Dwight Watt - Watt Thoughts #265 12/28/2012

#265 - Deficits, debt and the cliff (Watt Thoughts)

You have been seeing many recent items in the press about the deficits, debt and the fiscal cliff of the US government. However many mix definitions and do not seem to know difference between each and also cliff timeline.

Deficits are how much you spend than you take in during a year. Up until Obama took office our deficits had been running about $400 billion or less per year. Since Obama has been president the deficits have been over $1 trillion each year (over twice as high as before). A major blame has been the costs of the wars but both wars occurred at least 6 years under Bush and since Obama has been president he stopped the Iraq war totally for US troops over a year ago (on treaty signed between Iraq and USA in 2008) and is winding down Afghanistan war.

The debt is how much total we owe. You can have a debt and not be borrowing money (deficit). The US currently owes over $16 trillion. Even if we eliminated the deficit tomorrow the debt would still be there until we have a surplus and we would still be incurring major interest payments.

The financial cliff is not something that Congress and President Obama did not know about until October. It is the result of a bill passed by Congress a little over a year ago and signed by Obama. What it said was a committee would be appointed to find ways to cut the deficit by December 2011 (that date is right) of Bush tax cuts would be ended and major spending cuts on January 1, 2013. The committee could not agree on a plan and congress and Obama chose to do nothing a year ago. They chose to wait. They set the deadline and then decided to try to ignore until now. There are supposed to be tax changes and spending cuts to at $500 billion or more or stuff automatically happens January 1. What we keep hearing now is that some want tax increases on rich (although no one agrees on what that income level is) and they will work on figuring out how to cut spending in future in the future.

Kicking the can down the road on spending cuts means no spending cuts. I have heard the politicians say for 30 years that we will start cutting spending in a year or over a 10 year period but it never occurs. Congress and the President must do the spending cuts starting now along with tax changes. It is easy for me to say I will start running in a month, then in another month say I really need to get in shape by running but will start in 6 weeks, and so on and everyone knows I will never start running. However if I say I will do three days a week starting Monday and then start Monday in month I will be in better shape.



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