Lisa Simpson
Feb 10,2010
In: Finance

America’s Rank in the World will be Decided by the Budget Deficit

The government of USA’s position is similar to the man in the street whose home has gone underwater. But unlike the latter who is threatened by foreclosure and the teasing chance of walking away from a property that is worth far less than the loan due, Washington has to find other nations (perhaps China) to grant USA loans – more and more of it so that it does not drown.

In the current year the deficit is a staggering $1.6 trillion – 10.6% of the GDP. President Obama has promised to contain the debt caused by wars and very little income. The prospect for the next decade is bleak.

Even after Obama gives up his chair the deficit would continue to haunt the country. Right now each citizen is weighed down by $34,000. It means that either the conservatives will okay a tax hike or the liberals will have to think of cutting down entitlement measures. Perhaps both things would have to be done. Unfortunately bipartisan action continues to elude Obama.

What does the deficit of $3.8 trillion actually mean? Firstly China has started putting pressure about the huge debts due to her. China wants to know if the Treasury is strong enough to pay back the amount.

Secondly the huge debts being talked about affects the way other countries look up or down at her. The example of Japan may be cited. Its staggering debt had brought down Japan’s position in the world hierarchy.

Thirdly there is the all important issue of two costly wars. Obama has promised a pull out from Iran in the following year but coming out of the complexities of Afghanistan is going to prove more complex and complicated. The people of America are getting fed up. It is well to remember that Afghanistan was one of the reasons behind Soviet collapse. It is a known secret. Both the wars have led to the accumulation of huge debts. But there were hopes that these would come to an end and the country would go back to the prosperity associated with peace times. But it is not happening.

There is confidence that the economy of USA can correct by itself but there is little faith in the manner in which the Obama team is throwing around money – billions from the taxpayers. The TARP funds were targeted to generate jobs but the rate of unemployment is higher since the launching of TARP. While people are worried about their next pay packet Obama is concentrating on healthcare issues.

Blaming it all on Bush will not plug the leak.