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The Federal Budget Deficit and the Looming Crisis

Thursday, December 16, 2010, 5:02 PM
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The US federal government is barreling towards a certain fiscal train wreck. While there is much being gleefully reported about the return of the shoppers...er, consumers...uh, patriotic citizens...spending more than they have, there is almost no hope of growth returning fast enough to offset the amount of budgetary deterioration that now seems to be baked into the cake.

As always, one component of the problem is that the US political leadership has absolutely zero experience with controlling spending, let alone cutting spending. Where austerity is being attempted in Europe (at great pain, too...if you have not seen this video of the recent Greek riots, it is both remarkable and disturbing) the current civil unrest shows that citizens don't necessarily dutifully accept their politicians' belt-tightening policies.

The plan, such as it is, for the US fiscal and monetary authorities seems to be to keep up the government spending (including the Fed's QE efforts) for as long as necessary until self-sustaining growth returns.

 

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