Despite the mirage of stabilizing economic indicators, the Obama administration is immersed in a billowing sea of national debt. Will the administration’s stimulus package prove to be a life raft, or an anchor dragging the nation down into an ever deepening budget deficit? See the following article from Money Morning for more.
Even as investors get more and more bullish about the outlook for the U.S. economy, the economy’s underlying foundation continues to erode.
In a report to be released this week, the Obama administration will boost its 10-year projection for the federal budget deficit to about $9 trillion – an increase of roughly $2 trillion, or 29%, from its prior projection, Fox News reported over the weekend, citing a source from the Office of Management and Budget (OMB).
The new cumulative deficit projection – for 2010-2019 – replaces the administration’s previous estimate of $7.108 trillion. Changes in budget projections – whether they result in a surplus or a deficit – are often refined as economic conditions change. This new projection was necessary because the recession has gone on for so long, causing federal tax receipts to plunge – and because the economic rebound will be prolonged and weak, resulting in lower forecasts for future federal revenue.
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Although most of the news media focuses on the Obama administration’s $787 stimulus measure, the fact is that the federal government was pushing forward with nearly $12 trillion in rebound-related financing commitments, Money Morning reported this spring.
The administration earlier this year predicted that unemployment would peak at about 9% without the financial-jump-starting initiatives and 8% with them. But U.S. joblessness zoomed skyward anyway, and stood at 9.4% last month, although many economists now say that a double-digit unemployment rate – one of 10% or more – is easily possible.
The nation’s debt now stands at $11.7 trillion. In the scheme of things, that’s more important than talking about the deficit, which only looks at a one-year slice of bookkeeping and ignores previous debt that is still outstanding.
Back in June, the non-partisan Congressional Budget Office (CBO) predicted that the federal deficit would reach $1.825 trillion this year. The CBO and the Obama administration will tomorrow (Tuesday) separately release new budget-deficit predictions. Last Wednesday, a senior White House official, speaking on the condition of anonymity, told The Associated Press that the administration estimate would reach $1.58 trillion – or triple last year’s deficit.
The report for the budget year that ends Sept. 30 also will predict Washington to spend $3.653 trillion this year, although revenue will reach only $2.074 trillion, the unnamed senior official told The AP.
“Whether it’s $1.6 trillion or $1.8 trillion, it’s pretty bad,” said Robert Bixby, executive director of the bipartisan fiscal watchdog The Concord Coalition, told Fox News. “I hope no one tries to spin that as good news.”
Total U.S. debt has soared to $11.7 trillion (the budget deficit is the “shortfall” in the annual deficit, while the debt is cumulative), having balloned to that level as a result of the multiple annual deficits that have become the norm, it seems.
This article has been republished from Money Morning. You can also view this article at Money Morning, an investment news and analysis site.
