Wow. 1 point 7 trillion. Now that’s audacity.
President Obama’s projected budget deficit is expected to be seven percent of the economy over the next four years. For the moment, it won’t cost that much because US interest rates are so low. Borrowing 1.7 trillion now is like borrowing 800 billion a few years year ago. It’s not the money so much as paying for the money that really matters.
But it also matters, when you borrow, what you are doing with the money. When we borrow money in order to pay people for being more productive, we tend to get more productive people and the economy grows faster. When we borrow money to pay people more for not working, we’ll tend to get more people not working. You get what you pay for.
Some of the government’s deficit is investment in the banking sector, which could be recouped if Goldman and others pay their preferred shares back. But even there, if we build our budget around bailouts, we’re paying for trouble. And if we raise taxes on successful people, we tend to get fewer successful people.
President Obama’s campaign was build around hope. Let’s hope that his budget can be built around success, not failure.
Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!
Follow me on Twitter @GlobalMarketUpd