Fiscal Cliff Deal adds 4 Trillion to deficit.

Prior to the fiscal cliff, the Congressional Budget Office reported that the U.S. would a federal budget deficit under $1 trillion for the first time since 2008, but now it doesn't seem like it'll happen anymore because of the additional debt the U.S. is taking on with the awful, awful, awful fiscal cliff deal.

I don't know what's scarier: Ben Bernanke's endless creation of money or the federal government's ever-growing national debt!

andrew320 said:

Prior to the fiscal cliff, the Congressional Budget Office reported that the U.S. would a federal budget deficit under $1 trillion for the first time since 2008, but now it doesn't seem like it'll happen anymore because of the additional debt the U.S. is taking on with the awful, awful, awful fiscal cliff deal.

I don't know what's scarier: Ben Bernanke's endless creation of money or the federal government's ever-growing national debt!

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Ben Bernanke is doing what he is supposed to do by targeting inflation! The man in your avatar would probably be proud of him

As for the deficit, we are in a tough place. In the short run we don't want to scare markets out of recovery so we can't just cut. What happens with the spending is yet to be seen with the debt ceiling and sequestration debates coming up.

Here in the UK, there's a lot of attention being paid to this, because we know perfectly well that America's financial situation affects the rest of the world very strongly. And our commentators are starting to use the phrase "kicking the can down the road" in relation to the deal just done. They're pointing to that two month temporary respite, and saying, in two months its all going to kick off again.

But honestly, I don't see the way out of it; we need to cut debt, because the debt servicing levels are getting unsustainable, on a national as well as a personal level; but that deleveraging is cutting demand, as people repay debt by stopping spending on the things they were previously spending on.

It just seems to be a very long, very tough road ahead, and I don't think things are going to go back to the way they were.

There is no way out of it. Do you think the current government really cares though? Or do elected officials (of any party) really only care about getting re-elected in 4 years.

The thing about the debt is that the Federal Gov't had done the logically impossible and borrowed from itself. The debt looks scary but with the gov't itself and American people being the creditors it doesn't really matter as no property, land or commodities will be seized. The Federal Gov't isn't going to foreclose on itself...

The real issue is the deficit. The debt is money we have, it's just not our money (except in our case it is :help while the deficit is commitments we can't cover. Usually we'd just borrow and turn it into debt but that pesky debt ceiling and the lose of political will has made this an unattractive option leaving use with commitments we can't pay and the financial chaos that means. A balanced budget (or a deficit small enough for people to not mind borrowing) is a must, paying off the debt, not so much (so long as we maintain control of the credit that backs it).

David said:

The thing about the debt is that the Federal Gov't had done the logically impossible and borrowed from itself. The debt looks scary but with the gov't itself and American people being the creditors it doesn't really matter as no property, land or commodities will be seized. The Federal Gov't isn't going to foreclose on itself...

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The Fed isn't buying treasuries to finance debt. Its position is temporary.

myp said:

The Fed isn't buying treasuries to finance debt. Its position is temporary.

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The fact remains, the gov't's creditors are itself and the American people. As I said, so long as we maintain control of the credit we can have as much debt as we want as we're not going to call in our own debt.

I liken the situation to a house of cards only said house is set in a concrete foundation, propped up with mesh wire and the constituent cards are superglued together. Only when we lose control do we risk it all crashing down on us.

The deficit is the issue, the debt is a boogeyman fearmongers use to scare up the stupid and ignorant.

David said:

The fact remains, the gov't's creditors are itself and the American people. As I said, so long as we maintain control of the credit we can have as much debt as we want as we're not going to call in our own debt.

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Who told you we aren't going to "call in our own debt"? That is not true- the Fed's treasury holdings work the same way anyone else's do when they mature. And the temporary position matters because it means those treasuries will find themselves on the market sooner or later or mature at which point the Treasury pays out with interest as per the Treasury details, furthering the deficit.

David said:

The deficit is the issue, the debt is a boogeyman fearmongers use to scare up the stupid and ignorant.

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That's not entirely true. The debt drives expectations too. If there was 0% debt, rates to finance new deficits would probably be even lower than they are right now.