$100 Billion Deficit Increase is Forecast

Article Citation:

http://www.nytimes.com/2010/02/01/us/politics/01budget.html?ref=economy

Economic Terms:

1. Deficit – When more money goes out than comes in. A budget deficit occurs when public spending exceeds government revenue.

2. Gross Domestic Product – a measure of economic activity in a country. GDP = private consumption + investment + public spending + the exchange in inventories + (exports – imports).

3. Tax Revenues - The other early source of tax revenue was trade, with tolls and customs duties being collected from travelling merchants. The big advantage of these taxes was that they fell mostly on visitors rather than residents.

Citation: http://www.economist.com/research/economics/

Description:

The economic activity here is the debate over President Obama’s proposed plan to lower the unemployment rate while raising the rate of employment by employers and number of job availability. President Obama, previously opposing McCain’s tactic to implement a plan to disregard about 120 programs for the benefit of more salutary priorities such as education, research and energy programs, now proposed this same tactic. However, there is a $100 billion deficit forecasted as a result of President Obama’s recovery plan which will be bigger and more detrimental to the economy than last year’s deficit. His primary concerns underline increasing taxes on big banks, tax credits for small businesses that make new hires and money for infrastructure projects, increasing tax revenues and decreasing spending. President Obama and his budget advisor believe this plan will lower the deficit, rather than increase it due to a combination of renewed economic growth. The President will ask for a bipartisan commission to propose a plan to also balance the budget. If Mr. Obama’s plan is to survive, we will have survived the second worse recession experienced.

Analysis:

Prior to President Obama, President Bush’s decision for U.S. involvement in military enforcement resulting in war, and sending troops to fight a war in Iraq for oil has made governmental spending skyrocket, never compensating or fully recovering from these budget loses. The huge trade deficit is also a cause of today’s economic recession. Another aspect that also crucially matters is the current credit expansion; it keeps accelerating. But the problem is that more and more credit creates less and less economic activity, as measured by GDP.

Explanation:

This economic activity occurred due to a prolonged history and progressive problems of economic instability that was never rectified. President Bush left our economy extremely corrupt, furthering the corruption of the economy in our current recession and making it more challenging to rectify them in the midst of crisis. Our current economic crisis and recession is primarily a post-war effect that has never been atoned for. Additionally, the excess and unnecessary spending of money, consumer spending, and the excess borrowing of money and credit have resulted in the second worse economic recession which we are now experiencing.

Prediction:

As an economic commentator, I personally believe that this economic recession will continue to progress so long as our government is limiting the necessary supplies and resources for consumer, employer, and employee advantage. Although I do believe we as a nation are taking slow but progressive steps towards surviving this current recession, I do not believe enough progress is being made at the pace it should to bring about the economic growth, security, and equity we Americans have been seeking. As we are staying relatively consistent in limited progress through this recession, other nations and countries are suffering as a result. Our inefficiency is hampering the economic growth, security, and equity other countries seek as well. I hold this view because I of the news I have heard regarding “progress” the government is making and because I continue to witness the detrimental affect on our society the economic recession is fostering. I do believe our country as well as others will come out of this recession, but what I do not know is when and the duration of this economic activity. However, I do believe things will get worse before they get better.