Obama unveils budget with record deficit

[Ali G. 37]

WASHINGTON - President Barack Obama sent Congress a $3.83 trillion budget on Monday that would pour more money into the fight against high unemployment, boost taxes on the wealthy and freeze spending for a wide swath of government programs.

The deficit for this year would surge to a record-breaking $1.56 trillion, topping last year's then unprecedented $1.41 trillion gap. The deficit would remain above $1 trillion in 2011 although the president proposed to institute a three-year budget freeze on a variety of programs outside of the military and homeland security as well as increasing taxes on energy producers and families making more than $250,000.

........

http://www.msnbc.msn.com/id/35178623/ns/politics-white_house

[Ali G. 37]

Any comments scandal? Since you so graciously pointed out Australia's now laughable $28 billion deficit. Also keep in mind that the government there had 10 periods of surplus prior to the crisis.

This current deficit works out to be about 55 times greater than Australia's deficit.

Edited February 1, 2010 by Booyah

[spookyturtle 9,466]

Any comments scandal? Since you so graciously pointed out Australia's now laughable $28 billion deficit. Also keep in mind that the government there had 10 periods of surplus prior to the crisis.

This current deficit works out to be about 55 times greater than Australia's deficit.

So two wrongs make you right?

[Ali G. 37]

So two wrongs make you right?

Bud, I am always right.

[Hilarious Clinton 452]

It seems like Obama is trying to bankrupt this country. He's relying on his minions not knowing the difference between million, billion or trillion.

For the record 'quadrillion' comes after trillion.... you might want to brush up on that number.

[I'm Gone 60]

Budget freeze my butt. In the words of congressman Joe Wilson, "You Lie!"

[I'm Gone 60]

Whoops

Edited February 1, 2010 by I Quit

[luckytxn 2,264]

Big surprise that Obama the Socialist is turning in a record deficit budget and will be even higher after the politicians add their own touches to it.

[Dan J 277]

Deficit spending is justified at only one time, during a recession, and I'll give you one guess as to what we have now.

Deficit spending outside of a recession is bad, and we have a nice fellow from Texas to thank for that. Of course, the "fiscal conservatives" were mostly quite during his term.

[mawilson 2,133]

I miss GWB and his deficits... still measured in "billions".

Deficit spending is justified at only one time, during a recession, and I'll give you one guess as to what we have now.

Two consecutive quarters of growth?

[Dan J 277]

I miss GWB and his deficits... still measured in "billions".

Two consecutive quarters of growth?

We still have problems, even if companies and or sectors are recovering. We have to generate more growth no only to make up for what was lost during the downturn, but to be able to replace jobs that were lost to improvements in efficiency and productivity.

[I'm Gone 60]

We still have problems, even if companies and or sectors are recovering. We have to generate more growth no only to make up for what was lost during the downturn, but to be able to replace jobs that were lost to improvements in efficiency and productivity.

Government spending on make work projects is not goung to do anything but put us in a deeper hole. It was tried in Japan. Didn't work there not going to work here.

http://en.wikipedia.org/wiki/Lost_Decade_%28Japan%29

The strong economic growth of the 1980s ended abruptly at the start of the 1990s. In the late 1980s, abnormalities within the Japanese economic system had fueled a massive wave of speculation by Japanese companies, banks and securities companies. A combination of exceptionally high land values and exceptionally low interest rates briefly led to a position in which credit was both easily available and extremely cheap. This led to massive borrowing, the proceeds of which were invested mostly in domestic and foreign stocks and securities.

Recognizing that this bubble was unsustainable, the Finance Ministry sharply raised interest rates in late 1989. This abruptly terminated the bubble, leading to a massive crash in the stock market. It also led to a debt crisis; a large proportion of the debts that had been run up turned bad, which in turn led to a crisis in the banking sector, with many banks being bailed out by the government.

Michael Schuman of Time Magazine noted that banks kept injecting new funds into unprofitable "zombie firms" to keep them afloat, arguing that they were too big to fail. However, most of these companies were too debt-ridden to do much more than survive on further bailouts, which led to an economist describing Japan as a "loser's paradise." Schuman states that Japan's economy did not begin to recover until this practice had ended. [2]

Eventually, many became unsustainable, and a wave of consolidation took place, resulting in only four national banks in Japan. Critically for the long-term economic situation, it meant many Japanese firms were burdened with massive debts, affecting their ability for capital investment. It also meant credit became very difficult to obtain, due to the beleaguered situation of the banks; even now the official interest rate is at 0% and has been for several years, and despite this credit is still difficult to obtain[citation needed].

This led to the phenomenon known as the "lost decade", when economic expansion came to a total halt in Japan during the 1990s. The impact on everyday life was muted, however. Unemployment ran rather high, but not at crisis levels. This has combined with the traditional Japanese emphasis on frugality and saving (saving money is a cultural habit in Japan) to produce a quite limited impact on the average Japanese family, which continues much as it did in the period of the miracle.

The Japanese government responded with a succession of deficit-driven stimulus policies, alongside a similarly aggressive monetary policy from the Bank of Japan. As American leaders are doing now, Japan brought in temporary tax cuts, but the primary emphasis was on increased spending on infrastructure projects. The seaside town of Hamada, as just one example, gained their own bridge to nowhere, along with a new highway, university, prison, and art museum, among an array of government-funded projects. Although not always so extreme, rural Japan is littered with recently built infrastructure, warranted by hopes of job creation, not necessarily constituent need.

Consequently, the government’s surplus in 1990, equal to 2 percent of GDP, plunged to a string of deficits, only getting larger as the forgettable decade wore on, equal to 7.4 percent of GDP by the year 2000. Also getting larger during that period was the size of government expenditures relative to the economy, rising from 30.5 percent in 1990 to 38.6 percent in 2000.

The Bank of Japan’s strategy was to simply lower interest rates, and to continue doing so, holding to 1 percent or less for most of the 1990s. (In fact, Japan’s central bank discount rate still sits at 0.1 percent, as it has remained for almost a decade.) However, confidence in the Japanese economy had fallen to such a large degree that the cuts to the interest rate had no apparent effect on employment or economic activity. Few people were willing to borrow yen, certainly not enough to have the intended stimulatory outcome, and Japan found conventional monetary policy to be ineffectual. Despite interest rates close to zero, Japan was and continues to be dogged with price deflation.

By the end of the 1990s, Japan’s economy was in even worse shape than it was after the crash in 1990, and the lost decade looks set to be remembered as the lost two decades. The only prize the strategy achieved for Japan was the largest national debt, 200 percent of the entire economy, in the developed world.

[mawilson 2,133]

Government spending on make work projects is not goung to do anything but put us in a deeper hole.

Exactly. Government spending doesn't create wealth, just redistributes it.

It was tried in Japan. Didn't work there not going to work here.

Japan is in a really deep hole - their public debt will reach 227 percent of GDP this year

and 246 percent by 2014.

It's truly scary. Japan spends 25 percent of their tax revenue on interest payments alone.

And that's with super-low interest rates - the yield on 10-year government bonds has been

around 1.30-1.40 percent. Any significant increase in interest rates would push this expense

into crippling territory. It has been manageable so far only because Japanese savers have

been willing (or coerced) into lending for almost nothing - more than 90 percent of Japan's

national debt is internally held. This would be impossible in the US where consumers are

themselves over-leveraged and can't lend much to the government.

[Fandango 1,439]

my new avatar is my only response to this....

[Amby 490]

^ @ peep