Deficit Soars Higher into Record Territory

(AP)  The federal deficit surged higher into record territory in August, hitting $1.38 trillion with one month left in the budget year.

The Treasury Department said Friday that last month's deficit was $111.4 billion, below the $152 billion that economists expected. Still, the imbalance added to a flood of red ink already accumulated through a severe recession and massive spending needed to stabilize the banking system.

The soaring deficits have raised worries about the willingness of foreigners to keep purchasing Treasury debt. The Chinese, now the largest foreign owners of U.S. Treasury securities, have expressed concerns about runaway deficits. Treasury Secretary Timothy Geithner and other administration officials have sought to address those concerns by insisting that once the current downturn is over and the financial system is stabilized, the administration will move forcefully to get the deficits under control.

However, Republican critics contend the administration does not have a credible plan to address future deficits. Private economists worry the country could face the grim prospect of seeing interest rates soar in future years and the dollar weaken as foreigners dump their U.S. holdings.

The Obama administration last month trimmed its forecast for this year's deficit to $1.58 trillion, from an earlier $1.84 trillion. The recovery of the banking system led to the reduced estimate as it meant the administration did not need to get an additional $250 billion in bailout support for banks.

The $1.58 trillion estimate for the full budget year signals that that administration expects the imbalance in September to be around $200 billion. That would be a sharp deterioration from September 2008 when the government closed out that budget year with a $45.7 billion surplus.

Many private economists have slightly smaller deficit estimates for the full year but all agree that 2009 will be a record-holder by a large margin. The previous record deficit in dollar terms was $454.8 billion last year.

The administration's revised budget forecasts issued last month also underscored how much the government's fiscal picture has deteriorated. It is now projecting the deficit over the next decade will total $9 trillion, $2 trillion more than its estimates from a few months ago.

The deterioration partly reflects the country's deep recession, the worst since the 1930s. That downturn has cut into government receipts and pushed up spending in such areas as unemployment benefits and food stamps, along with the cost of fighting wars in Iraq and Afghanistan.

In addition, the government is using a $787 billion economic stimulus program passed by Congress last February to jump-start growth and is spending massive amounts from the $700 billion financial bailout package passed in October 2008 to stabilize the financial system.

The Treasury Department budget report for August showed the government collected $145.5 billion in revenues, a drop of 7.3 percent from August 2008.

It marked the 16th consecutive month that revenues have been lower than the previous year, a string that reflects how much the recession, which began in December 2007, has cut into personal income and corporate taxes.

Spending in August totaled $256.9 billion, down 4.5 percent from the year before. However, that comparison was misleading because the deficit last month was lowered by timing shifts which saw some payments shifted into July because Aug. 1 fell on a Saturday.

Primarily because of the timing shifts, last month's deficit was 0.5 percent lower than in August 2008.

[valwayne]

9.7% UNEMPLOYMENT, $9 Trillion in additional debt, Both still going higher! And Obama is going to save us by spending trillions and trillions more and paying for it with all fraud and waste saveings from Medicare. All while he improves care for the elderly and gives us all Government Controlled Obamacare!!!! Don't worry, be Happy! Happy Days are her again!!!!

[truthislife1]

We're broke.

[tmittelstaed]

Let me illustrate a few things for the chicken littles.

10 years ago I bought a house on a 30 year fixed. I have paid a lot of interest on this to the mortgage over the years. But if I sold the house today and paid off the mortgage I would have more money than I paid in interest. Why? Because the house's value has appreciated more than the interest rate. In fact, I would have much more money than if I just put the interest I paid into a passbook account at the bank 10 years ago and let it compound.

What the people running deficits are trying to do - and keep in mind Bush was running deficits (Clinton balanced the budget, don't forget) - is they are ASSUMING that the value of the economy will grow FASTER than the interest they are paying on the debt. In short they are trying to do the same thing I did with my home, on a much more massive scale. The idea is if we spend a lot that jazzes up the economy so it grows faster than the interest we are going to have to pay on it.

Now, I personally don't feel this is going to work with my home the next 10 years, which is why I just completed a refinance that shortens my mortgage term, and drastically reduces the amount of interest I'll have to pay in the coming years. I will, of course, be short on cash for the next decade since so much more of it will be going into retiring principle - and because of that I'll have a reduced lifestyle.

In 10 years, if my home value has doubled or gone up more than that, then I will have "lost" since I will have lost during that 10 years of a reduced lifestyle. So, as you can see, I'm gambling. The first decade of home ownership I gambled that my home equity would outpace the losses in interest - I won. The next decade I'm gambing the opposite, that my home equity WON'T outpace the losses in interest if I had not refinanced. I will "win" if that prediction is accurate, but I will "lose" if it is inaccurate.

This is just how deficit spending works on the Federal level. If your the President and your utterly convinced that the economy of the US is going to explode wildly, then the correct decision is to borrow money like crazy and buy everything now, since you will be spending 2030 dollars on lower 2010 prices.

If your the President and your utterly convinced that the economy is going to tank, then you spend as little as possible now, and hoard the country's money - because you then end up spending 2010 dollars on lower 2030 prices, and in the future you can get a lot more than if you get it now.

Obama is an optimist right now which is why he's doing what he's doing. I'm a pessimist right now which is why I'm doing what I'm doing. Neither of us is going to know if we were right until the future comes around. My advice to anyone who reads this is that whatever you are, optimist or pessimist - that you put your money where your beliefs are and spend, or not spend, accordingly.

[Stevenapoli7]

Obama is a dark lord of the Sith. He is using the recession to sensationalize a "crisis" just like Darth Sidious took control over the senate to pass his evil agenda in a time of upheaval. He is moving this great country away from free markets, capitalism, and meritocracy to one of federal control, handouts, bailouts, takeovers. My advice: Don't over regulate and don't under-regulate.

[babooph]

Deficit is no problem if it is spent to destroy & then rebuild some 3rd world nation -if it is for the US middle class benifit ,the US propaganda system goes wild !

[Lawyers-Guns-n-Money]

by pepperwood2 September 11, 2009 11:06 PM EDT
With all due respect velma179 I must admit that you are but half right. So sad!
=================================================

Logically, that must also mean you believe you are half right. I wonder which half you're admitting to being wrong about -- the facts or the history.

[robham777]

I think it was the fear for the future part.

[mav547166]

Wow it only took 8 months for President Obama to equal 20 years of deficits thats impressive.

[oilfix]

It's like being in a crippled submarine in one of those war movies,
drifting deeper beyond the hulls safe limit. Those who were surprised
by the initial crisis (never seen it comming) are still in command.
I'm sitting paralysized, with other wage earners, flinching with each
creak/moan, when is it going to blow?

[pepperwood2]

Deficit Soars Higher into Record Territory ..... Federal Deficit Hits $1.38T through August; Economists Estimate 2009 will be Record Year

The Treasury Department said Friday that last month's deficit was $111.4 billion, below the $152 billion that economists expected. Still, the imbalance added to a flood of red ink already accumulated through a severe recession and massive spending needed to stabilize the banking system. The recovery of the banking system led to the reduced estimate as it meant the administration did not need to get an additional $250 billion in bailout support for banks.

The Geitner Obama Plan got the Banks turned around, and it wasn't hard to do. According to their mentality, you just let the Banks increase the fees & charges of all kinds on their Customers Accounts. Then provide lip service to the contrary. Results are Record profits for Banking.

Now you have to convince THE PEOPLE to go out and Buy, Spend, & Borrow. Run up your personal debt even more to make The Geitner Obama Recession Plan work. Don't worry about getting behind on your payment$$$$. The OBama Geitner Plan has provisions for making fast & immediate repossession of your Property by the Banks, Saving & Loan sharks, Etc. To expedite the seizure of your property so it can in turn be reprocessed & resold to another client without missing a beat. While you're Home, Auto & Other debt obligations have been, for the most part, reduced. It's called The American Scheme produced and directed in The White House by Obama & Geitner. So Sad if we fall for this rhetoric all over again.

[velma179]

pepperwood..

Your analysis is so historically and factually incorrect -- with the added emphasis on fear-the-future that is so rampant in right wing ideology -- it would be laughable, but is instead so deeply tragic.

[timdgrim]

Can't we just call BSI and get our debt reduced? Though $1.38 trillion is a bit much on our USA Visa card.