**Fiscal Discipline da 2
IL--High Deficits Kill Economy
Download 0.63 Mb.
|
- Navigate this page:
- Continued spending crushes economic growth—debt composition proves
- Deficit reductions now, key to economic recovery
IL--High Deficits Kill EconomyContinued deficit spending will lead to a “Greece-style” economic collapseGardiner, Washington-based foreign affairs analyst and political commentator, 2012 [Nile Gardiner-, “Why Greece’s economic collapse is a nightmare for Barack Obama,” The Telegraph, http://blogs.telegraph.co.uk/news/nilegardiner/100158147/why-greeces-economic-collapse-is-a-nightmare-for-barack-obama/]bg As Greece teeters on the brink of economic collapse, and Athens heads for an inevitable exit from the Euro, the White House is watching nervously. The Greek calamity is having a distinctly unsettling effect on US markets, and stocks could fall heavily on Wall Street as well as London, Paris, Frankfurt, Milan and Madrid as economic uncertainty mounts across the Eurozone. It will also hurt the fragile economic recovery in the United States, with unemployment still stuck firmly above 8 percent for a record 39th month in a row, a housing market still in the doldrums, and anemic levels of job creation. 70 percent of Americans still believe the US is in recession, an impression that won’t be helped by the economic crisis across the Atlantic. But perhaps most damagingly for the Obama presidency, the debt crisis in Greece and across much of the EU is a sharp reminder to US voters of America’s own economic mess, which has been greatly exacerbated by the big government policies of the current administration. Economic freedom in the US has been declining significantly over the past few years, propelled by excessive levels of government intervention, spending and borrowing, with the largest budget deficits since World War Two. America’s national debt now stands at a staggering $15 trillion, and gross public debt surpassed 100 percent of GDP in 2011. And with the introduction of Obamacare, which is expected to add $1.6 trillion to net federal spending over the next decade according to George Mason University’s Mercatus Center, the federal budget deficit will grow by more than $340 billion over the same period on the present trajectory. The dire situation in Greece is a stark warning for the United States if it continues down its current path of profligate spending. The debt and broader economic crisis in Europe is merely the shape of things to come for America unless it reverses course. The Obama presidency has been in denial regarding the extent of the economic crisis, continuing to push the same failing big government solutions both at home and abroad in a self-defeating effort to revive economic growth. Continued spending crushes economic growth—debt composition provesHunt, PhD in Economics from Temple University and Vice President of Hoisington Investment Management Company, 12 [Lacy, interviewed by The Gold Report, “Economic Recovery Via Shared Sacrifice, Cutting Government Spending, Deficit and Debts,” May, 17, 2012, http://www.marketoracle.co.uk/Article34706.html]bg TGR: One of the core points you make is that the quality of debt determines the velocity of money. If the debt is productive, the velocity increases. At this time, the velocity of money is moving in the other direction. What's wrong with our debt? LH: The debt problem is complex. U.S. debt is about 360% of the Gross Domestic Product (GDP), public and private—too much relative to GDP. We have about $55 trillion (T) in debt and only $15T of GDP. The debt-to-GDP ratio is more than 100 points higher than in 1997–1998, yet our standard of living is unchanged. A key problem is that the composition of the debt has deteriorated. A greater proportion now supports daily consumption, either directly by consumer borrowing or indirectly via the Fed. Such loans won't generate future income. The debt is unproductive or even counterproductive, and the more it grows, the more it diminishes our ability to service the debt. As long as we proceed along this course, the velocity of money will continue to decline. It's a very interesting question you raise. Just within the last couple of years, velocity has fallen below the post-1900 mean of 1.68. In the first quarter, velocity fell to 1.58—a very significant deviation from the mean and about the lowest level in 50 years. The decline in velocity confirms that the quality of the debt is deteriorating.There is another way to observe the deterioration. We need increases in productive lending to generate increases in output per hour, which in turn is necessary to generate increases in income. Prosperity is measured by income, not GDP. GDP only measures spending, and although we've had some GDP expansion, disposable income per capita has basically been close to zero for most of the last two years. The spending only supports daily consumption; it won't generate the productivity needed to raise our standard of living. Deficit reductions now, key to economic recoveryBloomberg, January 7, 2011 [http://www.bloomberg.com/news/2011-01-07/bernanke-sees-slow-drop-in-joblessness-even-with-growth-pickup.html] Bernanke said that the longer lawmakers wait to deal with the federal budget deficit, “the greater the risks and the more wrenching the inevitable changes to the budget will be.” “By contrast, the prompt adoption of a credible program to reduce future deficits would not only enhance economic growth and stability in the long run, but could also yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence,” Bernanke said. Republicans have promised to seek cuts to reduce a budget deficit that may widen to $1.34 trillion for fiscal 2011, Credit Suisse Group AG strategists estimated on Dec. 7, a day after the president announced a deal with Republicans on extending Bush- era tax rates. The shortfalls were $1.29 trillion in fiscal 2010 and $1.42 trillion in fiscal 2009. Directory: files files -> Answer True False 2 points Question 2 files -> Integer programming and game theory files -> 4 Integer Programming files -> Bpa vehicle Window Repair Scenario #1 task: Procure vehicle window relacement. Objective files -> Pop Warner History files -> North Carolina Inclusion Initiative Mapping Where Children with ieps are Being Served Purpose files -> Fall 2013 Spring 2014 Program Data: Standard 1 Exhibit 4d files -> Hanban – asia society confucius classrooms network 2010 request for proposal files -> Northern England’s set-jetting locations Download 0.63 Mb. Share with your friends:
|