Patterico's Pontifications


Concerns About U.S. Economy as Deficit Balloons in April

Filed under: Economics,Obama — DRJ @ 8:34 pm

[Guest post by DRJ]

Mervyn King, Governor of the Bank of England, says the United States faces large deficits and fiscal problems like Greece and Europe:

“Every country around the world is in a similar position, even the United States; the world’s largest economy has a very large fiscal deficit. And one of the concerns in financial markets is clearly – how will this enormous stock of public debt be reduced over the next few years? And it’s very important that governments, both here and elsewhere, get to grips with this problem, have a clear approach and a very clear and credible approach to reducing the size of those deficits over, in our case, the lifetime of this parliament, in order to convince markets that they should be willing to continue to finance the very large sums of money that will be needed to be raised from financial markets over the next few years, at reasonable interest rates.”

In addition, the Treasury Department announced yesterday that the April deficit numbers were more than twice as high as expected:

“The United States posted an $82.69 billion deficit in April, nearly four times the $20.91 billion shortfall registered in April 2009 and the largest on record for that month, the Treasury Department said on Wednesday.

It was more than twice the $40-billion deficit that Wall Street economists surveyed by Reuters had forecast and was striking since April marks the filing deadline for individual income taxes that are the main source of government revenue.

Department officials said that in prior years, there was a surplus during April in 43 out of the past 56 years.

The government has now posted 19 consecutive monthly budget deficits, the longest string of shortfalls on record.”

No wonder Gallup’s recent poll shows Americans are worried about the economy.


23 Responses to “Concerns About U.S. Economy as Deficit Balloons in April”

  1. Read it and weep…

    What we have here is the failure of the unfree market. That means the failure of Greece. And the other PIGS (Portugal, Italy, Greece, Spain). And Europe. And it means the U.S., too. It even includes the Great Recession. The modern welfare state is collapsing around us.

    If you had believed in the 72-Year Rule, you would have seen this coming. The 72-Year Rule says the lifetime of any social order or governing paradigm is about 72 years. For example, how long was it from the adoption of our original Constitution (1789), which sanctioned slavery, to the Civil War (1861)? Call it 72 years. And from then until the New Deal in 1933? Another 72 years. How about from the Bolshevik Revolution (1917) to the fall of the Berlin Wall (1989)? That would be 72 years again.

    Do you know when the first Social Security check was issued? January 31, 1940. If my guess is right, Social Security has maybe two more years left.

    Generally, the modern welfare states were born in the 1930s. So the 72-Year Rule says the modern welfare states will collapse and/or turn into something else in the 2002-2012 time frame.

    Kinda makes you believe in the 72-Year Rule, doesn’t it?

    Of course, there are more immediate explanations than this rather mystical pattern recognition. The problem is government debts. Huge debts. Unsustainable debts and structural deficits, not just temporary ones to get through recession or war. And what is behind all these debts? The very programs we started setting up in the 1930s, our “social safety nets.” Feeling safe?

    Blame it on Bush and Iraq or whatever you want. But Bush was not President of Greece. And Greece was not one of the thirty nations willing to admit to being part of the U.S.-led Coalition in Iraq. In fact, Greece was one of the more socialistic of the modern welfare states. The problem was debt. Debt caused by things like government retirement programs, government health programs, and government unemployment payments.

    Read more:

    Generalmalaise (fc86d7)

  2. Unfortunately, I believe we are headed for a long, cold, winter. It may be May 2010, but we’ve been running on fumes for a few quarters now – propped up by false stimulus packages. The piper is coming.

    I think our only hope lies in a radical reduction in the size and scope of the government. How Greece weathers the next few months may be the best barometer. But with the chaos in Indonesia and elsewhere, who knows how much time we have left.

    Corwin (ea9428)

  3. Congress did not intend to increase the deficit when they passed spending legislation. That’s what stimulus was all about, for instance.

    Maybe the courts should be more vigorous in their enforcement of intent over text in regard to spending legislation.

    Amphipolis (b120ce)

  4. How Greece weathers the next few months may be the best barometer.

    My guess is, “rather poorly.” Greeks, as GenMalaise pointed out, tend to be more socialistic, even communistic, than other European nations. Over half their economy is tied up in either tourism or government jobs–and just ask African nations how effective governing is when the State is the only real source of employment in the country. They also have made striking something of a national pastime.

    NO WAY do they learn to live quietly with austerity, especially when the EU is essentially demanding that they live in recession-like conditions for the next two to three years. They’ll tear their country to pieces before they accept that the party is over.

    The irony is that if their government hadn’t played games and lied about their debt prior to joining the EU, this wouldn’t have been an issue. I guess the Greeks were either so star-struck by the One World Currency-type plan the EU had put in place, or were afraid of getting left behind, that they felt losing their economic soveriegnty wasn’t that big of a deal.

    Another Chris (2d8013)

  5. That puts Republicans in a strange position: unable to say the legislation failed, but at pains to distance themselves from their vote nonetheless. Over the past couple days, I’ve asked a number of GOP senators whether, nearly two years later, they think the bailout bill was effective. Their answers were revealing.
    Sen. Judd Gregg (R-NH), who’s retiring at the end of the year and is therefore unencumbered by the need to defend himself from the GOP base, has nothing to run away from.
    “It was extremely effective,” Gregg told me. “Not only was it effective and stabilized the financial industry, it also returned to the taxpayers almost $20 billion in interest and dividends that they would have otherwise not have.”

    So what are the interest rates for US and Greek bonds? What’s the future of Greek production?

    You people are economically illiterate. The “free” market caused this mess: a free market for con men. Did you know by the way that Texas escaped a good deal of the real estate crisis? And why? State regulation! Look it up.

    Calvino (b1153c)

  6. Nonsense, Calvino, the mortgage securities market was not a “free market”.

    Ever hear of Fannie Mae?

    SPQR (26be8b)

  7. “You people are economically illiterate” – Calvino

    I know well enough, as do most people, we don’t have a free market and the constraints on it today are what caused the real estate meltdown. The government decided to support those with little or no means to purchase houses; the government pressured the banks to make loans to people who couldn’t afford them; the government propped up Fannie and Freddie to back these risky loans and gave incentives to banks to make more loans.

    Face the facts: The program worked great, so long as house prices climbed. Even if a loan went bad, the mortgagee and the mortgager could come out ahead. But the program failed because of greed – the expectation that home prices would always go up.

    Read your history. The bubble was predicted and known over a decade ago.

    Corwin (ea9428)

  8. That puts Republicans in a strange position: unable to say the legislation failed, but at pains to distance themselves from their vote nonetheless.

    What a bunch of crap. The legislation didn’t do a damn thing to save the system, because it never cleared out the toxic garbage from the system. TARP allowed the banks to keep many of those bad loans off their books and not recognize them on their balance sheets, gave them $700 billion of the taxpayers’ money to play with on the stock market, and supposedly “pay it back” with liquidity provided by the Fed. In addition, the government now has $6.5 trillion that it, like the banks, is holding off of its public debt accounts. Why is Obama allowing the Treasury to act like Enron and the banks?

    So what are the interest rates for US and Greek bonds? What’s the future of Greek production?

    Interest rates for US bonds have been held artifically low because Bernanke doesn’t want to turn off the liquidity pump–and Obama is aiding and abetting it. Interest rates on Greek bonds went through the roof because they could no longer play the “extend and pretend game; the US still has that luxury, at least for now.

    You people are economically illiterate. The “free” market caused this mess: a free market for con men.

    A “free” market wouldn’t have bailed out the banks or the mortgage holders with a $750 billion helicopter drop. The housing bubble was aided and abetted by the government every step of the way, by both parties, because encouraging home ownership has been a national policy for the last 150 years going back to the Homestead Act. Even an economic superstar like yourself should be able to recognize that enabling and/or compelling banks to give out subprime/OptionARM/Alt-A loans was the latest iteration of that policy.

    Did you know by the way that Texas escaped a good deal of the real estate crisis? And why? State regulation! Look it up.

    Then why is Canada going through their own housing bubble right now, genius? Why are European countries, among the most heavily regulated on the planet, ALL underwater on their debt/GDP ratios? Perhaps you shouldn’t be so quick to call others economically illiterate.

    Or perhaps you can explain why, if the banks are suddenly doing so well, they still aren’t loaning, and why Bank of America is ramping up their foreclosure activity this year by 45%.

    Another Chris (2d8013)

  9. SPQR, please grow up.

    Lax regulation is lax regulation and that’s what caused the mess.
    Yes, Fannie and Freddie played a part, but that’s an argument for better regulation, isn’t it?

    Also: The non-profit set up by oil companies after the Valdez disaster to deal with response to future spills has 0 funds for research. Zero. Of course the same firms spend billions on research to get oil out of the ground.

    This is the most hilarious bit:
    “An analysis of data from the nonpartisan Tax Foundation by Washington Post database specialist Dan Keating found that people in states that voted Republican were by far the biggest beneficiaries of federal spending. In states that voted strongly Republican, people received an average of $1.50 back from the federal government for every dollar they paid in federal taxes. In moderately Republican states, the amount was $1.19. In moderately Democratic states, people received on average of 99 cents in federal funds for each dollar they paid in taxes. In strongly Democratic states, people got back just 86 cents on the tax dollar.

    If Sessions and Shelby succeed in shrinking government, their constituents in Alabama will be some of the biggest losers: They get $1.66 in federal benefits for every $1 they pay in taxes. If Louisiana’s Vitter succeeds in shrinking government, his constituents will lose some of the $1.78 in federal benefits they receive for every dollar in taxes they pay. In Mississippi, it’s $2.02.

    That may explain why, as the oil slick hits the Gulf Coast, lawmakers from the region are willing to swallow their limited-government principles as they dangle federal aid before their constituents. Sen. Roger Wicker (R-Miss.) said he would “make sure the federal government is poised to assist in every way necessary.” His colleague Thad Cochran (R-Miss.) said he is making sure “the federal government is doing all it can” — even as he added his hope that “industry” would pay.”

    so long suckers

    Calvino (b1153c)

  10. Calvino, I’m quite grown up. The problem is that you are not. You seem to confuse the myths you’ve swallowed with “economic literacy”.

    They are not.

    Most especially since you seem to think that Fannie Mae and Freddie Mac are examples of a lack of regulation. Here’s a clue – they are government entities themselves.

    Sheesh. And you tell me to grow up?

    SPQR (26be8b)

  11. You people are economically illiterate. The “free” market caused this mess: a free market for con men. Did you know by the way that Texas escaped a good deal of the real estate crisis? And why? State regulation!

    It was more likely State non-regulation, as in the sensible refusal of Texas to impose “smart growth” or “anti-urban sprawl” or “densification” land use restrictions on adults freely consenting to buy and sell property from one another.

    It was in the States and municipalities, who imposed those ‘progressive’ limits on land use development, that housing prices skyrocketed due to the restrictions on supply. Those skyrocketing zones were where the great majority of mortgage defaults occurred and still do occur.

    Texas saw very little of those government-mandated growth limits, and consequently none of the resulting price booms, and consequently no need for the obscenely stupid ‘creative financing’ whose poisoned mortgages Fannie and Freddie eagerly bought up, chopped into ‘mortgage-backed securities’, and sold to suckers worldwide.

    Insufficiently Sensitive (8906ed)

  12. Lax regulation is lax regulation and that’s what caused the mess.

    Which is why Obama, as the chief law enforcement officer in the country, has had the Treasury, the FDIC, the SEC, and the FBI to conduct thorough investigations of every financial institution and brought the people who committed fraud up on criminal charges where applicable.

    Oh, wait, he hasn’t done that, has he?

    Another Chris (2d8013)

  13. The idea that there was some kind of “lax regulation” is among the stupider of the stupid claims about the financial crisis.

    If Calvino wasn’t such an obvious troll, I’d point him to the video that can be found of Democrats resisting Bush admin efforts to rein in Fannie Mae.

    Or I’d point to the amount of money sticky-fingered Democrats like Franklin Raines hauled out of Fannie Mae.

    But given that its obviously a troll, that would be a waste of time.

    SPQR (26be8b)

  14. It is always easy to blame insufficient regulation or oversight and set up more bureacracy. What usually needs to happen is to first hold accountable those who were already charged with oversight and failed to do their jobs adequately.

    Speaking of Fannie and Freddy, I heard something earlier today about the limit for bailing out Fannie has been changed/proposed to be changed to “unlimited”. Anybody know about that, or maybe not true?

    MD in Philly (ea3785)

  15. #11 “It was more likely State non-regulation,”
    No it was not “more likely” anything it was IN FACT tight regulation.

    The Lone Star Secret
    How Texas avoided the worst of the real estate meltdown.

    “But there is a broader secret to Texas’s success, and Washington reformers ought to be paying very close attention. If there’s one single thing that Congress can do now to help protect borrowers from the worst lending excesses that fueled the mortgage and financial crises, it’s to follow the Lone Star State’s lead and put the brakes on “cash-out” refinancing and home-equity lending.”

    Parody doesn’t do justice to your stupidity.

    Calvino (b1153c)

  16. Actually, Calvino, the stupidity seems to be yours. The article you point to claims that Texas has avoided some of the increase in foreclosures by restricting the amount of money that homeowners could borrow against the equity of their homes.

    That’s not an argument that “lax regulation” caused the financial crisis. That’s an argument in favor of forbidding homeowners the ability to borrow out the equity on their own homes.

    And it has nothing to do with the fact that government entities like Fannie Mae were financing 3% down loans to encourage home ownership.

    You really don’t have a clue what is going on, do you?

    Did you even bother to understand the issues

    SPQR (26be8b)

  17. who needs understanding when you have talking points?

    redc1c4 (fb8750)

  18. red, Calvino does not even have that. Calvino does not understand the difference between a different policy position and “lax regulation”.

    What’s hilarious is that the basic claim of the article, that Texas foreclosure rates are low because of this policy, is not really supported by the evidence. Many states that have no such policy have lower foreclosure rates than Texas, like New York and Pennsylvania. Prior to the current recession, in 2007, Texas was ranked 12th by state is foreclosure rate.

    Silly nonsense.

    SPQR (26be8b)

  19. Parody doesn’t do justice to your stupidity.

    Says the guy who can’t wipe his backside without the government-funded program to provide him with a roll of toilet paper and an instruction manual.

    Another Chris (2d8013)

  20. stupidity doesn’t do justice to his stupidity…. 😀

    redc1c4 (fb8750)

  21. Hey guys !

    Give Calvino a break !

    “Lax regulation” did indeed cause the financial crisis …

    If there had been better and enforced regulation of Representatives like Representatives Frank and Waters and of Senators like Senators Dodd and Schumer and Obama, the financial crisis would not have happened !

    Alasdair (7dc63b)

  22. And yet another Troll comes by with the designated DNC talking points for the day. All you have to do is ask them some pointed questions, and they immediately go to insults.

    Dmac (21311c)

  23. And then disappear.

    SPQR (26be8b)

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