Recently, in the US political front, I am seeing some interesting misuse of the word deficit, especially President Obama’s use of that word.
Obama claimed recently, referring to his budget bill for over a trillion dollars, that he would reduce the deficit by half that in the next five years. Let’s look at that. A deficit is a loss in a business transaction; a deficiency in amount. And he was referring to budget accounts. The yearly budget accounts for the future, individual yearly accounts.
On the other hand, debt is a state of owing; an obligation. Let’s step back a bit from that. President Bush’s last budget bill, written by a Republican administration and passed by a Democratic Congress was the (up to then) highest budget bill ever passed, world wide, for any country of slightly over one half trillion dollars. And, to be fair, the Bush budgets increased throughout his reign with both Republican and Democrat Congresses.
Obama’s budget bill, written and approved by a Democrat Congress under a Democrat administration topped a trillion dollars. According to the Congressional Office of the Budget, future budgets will gradually drop to well over one half trillion dollars in the next five years due to recently started far-reaching and expensive federal programs; started by the Obama administration.
In reality, the federal debt will still increase from year to year, every year into the foreseeable future. While the deficits decrease, the debt just keeps increasing to multi trillions of dollars into the future.
This will be financed by deficit spending, defined as the spending of funds raised by borrowing.
So, my question here is if this is a simple misuse of words or a deliberate effort to deceive the US taxpaying public? Or did Obama’s TelePrompTer misfire when he was speaking?
But why should US internal affairs concern México? Only that México and the United States have tightly woven and complex economic ties. What affects one affects the other. And while US purchases much from the Mexico, the US also sells much to México. If you remove the oil sales by México to the US, the US has a positive trade balance with México. A rarity in US trade balances now.
As I have said before, México has followed the “Washington Consensus” after our 1994/1995 financial crises. And this was one case where the bailout of México, under President Clinton, was not only paid with interest in full, but early. The Washington Consensus requires countries to maintain, in the long term, balanced federal budgets. Something that Washington does not follow.
On the other hand, the US is increasing velocity to a national bankruptcy. Already creditors to the US (like China, Saudi Arabia and India) are starting to make noises about the viability of their investments in the US treasury. China proposes that their national currency should become the international currency for settling trade debts. But with the relatively short history of the China currency, that won’t happen for a long time. Now, the international community is talking about using “funny money” like “special drawing rights” for international trade (SDRs). This sounds like the funny money derivatives (credit-default swaps) that got Wall Street into a disaster, doesn’t it?
Let’s face it, if the drunken spending patterns of the Obama administration and the mentally challenged US Congress does not change, and fast, the US federal treasuries tin cup will stop getting filled. And when that happens, what we see today in the “Global Melt Down” will be child’s play.
The cry today is that Washington is mortgaging future generations with the debt. Before that happens, the US will turn on the printing presses to pay off the debt with worthless dollars. Shades of Germany in the mid 1930s.
Let’s hope that the recent “Tea Party” day does some good.
Now, not to end on a down note, I do commend Obama’s performance on the piracy situation off the coast of Somalia. There is only one option for action on pirates: kill them.
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Richard N. Baldwin T., a HispanicVista.com (www.hispanicvista.com) contributing columnist, lives in Tlalnepantla, Edo de México. E-mail at: [email protected]