Spence
01-22-2004, 11:39 AM
The $500 billion budget deficits created by President Bush and the Republican-led Congress will be the top economic problem facing the president should he win a second term, Wall Street analysts say.
The twin deficits -- the budget deficit and America's equally large trade gap -- already are being blamed for the precipitous fall of the dollar, which has lost between 20 percent and 40 percent of its value against other major currencies in the past two years. And the deficits are starting to put pressure on mortgages and other long-term interest rates.
Mr. Bush's State of the Union address on Tuesday night offered new spending and tax proposals, but no concrete plans to cut the deficit in half as he has promised to do, continuing the pattern that in recent years has led to exploding deficits.
"The spending spree in Washington continues," said Sung Won Sohn, chief economist with Wells Fargo & Co., the largest mortgage lender in the United States. "For now, there is no will in Washington to rein in the deficits."
The current account deficit has jumped in tandem with the budget deficit and reflects "America's insatiable appetite, including the federal government, for spending," Mr. Sohn said.
"We are borrowing $1.5 billion from foreigners every single day" to finance the deficits, he said, and that could grow to as much as $2.5 billion in 2005.
"The worry is that a growing portion of the money is coming from unstable sources, including the People's Bank of China, the second-largest holder of Treasury securities outside the U.S.," he said. "Unless Washington changes its course, more economic pain will undoubtedly ensue."
...
Federal Reserve Board Chairman Alan Greenspan has cautioned Congress about the economic consequences of deficit spending.
Mr. Sohn said interest rates on mortgages and other bonds could rise sharply once the realities are understood fully.
Source: The Washington Times (http://www.washingtontimes.com/functions/print.php?StoryID=20040121-105053-5813r)
The twin deficits -- the budget deficit and America's equally large trade gap -- already are being blamed for the precipitous fall of the dollar, which has lost between 20 percent and 40 percent of its value against other major currencies in the past two years. And the deficits are starting to put pressure on mortgages and other long-term interest rates.
Mr. Bush's State of the Union address on Tuesday night offered new spending and tax proposals, but no concrete plans to cut the deficit in half as he has promised to do, continuing the pattern that in recent years has led to exploding deficits.
"The spending spree in Washington continues," said Sung Won Sohn, chief economist with Wells Fargo & Co., the largest mortgage lender in the United States. "For now, there is no will in Washington to rein in the deficits."
The current account deficit has jumped in tandem with the budget deficit and reflects "America's insatiable appetite, including the federal government, for spending," Mr. Sohn said.
"We are borrowing $1.5 billion from foreigners every single day" to finance the deficits, he said, and that could grow to as much as $2.5 billion in 2005.
"The worry is that a growing portion of the money is coming from unstable sources, including the People's Bank of China, the second-largest holder of Treasury securities outside the U.S.," he said. "Unless Washington changes its course, more economic pain will undoubtedly ensue."
...
Federal Reserve Board Chairman Alan Greenspan has cautioned Congress about the economic consequences of deficit spending.
Mr. Sohn said interest rates on mortgages and other bonds could rise sharply once the realities are understood fully.
Source: The Washington Times (http://www.washingtontimes.com/functions/print.php?StoryID=20040121-105053-5813r)