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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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