	Generational Dynamics
	Forecasting America's Destiny ... and the World's

\| HOME \| WEB LOG \| COUNTRY WIKI \| COMMENT \| FORUM \| DOWNLOADS \| ABOUT \|

Generational Dynamics Web Log for 2-Feb-2010
2-Feb-10 News - Budget deficits continue to infinity

Web Log - February, 2010

2-Feb-10 News - Budget deficits continue to infinity

Greece faces another crunch.

One, Two, Three ... Infinity -- Budget deficit explodes again

After the budget deficit tripled in 2009 to $1.4 trillion, the Obama administration has announced that the 2010 budget will increase even further, to $1.6 trillion. But don't worry, folks, they've promised to reduce it in 2011 to a mere $1.3 trillion.

Two years ago, I wrote the article, "One, Two, Three ... Infinity," in which I compared to the ever-increasing government spending plans to a book by George Gamow that I read in school in the 1950s. My use of that particular phrase was to convey the idea that American debt was on an exponential growth path that would not be stopped except by a major financial collapse and crisis.

That's exactly what's going on. The exponential growth of the budget deficit is generational, and cannot be stopped by politicians.

Thus, President Obama's speech on the budget on Monday had the makings of a macabre joke. First, there's this:

"The fact is, 10 years ago, we had a budget surplus of more than $200 billion, with projected surpluses stretching out toward the horizon. Yet over the course of the past 10 years, the previous administration and previous Congresses created an expensive new drug program, passed massive tax cuts for the wealthy, and funded two wars without paying for any of it -– all of which was compounded by recession and by rising health care costs."

This is total nonsense. The budget surplus of the late 1990s occurred because of increased taxes collected from the dot-com bubble. The dot-com bubble collapsed in 2000, the last year of the Clinton administration, and that's when the deficits started growing. Since then, the deficit has barely been affected at all by spending; the main factor was tax income, as I explained several years ago.

And that brings us to the next point. President Obama's claim that the deficit will start coming down in 2011 is based on the assumption that the economy will start growing rapidly by then -- i.e., that the old credit and real estate bubbles will start to grow again. That's not going to happen. As I wrote recently in "Report from TARP Inspector: We're driving off a cliff in a faster car," the economy is going to plummet sharply.

So the $1.6 trillion deficit in 2010 and the $1.3 trillion deficit in 2011 are vast underestimates. The deficit is going to continue its exponential growth until there's a catastrophic financial crisis, which can't be too far off now.

Here's another paragraph from the President's speech:

"I've proposed a freeze in government spending for three years. This won't apply to the benefits folks get through Social Security, Medicaid, or Medicare. And it won't apply to our national security –- including benefits for veterans. But it will apply to all other discretionary government programs. And we're not simply photocopying last year's budget; freezing spending does not mean we won't cut what doesn't work to pay for what does."

Look at this paragraph, Dear Reader, and see for yourself how moronic it is. There's going to be a freeze in government spending -- after government spending was substantially increased last year, so the freeze is at last year's ridiculously high levels. And the freeze doesn't apply to the biggest portions of the budget; just to some discretionary programs.

Is there any proposal that's too ridiculous to be endorsed by President Obama?

I suppose that I shouldn't be unkind. After all, President Obama has almost no control over the budget deficit, any more than President Bush or President Clinton did. These things are caused by tax collections, by Congress, and especially by ups and downs of the economy. In recent years, that's meant that the growing and bursting of bubbles have been the main factors.

Financial deficit drama in Greece continues

Exactly the same kind of deficit song and dance is going on in Greece.

Wednesday is an important crunch day for Greece, according to EuroIntelligence, quoting FT. The EU is going to demand that Greece make big reductions in its public sector pay. There isn't a snowflake's chance in hell that Greece's public sector labor unions will ever let that happen.

The phrase "One, Two, Three ... Infinity" applies to Greece, as well as to America.

A very good overview of the Greek fiscal crisis can be found in a Reuters Factbox.

Additional Links

A fishing dispute between Canada and Denmark is heating up, according to the National Post. It turns out that Canada is complaining that Denmark is overfishing in Canadian waters.

49 Congressional websites were hacked over the weekend, according to Dark Reading.

The BBC is reporting that China is threatening sanctions against Boeing, since Boeing planes are included in the announced US arms sale to Taiwan.

Envoys from the Dalai Lama are in Beijing meeting with the Chinese government over the question of Tibet's autonomy. But The Hindu reports that the Chinese are unwilling to make any concessions at all. This isn't surprising, since China's government is becoming increasingly confrontational and less conciliatory, as younger generations take positions of power.

(Comments: For reader comments, questions and discussion, see the 2-Feb-10 News - Budget deficits continue to infinity thread of the Generational Dynamics forum. Comments may be posted anonymously.) (2-Feb-2010) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Web Log Pages

Current Web Log

Generational Dynamics Web Log for 2-Feb-2010 2-Feb-10 News - Budget deficits continue to infinity

One, Two, Three ... Infinity -- Budget deficit explodes again

Financial deficit drama in Greece continues

Additional Links

Web Log Pages

Generational Dynamics Web Log for 2-Feb-2010
2-Feb-10 News - Budget deficits continue to infinity