John on May 11, 2009 at 11:06 am
From the AP:
With the economy performing worse than hoped, revised White House figures point to deepening budget deficits, with the government borrowing almost 50 cents for every dollar it spends this year.
The deficit for the current budget year will rise by $89 billion to above $1.8 trillion — about four times the record set just last year. The unprecedented red ink flows from the deep recession, the Wall Street bailout, the cost of President Barack Obama’s economic stimulus bill, as well as a structural imbalance between what the government spends and what it takes in.
As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.
The long term outlook is grim, even if you grant the White House the ridiculously rosy scenarios for economic performance this year and next:
Annual deficits would never dip below $500 billion and would total $7.1 trillion over 2010-2019. Even those dismal figures rely on economic projections that are significantly more optimistic — just a 1.2 percent decline in gross domestic product this year and a 3.2 percent growth rate for 2010 — than those forecast by private sector economists and the Congressional Budget Office.
Just a reminder, the economy actually contracted two straight quarters at just over 6%. So there is actually a 5% difference between Obama’s projections and reality that hasn’t yet been recognized in his deficit figures. In short, expect them to be revised up sharply before the end of the year.
Category: Energy & Economy |