President Obama is meeting with his economic advisers to find ways of cutting the annual federal budget deficit in half by the time his term ends. This is despite the enormous cost of the economic stimulus package and the various bailouts that have recently been instituted. Bulk of the deficit reduction will be funded by reduction in Iraq war costs and business tax increases and by letting the Bush tax cuts expire in 2010. Mr Obama may also propose to tax the fees and income of the hedge fund managers at the ordinary income tax rates instead of capital gains rates as is currently being done.

The way I read this, his goal is for the annual federal budget deficit that he wants to bring down to 3% of the GDP. This does not address the fully accumulated budget deficit at the end of his term, which is likely to be enormous. The national debt will continue to rise for his entire term and frankly I do not see any way out of it. Hopefully the future administrations will take the tough steps necessary to reign in excessive government spending and fix the tax code so that tax burden is reduced resulting in greater economic growth (GDP) and greater compliance, which should result in higher tax revenues. I have remarked elsewhere earlier that the only surefire way of increasing tax revenues is to increase GDP. This will be the only way to start deflating the national debt bubble which promises to be a nightmare for the future generations.

Shailesh Kumar

Shailesh Kumar

Shailesh Kumar is an Entrepreneur, investor and blogger. He writes about value investing at Value Stock Guide. Learn about the stock market and discover the techniques proven to work best for long term investors for finding appropriate stocks to buy in their portfolio to get superior risk adjusted returns.