It’s no secret what the average American family does when income drops: Spend less and save more.
In fact, we’ve seen just that during these last two recessionary years. The personal saving rate, barely 1 percent of income in the first quarter of 2008, reached 5 percent last year and remains above 3 percent.
Businesses are doing the same thing. The Washington Post reported recently that non-financial companies are carrying some $1.8 trillion on their books, about 25 percent more than at the start of the recession.
This is partly because of federal meddling in the economy. With Obamacare heading their way, opaque financial regulations about to take force and lawmakers still contemplating a cap-and-trade law, companies figure some cash on hand can’t hurt -- if only to pay for new government-mandated rules. But they’re also holding on to some cash because that’s the logical approach thing to do when dealing with economic uncertainty.
So why this hasn’t this wisdom trickled up to national leaders?
Our federal government is on a sending spree unheard of since World War II, when Washington poured resources into a two-front battle the country couldn’t afford to lose.
The Obama administration’s “Mid-Session Budget Review” predicts this year’s budget deficit will top $1.4 trillion. That’s 10 percent of the nation’s economy. Measured in constant dollars, it’s the largest deficit in American history. The president’s team expects another $1.4 trillion deficit next year.
“These future deficits are driven almost exclusively by rising spending,” notes budget expert Brian Riedl of The Heritage Foundation. “President Obama’s budget would push inflation-adjusted federal spending past $36,000 per household by 2020 -- $12,000 above the level that prevailed under President Bush.”