George H. W. Bush famously called Ronald Reagan's idea that you could cut taxes and balance the budget "voodoo economics." And his son's vice president, Dick Cheney, is also well known for reinforcing Reagan's values when he said "Reagan proved [that] deficits don't matter."

Well, now Bloomberg News reveals that the current president will leave his successor with a record Federal Budget deficit of $490 billion in fiscal 2009. Why such a big deficit? Bloomberg speculates that "dwindling tax receipts because of the U.S. economic slowdown, the cost of payments distributed under the $168 billion economic stimulus package and the continuing cost of the wars in Iraq and Afghanistan" could all be contributing factors.

Disturbingly, the non-partisan Tax Policy Center in Washington suggests that both candidates have tax cut plans that would add to future deficits. Bloomberg reports that McCain's may cost "$4.2 trillion over 10 years and Obama's about $2.8 billion." Meanwhile, those wars the current president started cost "$10 billion to $12 billion a month." With the dollar down 72% since the current president took over, I think deficits do matter.

And the current president's legacy for his successor will determine just how much.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

The "Totally Informal Economics Roundtable" (TIER) met this past week -- the esteemed round table achieves a quorum whenever yours truly and my three astute economist friends from graduate school convene to discuss matters economic ... or to celebrate the birthday of one our school-age children, or for another social occasion. This week the topic was the global savings surplus.

Earlier on The FLY and on bloggingstocks.com, the TIER commented on the global savings surplus, or more-broadly, the large and increasing pool of global capital that's spanning the globe in search of return and yield.

It's hard for Americans to think in terms of a "savings surplus" with the U.S. posting a negative savings rate for more than a year, a savings rate well below appropriate levels for an advanced industrial economy, but the world is awash in capital, fed in part by savings. China, Japan, the European Union, and some petro-dollar countries have vast amounts of surplus savings. This fact, combined with a corporate capital base in the U.S. and abroad, has produced a multitude of unexpected consequences -- consequences that have lasted longer than many economists and analysts expected, the TIER agreed.

The first and foremost consequence, the TIER agreed, has been continued low interest rates for long-term bonds, mortgages, and certificates of deposit. Further, although recently released statistics from the Congressional Budget Office indicate the U.S. budget deficit in fiscal 2007 could drop to as low as $150 billion, five consecutive years of plus-$200 billion deficits normally should have led to a crowding-out effect on capital, resulting in higher long-term interest rates. Those high rates did not -- and have not -- materialized, the TIER agreed, due to that foreign savings surplus -- foreigners' willingness to buy U.S. Treasuries while spanning the globe for return and yield.