Well, it depends on if you want to borrow money to buy a house or a car or boat or something. You see there is a certain amount of credit out there. It's a large amount, but it's not infinite. The higher the deficit the larger a percent of that credit they hold. That reduces the amount available for you and me, and makes it more valuable. And one something becomes more valueable it becomes more expensive--as we all know.
Well Bruce Bartlett says that deficits don't affect interest rates all that much, but that increased scrutiny of the deficit will force President Bush to take action. "By early 2005, I expect the pressure to reduce deficits to be inexorable. While Republican control of the House and Senate may cause any budget deal to focus more on budget cuts and less on tax increases than they usually do, the latter are inevitable. It is simply unrealistic to think that a large deficit reduction plan can rely solely on budget cuts. Revenues will be on the table.
Remember that Ronald Reagan signed major tax increases in 1982, 1983, 1984, 1985, 1986 and 1987. By 1988, he had taken back almost half of the 1981 tax cut. But at the end of the day, he cut taxes more than he raised them. That is why conservatives forgave him and why they will probably forgive Bush, as well."
He might be right, and when he's not facing reelection, maybe he will be forced to do the sensible thing. Or maybe not.
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