EconomicGreenfield » deficits

The Quality Of Deficit Spending

Ted Kavadas — Fri, 19 Feb 2010 15:19:43 +0000

In the Wall Street Journal on Saturday, February 13 there was an editorial titled “High-Speed Spending.” This discussed the dubious financial dynamics of a long-proposed “high speed” Orlando-to-Tampa rail project.

I also heard of a proposal to do a similar project between St. Louis and Chicago.

I have lived in the Chicago area for most of my life and have never heard anyone expressing a desire to have faster transportation (or such a “high speed” rail option) between St. Louis and Chicago. Yet, in this case, as in the Orlando-to-Tampa case, the proposed “high-speed” rail project would cost billions of dollars.

If we are looking to spend money on infrastructure, perhaps it would be wiser to spend on our existing infrastructure, which is literally crumbling. Estimates to fix our existing infrastructure range into the trillions of dollars. These estimated figures are rapidly growing.

Examples of wasteful deficit spending are innumerable, unfortunately. In my opinion, we, as a nation, are not in a position to waste any money at this point.

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Editorial Of Note: “Greece’s Crisis: A Warning To Profligate U.S.?”

Ted Kavadas — Thu, 18 Feb 2010 14:26:23 +0000

On February 10th an editorial by Scott S. Powell appeared in Investor’s Business Daily titled “Greece’s Crisis: A Warning To Profligate U.S.?” The link can be found here.

I am highlighting this editorial as it discusses many important issues, most of which I have previously mentioned on this blog. As well, it compares our current financial situation to that of Greece’s.

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The Deficit And Federal Expenditures

Ted Kavadas — Sun, 07 Feb 2010 16:52:28 +0000

With the recent unveiling of the proposed FY2011 budget, I would like to make a few comments with regard to budget deficits and federal expenditures.

Here is a historical chart of federal expenditures. This chart is from the St. Louis Federal Reserve website. This chart helps one put rising government expenditures in a historical context:

A February 1 Wall Street Journal article concerning the FY2011 proposed budget noted the deficit in the proposed budget would shrink from $1.6 trillion this year to $700 billion (4% of GDP) in 2013.

Various underlying economic assumptions from which this future deficit figure is derived can be found here:

http://www.whitehouse.gov/omb/budget/fy2011/assets/econ_analyses.pdf

I believe these assumptions are rather sanguine – even if one believes that we are in a sustainable recovery.

Our nation has a long history of being far too optimistic during budgeting. This appears to be yet another example in-the-making. What is particularly disconcerting in this instance is that even if these economic assumptions are met, there is still a $700 billion shortfall in 2013. This deficit level does not continue to decrease after 2013, as seen in the budget.

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The National Debt and Deficits

Ted Kavadas — Tue, 09 Jun 2009 18:50:59 +0000

John Taylor wrote the following article “Exploding Debt Threatens America”:

http://www.ft.com/cms/s/0/71520770-4a2c-11de-8e7e-00144feabdc0.html?nclick_check=1

Although I don’t agree with some of his figures and reasoning, the central point is important: This debt level is a serious problem.

It also illustrates the difficulty of ridding ourselves of this level of indebtedness.

These issues will likely get greater attention now that sovereign debt levels are coming under renewed scrutiny.

Furthermore, a question that should be asked is whether amassing ever-greater deficits and debt levels is compatible with the concept of sustainable prosperity.

I’ve been meaning to write an article about our national debt, as I think the topic deserves much greater discussion.

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