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2010-10-08 13:06:51

Understanding Deficit and its Implications

<p>With it affecting all and sundry it is  necessary to understand the deficit and its implications. Broadly speaking it  means <a href="http://www.foreclosurewarehouse.com/content/foreclosures/tax-foreclosure/how-to-buy-government-tax-foreclosure-properties/">government</a> is spending more than what it is earning. This leads to  deficit that has to be contained.</p>
<p>When Bush entered White House at the start  of 2001 there was a generous surplus in budget accounts. It was predicted that  this would increase substantially. But today USA is weighed down with a massive  deficit – the largest since World War II. The <a href="http://www.foreclosurewarehouse.com/content/general/freddie-mac-housing-forecast-sees-slow-recovery/">forecast</a> for the next decade is  gloomy and unsustainable.</p>
<p>What has caused this to happen? It has  happened both gradually and then suddenly.</p>
<p>The deficit increased slowly when the Bush  government adopted certain policies. In 2001, it was projected that in 2008  there would be a surplus equivalent to 4.5% of GDP. But in reality when 2008  came the deficit was 3.2%. It was all due to certain policies like <a href="http://www.foreclosurewarehouse.com/content/foreclosures/tax-foreclosure/how-to-buy-government-tax-foreclosure-properties/">tax</a> cuts and  increasing expenses.</p>
<p>In 2009 the situation became alarming with  the collapse of the financial markets and the tanking of the economy. Lately  the <a href="http://www.foreclosurewarehouse.com/content/foreclosures/foreclosure-crisis/country-foreclosures-effect-overall-economy/">economy</a> is showing weak signs of recovery but the deficit has worsened and  is set to touch 13% in 2010. Nearly two thirds of the swinging of the pendulum  is because of the ailing economy and one third because of the policy taken in  response to the downward spiral.</p>
<p>Downturns occur in cycles and deficits are  not always inevitable evils; in fact it can do good things. Although the  present gsp is unparalleled it is not a problem by itself especially if it settles  to down to general levels within the forthcoming couple of years.</p>
<p>But the future looks bleak. There are two  ways of looking at tomorrow – short vision and long vision. Experts say that  USA is facing a budget problem for the long term because of fast increasing  programs relating to old-age entitlements.</p>
<p>Even the future for the next decade is  gloomy. When the years roll onto 2019 even if the Obama government has  everything going its way and the economy keeps recovering steadily, the deficit  will not go below 5.5% of the GDP. It is a very high percentage even in normal  times. The ratio between debt and GDP will spike up to 82% and not stop there.</p>
<p>The irony is that things will not go the  way Obama’s team wants it to go considering already its bleak performance.</p>

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