Tuesday, October 21, 2003

U.S. Government Drops Fiscal Bomb: Largest Deficit in History of Nation

Providence - With little to no fanfare, the Treasury Department reported a record deficit for the 2003 fiscal year. Total government expenditure of tax dollars not yet in existence has totaled $374.22 billion this year. Yes, that is $374.22 billion in red ink. But wait, it gets better, the government also expects an even bigger deficit next year, one likely to hit $500 billion. The current debt down to the penny is $6,834,021,912,939.72 as of October 17. Far past time to shop for terms on a debt consolidation program I would say.

The previous record was shattered by more than $80 billion as the government reported a deficit of $290 billion in 1992. As a percentage of the economy, the deficit this year totaled 3.5 percent, the largest since 1993. I wonder if the federal government has ever heard of saving 10% of your monthly income.

Joshua Bolten, head of the White House's Office of Management and Budget attempted damage control, stating that we can reduce the deficit if "we continue pro-growth economic policies and exercise responsible spending restraint."

Hmmm, sounds like more smoke and mirrors. I have seen very little in "pro-growth economic policies" to even think of continuing. Where is the elimination of the income tax? Where is the elimination of the ponzi scheme known as social security? The Death tax? The numerous hidden taxes we pay unwittingly everyday. Moreover, to even mention "responsible spending restraint" is laughable. Actually, it is more than laughable, it is absolutely horrifying the way this government manages its purse. Where is the significant reduction in public expenditures in correspondence with our current revenue projection? Where is the efficiency and consumer awareness of the private sector?

Treasury Secretary John Snow chimed in with the same old broken record on revenue growth and shrinking debt: "As the economy grows, government revenues will go up, which will help keep the deficit under control." Yadayadayada.

This is wishful thinking at best with absolutely no foresight into contemporary politics. Deficit reduction is not an inevitable consequence of any growth in government revenue.

In the awkward and unfamiliar position of urging spending restraint, Tom Kahn, Democratic staff director for the House of Representatives Budget Committee concluded that "there's nothing here to cheer about, it's still by far the biggest deficit in American history." It is a nice change to see Democrats parade for fiscal restraint and accountability in government expenditures. To see a red-faced Democrat crying over the debt is a glorious sigh to behold. I hope the trend continues, at least as long as the wind.

In the Times of London, Treasury Secretary Snow stated that interest rate increases will be unavoidable in the future as the U.S. economy picks up steam after a long, slow recovery from the 2001 recession. "Interest rates are the price of capital. As profits increase, there is going to be a need for a capital-rationing process," Snow told the British newspaper. This is elementary economics, the problem is that the Fed is engaging in sufficient manipulation of the money supply that all bets are off in terms of any predicative value on future events.

"I'd be frustrated and concerned if there were not some upward movement" in rates, he said. You can only sell cars for zero money down and no interest for so long, so says Mr. Snow.

Treasury spokesman Rob Nichols went to great length to explain that Snow was not predicting or moving Fed policy. According to Nichols, Snow's comments were about longer-term rates, such as those on mortgages and corporate bonds, that are set by market forces. I say we employ the whole federal workforce to explain the concept of “market forces.” If any problem occurs, the bureaucrat on duty will just wax poetically on spontaneous order, catallactic exchange, and the invisible hand to assuage any fear of change or uncertainty that may arise among the populace. Now that is taxpayer value.

Meanwhile, Mr. Nichols continued to clarify Secretary Snow’s comments: "The secretary respects the independence of the Federal Reserve in making decisions about our nation's monetary policy.” Why Congress neglects their duty is an abysmal failure. The Fed certainly acts within the shadows of public awareness of its actions. "The secretary was pointing out that when economies begin picking up steam, interest rates tend to rise. The secretary also pointed out that job creation will increase when our economy strengthens." Nice to have the American people receive an economics lesson for a good half-a-days news cycle.

I just wonder if they ever thought about respecting the independence of the American people enough to provide a stable currency without large depreciations in purchasing power? No, didn't think so. And on the last point, are jobs created before the economy strengthens or does the economy strengthen before jobs are created? I forget. Maybe I shouldn’t ask Mr. Nichols to clarify.

  • Record Deficit of $300 Billion Plus
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