How do you think that this will impact the US economy?
Saturday, December 11, 2010
November federal budget deficit highest on record
The federal budged deficit has reached an all time high! The budget rose 150 billion dollars this past month marking the highest monthly increase. This is only going to get higher especially if congress passes a tax cut plan that will cost 855 billion over the next two years. However it is poised to raise growth as well.
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4 comments:
Government spending is important in a time of high unemployment. While the deficit is very high, so is unemployment. We will not get out of the recession if we cut back on spending. However, if the tax cuts expired for only the highest percentile, we would be returning more taxes.
This is one of the scariest moment for the economic recovery because the recovery can result in a double dip or a continuing improvement! Currently, GDP has been growing due to the government's spending. Unless consumer's spending is going to pick up soon and simultaneously replace the government's spending, the chance of a double dip is more than likely.
I agree with Allison that deficit spending is necessary in a time of high unemployment to keep people working and money flowing. I also feel that tax cuts for the rich are not as effective for stimulating growth as tax cuts for the middle class because middle class consumers would actually spend the excess cash whereas the wealthy would continue hoarding it. Tax cuts for the wealthy would simply raise the deficit in the long run. At least deficit spending and tax cuts for the middle class would help stimulate growth despite the long term deficit effect.
There is going to be deficit spending in a time where their is a recession. I do not think that cutting taxes a good idea right now. The U.S. needs to lower the deficit it currently has. It will raise growth though and this is what we also need. A few years from now the tax cuts should be raised and by this time hopefully most people will be back to work and making the money they used to before the recession.
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