White House Seek Extra $80 Billion, Leading to New Record Deficit

[zimv20]

link (http://nytimes.com/2005/01/25/politics/25cnd-budg.html?hp&ex=1106715600&en=5220775a97ac4547&ei=5094&partner=homepage)


WASHINGTON, Jan. 25 - President Bush will ask Congress for an extra $80 billion next month, mostly to cover costs of the war in Iraq, and White House officials predicted this afternoon that the budget deficit would hit a new record of $427 billion this year.

The new request would bring total costs of the war to more than $200 billion by the end of this year, with spending likely to continue at near current levels through at least 2006.

White House officials said today that they were still on track to fulfill President Bush's campaign promise of reducing the budget deficit in half by 2009.

But the administration is already well behind on its goal. The White House predicted last summer that the budget deficit would decline in 2005 and continue to sink after that.

The new estimate calls for the budget to climb slightly, and a new report earlier today by the nonpartisan Congressional Budget Office shows that deficits will remain above $350 billion through 2009 and climb sharply after that.

The Congressional Budget Office estimated that continued costs of the war in Iraq and other aspects of the war on terrorism could add $285 billion over the next five years.

The congressional agency also noted deficits would climb much more sharply in the subsequent five years. Extending Mr. Bush's tax cuts would cost $1.8 trillion over the next 10 years. Preventing an expansion of the alternative minimum tax, a parallel tax that was designed to prevent wealthy people from taking advantage of loopholes, would cost about $500 billion.

Even without the war in Iraq, and despite expectations of strong economic growth over the next two years, the Congressional Budget Office said the federal budget outlook has gotten worse since last year.

Indeed, congressional analysts predicted that interest costs on the Federal debt will double over the next decade to more than $300 billion a year.

(more)

a budget deficit of $427 billion works out to roughly $1423 for every man, woman and child in the US. sheesh, that's just the _shortage_. anyone want to calcuate how much $1423, if put on a credit card today, will work out to in 2009?

then multiply it by 300 million. cripes is this gonna hurt come winter.

[skunk]

How secure will SS be when the funds are all invested in a free-falling Stock Market? For that matter, what happens to government bonds when government goes bankrupt?

[Blue Velvet]

Still, y'all can take some comfort from knowing that those gays won't be able to marry...

[skunk]

There's two sides to every plug-hole... :rolleyes:

[IJ Reilly]

How secure will SS be when the funds are all invested in a free-falling Stock Market? For that matter, what happens to government bonds when government goes babkrupt?

Babkrupt? A word not found in Webster's Unabridged Dictionary.

[skunk]

Babkrupt? A word not found in Webster's Unabridged Dictionary.
Alternative spelling.


:rolleyes:

[IJ Reilly]

Not in American English it isn't, so I am wondering about its etymology.

[skunk]

As BF would say: "Meh"
:cool:

[IJ Reilly]

To what, exactly? :confused:

[skunk]

Look, it was a typo, OK? The "n" key happens to be next to the "b" and I missed. Sheesh, gimme a break, willya? :o

[skunk]

There, I've changed it.

BTW, I refrained - with some difficulty - from drawing attention to your "Becuase he's hiding" thread title. Now you've forced me to. :p

[edesignuk]

aii, aii, the gammer/spelling police are out...

I don't really understand much about economics, but surely this can't be good for the already weak dollar?

[skunk]

aii, aii, the gammer/spelling police are out...
WTF is "gammer"? :D

The "American Economy": now there's an oxymoron.

[edesignuk]

WTF is "gammer"? :D
You got that quicker than I was expecting :p

[IJ Reilly]

Look, it was a typo, OK? The "n" key happens to be next to the "b" and I missed. Sheesh, gimme a break, willya? :o

You first. (As the board's self-appointed grammar and usage cop, I should hardly think you'd need a break, but the rest of us might appreciate one from time to time.)

Funny part is, before I asked, I googled your spelling and found plenty of instances out on the 'net. So it was an honest question, not an effort to catch you. (Not that I would ever do such a thing.)

[Thomas Veil]

*Ahem!* To return to the topic...

This would've been so easy in the good old days, when the Dems had a majority to work with:

"You know, George, you tell us you want another 80 billion dollars. I'm sure we can cut a deal. Now, about this Social Security privatization thing.... Oh yeah, and let's talk about your tax cuts...."

[skunk]

You first.
It's a fair cop. I'll come quietly, guv'nor.

(As the board's self-appointed grammar and usage cop, I should hardly think you'd need a break, but the rest of us might appreciate one from time to time.)
I'll get my coat...

Funny part is, before I asked, I googled your spelling and found plenty of instances out on the 'net. So it was an honest question, not an effort to catch you. (Not that I would ever do such a thing.)
Amazing how many typos there are out there.

[IJ Reilly]

I'll get my coat...

To quote my favorite philosopher, Groucho Marx: "Just when I tell you to go, you leave me!"

[miloblithe]

I don't really understand much about economics, but surely this can't be good for the already weak dollar?

Right now the overall US debt is at about 63% of GDP. As a point of reference, the EU requires that those countries that want(ed) to join the Euro commit to keeping their debt at 60% of GDP. France and Germany are right about there. Italy and Belgium are WAY over (100+%). Japan is well over 120%, and more or less screwed. China is at about 30%, and in excellent shape.

Now, the other EU target is that in any given year, a country's budget deficit should not exceed 3% of its GDP. So, for the US, a roughly $11 trillion economy, a $427 billion deficit is 3.9%. Bad but not that bad. Keep in mind, the EU's economic growth rate is lower than the US'.

And that's the thing. We all get freaked out about the fact that if you keep running budget deficits, your overall debt keeps growing, but this is not really true. If your economy grows at a faster rate than your debt, your debt is in fact shrinking (if the US debt was $1 trillion in 1980 and $1.1 trillion in 2000, obviously that would be a vast reduction in debt.)

So, the key is that the deficit shouldn't be higher than the economic growth rate, or at least not for long and at least not often. The problem is that Bush's policies (and we all know the deficit isn't going to be cut in half by this administration) seem assured to push us up near or past 70%. Pretty poor showing for an administration that was handed 59%.

As for the dollar, yes. In the long run, if we continue to run such high deficits, the dollar will remain low.

(and no. I've never taken an economics class. But I did sleep in a Holiday Inn...)

[zimv20]

(and no. I've never taken an economics class. But I did sleep in a Holiday Inn...)
eh?

[miloblithe]

eh?

Zim, I congratulate you on not being able to identify a bland reference to a commercial.

...I miss the days when the only TV I had was black and white, didn't really work, only got 1.5 of the three stations available, and, given the fact that I was in Siberia, didn't get broadcasts in a language I understood very well. In other words, I miss not watching TV.

[kerb]

The new request would bring total costs of the war to more than $200 billion by the end of this year, with spending likely to continue at near current levels through at least 2006.

disgusting.

anyone have figures on US gov contribution to the AIDS crisis in Africa?

[OutThere]

aii, aii, the gammer/spelling police are out...

I don't really understand much about economics, but surely this can't be good for the already weak dollar?

Good for Brits and other Europeans who want to go to the U.s and buy things...cheap cheap cheap! :rolleyes:

[miloblithe]

Good for Brits and other Europeans who want to go to the U.s and buy things...cheap cheap cheap! :rolleyes:

That's the whole idea. Europeans buying more US products, and Americans buying fewer European products because of the exchange rate will help reduce the US imbalance of trade.

[IJ Reilly]

That's the whole idea. Europeans buying more US products, and Americans buying fewer European products because of the exchange rate will help reduce the US imbalance of trade.

... any benefits of which will be wiped out by the higher cost of imported oil, increases in inflation and rising interest rates. Don't be shocked if the trade deficit doesn't decrease at all, even with a plummeting dollar.

[takao]

That's the whole idea. Europeans buying more US products, and Americans buying fewer European products because of the exchange rate will help reduce the US imbalance of trade.

hmm i doubt that it will work... at least it doesn't look that way ...

(from custoemr point of view: while i get about 5% more for my money in the US i get about 30-35% more when simply cross the border to hungary which is closer as well)

even with the weak doller the travels to the US are going back, while the balcan and eastern europe are growing big in tourism... at least in austria

and i don't have the feeling that US products are cheaper here than other european products...

[kerb]

... any benefits of which will be wiped out by the higher cost of imported oil, increases in inflation and rising interest rates. Don't be shocked if the trade deficit doesn't decrease at all, even with a plummeting dollar.


Britain has it's own oil reserves.

[IJ Reilly]

Britain has it's own oil reserves.

Which has naught all to do with the point I was making, but thank you for sharing...

[Ugg]

That's the whole idea. Europeans buying more US products, and Americans buying fewer European products because of the exchange rate will help reduce the US imbalance of trade.

Consumer products are mostly not the issue here. There never has been a big market for American made autos, understandably so and the rest of the consumer market is notoriously fickle. Also, much of what is sold to the consumer in the US is made in China anyway. What is hoped for is massive purchases of airplanes, heavy machinery, technology, etc.

Usually when there is a massive currency rate imbalance there is a huge uptick in foreigners coming to the US. Due in part to the new restrictions on travel to the US and anti-American feeling, that has so far not taken place. However, this year looks to be a good one for the European tourist industry in regards to visiting Americans. In other words, the reverse is happening.

The upside of this for European manufacturers is that they are becoming leaner and meaner and when the dollar, hopefully, gains some strength they will be far more competitive in the US market so any gains to the US will be short in duration. France, Germany and Italy and Spain are going through major overhauls of their social welfare systems which will mean lower labor costs however, their spending on healthcare will still be half that of the US. If the US doesn't address the fundamental problems of its high cost manufacturing, of which health care is the single most important it will lose many, many jobs. But, as we all know, gw & co. has chosen to focus on SS which is viable and will be for quite some time.

[pseudobrit]

Fantasy: n
1: imagination unrestricted by reality
2: fiction with a large amount of fantasy in it
3: something many people believe that is false
see also:
http://www.cbo.gov/docimages/577301.gif

[kerb]

Which has naught all to do with the point I was making, but thank you for sharing...

well then I fail to see your point

[blackfox]

well then I fail to see your point
IJ was talking about the positive effects of a cheaper dollar on the US economy (ie greater exports because of cheaper goods etc) being erased by the more expensive importation/purchase of necessary goods like oil and because of higher interest rates and inflation.

I do not believe England was mentioned, hence the evident confusion.

[IJ Reilly]

Evidently. ;)