Fiscal Year 2008 Deficit – $450 billion

Don’t blame Bush (Republican) or Obama (Democrat) for the large government budget deficit of 2009.  Rather, blame them both.  Bush was in office when the 2009 fiscal year was planned and for the first four months of the 2009 fiscal year.  Obama followed through with the planned budget adding his own spending bills and stimulus in the remaining eight months of the 2009 fiscal year.

The problem is government spending more money than they collect resulting in a budget deficit. There are two ways to immediately solve a deficit, spending restraint and/or higher taxes. Two other ways for government to resolve a deficit, which harm everybody in the long run, are to issue more debt or print more money.

The best approach to solving the deficit would be to eliminate the budget deficit in the first place.  Government spending must be reined in and political role models of this mentality are unfortunately difficult to currently find.

Don’t blame Obama for Bush’s 2009 Deficit – http://joeyconway.com/4gbh9m

• War – Iraq
• War – Afghanistan
• Foreign Policy – Iran
• Foreign Policy – General Guidelines
• Health Care – Costs
• Corporatism – General Concept
• Health Care – Current Insurance System

If each car was roughly worth $3,000 with 700,000 vehicles totals $2.1 billion in wealth was destroyed. It is as if a hurricane came through and completely destroyed 700,000 vehicles.

This limits the supply of used cars available on the market, forcing up existing used car prices. It also limits the supply of parts available on the market, forcing up existing part prices. This mostly affects lower-income drivers will now have to pay more for purchasing a used vehicle and maintaining their used vehicles.

It took roughly 1,100 more federal bureaucrats to manage and execute this program, which means 1,100 fewer workers in the private sector.

All this effort to destroy used cars was paid for by $3 billion authorized through Congress using taxpayer money. This was an indirect transfer of wealth from the average middle class taxpaying citizen to the more affluent, able to afford a new car during a recession, citizens. This program financially punishes the middle class taxpayer who paid for this program through their taxes and will have to pay more to purchase a used car and maintain a used car.

Roughly $2.1 billion in wealth was destroyed while another $3 billion of wealth was redistributed from the middle class to the more affluent.

Cato.org – Cash for Clunkers: Dumbest Program Ever? – http://joeyconway.com/cqnhea

Cato.org – There’s No End to Replacing Clunkers – http://joeyconway.com/2q6yv5

Washington Times – Obama’s protectionist policies hurting low-income Americans – http://joeyconway.com/zmtet2

The U.S., as of Sept 2009, has sold $1.517 trillion in debt this year compared with $585 over the same period last year. Barclays forecasts the government will sell $2.1 trillion in debt for 2009 and $2.5 trillion for 2010 compared with $892 billion for 2008.

Congress determines the limit to the amount of debt the Department of Treasury can issue.  The American Recovery and Reinvestment Act of 2009 signed into law on Feb 17 2009 set the limit to $12.104 trillion.  The Treasury currently forecasts it will hit this limit by Nov 2009 and started asking Congress to increase the limit again in Aug 2009, only 7 months after it was increased.

It is obvious the national debt is setting record highs.  This national debt is a promise of repayment to the holders and is backed by the government, which represents the taxpayers.  It is an ever increasing burden for all taxpayers.

US Treasury Debt History – http://joeyconway.com/brq96x

Bloomberg – Negative Bond Returns Converge With Mortgage Miracle - http://joeyconway.com/c85t3z

Keynesian economic policy is to replace the lack of private sector demand during a recession with government “public” sector demand.  The underlying assumption is the original private sector demand was correct.

The response of providing tax credit to home buyers seems to make sense on the surface as it provides them assistance and encourages more people to purchase homes.  On further analysis, the tax credit really only helps the seller by allowing them to charge that much more for the price of the home.  This keeps housing prices from falling further and reaching their true market equilibrium price.

The original private sector demand in the housing market was incorrect and fueled by a artificial bubble.  The market will force a correction.  We can either allow the correction to quickly occur and move on, or we can prolong it with the risk of making it worse through intervention and market manipulation.

Cato – Republicans Just as Guilty of Flawed Keynesian Thinking – http://joeyconway.com/c76kav