Questions

[entipy]

Ok, the election and the ensuing discussions I've seen 'round the net have got my brain ticking.

So, any answers and/or resources would be appreciated.

1. Is our national budget a matter of public record?
2. Why do we constantly maintain a deficit?
3. Do other countries, in general, work with a national deficit, also?
4. How would one go about keeping up with exactly what an administration is doing/changing/helping/killing/making worse/better - other than news? (I don't trust news sources, generally.)

It may seem pretty pathetic that someone doesn't know these things about her own country, but... there it is.

I'd like to know.

[LizardKing]

Check this out, it may not answer all your questions but it is pretty cool to be able to play with the federal deficit.

http://www.budgetsim.org/nbs/shortbudget04.html

Lookit what happens when you get rid of Social security. (say if it were privatized.)

[entipy]

Thanks, LK! I'll check that out.

[Evilpoptart]

1. ya you prolly can find the budget as a .pdf file somewhere. I will look and see and send it ur way if you want.

2. Not always. Only in the last 50 or so odd years have we been under a deficit. During Clinton, the budget was actually balanced for a few years, and we had a surplus of cash. Thats what so weird about Neo Con's. They claim they are republican, but yet Bush has whipped that surplus and grown the debt more then all the other presidents COMBINED

3. Again, not that I know of. I talk to a few politically active people from the UK. And they don't seem to. I could be wrong, I wish Amarote would jump in here on this one

4. Again there are lots of sources. NPR is a good one. There are also a few congressional newpapers out there although I forget their names atm, they can tell you whal congress has done each day.

[Sterling]

At certain times, running a budget deficit is not, in itself, a bad thing. Running a budget deficit indefinitely, or in the wrong circumstances most definitely is.

If the economy goes into recession, it's perfectly normal, and indeed desireable, for a government to run a budget deficit. Running a deficit is stimulative, because it means the government is spending money, which goes into the pockets of it's citizens, and not taxing correspondingly heavily. This is financed via loans from overseas through the bond market.

However, ultimately those loans need to be paid back, or the debt servicing costs mount - no different to your credit card bill. The corollary of this is that in order to pay down those loans, sometimes there needs to be a corresponding budget surplus. This is where governments get into trouble - instead of spending the surplus to pay down the deficit, or stockpiling the surplus to pay for a future deficit, they tend to give it away either through spending or tax cuts.

So, what happens if the budget deficit doesn't get paid down? Well, like any bad debt, people are less inclined to lend to the debtor. Since bonds are denominated in dollars, and the bonds are becoming less attractive, this puts downward pressure on the currency.

Another factor which puts downward pressure on the currency is a trade deficit. If you are importing more goods than you are exporting, you are having to in effect buy a lot of foreign currency to pay for those goods. Selling a lot of your currency and buying a lot of someone elses causes the value of your currency to drop (supply and demand).

The US suffers from both a large trade and a huge budget deficit, and you can see the effects on the dollar. Today the dollar hit its all time low against the Euro, and the smart money (so to speak) is on it falling much further. Ultimately this correction in value can wipe out the trade deficit, by pricing imported goods out of the market and making exports more competitive, although the dollar has a very long way to fall for that to happen.

When the value of the currency falls, the government may also have to intervene by either buying currency (in this case dollars) from the market to prop up the value or by raising interest rates. Raising interest rates has a dampening effect on the economy, and hurts consumers.

The last way a government can get out of deficit is simply to print more money. Which leads, of course, to massive inflation.

In any case, the long term effect on the economy can be severe.

[Sterling]

To answer the specific question about the UK. Yes, the UK government is currently running a budget deficit. This is, as I said, perfectly reasonable so long it is balanced by appropriate surpluses in other years. The difference between the UK and US governments is that the UK government has a policy of running a balanced budget over the economic cycle (in other words that the surpluses pay for the deficits), whereas the US government's policy seems to be to stick its collective fingers in its ears and say "la la la, I can't hear you".

[entipy]

* entipy blinks

Thanks.... Not sure I understand all of that, but thanks, anyway. :)

[Amaurote]

Going on from Sterling's point about the dollar's continued fall against the Euro, there's been much speculation over here that this is in fact a deliberate policy on the part of the US. Chirac was muttering darkly about reprisals only the other day - he didn't actually use that word, but it was pretty clear what he meant - if the policy of depreciation began to price EU exports out of the US market. In other words, we're looking at more protectionist skirmishes, with Tony Blair proclaiming himself a bridge between Brussels and Washington, which presumably means a crapload of angry politicians trip-trapping all over us again.

What I do find interesting about this is that for the last three years, Bush has been constantly compared to Herbert Hoover, who had a monomania about balancing budgets. Bush is supposedly simply a Christian conservative with neo-con handlers, yet his attitude to balancing budgets is actually less orthodox than a neo-Maxtonian socialist like Gordon Brown, and while there was certainly at least one fiscal conservative standing in the Presidential election, he wasn't the incumbent...it isn't terribly surprising, I guess, the same thing happens over here: you elect an unreconstructed Thatcherite, you get a rocketing PSBR. Maybe we should start faking outrage the way the Right fakes religiosity?

[Evilpoptart]

LMAO!

And again, this goes to prove my theory that people outside looking in, have a much better view of whats actually going on. Its a shame when one has to surf the BBC just to see current events from this country.

[Sterling]

Well, it's not that surprising, it's a fairly common principle: you cannot reason about a system from within it. I think it was Nietzche that made that observation about sanity - you can never prove to yourself that you are sane.

Similarly, it's not really any surprise that Americans are uniquely unqualified to make observations about the state of America.

[JakeD]

Similarly, it's not really any surprise that Americans are uniquely unqualified to make observations about the state of America.

Too true...even those of us who try our best to stay on top of things and to understand every angle of the occurrences in our country lack the accountability and generally neutral mindset characteristic to an outsider's perspective...just goes to show that if you're a cog in the machine, you're not necessarily going to be the best source to rely on if something goes haywire.