The recession and anti-terrorism campaign have both affected the government's bottom line in many ways. First, the recession has reduced government revenues; April tax receipts were down 30 percent in 2002 from a year earlier.
Second, after months of bickering, Congress and U.S. President George W. Bush finally agreed on a $43 billion economic stimulus package in March, funded mostly on borrowed assets.
Finally, defense and security increases combined have added $85 billion to government outlays. With partisan bickering likely to remain the norm, more deficit spending seems the preferred funding option in the short term.
This isn't without consequences. The government is tapping private financial markets for $33 billion in cash that would otherwise have been used for private investments. With business investment already stagnant, this could take some wind from the sails of the recent recovery. Worker productivity -- the backbone of recent U.S. economic growth -- is so far still growing, but renewed investment now would guarantee a continued positive economic trend.
Therefore, the government's need for cash could create a mid-term blip in productivity growth, and, by extension, overall economic health. The debt issuance also reduces cash available for other long-term private investments, such as the cheap mortgages that have fuelled the all-important housing sector over this past year.
Second, after months of bickering, Congress and U.S. President George W. Bush finally agreed on a $43 billion economic stimulus package in March, funded mostly on borrowed assets.
Finally, defense and security increases combined have added $85 billion to government outlays. With partisan bickering likely to remain the norm, more deficit spending seems the preferred funding option in the short term.
This isn't without consequences. The government is tapping private financial markets for $33 billion in cash that would otherwise have been used for private investments. With business investment already stagnant, this could take some wind from the sails of the recent recovery. Worker productivity -- the backbone of recent U.S. economic growth -- is so far still growing, but renewed investment now would guarantee a continued positive economic trend.
Therefore, the government's need for cash could create a mid-term blip in productivity growth, and, by extension, overall economic health. The debt issuance also reduces cash available for other long-term private investments, such as the cheap mortgages that have fuelled the all-important housing sector over this past year.