9/29/2005

American Deficit

According to an article that I read the government deficit for 2004 was a record high of $480 billion and is estimated to go up to $1.4 trillion over the next decade. What are we going to do? In my opinion I think that the government is not alone when it comes to deficit. There are millions of Americans who spend more than they make. Many Americans buy houses and cars they cannot afford and are so far into debt they can't see out. So what do these people do? They take out bankruptcy. How are these people getting so far into debt? Why don't people just buy things that they can afford? Same goes for the government. I can understand some of the government debt is very legitimate, but $1.4 trillion, for what?

2 comments:

Anonymous said...

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Dr. Tufte said...

-1 on Taylor's post for a bad link.

Taylor: try to make the text of your link more informative next time.

How does this relate to ManEc?

Here are two points from a macroeconomist.

1) The deficit will balloon because it is measured in nominal terms. It's next to meaningless. My income is going to balloon over the next 10 years too - but that doesn't mean I'll be able to buy more.

2) It isn't reasonable to use the same view towards individual or household debt, and debt incurred by governments or corporations. The latter are not going to die with certainty. This makes their debt much less problematic, since there just isn't a sense in which they need to pay it back by a certain point or go to probate court.