WASHINGTON, Jan. 7, 2009
Report: U.S. $1.2 Trillion In The Hole
Congressional Estimators Project Unparalleled Budget Deficit For 2009; Obama Balancing Debt and Stimulus
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Play CBS Video Video Obama Pushes Economic Stimulus Barack Obama works to get his economic stimulus plan in gear as a new Congress gets seated, reports Chip Reid. Maggie Rodriguez talks to Roland Burris about his controversial appointment.
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"I'm going to be willing to make some very difficult choices in how we get a handle on this deficit," President-elect Barack Obama said Tuesday. (AP Photo/Gerald Herbert)
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Interactive Eye On The Economy In-depth features on U.S. markets, taxes, employment and the Federal Reserve.
The aide says the CBO also sees a $703 billion deficit for 2010.
The dismal figures come a day after President-elect Barack Obama warned of "trillion-dollar deficits for years to come."
CBO's figures don't account for the huge economic stimulus bill that Mr. Obama is expected to propose soon to try to jolt the economy. At the same time, they do not reflect the immediate cost of the Wall St. bailout.
The shrinking economy has led to a sharp drop in tax revenues, which is largely responsible for the deficit, along with about $350 billion in spending so far for the Wall St. bailout.
Mr. Obama announced Wednesday the appointment of Nancy Killefer as White House chief performance officer, a new post created to increase government efficiency - one of Mr. Obama's campaign pledges.
Obama said that concerns about rising deficits prompted him to turn down advice from some economists who called for spending $1 trillion or more to jump-start the economy. Obama's proposal is expected to cost nearly $800 billion over two years.
"We have an economic situation that is dire, and we're going to have to jump start this economy with my economic recovery plan, creating 3 million jobs," he said. "That's going to cost some money. And in the short term, we will actually see, potentially, additions to the deficit."
There are also signs that the stimulus bill could become a magnet for good old fashioned pork-barrel spending, reports CBS News correspondent Chip Reid. Mr. Obama has banned congressional pet projects, so the lobbying has shifted to the states and cities.
A wish list from the U.S. Conference of Mayors includes three aquatic centers in Miami for $30 million, a polar bear exhibit in Rhode Island for nearly $5 million, and a museum on the mafia in Las Vegas for $55 million, Reid reports, which are the kinds of projects that could jeopardize Republican support.
Mr. Obama also said that by February he expects to have a plan on how to deal with big ticket spending such as Social Security and Medicare, waste in government and other factors, as well as some "specific outlines" on how to control the deficit.
"We're going to be inheriting a $1 trillion-plus deficit. And if we do nothing, then we will continue to see red ink as far as the eye can see," Obama said after introducing Killefer, who will become the White House's point-person to work with federal agencies to set performance standards and hold agency managers accountable for progress.
Obama called Killefer, who will work out of the White House Office of Management and Budget, "an expert in streamlining policies and wringing out inefficiences."
Mr. Obama and Congress are also promising quick enactment of the economic recovery plan, which will blend up to $300 billion in tax cuts with big new spending programs and could cost up to $775 billion over the next few years.
The flood of red ink probably won't affect that measure but could crimp other items on Mr. Obama's agenda.
The $1.19 trillion 2009 figure shatters the previous record of $455 billion, set only last year. It also represents about 8 percent of the size of the economy, which is higher than the deficits of the 1980s. The 2009 budget year began last Oct. 1.
CBO predicts the deficit will come under control within a few years, but such predictions depend on the expiration of President George W. Bush's tax cuts at the end of next year and repayments from financial institutions that received bailout funds.
While expected, the deficit numbers will give lawmakers second thoughts about creating new spending programs without finding ways to pay for them. And it is likely to prompt a debate about whether tax increases are necessary after the economy recovers from the current recession.
On Tuesday, Mr. Obama issued his most serious remarks yet about the danger of big budget deficits and promised his administration will take steps to bring the tide of red ink under control.
"I'm going to be willing to make some very difficult choices in how we get a handle on this deficit," Obama said Tuesday.
Economists warn that large and sustained budget deficits put upward pressure on interest rates. In the short term, however, efforts to restrain the deficit could have a contracting effect on the economy.
© MMIX, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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See all 185 CommentsThere''s blood on the streets every year. There''s American blood on the streets of Iraq. We should not have any there.
Education is government work and you were FIRED from that job. Your claims are extremely illogical so maybe that is why they TERMINATED you!~
"The fundamentals of our economy are sound"
He must have meant for the upper3%
However-
What we do need to do is change the tax structure!!!
I think we need to go to a flat income tax of 12%
A capital gains tax of 15%
An import duty of 8% on all imported goods
And a National sales tax of 5% on all products
Simplify the stupid Tax system
Get rid of all the loopholes
A 15% capital gains would spur business --
Increasing domestic spending and Manufacturing
An Import duty would bring in Trillions
To a Gov''t that''s cash starved --
And in the end changing the tax structure would
even the playing field.
We need something new that''s for sure
Steve Forbes has it right.
And they have no term limits like the president - they stay in office for life dummy ! ! !
Those elected officials approve a pay raise for themselves, spend your money and raise your taxes - and you blame the President and his relatives ? ? ?
And you really think your newly elected savior can end all that - based on his experience and background ? ! ? !
ASIA - UNITED STATES
U.S. Debt Approaches Insolvency;
Chinese Currency Reserves at Risk
by Maurizio d''Orlando
In a few months, America''s public debt has grown to more than 100% of GDP. Fear of a valuation crisis for the dollar, with tremendous consequences for Asian countries, major exporters to the United States.
Milan (AsiaNews) - In the United States, the danger of debt insolvency is growing, putting at risk the currency reserves of foreign countries, China chief among them. According to new figures published by Bloomberg in recent days (Nov. 25, 2008), the American government has employed a total of 8.549 Trillion Dollars to stop the financial crisis. This means a total of about 24-25.4 Trillion Dollars of direct or indirect public debt weighing on American taxpayers.
http://www.asianews.it/index.php?l=en&art=14054&size=A
Actual U.S, Debt is around $60 Trillion, so this story is total bullsh*t. Get ready to see things you never imagined possible. Collapse of Social Safety-Net Programs like Unemployment Insurance and Food Stamps, Massive Tent Cities of Homeless and Destitute Families, Shortages of basic necessities, Food Riots, Martial Law......
It''s going to get really, really, REALLY, bad.
Get ready now or be sorry later.....
Posted by down-ndirty at 02:07 AM : Jan 08, 2009
First of all, we have been exporting less and less and import more and more. Tariffs have the effect of creating MORE jobs, because it no longer pays to outsource jobs to countries with cheaper labor. Foreign companies are more likely to build plants in the U.S. to avoid tariffs. Without some kind of protection, it''s a certainty that more and more jobs will be lost to countries where labor is much cheaper, and where labor, pollution, etc. laws and regulations are lax to nonexistent.
Globalization, not Wall Street, is the reason the U.S. economy is where it is today.
Posted by incog-nito at 02:00 AM : Jan 08, 2009
Sadly, I agree. Our children and grandchildren will be paying for this mess for a very long time. The current debt is about $40K/person and that''s not something you pay off in just 10 or 12 years when you already have other household debts.
They can only tax us so much; and they will raise our taxes to pay it off...sooner or later.
Posted by txgrouch2008 at 11:16 PM : Jan 07, 2009
And then other countries put tariffs on our exports. Problem is we''re not the super-power we used to be, and we''re not the super-provider we used to be. The end result would be the same, or worse: Jobs lost because our exports go down. Besides, most developing countries can''t afford our products because they are union-made and very expensive.
My guess is that about 90% of every dollar earned and spent eventually goes back to the government in the form of taxes. That''''s a lot of revenue when you add it all up.
Posted by down-ndirty at 01:48 AM : Jan 08, 2009
I would agree that the economy needs a jump start, and Obama is doing the only thing a president can do to that effect. That is, to create jobs building infrastructure. There''s really not much else the gov''t can do.
The question is, will it be enough in the long run? A lot of jobs are permanently lost to outsourcing, with a lot more on the way. In the end the gov''t can only get back a fraction of what it spends to stimulate the economy. The rest has to come from the private sector, which continues to ship jobs overseas. Frankly, I doubt the downward trend can be reversed anytime soon, if at all.
Posted by DJ_Houston at 01:18 AM : Jan 08, 2009
Well, if you have to ask the question then it''s going to be difficult for you to understand the answer.
For the past six years Bush has done nothing to stimulate the economy, in spite of rising unemployment rates. His tax cut went mostly to the rich but they don''t spend and when they do they find loopholes to avoid taxes.
Bush did invest heavily in an unnecessary war with the "expectation" that we would reap "oil benefits." Yup, gas was nearly $5/gal and is now heading back in that direction. And it looks like the only people to benefit from Bush''s war stimulous is OPEC, Blackwater, and KBR. But I guess you would rather have us continue "investing" in the middle east war than to try something different.
It seems to me that a real economic stimulous package would get unemployed people out of the unemployemnt ranks and back into jobs, and paying taxes and spending money again.
My guess is that about 90% of every dollar earned and spent eventually goes back to the government in the form of taxes. That''s a lot of revenue when you add it all up.
Posted by txgrouch2008 at 08:03 PM : Jan 07, 2009
So, by the same analogy one could say that Carter''s problems were JUST a lingering effect of EIsenhower and Nixon''s failures in the middle east. Carter''s major failure was his inability to deal with the hostage crisis, which was caused by OPERATION AJAX and Nixon''s middle-east oil policy. Of course, Reagan was working behind the scenes to make sure Carter failed; ergo, hostage release 15 minutes after Reagan became president.
LoL!!! Your statement above is dubious, at best. Reagan left office with a 5.3% unemployment rate. A DECADE before that the unemployment rate was 5.9% and declining.
On the other hand, the unemployment rate in Jan 93 was 7.3% and declined steadily for the next eight years to about 4% in Jan 2001. You do recall those were the Clinton years.
Wouldn''t you agree that "more people working" equates to a "good economy?"
What I recall from the Reagan years is 1) tax cuts that went mostly to the wealthy; 2) *** the military; 3) Iran/Contra and all the lies that went with it; and 4) his manipulation of the hostage release.
LOL!!! Reagan was just a B-movie actor and his best acting was as POTUS. But still B-grade.
Posted by DJ_Houston
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Well, for one thing, it''s gonna take some time to reverse the idiot-son''s tas rates - so the stinkin'' rich ain''t getting a free ride anymore...
Posted by mtee12 at 08:00 PM : Jan 07, 2009
AND he did it with a rethuglican-controlled congress.
Then Clinton botched things up, so by the time Dubya took office, all the Reagan prosperity was gone.
Posted by txgrouch2008 at 07:51 PM : Jan 07, 2009
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Reagun prosperity?? You gotta be in a very high tax bracket to say something as outrageous as that!!
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