US Runs A 4th Straight $1 Trillion-plus Budget Gap
Many private forecasters are less optimistic about the deficit. Analysts at JPMorgan foresee a $1 trillion budget gap for 2013. That would mark a fifth straight year of deficits of at least $1 trillion.
All that assumes the country avoids tax increases and deep spending cuts that take effect next year unless Congress reaches a budget deal.
â¿¿ THE THREAT
Over time, big government debts can damage the economy. The economists Kenneth Rogoff of Harvard University and Carmen Reinhart of the Peterson Institute for International Economics have found that growth tends to slow sharply once national government debt reaches 90 percent of GDP.When the government borrows heavily, it can drive up interest rates and divert financing that would have been available for private companies. Rising debt levels can cause some investors to lose confidence in the government's ability to pay its bills. They would demand substantially higher interest rates. Higher rates would discourage businesses and consumers from borrowing, thereby slowing the economy. The government would collect less in taxes and spend more on unemployment benefits and other social programs. That creates a vicious cycle like the one that has entrapped European countries such as Spain, Italy and Greece; Rates are rising, economies buckling, budget deficits widening and debts swelling. So far, that hasn't happened to the United States. Investors, worried about the troubles in Europe, have been eager to buy Treasury debt, allowing the federal government to borrow at historically low rates. â¿¿ THE FIX: If he's elected to a second term, Obama has pledged to reduce the government's deficits over the next 10 years by about $4 trillion. Obama says he would reduce the growth of federal spending â¿¿ slowly, to avoid triggering another recession. He also wants to end the Bush-era tax cuts on income that exceeds $200,000 people for single taxpayers and $250,000 for couples.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV