A budget deficit is simply the amount you have to borrow to spend what you intend to spend. Once you start spending more than you take in you run a deficit and you borrow the balance. However since the books are pretty well cooked what most don't realize is most all of the money spent is borrowed. Enough comes in through taxes to pay the interest. The interest goes to the Central Bankers throught he Fed. The various Fed banks are owned privately. The most powerful bank is the NY Fed Bank. Essentially why it hurts us personally is that all the debt is what creates inflation or a devaluation of paper currency. Cheap imports, easy sale of govt. debt in Asia (esp. China) and asset bubbles have kept inflation down somewhat. The CPI is the poorest measurement of inflation there is. It doesn't include food, energy and real estate prices which are the most important measures of inflation. Because of this most people think inflation has been running 3% annually when it is at least 3 times that high. Now with interest rates on the rise and asset bubbles in danger inflation will take off even more (that is why interest rates are on the rise- all the asset bubbles, esp. real estate are at risk) A budget deficit is not bad as long as it is small- it is the size of our debt that is about to bring some interesting times. With huge deficit spending we have managed to use asset bubbles in stocks, and now real estate to pump huge amounts of money supply into the economy. Basically we have stayed affluent by the power of borrowed money. So one day the bubbles (debt) stop pumping in money. That is when you cannot and should not borrow any more because you can't afford to. At this point if you have a huge manufacturing economy (like China now has) you can suffer some hard times but pay your way out of debt. We don't have much manufacturing left. The Real Estate bubble will slowly deflate as interest rates rise higher, energy prices will keep rising rapidly and we will find out what the 30 and younger crowd are going to do if things unravel over the next 5 yrs. I can tell you as an old timer just what deficits as large as ours do to us personally- they bankrupt you. There is one small satisfaction to the very wealthy- with high inflation they can pay off their debts with cheaper dollars. If the very wealthy begin to move out of dollars altogether then plant your garden it will be fun paying $10/gallon for gas and making $25/ hour. There is no way to avoid a super-recession or major depression if the Govt. continues to borrow huge amounts and the value of the dollar starts moving toward the price of the paper and ink. I know that's doom and gloom... but someday you have to pay. I cannot stand the fact we have borrowed this nation to the brink of ruin. Remember we still have affluence because of the rapid increase of debt creating asset bubbles over the last 15 yrs. It may take another 5 or even 10 yrs. But one way or another if we don't tighten the belt and stop borrowing money we will fall. Rome fell, Britain fell, but they weren't perched nearly as high as the U.S. is right now on debt. You can laugh at me but I don't think there is anything funny about deficits. So stick around in another 5-10 yrs. we won't even need to ask the question how do deficits affect us personally.
Thanks rhester for that thorough explanation, that's the kind of thing I was looking for. I'm not sure that you're entirely correct in all your assertions, but you can make a pretty convincing case and it definitely helps me figure this out.
I think a $300B deficit ain't that complicated to think that it is something bad for this country and everyone living in it.. just imagine if a person is debt and not making enought to pay his own bills.. that's a very bad thing right?
Yes, but the US government is not a person. If I don't pay my bills, the services I pay for are shut off. I can't force my boss to pay me more like the government can force people to pay more in taxes.
Unfortunately, the people will take it from both ends. The government will raise taxes AND inflation will reduce our buying power even more. As it is, the rich are getting phenominally richer and the rest of us are seeing our wages decline or stay stagnant. For example, my company has a stricy policy of 2% raises every year. With inflation at 3%, that means my purchasing power recedes by 1% every year. Unfortunately, as Rhester mentioned, the CPI (what the inflation numbers are based on) don't even include energy prices, which continue to increase FAR faster than 3% a year (gas went up 17% in a couple of days last week). This means that my purchasing power, and that of the people in my situation (just about the entire bottom 90% of earners) is just going to continue to drop. And that isn't even taking into account hyperinflation, like that which happened in Argentina in the '90s. Their economy had many of the same characteristics as ours (huge deficits, massive debt, and 15% of the tax receipts going to pay the interest on the debt) and they had a massive crash. I certainly hope that does not happen here, but continuing to borrow money like we do will come back to bite us, and by us I mean the people who don't have enough money to transfer our assets to another country or currency to protect their value.
Yeah, but that's the case whether the federal budget is balanced or not. Trying to micromanage the nation's problems from Washington, DC is the bigger problem, and a big cause of the debt problem.
I am personally affected by social security. I had a hard time listening to Bush tell us that SS was doomed while we are spending 1 billion dollars per week in Iraq.
1) Without elaboration, that first sentence doesn't answer the question you replied to. 2) That second sentence is completely irrelevant to the question.
Um.. yes. And those with the last name of Clinton, Reagan, Carter, Ford, Nixon...I could go on. Are you just another of those blind Bush-bashers or can you actually discuss a topic sensibly?
if you read his previous posts, he obviously puts thought into it. Maybe YOU shouldn't bash people. You could have made your point by listing facts. No need to deride his intelligence.
I didn't say anything about intelligence, my comment was on agenda. I was asking legitimate questions trying to discuss the budget and how it affects people, and he posts these one-liners dissing specific people he doesn't like and it does nothing to further the discussion.
I agree his last post was a one-liner, but his previous posts were informed posts and questions. It just seems odd that you use a blanket statement ("Bush-basher") to describe him as if none of his accusations have merit.
Several of the previous posts were one-liners too, and he seemed to immediately take offense to my serious question, which was not even a defense of Bush, it was an attempt to see how and why the original poster was upset about "what Bush has done" in regards to the budget. I used the "blanket statement", again as a *question* because he quoted MY comments in his replies, and the replies had nothing to do with what I was discussing. But then again, with this topic title, I guess I should have just posted "Bush killed my kitty" or nothing at all.
