Like a person packing on pounds, the US keeps adding to its flabby budget deficits, endangering the nation's economic health as well as the pocketbooks of ordinary Americans.
Here's the worry: Persistent deficits will lead to higher borrowing costs for consumers and companies, slowing economic activity.
As the country seeks to borrow ever more to finance those deficits, rates on Treasury securities would rise to entice investors. That would push up other interest rates, such as home mortgages, many auto loans, some home equity lines of credit and some credit cards.
"That's the pocketbook risk to the American consumer," said Greg McBride, a senior financial analyst at Bankrate.com, an online financial service.
For businesses, rates on cor-porate bonds would climb. It would become more expensive to borrow to pay for new plants and equipment and other capital investments.
With a succession of budget deficits, "you do expect to see higher interest rates. Where we fight about this is over how big the effects are. But they are definitely there," said James Feyrer, assistant economics professor at Dartmouth College.
The government's budget deficit last year was US$319 billion. While smaller than the record US$413 billion in 2004, it still was the third-highest ever.
A White House budget official now predicts that the deficit in the current budget year will top US$400 billion, pushed up by the costs of the Gulf Coast hurricanes. The red ink is expected to keep flowing for years.
The nonpartisan Congressional Budget Office forecasts deficits every year through 2015; that is as far out as the office projects. The White House forecast, which runs to 2010, also expects annual shortfalls.
"The budget deficit is like gaining weight. You are not really aware of it until at some point, all of a sudden, you can't do what you want to do because you are heavier. Interest rates go up and slow things down," said Brian Bethune, economist at Global Insight. "Then you go to your check up and the doctor tells you you got to lose 25 pounds."
The US' economic doctor is Federal Reserve Chairman Alan Greenspan.
Greenspan, who retires on Jan. 31 after more than 18 years at the central bank, has repeatedly urged Congress and the Bush administration to get the country's financial house in order.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique