Deficit spending and the housing bubble
There’s already been a lot written on what a large percentage of the deficit is the result of Bush era decisions. Two wars, massive tax cuts, the unfunded Medicare Part D, and a revenue collapse during the recession all took a huge toll on the balance sheet.
A lot of the stimulus spending was caused by the collapse in the housing bubble—which was also a debt fueled bubble. This was more private debt, often with an implicit government guarantee, than public debt. In other words, our economy had a whole lot of loans with an implicit government guarantee that could never be paid off. Much of what Obama has done is working to remove some of these bad loans—many of which were essentially public debt with as little public expense as possible. While it nominally increased the debt, it significantly decreased the amount the government was on the hook for.
Could one of you write a really cool paper on this already?
