[quote=briansd1][quote=pemeliza] The huge drop in tax receipts because of the weak economy. The government is not willing to cut spending to compensate for revenue drops.[/quote]
Exactly. That’s where the debt increases came from.
State and local governments must have balance budgets so they have been cutting. State and local cuts roughly amounted to the Federal stimulus.
That’s fiscal policy.
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Monetary policy is Federal Reserve action.
CA renter, you really need to separate fiscal and monetary policy to understand how it all works.
The Federal Reserve (Fed) buys financial assets to inject liquity into the economy. Eventually, they sell the assets at a profit or loss. The Fed has made big profits.
It’s important to not confuse the Fed with the Federal governnment (the Feds which refers more to Federal law enforcement).[/quote]
I understand the difference between monetary and fiscal policy; you need to understand that they’ve been working in concert. That’s why I always refer to the Fed/govt — they are both part of the problem.
Our public debt is affected by the loss of revenue — even though corporations are making RECORD PROFITS…those “tax cuts” are part of the bailout, too — but it’s also affected by the various expenditures and guarantees we’ve made.
We also have to understand that a large portion of the losses that will eventually be borne by taxpayers aren’t yet known. All the FHA and GSE refis and new purchases that were made during a period when home prices were being artificially inflated (to get these mortgages off the private balance sheets, and foisted onto the taxpayers shoulders) are a huge default risk, IMHO. I highly doubt the final numbers will be good for taxpayers. BTW, how much of what’s held on the Fed’s balance sheet is guaranteed (or will by guaranteed) by taxpayers? I’ll bet the Fed itself will end up with fairly minor losses compared to what the govt will end up taking.
AGENCY SUBTOTALS TOTAL DISBURSED TOTAL MAX. AT-RISK TOTAL OUTSTANDING
Treasury $816.1 billion $5.79 trillion $458.1 billion
FDIC $0.7 billion $10.0 billion $0.7 billion
Federal Reserve $3.95 trillion $8.06 trillion $1.08 trillion
GRAND TOTAL: $4.76 TRILLION DISBURSED $13.87 TRILLION MAX. AT-RISK $1.54 TRILLION OUTSTANDING
