The Obama administration has released its big-picture budget outlook for 2009 and beyond. The big headline: The U.S. government is on track to record a deficit of a whopping $1.75 TRILLION in fiscal 2009. That is by far the biggest deficit ever, and almost four times as large as the $459 billion figure for 2008. It’s also a gigantic 12% of GDP, the most in the post-World War II era.
It includes all kinds of goodies, including another potential $250 billion in bank bailout money (on top of the $700 billion in TARP money previously allocated). The budget also assumes a 1.2% decline in 2009 and a 3.2% expansion in 2010, which is more optimistic than the 2% decline and 1.8% increase that private economists are generally looking for. It also projects unemployment rates of 8.1% and 7.9% for the coming two years, less than the 8.4% and 8.5% projections found in a Bloomberg survey.
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{ 5 comments… read them below or add one }
It’s my understanding that the 459B 2008 deficit excludes the costs of the 2 wars, something Obama has pointed out repeatedly. If this is the case, the 1.75T projected deficit can not be directly compared to 459B deficit. Please correct me if I am wrong.
Fiat money inflation, here we come!
Where does this leave the Insurance companies who are still selling Annuities, whether they be fixed, variable or index?
Frank Mendolia
I have also been watching sadly as government spending continues to balloon out of control, but at some point won’t the market start to self correct? As the US credit rating or treasuries demand begins to deteriorate, won’t this force interest rate increases or at least attention to be paid to current treasury holders… which will force the hand of the fed to protect the dollar since they can’t be so clueless to not know that treasury holders can dump the treasuries faster than the US government can issue them. There are many people predicting the hyperinflationary end to the all fiat currencies, the US dollar included, but is the financial system really as unstable that there is no middle ground between depression style deflation and hyperinflation? I would love to hear your thoughts on the probability of different outcomes, extreme deflation to hyperinflation. Am I polyannish to believe that we are going to end up somewhere in the middle, with the fed and government doing its best to balance these outcomes?
Debt is used to retool an enterprise, whether public or private. The U.S. government need to be retooled from the disaster of the last 30 years. When a business needs to retool itself it uses a combination of retained earning[R.E.] and debt for this purpose and the alarms aren’t irrational such as they are when government does so. Now, the Federal government’s equivalent of R.E. would be a so called government “surplus” which was doled out to the CORPORATE WELFARE KINGS by Bush. Obama needs to retool the government from the Bush/Republican model of dysfunctional/malfunctional to a functional model, retooling if you will. Whenever retooling occurs there is an overlap of the operations being replaced concurrent with implementing the new, retooled model. Not to do this for a business enterprise would be a disaster and the business may collapse without this overlapping which requires extra expenses. For a government not to retool itself without continuing of current operation while implementing the new, retooled, operation we ONLY HAVE TO SEE WHAT HAPPENED TO RUSSIA AFTER THE COLLAPSE OF THE U.S.S.R. for a model of government doing so, a disaster. Bush/Republicans do not want to be elected for the purpose of governing, they think that their role is to get elected and that’s it. The American model of business would not allow or want a Russian/USSR type of model for obvious reason. It is what Obama is doing with the debt is what’s important and it is to retool the government from a dysfunctional corrupt model to a functional model which requires an overlapping of cost. This is considered good management practices.