Saturday, February 11, 2012
Obama's Proposed Fiscal 2013 Budget Has $901B Deficit
President Obama's 2013 fiscal budget includes, among other things, hundreds of billions of dollars in infrastructure projects. That means new and improved roads, sewers, and other public goods that will, after all the construction, leave us with a more efficient nation. The issue that I foresee is passing this budget through congress. The budget leaves the nation with a $1.33 trillion deficit, and we all know the republicans will not like this. The second largest expenditure on President Obama's budget is to jump start job creation. I'm interested in the regulation that will be attached with the money. How will firms use the money to create more jobs?
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The opposition will most likely increase more hype about the nations debt in order to combat this policy.
I agree that the unemployment problem is among the top priorities. Spending from the government is definitely necessary. However, we should note that this high unemployment rate is partly due to an elevated structural unemployment rate, due to many reasons such as sector shifting, etc. Spending on extending unemployment benefit as proposed is not going to help. I hope his detailed plan includes spending on training of new workers that will be appropriate for the new jobs needed in the changing economy.
First off, I agree with Hao. I hope the $350 billion will be used to jump start creation and train new workers in different fields to off set the structural unemployment. Hopefully Obama will follow through on this promise that he addressed in the State of the Union. Second, the age of our infrastructure system is quite old and certainly needs updating. My question is how will the money be distributed or what projects will be granted the money? Obama needs to create a system that maximizes the use of money and improves the chances of this budget getting past Congress, a.k.a pork barreling. We might see certain parts of the infrastructure budget being allocated to unnecessary projects in order to ensure political success of the budget as is.
These moves confuse me. Are we trying to lower deficit or are we not?
Building infrastructure and jobs sounds attempting. And in the coming election, the unemployment problem will be one of the issue people most concern. But, will the overwhelming budget deficit cause more problems in the end? I agree with what Hao says above, the fundamental reason for unemployment is not frictional but structural. In order to solve it, more government spending on education and job training will be necessary.
In order to make a long term improvement in our economy, it is essential that there is training and an improvement in human capital along with money. This move by the government reminds me of FDR's New Deal. But, it can be argued that WWII was the real way that the economy turned around in that case. How will the increased deficit change the way that America is viewed (and perhaps traded with) at an international level?
Hopefully, the suggestion to expand spending on constructions will at the same time provide unemployment people with more job opportunities. This will be a win-win situation. Additionally, as the debt problem is a serious one that needs to be solved, whether it is suitable to run an even higher deficit in the near future? What is the saturation of the economy? Politicians might want to think about it before making the final suggestions/decisions.
The number one goal of the macro economy is job creation. When Obama poses that we create jobs, he's catering the needs of the public. Using expansionary fiscal policy to create jobs also inadvertently creates a deficit. When Obama tries to create jobs, it theoretically creates a deficit. It will never be a win-win situation when expansionary fiscal policy is used, because increasing jobs creates deficit spending. What needs to happen is what happened after WWII, where Americans were ok with getting taxed in a patriotic sense, and jobs were popping up in new sectors. Granted that would require a war, but it's an easy way to escape depression.
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