Budget deficit to reach $1.2 trillion
WASHINGTON — The federal budget deficit will rise to a record $1.2 trillion this year, and a package of new spending increases and tax cuts planned by President-elect Barack Obama and congressional Democrats will push that figure higher, the Congressional Budget Office reported today.
In the first official reckoning of the damage caused by the severe recession, the report paints a bleak picture for 2009: a 2.2% drop in the size of the nation's economy, a jump in the jobless rate to 9.2% in early 2010, a 14% drop in home prices and a 1% decline in consumption.
The year-old recession, brought on by the slump in housing and its impact on financial institutions, "will probably be the longest and the deepest since World War II," the CBO said.
The budget deficit also will be the largest since World War II, and deficits will continue to haunt the federal government for the next decade, totaling $3.1 trillion. That's without any action by Obama and Congress to fix the economy, which will cause deficits to rise, the CBO said.
The report predicted that revenue will drop by $166 billion this year, or 6.6%. Spending will increase by more than $400 billion because of the government's takeover of the Fannie Mae and Freddie Mac housing corporations and the federal bailout of financial institutions. [...]
I'm not saying Obama will make a 3 Trillion dollar deficit. Not intentionally. Presumably he is planning to spend money to save the economy, and try to avoid a 3 Trillion deficit. But all these bailouts could be just throwing good money after bad. And it's money we don't have.
When McCain was nominated for the Republican ticket, he was heavily criticized by conservatives for opposing the Bush tax cuts. But when he opposed those tax cuts, it was because they were not accompanied by spending cuts. He was absolutely right. If you cut taxes and increase spending, you get in the mess we're in now.
Our next president seems to also want to cut taxes AND increase spending. Why, because it worked so well for George Bush? Obama kept insisting throughout the campaign that a vote for McCain was a vote for George Bush's failed policies. Now Obama himself is continuing one of Bush's biggest failed policies: cut taxes and spend more. How ironic.
It's imperative that we reduce the deficit. We must live within our means. We have seen what happens to individuals and businesses that refuse to live within their means. Now the government is supposed to bail them out? Who is going to bail out the government, when it continues to live beyond it's means?
If we get a 3 Trillion dollar deficit, it won't matter who did it or how we got there, if it leads to economic collapse and ruin. Does that sound overly dramatic? Consider what such a deficit could do to the value of the already weak dollar, and where that could lead.
If Obama's spending plans work to revive the economy, I'll be happy to be proven wrong, and gladly eat my words here. But I say what I say because I'm just not confident that a failed Bush policy is Change We Can Believe In.
A real change would be a common sense fix that wouldn't cost the tax payers anything.
Related Links:
Financial Crisis: a free-market solution?
"Bankruptcy, not bailout, is the right answer"
Economic Recovery & the Lessons of History
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