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The U.S. Deficit and Rates: Two Ticking Time Bombs.(United States)
Here's a little confession: I voted for Bill Clinton back in 1992. I voted for then-Gov. Clinton not because I liked him a whole lot better than George H. Bush but because he promised to fix the economy and reduce the deficit.
In retrospect, I have nothing but respect for the first President Bush. I think he did a commendable job winning the Persian Gulf War, and building a coalition of nations to fight Saddam Hussein. Historians, unfortunately, have forgotten that it was this Republican president who cleaned up the S&L mess, and re-regulated that once sleepy industry back to its core mission of providing home finance money to Americans.
As for the second President Bush, I can't say I'm a big fan, but I'm willing to give him a chance if he does what President Clinton did: reduce the budget deficit. Right now that looks like a tall order, but if the former governor from Texas wants to build any kind of legacy he will need to do something about the deficit.
For the fiscal year ending Sept. 30, the U.S. budget deficit was an eye-popping $413 billion, or 3.16% of the nation's gross domestic product. The highest deficit (as a percentage of GDP) is the 6% setback in 1983.
There are several schools of thought on the deficit. Some economists, particularly those leaning right, believe that as long as the deficit (in percentage terms) stays under 3%, it's really nothing to worry about. But a $400 billion hole in the ground is still a $400 billion hole in the ground no matter how much revenue is flowing through the Treasury Department.
What does the federal deficit have to do with the mortgage business? Large deficits in and of themselves won't necessarily drive rates higher, but if foreign investors stop buying our Treasury bonds because they can get a better deal elsewhere, then rates will rise.
The math works like this: the U.S. government funds the deficit through the sale of Treasury bonds (debt). The government stopped issuing 30-year bonds a few years back, leaving the 10-year as the long-term instrument of choice. Mortgages (as we all know) are priced off the 10-year.
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...8--WASHINGTON--President Bush on Monday said the 2003...next month may run a deficit, the first federal...nation might have to run deficits in time of war, in...charge that a return to deficit spending would push...not say how large the deficit might be in the budget...
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- News wire article from: AScribe Business & Economics News Service December 9, 2004 700+ words
...environment. They also rank the budget deficit and Iraq at the top of a list of items on which President Bush should focus during his second...that addressing the U.S. budget deficit should be at the top of the president...
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- Press release article from: PR Newswire December 9, 2004 700+ words
...environment. They also rank the budget deficit and Iraq at the top of a list of items on which President Bush should focus during his second...that addressing the U.S. budget deficit should be at the top of the president...
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- Press release article from: PR Newswire February 8, 2006 700+ words
...transcript of remarks by President Bush in signing of S.1932 - Deficit Reduction Act of...track to cut the deficit in half by 2009...increases, immense deficits, or deep cuts in...mandatory spending, the Deficit Reduction Act will...
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- Newspaper article from: The Christian Science Monitor March 19, 2004 700+ words
...action has added to deficits. That hints at...displays alarm at the deficit. If bond investors...to the those huge deficit numbers," says Mr. Behravesh. President Bush talks about cutting...also not reduce the deficit much. In a political...
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- News wire article from: The America's Intelligence Wire February 11, 2007 700+ words
...today's program, the buck starts here. See how President Bush's deficit decisions today could play out down the road...It is a land grab. WASTLER: It is big. Now, President Bush unveiled his $2.9 trillion budget for 2008 this...
Source: HighBeam Research, The U.S. Deficit and Rates: Two Ticking Time Bombs.(United States)