President Obama, Stop the Deficit Spending

Alan Der Ohannessian

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President Obama says one thing and does the opposite. In his recent budget proposal, he said Americans should save more and spend less. Then he proposed a $3.8 Trillion budget plan.

The gap between what the government earns and spends will be 1.5 trillion for 2010.

The president said that spending was necessary to fight a recession which has lead to a 10% unemployment rate.

It’s more like a depression because the actual unemployment rate reaches 17% if you take into account the people who work part-time or those who don’t look for work because they’re discouraged. During the Great Depression in 1929, the unemployment rate reached 25%. Today’s rate is harrowingly close.

The president also said if we don’t spend money, then the recession will turn into catastrophe. If the government keeps spending money it doesn’t have, they will ensure future generations with lower standards of living.

The US economy should have entered into a recession in 2001, as people lost their savings in the stock bubble from 1996 to late 2000.

Instead of going through the pain, the government slashed interest rates to encourage more spending.

It’s similar to giving more booze to an alcoholic. A stroke of short-term genius.

People with no savings qualified for home loans and borrowed money against their home equity which they thought would keep rising. However, they had adjustable mortgage rates, meaning it would spike after a while. When the rates shot up and people had no savings, homes went into foreclosure, causing the economic recession.

In the proposed budget plan, he proposes raising taxes on the wealthy. According to the Wall street Journal, the tax raise will reach 10% on businesses for the next decade.

If he taxes the rich, they will start firing employees, or worst they will open their businesses in countries with lower taxes, leaving US at a competitive disadvantage.

Already, young Americans are heading to China and starting businesses or looking for work. While Obama said he won’t accept second best for America in his speech, he’s acting like it does.

Instead of raising taxes on businesses, he should reduce them, and encourage people and the government to save.

The more people save the more capital businesses have  to invest. They should invest in production, something this country has been losing for years. Therefore, we import most of our products. Everything we consume is made somewhere else like China, India, or Pakistan.

The reason we consume stuff at low prices is because exporting countries keep their currency devalued against the dollar.

A country is like a household, when a family spends more than it earns, it should cut back otherwise it will go further into debt.

Instead of cutting spending, America borrows $3 billion a day. The government and the American people are indulging themselves at the present at the expense of the future consumption.

The reason, the world is loaning us money is because they have faith that the government will restore their financial house. They loan us money in exchange for treasury bonds, a piece of paper stating that the US government will repay the money with interest backed by the credibility of US government. Would you continue lending money to someone who keeps piling more debt and borrows to pay the debt?  It doesn’t make sense to me.

If we don’t start saving as a nation, the world will lose confidence in the US dollar and it will crash. American’s purchasing power will diminish like other developing countries.

Therefore, president Obama stop the deficit spending now before it’s too late.