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Estimates use static models, which incorprated a 3% GDP expansion. Since we got a negative print on GDP in Q4, that estimates isn't worth the digital paper it's not printed on. The deficit will be driven by GDP. With near ZERO cap ex...again.lol
The government can and does expand the economic pie, every time it deficit spends. Dollars are only created through deficit spending. A reasonable number of new dollars added to the economy demands production that would not have otherwise happened.
Increasing the monetary base is by no means increasing economic activity. One has no correlation to the other. Increased money supply does not increase velocity. And dollars are created in numerous ways such as the fractional reserve banking system.
But the govt. doesn't just increase the amount of money out there - they spend it. And those dollars continue to cycle through the economy. So velocity, or more accurately total activity, does increase. Also, banks can only create credit.
That is not true. We are currently flooding the system with monetary expansion and corp USA has 2 trill on their balance sheets with no cap ex expansion. And the fractional reserve system does create money.Very little of currency is physical anymore
I love this subject. Should we move this discussion to one of our articles?
Feel free...I wrote this several months ago...have a read. https://hubpages.com/politics/Can-The-Government-C...
While that could be part of an overall deficit reduction bill, it would only constitute a fraction of a percent of the total budget. Fun fact: during Obama's presidency, the government has cut over 600,000 government jobs.
The jobs are not the issue. It's the budget. Federal spending ballooned to unprecendent levels before he lost the super majority. Fed agencies received 30% permanent budget increases. Total discretionary spending went up over 20% in 2 years.
Actually, the govt. has been cutting back like crazy. My wife is a federal employee, and has been for a while now. The general trend is hiring freezes and foregone raises and bonuses. Another trend - outsourcing to the private sector.
But, from an macro standpoint, the budget deficit has gone down. It's still high, but will only get smaller as sequestration hits. They could retroactively replace the cuts, I suppose, and they most likely will, but it will be deficit reduction.
Not by a long shot. The budget deficit was about 400 billion at the end of 2008. Today it's over 1 trillion. And as a share of GDP it is substantially larger. Gov't cut backs only came after an unprecedented spike. And it is due to gridlock.
You're correct about the 2008 budget deficit. The 2009 budget, however, was enacted June 5th, 2008, which is far before President Obama took office. It included a 1.4 trillion dollar deficit. It was not due to his spending.
The Federal stimulus signed by Obama had an 80% increase in discretionary spending. 20% was on a permanent basis. That was unprecendented. The deficit you are refering to included TARP which was paid back in full. Estimates also had 3% GDP...LOL
I would like to see a link to those cut jobs.
There not cuts in jobs, there cuts in projected hiring. That's what baseline budgeting is all about. Slowing the rate of growth, not cutting. Sad...but true