Remember that 7 trillion deficit? Make that 9 trillion.

Obama Ink

As Obama goes on vacation, the Administration saw fit late Friday afternoon to release the news that the projected deficit was going up over the next ten years from 7 trillion to 9 trillion.  No doubt the Congressional Budget Office will have even more dire numbers, as the administration has consistently put the best face on the increasingly dire deficit numbers.  As I have constantly warned on this blog, our economy is about to hit a debt wall that will lead to a horrendous economy for years to come.  Fiscal lunacy, simple fiscal lunacy.  Some of my prior posts on the process by which we are careening towards national bankruptcy are below.














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  1. Banking crises are expensive to resolve. S.H. Hanke last fall noted that resolution of recent crises had resulted in public sector commitments ranging in size from a sum equal to 16% of annual domestic product (Korea) to a sum equal to 52% of domestic product (Argentina). Please note that by 1940 the ratio of public debt to annual domestic product was 0.52 and by 1945 it was 1.19. The difference is that we had large pools of accessible private savings in 1945. We also had as President Harry Truman, who may have been more devoted to fiscal balance than anyone who has occupied the office since 1933, and he in 1945-47 faced a Republican Congress led by men of late Victorian upbringing. We have been in worse shape before; regrettably for us, both the populace and the political class were once of a higher calibre.

  2. As much of an admirer of Truman as we might be, Bill Clinton was probably more devoted to fiscal balance, considering the mess he inherited from Reagan-Bush, and what he was able to accomplish, thanks largely to a peaceful decade after Gulf War I.

    It’s cute how the deficit is packaged, regardless of the party in control. Try asking someone, “How much do we owe, and what will the payments be?” Lots of people can answer the first about their house or car. Very few the latter question. Try asking either populace or the political class (oxymoron?) the question on the fed budget.

  3. “As much of an admirer of Truman as we might be, Bill Clinton was probably more devoted to fiscal balance, considering the mess he inherited from Reagan-Bush, and what he was able to accomplish, thanks largely to a peaceful decade after Gulf War I.”

    Well Todd you got one point right. Clinton came in after the Cold War and he ignored the rising jihadist threat and thus there were no wars on his watch. He was basically a typical spend through the roof Democrat, but he was saved from his own instincts by the GOP taking control of Congress in 1994, largely due to his botched attempt to saddle the country with ClintonCare. Plus the tech bubble generated ever-increasing amounts of revenue throughout the 90s. Bubba had better fiscal fortune than any president since Calvin Coolidge.

  4. Todd,

    Deficits as a ratio of domestic product were abnormally large in the years running from 1981-93. The tax cut legislation implemented in 1981-84 is partially responsible for this, as was the recession in 1981-82, as was the increase in military expenditure implemented from 1979-85. The Democratic Party had control of Congress for half that time, however, and was never without organizational leverage through control of the House Budget and Appropriations Committees through the whole twelve years. Both the administration and Congress agreed on proportionate reductions in military expenditure and tax increases after 1988. That, the antagonism of the Republican Congress after 1994, and eight years of unchecked economic growth allowed the deficit to be extinguished in 1999. The previous surplus budget was in the fiscal year concluding in 1969, also at the close of a period of unchecked and abnormally high economic growth.

    It is forgotten that Pres. Truman and Congress faced in 1945-47 the most difficult economic situation of any which arose during the period running from 1938 to 2008. Output was declining at a rate of 10% per year in 1946 and the Army and Navy disgorged some 9 million men as the country demobilized. If I am not mistaken, the nominal value of the outstanding public debt actually declined during Truman’s eight years in office, something it has not done since.

  5. What this tells me is that we can expect inflation in a big way. Good grief. Can you even imagine a number like 9 Trillion and the taxes that will be levied to meet it. Not only that but the government never gets their numbers right. I’m looking to secure what money I have in things that will hold value. This morning I’m looking at gold and silver spot prices with the widget and thinking that I might very well see a buying opportunity shortly. Of course I can’t help but wonder if this admin is capable of what FDR did by confiscating gold and making it illegal to own back in his presidency.

    The fact that our government continues to refuse to give numbers and access to those numbers by it’s citizens on the gold reserves our nation holds is my opinion is telling me we may see the precious metals move in a big way in the coming year.

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