FYI: Where Did the Big US Deficit Come From? No Money for Coral Gables.

The US government deficit increased in the last year and it is expected to increase in years to come, and it is reported that it has come from three big sources.

  • Most of it, 59 percent, was comes from the economic recession because government revenues fall with economic activity.
  • Only 17 percent comes from the government spending (called discretionary spending) in response to the crisis, including the TARP to fix Wall Street.
  • And then 14 percent comes from increased interest payments on the national debt. (By the way, a lot of the debt is still owned by the US government itself.)

This tells us that concerns about the TARP and stimulus package spending are greatly exaggerated.  In fact, many economists are quick to say that too little was spent on stimulus and on the wrong things.

Notice that Coral Gables has taken a big budget hit this year because money from the State of Florida are dwindling and there was very little money left over from the stimulus spending for local infrastructure.  This tells me that local and state governments could have used a lot more money than they got.

About Stephen E. McGaughey
International consultant in economic development programs and projects

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