a little east of reality

Monday, September 19, 2005

US deficit

Some interesting information on the US deficit came to light today:

On the US budget, Clinton warned that the federal deficit may be becoming untenable, driven by foreign wars, the post-hurricane recovery programme and tax cuts that benefitted just the richest one percent of the US population, himself included.

"What Americans need to understand is that ... every single day of the year, our government goes into the market and borrows money from other countries to finance Iraq, Afghanistan, Katrina, and our tax cuts," he said.

"We have never done this before. Never in the history of our republic have we ever financed a conflict, military conflict, by borrowing money from somewhere else."

Clinton added: "We depend on Japan, China, the United Kingdom, Saudi Arabia, and Korea primarily to basically loan us money every day of the year to cover my tax cut and these conflicts and Katrina. I don't think it makes any sense.

I was aware of the fact that the US deficit was funded by overseas governments buying US government bonds. I learned that in Asian Studies five years ago - that all Japan need do is stop buying US bonds in order to really screw up the US economy. The reason they don't do that is because the money comes right back to them when Americans buy Japanese goods. And they buy a lot of them.

What I didn't know was that this had now extended to them paying for a military engagement this way. I'm not a huge Clinton fan (being one of those weird people who actually thinks leaders shouldn't be liars) but I do respect the fact that he is saying this, even though he is one of the few who get the highest level of tax cut. I wonder if the rest of the 1% richest people in the US care. Maybe not. After all, it's the middle class who pay the bulk of taxes, not the super rich, and it's the middle class who will end up paying for this deficit.