$38.5 BILLION IS A LOT OF MONEY

Apparently from the result Friday night (8April 2011), the Federal government is to be spared a partial shutdown. Though the details are yet to be spelled out, it appears that $38.5 billion is to be taken out of the American economy over the next five months. It is not possible to tell just what the impacts of this will be, but $38.5 billion is equivalent to the income of 770,000 median income HOUSEHOLDS in America (a bit less than $50,000 each).* If our economic recovery was raging, the effects might be relatively little. Whether the cuts are sufficient to put our fragile economy into some sort of recession is not known to me, but the economic impact of "austerity" in Britain and France seems to be having a negative impact.

Much as some people like to pretend, the Federal government does not just take $38.5 billion out and make a bonfire of it. It goes out in salaries, contracts and benefits throughout America. Just how many thousands of people are going to be fired (both Civil Servants and contractees), how many thousands of contracts are to be terminated and broken, and the extent of reduced benefits are yet to be determined. In addition, just how many social strictures are still buried in the bill are not yet known.

For several years now, I have had this lingering suspicion that I have lived through the best of American history, at least for the middle and poor classes. If we really are going to try to reduce the Federal budget by something like $1.5 trillion to match Federal revenues, I can't see how that can be done without causing a deep recession or depression for the poor and middle classes. Other examples, the median household income has been declining in recent years, and we have insisted on running up a trade deficit for 34 consecutive years with no end in sight. On the other hand, I have always projected disaster and very little of it has occurred. So I can only hope there is some way out of our current predicament, even though I certainly can't see how. A bubble economy might do it, but is one in sight?

* President Clinton got rid of roughly this number of employees when he was President, a record, with seemingly little impact on the economy; however, that was at a time of strong economic, even bubble, economic growth so whatever the Federal government took out of the economy was replaced and then some by the private sector plus by state and local government increases (State and local government employment is being reduced as well.). Such is not the case today though there seems to be a nice recovery developing to some unknown extent by so-called quantitative easing (QE). Federal revenues are at 60 yr lows, so the economy has a long way to go to save the American lifestyle as we know it if we are going to try to balance the budget or even come close to doing so.