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Thursday, October 16, 2014

Deficit Warning

For John, BLUFYou are OK, but others will be a drag on the economy.  Nothing to see here; just move along.

First off, a review of the definitions:
  • DEFICIT—In an individual budget year, the difference between revenue collected and monies spent.
  • DEBT—The total debt of the Federal Government, accumulated over time, made up of many annual deficits.
In this article Bloomberg Reporter Megan McArdle yesterday gave us "Don't Care About the Deficit? Now You Should".  She links to this Bloomberg article.

There are two factors that seem to be in play here.  One is the fact that people are living longer, thus placing additional demands on "Social Security benefits, Medicare and, eventually, Medicaid to pay for their nursing homes."  My question is where are the actuaries who are supposed to give us warnings about these costs?  If the actuaries can't keep track of this, how can we trust that our insurance policies are of any value?

The second point is that unless there is economic decline we will eventually find the Federal Reserve Bank raising interest rates, which will make our debt servicing more expensive, increasing our annual deficit.

Hat tip to the Instapundit.

Regards  —  Cliff

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