US Deficit for 2010 - $1.294 Trillion



By: YOSEF TASTASSA  
Published: October 17th 2010
in Economics » Local

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Pic: Fotolia

The fiscal year in the United States ended on September 30th 2010. The figures show that without a doubt, the American economy is still deep in the mud, and doesn't really find the magic formula to go back on the right tracks. The figures are enormous, unbelievable and scary!!

 

Compared to the 2009 fiscal year, the income of the US Government increased by 2.7% to $2.16T (Trillion - 1,000 B) US. US Government expenses went down by 1.8% to %3.46T US, meaning that the Federal deficit for the fiscal year 2010 was $1.294T US.

 

In terms of the federal budget, the deficit is 60%. In terms of the US GDP (Gross Domestic Product) the deficit is 8.94%, meaning that for every $100 any American spent, he or she earned only %91. The American’s daily deficit is over $3.5B, an enormous figure in any term. The fact that the total US deficit decreased when compared to last's year deficit of $1.416T, doesn't comfort anyone.

 

What do the figures mean for the Americans?

 

The market is still not recovering from the 2008 crisis; the American tax payer is not making enough money, and therefore doesn't pay enough taxes. Just looking at house prices in some US cities will make us all understand how difficult things are.

 

The Central Bank has to cover its deficit from somewhere, either by printing more green bills that eventually cause inflation, loss of stability in the local markets and a rapid devaluation of the local currency (USD), or by issuing US Government Bonds that are sold to the public in order to raise money for the purpose of covering the deficit, while increasing the inner debt

 

The biggest problem is issuing bonds to overseas countries, especially China. The Chinese economy is feeding the American one. Instead of paying in cash, the Federal Bank is issuing bonds that China is buying. A bond is a debt, and a debt has to be paid. Currently China is holding US bonds in the amount of approximately $1B US. How would any of us feel if we owed so much money?

 

What should Canada do?

 

What do the figures mean to Canada? Should Canada do something? Can Canada do something? And how does our much smaller economy deal with US deficit?

 

The United States is not across the Atlantic Ocean nor is it across the Pacific. It is right here, next door, our nearest neighbour, and that neighbour is in some economic troubles.

 

We should be thanking Canada for its very responsible fiscal policy that saved the local economy from the very unpleasant American and world economic crisis.

 

Canada's economy sees, and should keep seeing the US as an economic partner, and positively respond to any required economic assistance from the US.

 

At the same time Canada should search for new markets to cooperate with it, especially in Asia, the Middle East and Africa. Strong long-term economic relationships with other world economies will put our nation in the right track of sustainable economic growth, reduce the unemployment rates, and increase the much needed foreign investments in our homeland.

 

Economic policy makers and regulators should keep focusing on the housing and real-estate sectors and make sure that mortgages covered by bonds are issued carefully and responsibly.

 

Canada's Central Bank should keep moving towards a balanced federal budget, and use its monetary tools: interest rates, states bonds and other liquidity control tools in order to keep the markets balanced and stable.

 

One of the most important things to do is keep encouraging the labour market, and find the ways to increase fertility ofworkers.

 

If each Canadian citizen would produce only one extra Canadian Dollar a day, the contribution to our economy would be about $13 Billion a year. How about that?



Related articles: (US economy, Canadian economy, deficit)
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