Hey, Big Spender!

Reading over my last post got me thinking - yes, I know, that's a dubious proposition - about the economy (in general, that is - my personal economy at the moment is something I'm in denial about) and why it is that, regardless of how the economy's actually doing, certain people are always able to come up with ways to tell you that it's worse than you think.

Right now, for example, if you attempt to have a conversation about the economy and you happen to bring up some of the good numbers from my previous post, it's an absolute certainty that someone within hearing range will say "Yes, but what about the deficit?" and everyone will nod their heads knowingly and then go back to discussing the fine art of popping wheelies on their new riding lawnmowers.

If the economy were a horror movie, the deficit would be the boogeyman. It's always lurking somewhere just out of sight, in a closet or a basement maybe, but it never quite gets to the point where it jumps out at you. And, as Stephen King will tell you, in any horror movie, sooner or later the big bad has to make an appearance. Otherwise, it's like "Pour me another Manhattan, Gladys, and tell the Deficit to keep it down in there, will you?"

The problem with government debt (i.e. deficit spending) is that it never seems to affect us on a personal level. All it is really is buying today and paying for what we bought next week, month, year, etc., which is something most of us are already very familiar with. Deficits can lead to higher interest rates and inflation but not always. They can also help to stimulate the economy and create jobs, especially when coming out of a recession. In fact, if President Hoover had left well enough alone after the Stock Market Crash - instead of raising taxes - the Great Depression might have been only good or so-so.

What's more, I can't imagine the deficit playing any part whatsoever in personal economic planning. If someone gets a raise at work, I can't see them saying "Gee, honey, we should really give this back to the government to help cut the deficit". Or what about when making a major purchase, like a home, does anyone go "Boy, I'd really love to buy that house but what about the deficit?"

For what it's worth, here's one economist's take on our current deficit:

I know, I know. What about the deficits? Can we afford these tax cuts? As our after-dinner speaker last night, Dallas Fed President Richard Fisher, pointed out: aren't deficits and the associated federal debt at staggering all time highs? Yes -- but as is often the way with after-dinner speakers, that wasn't the whole story. Our GDP is at all-time highs, too. As a fraction of GDP, our deficits and our debt are nothing special. They're about average for the last 30 years. We've seen higher in this country in the past, and in fact many nations today have far worse.

You see that? The deficit is "staggering". Isn't that something? And yet, at the same time, it's "nothing special". As to which one is correct, how should I know? I'm not an economist. But the next time you're having a conversation with your buddies about the economy and someone brings up the boogey-er, deficit, just smile and shake your head.

And pop another wheelie.