitalists are running scared, whilst simultaneously anticipating a tax rise. Oh no!!! The new custom Porsche will have to wait.
Economic redress finally asserts itself.
Monday, 23 February 2009
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7 comments:
that's not exactly true - don't forget he can also cut spending
yeh...but that doesn't seem likely. I'm pro obama and spending on the man, but realistically, something's got to give..how can you simulaneously enable every man, woman and child whilst saving money. if it wasn't for the current dire situation, it might be possible. he would have to have a real ace up his sleeve.
Well one obvious thing to cut is the 20% they spend on the military. However I thnk raising taxes is inevitable - have a look here http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP
how the US tax revenues compare with other countries
http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP
full link
strange it wont come through - just search Wiki for "List of countries by tax revenue as percentage of GDP"
A government has a few alternatives to reduce public debt besides raising tax levels:
1. Spur economic activity. Every taxable transaction adds to the coffers.
I think this is one of the primary reasons behind the US / Aus "stimulus" packages. Eventually most of those dollars will be going back to the government in the form of tax. So suppose the government claws back 10% of Rudd's $950 bonus from every transaction via GST. With enough transactions, that entrie $950 bonus will eventually be re-pocketed by the government. That is my understanding anyway, so it isn't really "bad" debt. The worse thing that can happen though is if this $950 is saved instead of spent. Every dollar saved increases public debt.
2. Inflate your way out of debt. I think I've already given my spiel on inflation, but no government in its right mind will tolerate deflation. The latter could happen, which would then suggest this crisis is beyond government/central bank control, although there wouldn't be stopping Bernanke dropping dollars from a helicopter. So I don't see deflation as a permanent possibility, although Japan as a case study is kinda interesting, so who knows. Can't really make an informed conclusion on this, only a gut-feeling. Anyway I think inflation is the most palatable "easy" solution, and probably popular for those in debt (majority of people). I read a few interesting articles predicting the remonetisation of gold and silver. Gold punched through US$1000/oz a few days ago. Great time to be a gold bug. :D
I think deflation is a very real possibility for a variety of reasons, if only the general climate of job loss and uncertainty of the future. At the back of each and every persons mind is climate change guilt, meaning (hopefully) less spending on useless items, harking back to the days of yore where we only bought necessities!!! hehe..
But seriously, spending and shopping as an activity became a be all to some people in a capatalistic climate, I mean, even I know people who shop for pleasure-as one of their main sources of pleasure. Maybe this mental break has changed some people-the average consumerist, causing a tendency towards deflation.
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