buget deficit as percent of GDP

By Hal Canary, 2004-11-25 12:53:10 (link)
#economics

I've been worrying about the federal buget deficit and its effect on the value of the dollar. Here's what Tresury has to say:

At 3.6 percent of GDP, the 2004 deficit is up from the 2003 level of 3.5 percent of GDP and is the highest level since 1993.

The deficit increased in 2004 even though the recession officially ended in November 2001. This is the first time since before the Depression of the 1930s that the deficit has continued to increase this far into a recovery.

Nations in the eurozone are required to keep their deficits under 3% GDP. They don't always meet this goal, but it is a real goal for them.

The administration here has shown no desire to keep deficits in check. They will not cut military spending and they will not fail to cut more taxes, so theoreticaly, they will have to cut non-military spending (another conservative goal). I don't see that happening, because as soon as they start to gut those parts of the buget in quantities large enough to make a difference, they will lose the significant percentage of republican voters who believe that the gop can deliver a free lunch. There is an election in a only two years away.

So the dollar will gradually slide against the euro. But it's not as bad as it could be. It's only the difference between 3.6% and 3.0%.


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