How can we have a multi-trillion dollar deficit after 4 years?

Can someone please explain how we get such an enormous deficit in a short time?

Isn't this a really bad thing?

Does it effect the value of the dollar abroad?

In order:

Ask GWB.

By spending more than we take in.

Yes.

Of course.

I believe that the Nation's DEBT is presently at 7.6 Trillion dollars. That is the accumulated deficit which has been running at 773 Billion yearly since Sept 30., 2004. That means that every man, woman and child has a share of $25,780 of government debt - in addition to their own mortgages, credit card debt, etc. And, in case one finds it reassuring to be told that "we owe that money to ourselves", don't you believe it. Forty percent of it is owed to other nations like China, Japan, etc. Of course, we can just let our children and grandchildren worry about that, we can just postpone the day of reckoning by paying on the interest. Just like your bank card pay the minimum - forever.

How can we have a multi-trillion dollar deficit after 4 years?

--> By spending more than you make. governmnet is very good at this, and from their example millions of Americans live in constant debt. In this particular Administration we have a lot of spending going on - a lot of promised moneis going to, oh I don't know Enron, Halliburton, pockets of politicians, A military which obviously isn't spending it on things like armour.

Can someone please explain how we get such an enormous deficit in a short time?

--> It's a Two Fold issue: 1. elect a man who can't keep his own personal finaces in order, you are assured that he will do the same for America.

2. No accountablity when it comes to spending. Americans need to say "enough - we are not longer footing this bill" Unfortunately IRS will come and collect you and your property if you do that.

Isn't this a really bad thing?

--> Its no different than if you personally ran up your credit cards to the max, bounced checks and continued spending like there is no tommorrow. Creditors would soon come to the point where they say "no More Credit" Banks would foreclose on you. Of course this is a government and not too many backs would forclose on the White House - however since the banks can not take back the white house they lose out and either increase fees for the rest of the people they serve or they go belly up.

Does it effect the value of the dollar abroad?

--> Yes. Definately. And we are seeing it happen today.

Cheers

David

Deficit is usually used to refer to a single year. We haven't broken the trillion mark on that, but the debt has increased by a few trillion over the past few years.

Federal Debt graphically
Federal Debt in a table

We get a deficit by paying out more than we put in. There are mitigating circumstances. Althoughy he has more influence than any other single person, the president does not control the economy alone and a weak economy reduces income without decreasing obligations (in fact, it probably increases them. That only explains part of it, however.

This is a problem, and does hurt the dollar

Here is a brief but interesting article from Newsweek which outlines some of the concerns over budget deficits.

Cutting the deficit by 50 percent by 2009 is certainly better than not cutting it at all, or even increasing it. But the fact remains that so long as there is a deficit, the national debt continues to increase by the amount of that deficit. And, more importantly, the interest on that debt continues to be the third largest item in the budget. Try imitating that in your personal budget and see where it must inevitably end! Get out the pitchforks !

quote:

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Originally posted by frankvan:
Cutting the deficit by 50 percent by 2009 is certainly better than not cutting it at all, or even increasing it. But the fact remains that so long as there is a deficit, the national debt continues to increase by the amount of that deficit. And, more importantly, the interest on that debt continues to be the third largest item in the budget. Try imitating that in your personal budget and see where it must inevitably end! Get out the pitchforks !

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Indeed. Debt has done in more great nations than all other factors combined. Where are they now: The Chinese Empire, the Ottoman Empire, the Russian Empire, the USSR -- all succumbed to the inability to cover their debts.

Alan Moore

The dollar vs. Euro (about 1.3 $ per Euro as opposed to 90 cents per Euro some years ago, and about 1.17 per year only two years ago) is helping decrease the debt by inflation against the Euro.

This, in theory should help American goods (if we still manufactor anything at all.)

However the risks seem rather severe. Inflation will decrease the debt, in an ugly way.

QUOTE: "This, in theory should help American goods (if we still manufactor anything at all.)"

Granted that is the conventional wisdom. It should reduce the deficit, but the debt will not be reduced until the deficit is reversed. And apparently, the deficit has not been behaving as one might expect - at least for now.

Here is another article demonstrating the current effects of our deficits.