Obama calls for a reduction in the U.S. deficit???

Only days after signing the largest stimulus package known to man, as well as instituting a number of other costly bailouts to various market sectors, President Obama issued a statement that he has set a goal to slash the United States annual deficit in half by the end of his term. Mr. Obama inherited a deficit for 2009 of close to $1.2 trillion, which is expected to rise to more that $1.5 trillion given the initial spending from the stimulus package. I am not criticizing Mr. Obama for either of the two issues but I am having a hard time understanding how he is going to accomplish both of these lofty goals. With the economy being in its worst condition since 1982, the U.S. government needed to step in to provide some much needed relief and did, coming in the way of the bailouts and stimulus package. By doing so, the U.S. deficit took a extremely large hit, but this was the lesser of two evils, hoping that the $800 billion stimulus package would stop this downward spiral and spark some hope in the eyes of everyone across the world. Also, Mr. Obama has intentions to deliver this year on ambitious campaign promises to implement his health care and energy policies, which undoubtedly will add to the already enormous deficit. Mr. Obama also has plans in the future to reconstruct the country's education system by providing schools with increased funding and pay for teachers. I don't claim to be a very smart man but even a child can understand that a great deal of money will have to be provided to accomplish these goals and agendas. One way of raising the necessary funds to achieve his aspirations would be for Mr. Obama to raise taxes on the citizens of the U.S., which in these economic times would only act as gasoline on an already out-of-control fire. Another option President Obama has at his disposal, is to borrow even more money from foreign countries to finance his political agenda, leaving the tax payers, me and you, with more and more debt, with interest, to repay. This is a classic example of having your cake and eating it, too!!! It just can't work!!! The two major goals that the President is trying to achieve are contradicting!!! In a recent article published in the New York Times, Mr. Obama was quoted saying, "We can't generate sustained growth without getting our deficits under control." If that is in fact true, and I personally think it is the case, it is vital that we put all other agendas, policies and goals aside and focus on reducing the deficit to generate growth in the U.S. The stimulus package may in fact be necessary to stop this economic downturn but the line needs to be drawn somewhere!!! Everything that the government has done to stimulate the economy is water under the bridge and now the government needs to take a step back, focus on reducing the deficit, and let the economy run its course. This isn't the first recession we have experienced and it certainly won't be the last. The economy has always come out of the contracting state and this holds true for the current recession. Once we have weathered this economic storm and the U.S. budget has been somewhat controlled, then if the President want to look into these political policies, I see no problem. A good leader is one who can assess the current situation and make adjustments to the overall objectives to ensure the best possible outcome for his/her team, company, or in this case, country. Let's focus on the most important objectives, economic growth, and then work our way down the list when the time is more appropriate.


Dr. Tufte said...

-1 on Trevor for no link.

I think this post is right on the mark.

Having said that, it hasn't been my experience that politicians get this point at all. As near as I can figure, they're just making up most of it as they go.

Well ... not really ... but what are we supposed to think when they claim to be able to go in two opposite directions at the same time?

FWIW: when the contraction ends, we will see deficits go down no matter what, and given that contractions do tend to run shorter than election cycles, it is very likely that the deficit will be declining by the time of the 2012 election.

carson said...

Having just watched President Obama's speech to Congress tonight, I had similar sentiments running through my head (trying to "have their cake"). We were all given the "hard times ahead" line backed with a hopefull and admittedly inspiring list of programs and initiatives to lift the economy out of the current recession. The president did, however, acknowledge the problem of increasing the deficit and not burdening future generations. While explaining rather directly to the American worker what he/she will recieve in tax breaks, he additionally added other healthcare, educational, and 'green'energy aggendas and still claimed to cut the deficit in half by the end of his second term. President Obama is a great, characsmatic, and encouraging leader, but he sounds like he is banking on the audacity of hope to cut our defict.

Dr. Tufte said...

-1 on Carson for multiple spelling errors.

I didn't listen last night (I know - I'm terrible - but I haven't listened to those for at least 25 years).

The main reason is exactly spelled out here. If it's all about stating things that are inconsistent with reality, and forecasting things most of which are unlikely to occur, what's the point?

Liam said...

I am wondering, when in fact, or even if, our expansionary policies will catch up. May those who speak of doom levels rising with the money supply, hand in hand, stop speaking. Not because they are wrong, but because I am wondering if they have some validity. If we consider it reasonable to call money paper, when will it sink in to the American people? But we haven't yet, will we ever?

Anonymous said...

Dr. Tufte, I may agree that the deficit will be declining by the time 2012 rolls around, but do you think that overall the yearly deficit will be higher or lower than it is now? I can’t bring myself to believe that by spending the kind of money Obama wants to spend, that we will be anywhere near shrinking the deficit. Where are the cuts going to come from that will allow that kind of spending…spending that is not deficit spending? According to NYT
the cuts will be from “Iraq troop withdrawals and higher taxes on the wealthy,” The article claims that $90 billion a year would be saved from troop withdrawal in Iraq, but does not detail the additional spending that would come from an increased presence in Afghanistan. I didn’t get data on what revenues higher taxes would generate, nor did I investigate the increased costs due to his healthcare reform or other programs. The article says Obama’s full policy will be available in April.