So What’s Wrong With Running A Deficit?

(H/T reader Ron for the link)

I put up a post just a few minutes ago titled, Translation: What We Need Is More Time To Crash The Economy; meanwhile one of the monster’s readers dropped a link to another article that goes hand in hand with “Translation”.  Here’s an excerpt of the previous post to give you a flavor for the linkage.

I would not call the pResident an out-in-out liar unless it was proven without a shadow of a doubt that he was actually lying about something,(and common sense says he most likely is), BUT, considering the actual opposite of almost every statement he makes occurs, I think a translation is in order and the title of this post would be what Bambi actually means when he says: Obama asks for patience on economy

Which brings us to the story dropped here, (and it’s a doozy):

The Coming Deficit Disaster

The president says he understands the urgency of our fiscal crisis, but his policies are the equivalent of steering the economy toward an iceberg. (YA THINK?)

President Barack Obama took office promising to lead from the center and solve big problems. He has exerted enormous political energy attempting to reform the nation’s health-care system. But the biggest economic problem facing the nation is not health care. It’s the deficit. Recently, the White House signaled that it will get serious about reducing the deficit next year—after it locks into place massive new health-care entitlements. This is a recipe for disaster, as it will create a new appetite for increased spending and yet another powerful interest group to oppose deficit-reduction measures.

Our fiscal situation has deteriorated rapidly in just the past few years. The federal government ran a 2009 deficit of $1.4 trillion—the highest since World War II—as spending reached nearly 25% of GDP and total revenues fell below 15% of GDP. Shortfalls like these have not been seen in more than 50 years.

Going forward, there is no relief in sight, as spending far outpaces revenues and the federal budget is projected to be in enormous deficit every year. Our national debt is projected to stand at $17.1 trillion 10 years from now, or over $50,000 per American. By 2019, according to the Congressional Budget Office’s (CBO) analysis of the president’s budget, the budget deficit will still be roughly $1 trillion, even though the economic situation will have improved and revenues will be above historical norms.

The planned deficits will have destructive consequences for both fairness and economic growth. They will force upon our children and grandchildren the bill for our overconsumption. Federal deficits will crowd out domestic investment in physical capital, human capital, and technologies that increase potential GDP and the standard of living. Financing deficits could crowd out exports and harm our international competitiveness, as we can already see happening with the large borrowing we are doing from competitors like China.

At what point, some financial analysts ask, do rating agencies downgrade the United States? When do lenders price additional risk to federal borrowing, leading to a damaging spike in interest rates? How quickly will international investors flee the dollar for a new reserve currency? And how will the resulting higher interest rates, diminished dollar, higher inflation, and economic distress manifest itself? Given the president’s recent reception in China—friendly but fruitless—these answers may come sooner than any of us would like.

Go over, read the rest, and then watch this for the simple, down to earth explanation of how screwed we are, and what it is going to take to fix what ails us – and it ain’t Barack Obama.

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