What Happens When You Spend What You Don't Have?

It's the question that not too many people were asking a few months back: Where was the money for the allegedly wondrous government stimulus plan going to come from? Visitors to this site most likely already knew the answer. Today, the Associated Press spelled it out pretty clearly in "Stimulus Plan Pushes Deficit to All-Time High."

May imbalance more than doubled from a year ago to $165.9 billion

The U.S. government says a flood of economic stimulus payments pushed the federal budget deficit to an all-time high of $165.9 billion in May.

The Treasury Department reported Wednesday that the May deficit was more than double the imbalance in May 2007.

That reflects some $48 billion in payments as part of the government's $168 billion effort to give the economy a jump-start and keep the country from falling into recession.

For the first eight months of the budget year, the deficit totals $319.4 billion, slightly below the all-time record for this period of $346 billion, set in the 2004 budget year.

Comments

[Ed H]

This is reason enough to want to see the backside of the Bush administration. It's not tax and spend, it's cut taxes and spend. Here's what these deficits have looked like in percentage of GDP terms:

http://www.creditwritedowns.com/2008/05/chart-of-day-us-federal-deficit.html

I see a big number being added to this chart in the fall.

[Dr. Steven J. Balassi]

The U.S. government suffers from the same thinking its citizens do. There should be a balance between the short- and long-term. Going into debt as an investment is a good thing. An example is paying for your college education or buying a house. The problem is people go into debt for things they don’t need (keeping up with the Jones’s).

Our politicians think the same way. Our political system is very short-term. Most politicians run for office every four years. They don’t get votes by saving money or cutting programs, they get votes by giving (our stimulus package). They do this because it looks good to voters. Since we don’t think long-term as citizens, we fail to ask them to think long-term as well. Our household and country debt is the result of this excess.