Obama, The Deficit and The American Public

By Adeline Guerra

Arguably, the national debt was the issue for American voters this week. But many of them didn’t exactly know why. It has something to do with jobs and economy stuff. Right?

First, make no mistake. The national debt is the direct result of the Bush administration’s decision to conduct two wars without the financial means to back them up. Then the bailout, and the auto bailout and the stimulus added more. Today, America is in serious trouble, and divided over how we will fill the humongous deficit hole.

Democrats trailed behind in the campaign and we now know Republicans regained seats in Congress. Yet, the Democratic Party was not exploiting the work done by the Obama administration to reduce the budget deficit (yes, you read that right) and how it went from 1.416 trillion dollars to 1.294 trillion dollars this year. A trillion-dollar national debt won’t reduce itself by tomorrow, but measures are being taken to control it.

Thanks to more fiscal revenues from corporations and less bailout money spent, the deficit was actually reduced in 2010 compared to 2009, a record year for the American deficit. Still, it’s predicted deficit for 2011 will be 1.070 trillion.

If 70 percent of Americans say “it is very important for Congress to reduce the federal budget deficit,” it’s because every policy matter in the U.S. is somewhat related to it. The deficit means ending the war in Afghanistan that we can no longer sustain. It means less money for education and student loans; inadequate funds for repairing Americas eroding infrastructure: clean water, roads and levies; No cash for health care, welfare or unemployment.

Further, a huge debt also means a weak economy. The size of the national debt will determine America’s future and global competitiveness. Paying it down will help bolster America’s role in the world economy and renew its ability to stay the best at research and development. Bottom line:  American jobs should come back once the deficit problem is sufficiently addressed.

But it’s not all America’s fault, Obama’s or Bush’s. The free market system isn’t working like it should because someone isn’t playing fair.

The Obama administration is currently battling with China to liberalize its currency and play by the rules of capitalism. This is important to Obama and his economic advisers because a simple revaluation of the Yuan could create millions of American jobs by making U.S. exports competitive again. Case in point: the dollar is weaker than the Euro or the Pound, American exports are higher in volume than for Europe. But the American public doesn’t really get that, and will continue blaming Obama for his jobs stimulus plan of last year, seen by many as another way to worsen the debt problem.

Conceptualizing a trillion-dollar debt is hard. According to a Time magazine article, it’s actually impossible for our human brains. Thousands of Americans are in debt. From college loans to credit card debt, Gen Y is directly participating to the deficit. The good news is, with the war in Iraq coming to an end(ish), and the prospect of a solution to end the American presence in Afghanistan, the deficit might not get worse– provided the worry of a double-dip recession remains only an anxiety.

Barack Obama’s policy relies on China still being the U.S.’s first creditor. But China is starting to sell off the American debt, and letting go of these assets means that China is not ready to let its currency adjust to the market. Concurrently, the U.S. is also pushing for the revaluation of foreign currencies to avoid deflation and have foreign countries solve our mistakes.  However, only time will tell if the G20 countries will abide by America’s demands.

Thus American jobs will probably have to be created another way, and national solutions are the most promising. When President Clinton was in office, Republicans were the first ones to roar at the deficit problem, whereas under President Bush, it was the Democrats’ turn. Now that the deficit has gotten out of control, and the American public is largely united on the issue: it has become bipartisan.

Balancing the budget may not be easy, but until currencies stabilize it seems to be the only solution we can count on. Getting rid of earmarks and pork in Congress would be a good start, before making Gen Y and their parents pay even more taxes for the deficit reduction.

As much as “Obama’s Wars” might determine a possible reelection, the management of the deficit might become the prism through which the American people will decide whether they want to give him another go in 2012. Everyone in the U.S., especially the President, is at the mercy of the deficit.

Photo by:  Truthout.org’s