Deficit and voting
 

Here's an honest question for y'all. According to any of these links: http://news.google.com/news?hl=en&lr...nG=Search+News

The US deficit is over $400 billion dollars. I'm fiscally conservative (don't spend money you don't have), and I always thought the republican party was to. So why is this acceptable/ignored by voters? Why would people vote for a government that is so fiscally unconservative?

If I'm a complete idiot, by asking this question, please feel free to tell me so as long as you also correct my understanding.

1. The word deficit is really a term that people may think is negative but isn't.

2. Republicans and Bush understand that spending has increased but will be moving to decrease that spending in the coming years as well to avoid any unintended consequences.

3. Several taxes were eliminated that were unnecessary. This is the reason why the markets are swaying with the possibility of Kerry being elected since those taxes affect equities. It's not just about spending but collecting unnecessary money from tax payers for that spending.

4. Look at the alternative.

5. This goes back to point 2 and hits point 4. Really many of us are not happy with spending too much. We are OK with deficits but not if it gets alarmingly large. We are trying to influence President Bush from within the party just as many others lobby to do.

6. The US economy is tied to the world economy. Right now there are 2 factors driving the global and US economy - the US deficit and Chinese spending, Russia a bit but not as much. You can't just one day say hey no deficit. It's not that easy.

-Rudey

Some deficit is fine. In fact, it is beneficial.

This particular deficit under the control of Republicans has grown. I'm not sure that was the original intent, but it has.

Why? Well, we fought a war, we're making some fundamental changes to the country's security infrastructure. All of that costs money.

We have some fundamental conflicts within the traditional conservative platform --

strong defense vs. fighting the expansion of government
fighting a necessary war vs. not spending money we don't have

There are some true dilemnas, some real damned if you do, damned if you don't situations. I think in most cases, the administration has opted to spend money rather than risk lives.

As for cutting taxes to grow the economy, it seems to have worked fairly well since the economy is recovering. Do you think we'd be recovering quicker if taxes were higher?

Does the average American even know what the deficit is? Or do they just think deficit=bad?

Thanks for the info rudey and ktsnake.

I can't speak for the average American (duh) but I always thought deficit=bad. I think most Americans probably would agree with the statement "deficit=bad".

Now, I'm going to have to go and read more on this topic because obviously the news doesn't cover it well.

What an awful myth. You hear the words debt, deficit, atomic, nuclear, etc. and you immediately think bad. Even the word sugar is considered bad because of previous associations with slavery.

The first use of mass debt to finance large scale projects was done with the railroads in America. That's a random factoid about how its debt that finances such large projects. The word however is associated with something negative.

Again, as for Bush's policy. He represents the American people. Whatever your party is you have power (I guess you're Canadian so you may not). We are able to influence our Senators, congressmen and our President. Some have louder voices than others, but you still have a voice.

-Rudey

Very true observation - Rudey can suggest more specific texts, but the work of Keynes is a good place to start reading on this particular topic . . . I'd just google for Keynsian economics, and see if you can get a general overview to start with, and you'll be well on your way to understanding why the budget deficit is usually intentional, beneficial, and necessary (until it gets over the top).

Re: Deficit and voting
 

There is nothing wrong with running a deficit of that size when the US is in (or emerging from) a recesion.

When Democrats criticize Bush for running a deficit, they are being disingenuous because they would do the same thing. The only difference between the two parties is how they would implement the deficit financed stimulation.

Timing is everything. Well, usually.

Here are two things that puzzle me, being the first to admit that I'm not a financial expert.

How can your cut taxes (income) and start a war (expense) at the same time? I asked a Conservative Republican Congressman that last year and he didn't have an answer -- and admitted it in so many words. I'm not all that smart, but it seems obvious to me that you can't keep on spending at record levels and cut back on the amount of money coming in.

Second, since deficit spending is really borrowing, what happens if the lenders decide to collect? That's a highly simplified question that I've heard argued on talk shows and NPR. Isn't that the way some American cities and even some small countries got into serious financial difficulties -- even went bankrupt?

I don't want to pay any more taxes than necessary, but infrastructure and at least some social programs have to be funded.

I personally think the current administrations fiscal policies are dangerous. But, as usual, that's simply an opinion.

1) That's right, you can't keep spending and not have money to spend with. I think that the Bush administration, as well as any administration should cut back on expenses. However, I see the Bush administration being the one to do that and not any possible Kerry administration.

2) Lenders don't just collect. That's not how bonds work. Bonds are structured for a certain time span and pay off principal and interest in a fixed or variable pattern for a set amount of time. Notes are short term. Anyway municipal bonds are usually at extremely high credits and pay little interest because they are safe - even California is still at a high credit rating. Federal bonds are rated pretty high and are not emerging market funds - American bonds are not speculative like some third world country. Furthermore, if the bonds are structured unfavorably because of market conditions at the time they can often be refunded or restructured at a new rate. I mean I can go on and on but this is something I never thought people actually thought of so I don't understand any sense of worry here. Investment banks are not like commercial banks - we help build things, we don't come in and collect the farm when you can't pay.

-Rudey