According to a Bloomberg report (clip below), President Obama's budget office will announce next week that the 2009 deficit will come in about $260 billion dollars less than expected.
The original 2009 deficit projection from President Obama's budget office was a jaw-dropping $1.84 trillion dollars, while the CBO (Congressional Budget Office) predicted a slightly smaller $1.825 trillion dollar deficit. The CBO is slated to release their revised numbers next week.
So why is the deficit projected to come in at $262 billion dollars less than expected?
Two major reasons:
1) The stabilizing economy means that there will no longer be use for a $250 billion contingency plan to help the financial industry
2) Fewer bank failures than originally anticipated
Now, I guess that this is "good" news. The government needed to spend (and spend big) in order to prevent the US economy (and by extension, the global economy) from slipping into a depression. Given the recent signs of stabilization in the economy, it appears as though they have succeeded.
It's not the 2009 and 2010 deficits that are worrying some people - instead, it's the string of projected deficits from 2011 through 2019.
The CBO (Congressional Budget Office) predicts that the SMALLEST deficit posted over the next TEN years in the United States will be $658 billion dollars (2012).
This is an alarming statistic that will result in the US having a total national public debt of nearly $20 trillion dollars within just a decade. With a string of other issues to worry about (health care reform, social security, etc), the United States could really be in some dire straits by 2020.
As Warren Buffett pointed out earlier this week, the United States will likely have to turn to the printing presses in order to continue to make up for their deficit spending. There is a limit to how much debt countries such as China, Japan and the UK can soak up. Printing money results in a devalued currency.
The point of this article? I was speaking with someone earlier today who was positively clapping their hands with glee at the prospect of the deficit coming in at $260 billion dollars less than expected.
This is all fine and well, however it's the projected massive deficit spending over the next decade that should be particularly worrying to people.
Despite a stabilizing economy, the United States still has many, many issues to overcome.
I have no idea what the cost of servicing this debt is. If the interest rate was 4% on average, it would cost $800 billion annually to service the estimated $20 trillion debt. OUCH!
Does anyone have a realistic number to use for an average cost of this debt?
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Comment by Dave on August 20, 2009 @ 6:25 pm
Hey John
The United States spent $412 billion dollars last year to service their debt.
