Obama promises to cut annual deficit in half by 2013
I’ll be quick to clarify – that’s the annual deficit, not the national debt. The deficit is the amount that’s added to the debt in any given year – the debt is the total amount owed. Any year that we run a deficit, no matter how small it is, we’re actually adding to the national debt.
That out of the way, President Obama has set a goal of reducing the deficit by 50%. Now he didn’t set a hard number – so it’s not really clear what he means. The Federal government will run a deficit of well over $1 trillion for 2009. Perhaps in the $1.5 trillion – $2 trillion range. So if his plan is to cut it in half from this astonishing level, then it’s not really all that great of a plan. Our President’s goal is to have deficit of $750 billion – $1 trillion by 2013? Is he serious?
It’s not entirely Obama’s fault
It’s not as if Obama created this mess, after all – he inherited it. However, urging Congress to spend $787 billion on a bill they hadn’t read, and speedily at that, is not exactly a promising sign. Will Obama continue down this path of outrageous spending through his entire presidency? Or will he curb spending, and be praised for having a deficit of “only” $750 billion in 2013?
What we can learn from this
Cutting your spending isn’t enough – if they still exceed your income. You aren’t the federal government, and you can’t borrow money from foreign countries to fund your overspending. Nor can you print it and borrow from the Federal Reserve. All you can do is overextend yourself with loans and run up your credit cards. Eventually the music will stop for you, and your creditors won’t if you cut your deficit in half. The fact is, your debt keeps getting bigger.
Go for the surplus
What you need to aim for every month, every year, is a surplus. That’s a positive number after you subtract your expenses from your income. With a surplus, you can save, invest, and pay off debt. Yes that’s right, a surplus can actually make debt shrink, rather than just grow less quickly. With a continued surplus comes financial freedom – and that’s the goal here, isn’t it? Don’t follow in the footsteps of our government; instead, use them as an example of how not to handle your money.
February 24th, 2009 at 9:46 am
Cutting the deficit while growing our national debt, makes me laugh. Offcourse the media and the administration just picks up the “cutting debt” line so that everyone feels better. But I like the way you have explained it here.
Or put another way, it’s like cutting your household expenses while adding to your home loan by taking on extra lines of credit. Short term relief for ling term pain. The beauty of a 4 year adminstraton.
February 24th, 2009 at 12:19 pm
Indeed, the short term contributes to lack of long-term sight.. I never really thought about that. But on the other hand, do we want a King for the next 30 years?
March 8th, 2009 at 8:11 pm
I feel this article doesn’t have enough information. What were the annual deficits during the Bush administration so we can have the history on the subject. Also, I agree that Obama stepped into this mess and is doing his best to get us out but he wants to be true to his word. If he does better than 50% great but he just does 50% than he didn’t lie and is keeping his word. And we haven’t seen that lately. That money was to help the economy Bush left in ruins. And I voted for Bush. I am sooo disappointed at their blatant lack of caring what happened to the economy after they stepped away from the Presidency! Disgusted.
March 10th, 2009 at 8:10 am
Sarina, here are Bush’s deficit numbers:
2001: $128 billion surplus
2002: $157 billion deficit
2003: $377 billion deficit
2004: $412 billion deficit
2005: $318 billion deficit
2006: $248 billion deficit
2007: $162 billion deficit
2008: $455 billion deficit
2009: ( Bush’s budget ) ~$1.5 – $2 trillion EST.
Any way you slice it, any way you dice it…. “lowering” the deficit from ~$2 trillion to ~$1 trillion is embarassing to even propose. A $1 trillion deficit is not, in any way, an accomplishment.