2009 March 21 Saturday
US Budget Deficit To Hit $1.845 Trillion

Can we run America down? Can we collectively act so foolishly that national bankruptcy becomes a possibility? Sure. We are going to average almost $1 trillion in debt per year for the next 10 years as Barack Obama tries to outdo George W. Bush in fiscal irresponsibility.

This year's budget deficit will hit $1.845 trillion, the nonpartisan Congressional Budget Office estimated Friday a figure $600 billion higher than the CBO projected just six weeks ago.

The agency also predicted a total of $9.3 trillion in deficits over the next 10 years.

I think American triumphalism leads many to believe that surely we can't really and truly ruin the place. We keep doing more stupid things and ruin doesn't happen. So we begin to think we are immune. This just leads to doing even bigger stupid things. Hey, its not like we can be so incredibly stupid that we bust our biggest banks. Oh wait...

National debt will exceed 82% of GDP if events unfold as the CBO forecasts.

The result, according to the CBO, would be an ever-expanding national debt that would exceed 82 percent of the overall economy by 2019 -- double last year's level -- and threaten the nation's financial stability.

"This clearly creates a scenario where the country's going to go bankrupt. It's almost that simple," said Sen. Judd Gregg (N.H.), the senior Republican on the Senate Budget Committee, who briefly considered joining the Obama administration as commerce secretary. "One would hope these numbers would wake somebody up," Gregg said.

We are becoming more like southern Europe. A high debt puts us in league with Italy (with a public debt 105.6% of GDP for 2007). We are even bringing in Hispanic immigrants who some try to compare to Italians as a way to assure us it'll all work out. What could go wrong?

The retirement of the baby boomers and the worsening demographic condition of the country (the next gen isn't going to be as educated or as smart) are going to bring to a head a set of long developing problems. At a time when our problems are starting to come to a head Saint Barack wants to expand the Great Society. Really bad timing.

In his White House run, Obama assailed the economic policies of his predecessor, but the eye-popping deficit numbers threaten to swamp his ambitious agenda of overhauling health care, exploring new energy sources and enacting scores of domestic programs.

The dismal deficit figures, if they prove to be accurate, inevitably raise the prospect that Obama and his Democratic allies controlling Congress would have to consider raising taxes after the recession ends or else pare back his agenda.

The battle of the 2010s is going to revolve around whether to cut benefits or raise taxes. Saint Barack is going to get one last big expansion of the Leviathan into place. But after that the cuts begin.

Share |      By Randall Parker at 2009 March 21 10:38 AM  Economics Political


Comments
Bob Badour said at March 21, 2009 11:32 AM:

If we are lucky, he'll end up doing a Bob Rae. Blow his load in the first year and force himself into a union busting fiscal conservative corner.

Steve Johnson said at March 21, 2009 12:21 PM:

Federal cuts never have to happen.

State cuts, yes, when every dime has been squeezed out of the taxpayers and every important function has been cut, then you'll get some cuts in waste.

City government same thing.

The difference is that city and state governments don't get to print money and so have to go to the bond market for funds over tax revenue and have to pay back bonds or be cut off.

The federal government has no such constraint. There is no such thing as Washington being forced to cut.

Randall Parker said at March 21, 2009 10:08 PM:

Steve Johnson,

I see a couple of possibilities that could constraint the US government:

1) Inflation cuts the buying power of dollars spent by the federal government.

2) Interest rates go so high that the Feds can't afford to borrow to fund their spending.

Quequeg said at March 21, 2009 11:02 PM:

Japan has more than 180% debt to GDP and their currency is still strong. If we reach 82% debt to GDP (by 2019 as estimated by the CBO), then we'd still have a long way to go to catch up with Japan. On the other hand, Japan has a trade surplus.

So, how far can the federal debt go before financial instability or bankruptcy? And what would that look like? And which country (Japan or the US) is most likely to face that fate first?

It seems like all countries are spending recklessly. I recall reading the following idea somewhere: "In the end, gold and the dollar will rise together". I guess the theory is that if and when the global fiat currency system begins to collapse, then the dollar will be the strongest of all the fiat currencies.

The Undiscovered Jew said at March 22, 2009 7:26 AM:

Can we run America down? Can we collectively act so foolishly that national bankruptcy becomes a possibility?

Yes we can!

The battle of the 2010s is going to revolve around whether to cut benefits or raise taxes. Saint Barack is going to get one last big expansion of the Leviathan into place. But after that the cuts begin.

Welfare for Sterilization is definitely the way to go.

HBDers should argue that we cannot take care of the ageing baby boomer population unless we keep NAM population growth under control. Best way to control the NAM population while keeping them docile with low birthrates is to require either sterilization or longterm contracteption in exchange for longterm welfare support from the state.

Also, sterilizing juvenile delinquents and criminals about to be released into the general populationw will help drop NAM birthrates.

Argue before senior citizens "You can either keep Medicare or keep minorities on welfare, but you can't have both without welfare for sterilization."

Dumbama said at March 22, 2009 10:52 AM:

Quequeg could not be more wrong if he tried. The actual US debt is 60 trillion and counting. Unfunded mandates and near term commitments are ballooning out of control. Obama's spending tantrum will shoot the hell out of any fiscal control remaining.

The US government has lost its mind. Disaster and catastrophe lie in wait, and will not wait long.

SHTF said at March 22, 2009 12:05 PM:

And it looks like the Obama/Geithner "plan" for toxic debt is going to cost at least $1 Trillion, but that is probably a lowball figure considering the way this shit works... Buy gold and guns. Don't wait. This shit is going to be bad. Expect NAMs to go bonkers (yes, more than usual). Have a friend or family member who lives in a rural area? Give them a call...

Mirco said at March 22, 2009 5:13 PM:

A comment from an italian: Italian have a large public debit, but they don't have a large private debit. The state could go bankrupt but the people will not go there.
Italy had a men IQ a bit higher than the US, so the main resource is already there to be used.
If things go well, we could be in the process to "stealthy" privatize many services and offices run by governments.
The current project "Reti Amiche" (Friendly Nets) aim to let some private chains to give many of the services that now are given by government offices.

The obvius second stage, after the use of the alternatives is popular, is to reduce the government offices and their staffing and drive the remaining people to use the private option.

Steve Johnson said at March 22, 2009 9:43 PM:

"I see a couple of possibilities that could constraint the US government:

1) Inflation cuts the buying power of dollars spent by the federal government."

Federal government gets first crack at spending the hot new dollars. Just keep jacking up spending to every department in the proportions that they get now. Who in government gains power by defending the dollar's purchasing power? No one that I can think of; the only constraint on inflation is the fear of popular unrest if the dollar starts losing value so rapidly that it can't be used for long term contracts. Everyone in government fears popular unrest but they're doing an excellent job of importing millions of people who don't do much of anything about bad government.

"2) Interest rates go so high that the Feds can't afford to borrow to fund their spending."

Impossible. If rates were a million percent per week the Fed could afford it; they get to print however many dollars they please.

Maybe at some point foreign, sorry, international (anyone else notice the campaign to eliminate the word "foreign"?) lenders will refuse to lend to the USG in dollars. At that point the dollar is finished as a valuable currency but it still has one feature. All US citizens need dollars to stay out of jail; USG only takes dollars for tax bills. That will keep the American people stuck with dollars when everyone else moves away from them.

I don't see this ending well because I don't see anyone with an incentive to keep things from going to hell. Federal power is fragmented and the owners of the shards only care about their shard.


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