Deficit Future

Greenspan: High deficits could spark bond crisis

2010-11-14T18:00:00.000-08:00

The United States must move to rein in its massive budget deficits or it faces the risk of a bond market crisis, former Federal Reserve Chairman Alan Greenspan said on Sunday.
"We've got to resolve this issue before it gets forced upon us," Greenspan said of the ballooning U.S. debt levels.

He spoke as a panel, chaired by former White House chief of staff Erskine Bowles and former Senator Alan Simpson, is due to deliver a report on debt and deficits by December 1.

A draft report made public last week offered a series of politically tough tax and spending choices that would seek to reduce the debt by $4 trillion by 2020.

The suggestions received a lukewarm reception from some politicians and outright condemnation by others, including House of Representatives Speaker Nancy Pelosi, who pronounced the ideas "simply unacceptable."

Greenspan, who spoke on NBC's "Meet the Press," said he believed "something equivalent" to what Bowles and Simpson recommended would eventually be approved by Congress.

"The only question is, is it before or after a bond market crisis? Because there's no alternative," he said.

Congressman Phil Hare disputes existence of national debt

2010-10-08T07:20:00.000-07:00

Chairman Of Joint Chiefs Of Staff Says National Debt Is Biggest Threat To National Security

2010-08-28T09:56:00.001-07:00

From zerohedge.com:

Not China, not Russia, not North Korea, not Iran, not terrorists...According to Admiral Mike Mullen, the Chairman of the Joint Chiefs of Staff, the "single biggest threat" to American national security is the US national debt, which is either $8.85 trillion (public debt), $13.4 trillion (total national debt), $20 trillion (total debt including GSE debt), or $124 trillion (total debt including unfunded obligations), depending on one's definition of the word "debt." And as Zero Hedge has long been warning, the imminent increase in interest rates (sooner or later), will eventually put the country in an untenable funding position. "Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit." The Chairman (the real one, not his pale imitation over at Marriner Eccles) politely forgot to add that the successful rolling of nearly $600 billion in debt per month is likely an even greater threat to national security.

Obama Policies Will Increase National Debt by $9.7 Trillion

2010-03-09T21:22:00.000-08:00

From Opposingviews.com

“President Obama’s policies would add more than $9.7 trillion to the national debt over the next decade, congressional budget analysts said Friday. . .The 10-year outlook by the nonpartisan Congressional Budget Office is somewhat gloomier than White House projections, which found that Obama’s policies would add $8.5 trillion to the debt by 2020.”

Obama Administration Using Accounting Gimmicks That Would Make Enron ‘Blush'

2010-02-28T16:25:00.001-08:00

From Cnsnews.com

Rep. Jeb Hensarling (R-Texas) says the Obama administration is using an accounting “gimmick” in its budget by not including the debt owed by mortgage firms Fannie Mae and Freddie Mac.

“The accounting gimmicks that are used today would make an Enron and WorldCom accountant blush,” Hensarling told reporters. “The American people know that under the policies of this administration—under the policies of this Congress—we are drowning in a sea of red ink.”

Hensarling, a member of the House Financial Services Committee, joined a group of House Republicans Tuesday in announcing the introduction of a bill that would require President Obama’s Office of Management and Budget to include the liabilities of Fannie and Freddie in the national debt calculation.

Clinton Says U.S. Deficit, Debt a National Security Concern

2010-02-28T16:24:00.000-08:00

From Businessweek.com

The record U.S. budget deficit and debt should be viewed as a growing national security concern, U.S. Secretary of State Hillary Clinton told lawmakers yesterday.
“We have to address this deficit and the debt of the U.S. as a matter of national security, not only as a matter of economics,” Clinton said in testimony to the House Appropriations Subcommittee on State, Foreign Operations and related programs. The panel was reviewing the U.S. foreign affairs budget for fiscal year 2011.

Budget Deficit Panel Is A Smoke Screen To Secretly Raise Taxes

2010-02-28T16:22:00.000-08:00

From Americasnewsonline.com

President Obama used an Executive Order to create the Budget Deficit Panel, when it could not pass the Senate. Its appointees supposedly represent both Democrats, Republicans and Independents. Its name describes its duties. What can be done to alleviate a growing budget, that can lead to debt that will cripple the nation.

Fix the deficit first, Bernanke tells U.S. politicians

2010-02-28T16:20:00.000-08:00

From Theglobeandmail.com

Over the course of almost four hours of testimony at the House financial committee yesterday, Mr. Bernanke was asked more about the country's record deficit and debt than any other subject, putting him in the middle of a debate that Democratic President Barack Obama and his Republican opponents in Congress appear eager to have but unwilling to resolve.

Mr. Bernanke stepped gingerly around queries that reflected the challenges of a country struggling to escape recession, yet were often political traps rigged to manipulate Mr. Bernanke into embarrassing one side or the other.

Seeking neutral ground, the Fed chief said it was "very, very important" that the administration and Congress come up with a credible plan to deal with the $1.6-trillion (U.S.) deficit. He stressed that the effort would pay immediate dividends by easing the minds of the investors who finance the government's operations.

Protecting Yourself from the Giant New Deficit

2010-02-28T16:02:00.000-08:00

From Wsj.com

For every dollar in debt that Americans have paid off since they started cleansing their balance sheets in mid-2008, the U.S. government has borrowed more than $7. All the hard work by consumers to replenish their piggy banks may be for naught if big government budget deficits play havoc with the economy.

The Obama administration projected that the federal debt could double over the next decade, prompting Moody's Investors Service to warn that the pristine AAA credit rating of the U.S. "could come under downward pressure."
Investors need to account for the burgeoning federal budget deficit as they save for retirement, college tuition or homes. Uncle Sam's borrowing binge could set off a surge in inflation and push down the dollar, both of which would erode the value of savings. It could also push interest rates higher, hammering the value of the more than $1 trillion in Treasury bonds owned by households directly or through mutual funds. Income taxes, already set to rise, might have to climb further to help close the government's budget gap.

Voters Are Worried and Angry About Deficit

2010-02-24T19:41:00.001-08:00

From Foxnews.com

The poll shows that 54 percent of voters say the deficit makes them feel worried, while 32 percent say they feel angry. Few -- 8 percent -- are okay with the new estimates that have the federal deficit growing to over $1.5 trillion dollars.

Furthermore, more voters -- 47 percent -- think President Obama's federal spending freeze proposal is just a gimmick that won't really help, while 37 percent, or almost four in 10, think it's an important step in reducing the deficit.

Obama’s State of the Union Address Dampens Hope for a Real Budget Action

2010-02-01T13:33:00.001-08:00

From Heritage.org

The key question is whether the President’s freeze represents a first small step towards real fiscal responsibility or an attempt to divert nervous taxpayers’ attention away from larger spending increases elsewhere. The President’s continued support for a trillion-dollar health care expansion as well as yet another expensive stimulus bill suggests the latter.

Deficits and debts in plain English

2010-01-31T20:40:00.000-08:00

From Axcessnews.com

National deficit

2010 Estimate: $1.4 trillion - CBO

What it is:

The deficit is the yearlong difference between "what the United States Government takes in from taxes and other revenues" and what the government spends. - U.S. Department of the Treasury.

What that means:

The projected deficit is the highest the U.S. has ever had, meaning the government has either been collecting less money, spending more, or both.

"The high deficits are an outrage" Chris Edwards, an economist at the libertarian CATO Institute in D.C., said. "They are unethical."

Others say the increased spending was necessary.

"It's clearly too much, but that has to be put in the obvious context of the recession," said Andrew Yarrow, vice president and director of Public Agenda's D.C. office. The group generally opposes higher deficits.

"Most would agree that the government had to do something," he said.

Michael Linden, associate director for tax and budget policy at the Center for American Progress, said, "The current deficit is not a concern. It is very high, but that's mostly a function of the emergency spending that had to happen."

CAP is a progressive group founded by former Clinton administration officials.

The deficit isn't just caused by spending, Linden said. The government has collected considerably less tax revenue this year because people were making less and because the government wanted to stimulate the economy by letting people keep more of their own money, he said.

Public debt

2009 Calculation: $7.6 trillion - CBO

What that means:

The public debt consists of all the deficits of previous years added together. It is all the debt owed by government branches. - U.S. Department of the Treasury.

Public debt is often confused with national debt, an estimate that includes the money different branches of government owe to one another and is therefore considerably higher than public debt. It's the national debt the Senate voted to raise this week.

What that means:

For most of national history, the U.S. didn't have a public debt.

"Other than during the Civil War and the World Wars, the U.S. largely balanced its budget until the late 1960s," Yarrow said.

U.S. public debt has been building up for the last half century.

"It's really the spending that's out of control," Edwards said. Wars over the past couple decades, domestic spending and tax cuts during the Bush years and recent stimulus plans have been expensive, he said. "Both parties are to blame."

Not all say the high debt is a problem.

"Right now the debt is at a manageable level," Linden said.

"It really can't get too much higher" without some risks coming into play, he said.

Lowering debt would mean making some sacrifices.

"In many ways, Americans have really wanted to have it all," Yarrow said.

"They've wanted to have more spending, but they've wanted to pay less in taxes, and that just doesn't add up," he said. "The government has played along with them."

Long-term effects of the public debt and deficits

The public debt "doesn't have any effect in the near term," Linden said. "It's a high public debt, but it's not too much of a burden. The problem is if it continues to rise."

But Yarrow cautioned, "If we do nothing, entitlement programs," including Medicare and Social Security, "will compose all of the budget."

The debt will hit younger workers the hardest, Edwards said.

"There's a huge threat of enormous tax increases for young workers in the future," he said. "The increasing power of the elderly lobby will put pressure on politicians to raise taxes on young workers."

Many countries, waiting on the U.S. to pay back loans, are starting to question the value of holding U.S. debt, Yarrow said.

If these countries were to pull money out of U.S. markets, they could cause "severe panics in financial markets," he said.

This debt may be a problem for future generations.

"Money borrowed by the federal government must be paid back by future generations with interest," Rep. Mike Pence, R-Ind., said in a press release this week.

"There are a lot of ways this can hit individuals down the road," Yarrow said. "And not too far down the road."

Obama to Propose $3.8 Trillion Budget

2010-01-31T20:34:00.000-08:00

From Foxnews.com

Congressional aides are preparing to slog through an expected $3.8 trillion in spending to be proposed by President Obama on Monday when his fiscal year 2011 budget is delivered to Capitol Hill.

Sources tell Fox News the proposed budget predicts the national deficit will crest at a record-breaking $1.6 trillion in the current fiscal year, then start to recede in 2011 to $1.3 trillion, then to $700 billion in 2013.

Still, the administration's new budget to be released Monday says deficits over the next decade will average 4.5 percent of the size of the economy, a level which economists say is dangerously high if not addressed, said the congressional official.

Missing the Target

2010-01-21T08:40:00.000-08:00

From Wsj.com

Unlike previous recessions, the current downturn was not caused by Federal Reserve tightening and therefore couldn't be reversed by lowering interest rates. President Obama was correct to conclude that boosting economic activity required a fiscal stimulus.
Unfortunately, despite the talented team of economists in the administration, most of the president's economic policies have done little to help the problem. And indeed, many of these policies have created even more problems than they solved.

For starters, the president allowed congressional Democrats to design the $787 billion stimulus package. The result was an unnecessarily large increase in the national debt for a very modest rise in gross domestic product, with too much emphasis on redistributing income and preserving public-sector jobs and not enough on raising economic activity. Only about one-fourth of the nearly $800 billion will be used for government spending that adds directly to GDP. In contrast, the funds given to households will be largely saved or used to pay down existing debts. And the dollars that went to state governments relieved pressure to use their "rainy day" funds or levy temporary tax increases.

The Global Debt Bomb

2010-01-21T08:39:00.000-08:00

From Forbes.com

Whether or not you believe the spending spree was morally justified, you have to be concerned about the prospect of a dismal, debt-burdened fiscal future. More debt weighs heavily on GDP, says Carmen Reinhart, a University of Maryland economist. The coauthor, with Harvard professor Kenneth Rogoff, of This Time It's Different: Eight Centuries of Financial Folly (Princeton, 2009), Reinhart has found that a 90% ratio of government debt to GDP is a tipping point in economic growth. Beyond that, developed economies have growth rates two percentage points lower, on average, than economies that have not yet crossed the line. (The danger point is lower in emerging markets.) "It's not a linear process," she says. "You increase it over and beyond a high threshold, and boom!" The U.S. government-debt-to-GDP ratio is 84%.

Senate discussing a raise in national debt ceiling to above $14 trillion

2010-01-21T08:37:00.000-08:00

From Washingtonpost.com

The Senate opened debate Wednesday on a plan to raise the nation's debt limit by $1.9 trillion, a move that Democrats hope will see the Treasury through this fall's congressional elections.

The record increase would raise the Treasury's legal ceiling for borrowing to $14.3 trillion -- about the size of the nation's overall economy.

Treasury expects to exceed the current debt limit of $12.4 trillion as soon as next month. Much of that borrowing is between government agencies; borrowing from foreign governments and other private investors stands at about $7.8 trillion, or around 54 percent of the nation's gross domestic product, a level that has been rising rapidly in the aftermath of the deepest recession in a generation.

U.S. debt to reach $50 trillion by 2030

2010-01-18T09:17:00.000-08:00

From Wnd.com

Fred Bergsten, former assistant secretary of international affairs for the Treasury, sounded the alarm that dollar deficits may not be funded for long by foreign nations, including China, in the Nov./Dec. 2009 issue of the Council on Foreign Relations "Foreign Affairs" magazine.
By 2030, Bergsten anticipates the net foreign debt of the United States will exceed $50 trillion, or 140 percent of gross domestic product.
He predicted that by 2030, the United States will be paying $2.5 trillion a year to the rest of the world, equal to the nation's current total spending on health care
, just to pay the interest on U.S. debt.
Bergsten warns the U.S. debt crisis is so severe that the Obama administration must both reduce federal budget deficits and embrace a declining dollar, or face a collapse of the U.S. economy.
"These projections suggest that the United States' annual current account deficit will thus climb to almost $6 trillion by 2030, more than seven times its previous high," he wrote. "Such a sum would account for more than 15 percent of GDP, or two and a half times the peak rate of 2006, and would be at least triple the accepted international norm for sustainable current account deficits, which is four or, at most, five percent of GDP."
He continued, "It has long been known that large external deficits pose substantial risks to the U.S. economy because foreign investors might at some point refuse to finance these deficits on terms compatible with U.S. prosperity.
"Any sudden stop in lending to the United States would drive the dollar down, push inflation and interest rates up, and perhaps bring on a hard landing for the United States – and the world economy at large."

In just two days this week, the Treasury issued $61 billion in new debt

2010-01-18T09:15:00.000-08:00

From Goldseek.com

In just two days this week, the Treasury issued $61 billion in new debt – twice as much money as Japanese households put into their domestic equity funds during all of 2009, itself a 50% jump from 2008.

Yet one "big bidder" still opted to lend the federal government one fifth of that sum, according to bond analysts speaking to the Financial Times at least. And overall, the government's creditors offered to lend Washington three times the money it sought.

Now, if the Treasury didn't need that $61,000,000,000 to cover 6.3 days of spending, the money raised in new bonds between Tuesday and Wednesday this week could cover 12 days of interest due on the outstanding debt, already running above $12.3 trillion and outweighing the market value of every company listed on the New York Stock Exchange.

2010-01-15T15:22:00.001-08:00

High U.S. debt means slower growth, history suggests

2010-01-15T15:19:00.000-08:00

From Kansascity.com

A new report that reviewed 200 years of economic data from 44 nations has reached an ominous conclusion for the world's largest economy: Almost without exception, countries that are as highly indebted as the United States is today grow at sub-par rates.
The report, "Growth in a Time of Debt," was written by two respected academic researchers who recently published a thick book on eight centuries of economic crises.

There's never been an example when the end result of socialism was not inflation

2010-01-15T15:17:00.000-08:00

From Marketoracle.co.uk

HR: First, I'm not assuming that reversing this momentum is impossible; I'm just saying it's unlikely, and historically once you start building momentum of spending money and paying people to join government programs and get all kinds of gifts from Santa Claus in Washington, it is unlikely to be reversed. As a financial advisor, my job is to help my constituents make money, and my constituents are not on Wall Street or Pennsylvania Avenue. They're on Main Street. And so my job is to help them figure out what to do with their money in these difficult times. Because I am an optimist, I am convinced that no matter how bad things look, some opportunities are out there somewhere. There's a silver lining in all these clouds.

I know I can't tell the government what to do, even if we changed the administration in the next elections. But in the meantime I can help people know what to do with their resources so that they will suffer the least damage or even prosper and make a lot of money from the environment around us by becoming mavericks. A maverick is a bovine that's left the herd and is probably lonely out there by himself for a while, but the herd will be turned to hamburger, and the maverick will make big money if he knows what to do.

TGR: Let's talk a little bit about knowing what to do and some of your advice. In How to Prosper in the Age of Obamanomics, your recently published book, you are pretty enthusiastic for gold as a hedge against the devaluing U.S. dollar.

HR: Will Rogers said, "Invest in inflation; it's the only thing that's going up." As we move into an inflationary socialist environment, bear in mind that there's never been an example when the end result of socialism was not inflation. I remember being in Russia during the Gorbachev years, when using price controls to try to stamp out inflation merely created shortages. We were on a bus going to a museum, and all of a sudden we had to stop because people were blocking the road, rushing across the street. A rumor was out that a store had some goods, and everybody was carrying an empty gunny sack. They didn't know what they might find, but they wanted it. They knew that they could use it or trade it or sell it.

National Debt Could Bring Social Collapse

2010-01-07T08:49:00.000-08:00

From Thebulletin.us

“What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom.” – Adam Smith, “The Wealth Of Nations,” 1776.

So – who pays for it all? Who provides the blank check? The producers, who else? Money does not grow on trees, despite what our “leaders” seem to think – if they think at all. And don’t kid yourself about how it’s only the “rich” who will pay for this: there simply aren’t enough rich people in this country to fund a $14 trillion bill.

With a current population of 308 million, the national debt now exceeds $40,000 per capita; when the debt ceiling gets raised again in the next couple of months, that figure will jump to over $45,000 for every man, woman and child in America.

This, I submit, is an absolute looting spree, happening right before our eyes – and, as such, it constitutes the hugest heist in all of human history. It is nothing less than an irrational, amoral, legalized, politically-motivated plundering of the productive assets of the United States, with no thought or reason given to the consequences, of which there can only be one: total, terminal economic dissolution and disintegration.

And what can we expect from such a collapse? Social catastrophe, martial law and the final destruction of the American Republic. What did Rome get when she fell, devastated by taxes and control? The barbarians and the Dark Ages. What did Germany’s Weimar Republic get when she was shattered by hyperinflation? Adolph Hitler and the Nazis.

Promise to Trim Deficit Is Growing Harder to Keep

2010-01-07T08:44:00.000-08:00

From Nytimes.com

President Obama is making final decisions on his budget for next year and is still promising to outline a path to substantially lower federal deficits. But on nearly every front, that goal has gotten harder since his first budget a year ago.
A deeper recession and slower recovery than the administration initially forecast have increased the tab for economic stimulus measures beyond the original $787 billion package, adding hundreds of billions of dollars for programs like unemployment relief and tax credits for homebuyers.
The savings Mr. Obama once projected from winding down the war in Iraq are being eroded by a bigger buildup in Afghanistan than he had initially contemplated. Congress has rejected or ignored his proposals to raise revenues by changing tax rules for multinational corporations and capping deductions by wealthy individuals; for Mr. Obama to reprise those proposals could raise questions about the credibility of the numbers in his budget.

2010-01-07T07:55:00.001-08:00

U.S. Nears the Precipice

2010-01-04T11:25:00.000-08:00

From Online.wsj.com

Economists have long fretted about how an aging population and growing health-care costs will cause the U.S. budget deficit and public debt to balloon -- an outcome that could wreak financial havoc by undermining confidence in the U.S. dollar.

Obama signs U.S. debt limit increase into law

2010-01-01T16:51:00.000-08:00

From Reuters.com

President Barack Obama on Monday signed into law an increase in the U.S. national debt limit to $12.4 trillion, the White House said in a statement.

Coming Soon: The Bill for the Massive U.S. Debt

2010-01-01T16:49:00.000-08:00

From Moneymorning.com

The Spiraling National Debt

Right now, without counting future unfunded liabilities like Social Security or Medicare, our national debt tops $12 trillion. There are roughly 100 million American households. That's a national debt of roughly $120,000 per family.

In order to keep the government functioning, Congress just increased the federal debt ceiling to $12.5 trillion. And the party isn't over yet.

In an effort to keep mortgage interest rates low, the Fed pledged this month to buy yet another $500 billion of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) guaranteed mortgage securities.

But all that spending has a price. And the bill is about to come due.

The White House estimates that the government will have to borrow about $3.5 trillion more over the next three years. On top of that, the U.S. Treasury has to refinance, or roll over, a huge amount of short-term debt that was issued during the financial crisis. Treasury officials estimate that about 36% of the government's marketable debt - about $1.6 trillion will mature in the next 12 months.

A debtor nation

2010-01-01T16:46:00.000-08:00

From Americanthinker.com

In all the years of the nation's existence up to the end of 2007, the total national debt held by the public amounted to 36.2% of the Gross Domestic Product (53.8% by the end of 2009). By the end of 2012, based on the proposed budget of the Obama administration, that percentage will be 71.6. Thus, in five years, the debt will nearly double. If the trend is not stopped, then by 2019, the debt will triple to over 100% of GDP.

These projections do not include the overwhelming future impact of the health care reform bill recently passed in Congress, which will cost over $2.5 trillion in its first ten years of implementation. Nor does it include the carbon cap-and-trade or any other pending spending and regulatory bills. Beyond the expenditures contemplated, these actions will stifle domestic economic growth, so necessary for government revenue, and leave the now-global economy in the hands of our potential adversaries.

To put this into perspective, by 2019, three items -- interest on the debt, Social Security, and Medicare-Medicaid -- will account for 92% of all revenue to the federal government. Everything else will have to be funded by borrowing.

If Social Security Gets No Increase, Why Do Federal Workers?

2010-01-01T16:43:00.000-08:00

From Theledger.com

Regarding the Dec. 14 front-page article "1.1 Trillion Plan - Senate Sends Spending Bill to Obama," page A1 and A6 - Spending - Column 3, Paragraph 3, "The bill also approves a 2 percent pay increase for federal workers." The government stipulated that people on Social Security, Social Security Income and Social Security Disability will not be getting a raise next year in their checks because there has been no increase in inflation this year.
If this is true, then where did they find money to give their federal employees a 2 percent raise and why? Why should they get raises, but elderly and sickly cannot?
They're not having to choose between paying bills, electricity, eating or buy medications. They probably make three times what the elderly do.
These people on Social Security have paid into it all their lives, so when the time came for retirement, they thought they would be OK.
We're in a recession. There is no money for increases in Social Security, but there is always money for raises for government employees.

decade from hell

2009-12-27T20:19:00.000-08:00

From Myhighplains.com

On the heels of recent action by the U.S. House, the Senate has approved a two-month increase in the federal debt limit. The temporary boost allows the government to cover financing needs over the next two months.

How much you want to bet it will be made permanent?

Our government is digging it deeper and deeper

2009-12-27T20:14:00.000-08:00

From Dissidentvoice.org

Interest rates are very low today, by historical standards, but they will not always be low. When interest rates rise, the interest cost on the same amount of debt will be higher. If current interest rates were to double, over a period of time, the $451 billion interest cost would double to $902 billion. The United States government has dug itself into a very deep hole over the past 28 years. We are in so deep that we can barely see the dim light at the top of the hole. Unfortunately, instead of filling the hole in, our government is digging it deeper and deeper!

2009-12-27T19:37:00.000-08:00

From Boston.com

“For the next decade or two, on some reasonable sets of assumptions, our borrowing cushion shrinks significantly, threatening to test our capacity to raise funds to finance unprecedented deficits,’’ Greenspan said in testimony to the Senate Homeland Security and Government Affairs Committee.

Greenspan warned that the rising public debt leaves the government’s fiscal position vulnerable to a rise in interest rates.
In answer to a question about why rising debt is a concern, Greenspan said: “The critical issue that economists worry about’’ is the spiral that occurs with ever-rising debt and debt service, often followed by higher interest rate. As a consequence of that, “the debt service becomes explosive and that moves directly into the budget deficit,’’ he added.

Selling Fear

2009-12-18T08:37:00.000-08:00

Obama: U.S. 'will go bankrupt' without health care bill

From Usatoday.com

"If we don't pass it, here's the guarantee," Obama said. "Your premiums will go up, your employers are going to load up more costs on you ... Potentially they're going to drop your coverage, because they just can't afford an increase of 25 percent, 30 percent in terms of the costs of providing health care to employees each and every year."
He added that the costs of Medicare and Medicaid are on an "unsustainable" trajectory and no is action taken to bring them down, "the federal government will go bankrupt."
"If we don't do this, nobody argues with the fact that health care costs are going to consume the entire federal budget," Obama told Gibson, the ABC anchor who is retiring this week.

2009-12-18T08:35:00.000-08:00

From Ft.com

For more than two centuries, we have been able to hold the level of U.S. federal debt to well below our long-term capacity to borrow.

But for the next decade or two, on some reasonable sets of assumptions, our borrowing cushion shrinks significantly, threatening to test our capacity to raise funds to finance unprecedented deficits.

The challenge to contain this threat is more urgent than at any time in our history, in part because of today’s limited flexibility of adjustment, especially of entitlement spending whose constituencies are well entrenched.

2009-12-15T22:48:00.001-08:00

2009-12-15T12:26:00.001-08:00

Republicans Try to Put a Freeze on Debt Limit, as Democrats Call for $1.8T Hike

2009-12-15T12:25:00.000-08:00

From Foxnews.com

Republicans in the House are trying to derail Democratic efforts to lift the national debt limit, though they acknowledge it may be too late this time around.

Democrats Seek $1.8 Trillion Debt Hike

2009-12-15T12:23:00.000-08:00

From Thenewamerican.com

House Majority Leader Steny H. Hoyer (D-Md.) stated on December 11 that the federal government must borrow at least $1.8 trillion more in 2010 if the United States is to avoid defaulting on its debts. This would be over and above the current $12.1 trillion national debt limit. Democrats are trying to stick together to pass a bill that would raise the federal debt ceiling to $14 trillion. By doing this now, they hope to avoid dealing with the issue closer to next year’s midterm elections.

Yet the politically unpopular move of putting the nation deeper into debt is being resisted by more than 50 moderate “Blue Dog” Democrats. They are vowing to withhold their votes unless a “pay-as-you-go” law is included in the debt-increase legislation.

How Does the National Debt Impact YOU?

2009-12-15T12:22:00.000-08:00

From Prweb.com

“The truth, of course, is that the national debt affects us all.”
Rolens points out that there are only so many ways a nation can attempt to control or offset its debt, and all the those ways diminish the individual citizen’s ability to fulfill his or her needs and goals.

“Experts can get highly technical in explaining the dangers which necessarily accompany an exploding national debt,” say Rolens, “but the basic explanation is pretty simple. Bottom line, a nation can do two things to cut debt: the first is to raise taxes, and the second is to cut services. The higher the debt, the greater the tax hikes and the more severe the service cuts. In other words, you have fewer tax dollars and you get less for each dollar that you do have ... everything, from schools and the highway system to environmental programs and national security, suffers. ”

The coming debt panic

2009-12-15T12:20:00.000-08:00

From Washingtonpost.com

IT'S TIME to stop worrying about the deficit -- and start panicking about the debt. To put it another way, short-term deficits aren't the real problem. The punishing hangover of borrowed money is. The ballooning national debt once looked like a long-term problem. Now, the long-term has become the middle-term, fast-forwarded by the cratering economy and the unavoidable and immense spending in the service of saving it.

Consider: In the space of a single fiscal year, 2009, the debt soared from 41 percent of the gross domestic product to 53 percent. By way of comparison, the average for the past half-century has been 37 percent. This sum, which does not include what the government has borrowed from its own trust funds, is on track to rise to a crushing 85 percent of the economy by 2018. Getting the debt back down to a reasonable level will require extraordinary, almost unimaginable, fiscal discipline and political cooperation. Failing to do so will lower the national standard of living and ultimately threaten America's economic stability.

US needs plan to tame debt soon, experts say

2009-12-15T12:17:00.000-08:00

From Reuters.com

The U.S. government must craft a plan next year to get its ballooning debt under control or face possible panic in financial markets, a bipartisan panel of budget experts said in a report on Monday.

Though the government should hold off on immediate tax hikes and spending cuts to avoid harming the fragile economic recovery, it will need to make such painful changes by 2012 in order to keep debt at a manageable 60 percent of GDP by 2018, according to the Peterson-Pew Commission on Budget Reform.

Without action, investors could lose confidence in the United States, driving down the dollar and forcing up interest rates, said the former lawmakers and budget officials who crafted the report. That could cause a sharp decrease in the country's standard of living.

TARP funds in play for jobs program

2009-12-15T12:16:00.000-08:00

From Washingtonpost.com

During a speech about the economy next week, President Obama is likely to endorse using some of the government's $700 billion financial bailout for a new jobs-creation program, the White House said Friday.

"The president thinks we should and must do everything in our power to create an environment for job growth and job creation," press secretary Robert Gibbs said. When asked whether Obama will talk on Tuesday about the use of bailout funds, Gibbs said, "I think that's likely."

New $100 billion safety net for jobless in works

2009-12-02T22:06:00.000-08:00

From AP:

As unemployment spikes, the cost of compassion is going up too.
By as much as $100 billion.
That's the potential price of a push by Democrats in Congress to continue providing extra help to the jobless beyond the core 26-week unemployment insurance package provided under permanent law.
The jaw-dropping numbers combine the approximately $85 billion cost of continuing emergency benefits through 2010 for the long-term unemployed — jobless more than six months — plus an estimated $15 billion to continue subsidies to help pay health insurance premiums.
Even before the last new round of extended benefits in November, the cost of unemployment compensation was estimated by the White House to exceed $140 billion for fiscal 2010, which began in October. Just two years ago — when the unemployment rate was 4.8 percent in contrast to the current 10.2 percent — the cost of unemployment benefits was only $43 billion.
Extending unemployment benefits again is an obvious solution to Democrats preaching compassion for the long-term jobless, as well as to economists who say cutting off the flow of money could harm the economy.
"This is the most effective way to get money into the economy. It's given to people who are simply out of money," said Rep. Jim McDermott, D-Wash., a key supporter. "They're spending it. They're not socking it away in a mattress somewhere."
Several temporary benefit extensions dating from mid-2008 are set to expire Dec. 31. In January alone, an estimated 1 million people will lose benefits as their extended coverage runs out. By March, 3 million people will have lost benefits averaging about $315 a week.
Also expiring is a program subsidizing 65 percent of insurance premiums for unemployed people who sign up for a continuation of health benefits formerly provided by their employer under the so-called COBRA program. The nine months of COBRA subsidies and the additional weeks of unemployment benefits were both core pieces of February's economic stimulus plan.

Pelosi: Americans Would Accept More Red Ink in Exchange for Jobs

2009-11-30T20:07:00.000-08:00

From Foxnews.com

"We have to shed any weakness that anybody may have about not wanting to be confrontational on this subject for fear that we'd be labeled not sensitive to the deficit," Pelosi said, in a recording posted by Think Progress.

"The American people have an anger about the growth of the deficit because they're not getting anything for it. ... If somebody has the idea that the percentage of GDP of what our national debt is will go up a bit, but they will now -- and their neighbors and their children -- will have jobs, I think they could absorb that, and then we ride it out and bring money in," she said.

Voter Anger Is Building Over Deficits

2009-11-30T20:04:00.000-08:00

From Online.wsj.com

After engineering an unprecedented spending surge for nearly a year, President Barack Obama now wants to signal that he takes deficits seriously. So this week the White House announced that it is considering creating a commission to figure how to fix the budget mess.

Eureka!

Well, almost. What seems to concern the president is not the problem runaway spending poses for taxpayers and the economy. Rather, what bothers him is the political problem it poses for Democrats.

Last year, Mr. Obama made fiscal restraint a constant theme of his presidential campaign. "Washington will have to tighten its belt and put off spending," he said back then, while pledging to "go through the federal budget, line by line, ending programs that we don't need." Voters found this fiscal conservatism reassuring.

However, since taking office Mr. Obama pushed through a $787 billion stimulus, a $33 billion expansion of the child health program known as S-chip, a $410 billion omnibus appropriations spending bill, and an $80 billion car company bailout. He also pushed a $821 billion cap-and-trade bill through the House and is now urging Congress to pass a nearly $1 trillion health-care bill.

National Debt Now Tops $12 Trillion

2009-11-23T11:58:00.000-08:00

Another landmark amount surpassed.

Freshman House GOP’ers Urge Pelosi For Separate Vote On Debt Ceiling

2009-11-23T11:57:00.000-08:00

From Talkradionews.com

On Thursday Rep. Leonard Lance (R-N.J.) urged House Speaker Nancy Pelosi (D-Calif.) to remove raising of the national debt ceiling language from the Defense spending bill. Lance said he’d like the Speaker to allow for a separate vote on the issue.

The Coming Deficit Disaster

2009-11-23T11:55:00.000-08:00

From Online.wsj.com

Going forward, there is no relief in sight, as spending far outpaces revenues and the federal budget is projected to be in enormous deficit every year. Our national debt is projected to stand at $17.1 trillion 10 years from now, or over $50,000 per American. By 2019, according to the Congressional Budget Office's (CBO) analysis of the president's budget, the budget deficit will still be roughly $1 trillion, even though the economic situation will have improved and revenues will be above historical norms.

The planned deficits will have destructive consequences for both fairness and economic growth. They will force upon our children and grandchildren the bill for our overconsumption. Federal deficits will crowd out domestic investment in physical capital, human capital, and technologies that increase potential GDP and the standard of living. Financing deficits could crowd out exports and harm our international competitiveness, as we can already see happening with the large borrowing we are doing from competitors like China.

At what point, some financial analysts ask, do rating agencies downgrade the United States? When do lenders price additional risk to federal borrowing, leading to a damaging spike in interest rates? How quickly will international investors flee the dollar for a new reserve currency? And how will the resulting higher interest rates, diminished dollar, higher inflation, and economic distress manifest itself? Given the president's recent reception in China—friendly but fruitless—these answers may come sooner than any of us would like.

Wave of Debt Payments Facing U.S. Government

2009-11-23T11:52:00.000-08:00

From Nytimes.com

The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true. But that happy situation, aided by ultralow interest rates, may not last much longer.

In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.

“The government is on teaser rates,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates lower deficits. “We’re taking out a huge mortgage right now, but we won’t feel the pain until later.”

House v. Senate: Who Should We Tax for Health Care?

2009-11-23T11:50:00.000-08:00

From Business.theatlantic.com

Reid proposes $370 billion in new tax revenues over the next decade. $150 billion would come from a 40 percent excise tax on high-cost employer-sponsored insurance. Fees on makers of branded drugs and medical devices and on insurance companies would raise another $100 billion. Boosting the Medicare payroll tax by 0.5 percent on wages in excess of $200,000 ($250,000 for couples) would bring in another $55 billion. Among the cats and dogs: $15 billion from an increase in the floor on deductible medical expenses from 7.5 percent to 10 percent, and $6 billion from an excise tax on cosmetic surgery (the tummy tuck tax).

Reid picked very different revenue sources than the House. It would raise far more in taxes--about $540 billion through 2019. And 85 percent--$460 billion-- would come from a 5.4 percent surtax on incomes in excess of $500,000 ($1 million for couples).

Can We Save Social Security?

2009-11-23T11:46:00.000-08:00

From Parade.com

Unfortunately, none of the proposals currently under consideration is likely to be popular. “ Congress is going to have to tell people things they don’t want to hear,” says David John of the Heritage Foundation, a conservative think tank.
Increase taxes
Right now, employees pay a 6.2% Social Security tax on income up to $106,800 (the “income cap”). To generate more revenue, Congress could increase the rate at which income is taxed, raise the income cap, or add a new tax on income above $250,000. President Obama proposed this last idea during his Presidential campaign, but conservative economists say it would not dent the Social Security deficit.

More likely is a modest increase in either the payroll tax rate (from it’s current rate of 6.2%) or the income cap (from $106,800). Raising the cap is popular among Social Security reformers but would increase the tax burden on the middle class, since more of their income would be subject to the tax. Raising the payroll tax rate would disproportionately affect lower-income workers.

Change future benefits
Altering the way benefits are calculated could be a powerful tonic for Social Security’s fiscal ailments. “Financing current benefits isn’t such a big problem,” says Rudolph G. Penner of the left-leaning Urban Institute. “The problem is financing our promise of ever-increasing benefits.”

Number of workers supporting each retiree

1960: 5.1 workers
2008: 3.2 workers
2030: 2.2 workers

The current system ties benefits to wages: As people’s salaries increase, Social Security benefits grow. Under a popular idea called “price indexing,” consumer prices would be factored in, too. Benefits would increase more slowly, since prices tend to rise at a lower rate than wages. The idea may sound innocuous, but critics say it would change the very nature of Social Security and result in significant benefit decreases for people entering the system in the future.

Raise the retirement age
Of all the proposals under consideration, pushing back the retirement age seems the most likely to happen. People are staying in the workforce longer anyway, and the retirement age is already rising gradually—from 65 to 67 by 2027. Proposals are circulating to accelerate the jump to 67 by 2020. Requiring people to work longer before collecting Social Security doesn’t generate quite the ideological division tax increases do and doesn’t tamper with future benefits as price indexing would.

Any Social Security reform package is likely to contain some or all of these ideas. And it had better happen soon. Experts agree that the longer we wait, the more difficult it will be to solve the system’s financial ills. David M. Certner of the AARP believes that talk of a Social Security crisis is overblown. Still, he agrees that changes to the system are inevitable and says they should come sooner rather than later. “The sooner you make them,” he says, “the more modest the changes that are needed.”

The Hidden Costs of Too Much Government Debt

2009-11-23T11:29:00.000-08:00

From Marketoracle.co.uk

You don’t need me to tell you that our public debt is enormous. As of this week, it came to $12,031,299,186,290.07. That’s more than $12 TRILLION in case you have trouble grasping a number that big. In just the past decade, it’s up more than 111 percent.

Things are only going to get worse, too, because Washington has completely abandoned any semblance of fiscal discipline! We’re running ever-larger budget deficits, including $1.42 trillion in fiscal 2009 alone.

The interest cost alone on our debt last year was $202 billion. That’s enough to send every man, woman, and child in this country a $656 check. Keep in mind that those costs were artificially low because of the lowest short-term rates in history due to the Fed’s rate cuts. Moreover, the flight-to-quality rally in government bonds helped keep longer-term rates low.

As bond prices fall, rates rise, and absolute debt levels climb ever-higher. That number is going to spiral upward. In plain English, we’re going to be dedicating a larger and larger share of the U.S. budget just to pay interest on our debt. Forget about defense, health care, Social Security or anything else.

After spending binge, White House says it will focus on deficits

2009-11-13T21:24:00.000-08:00

From Reuters.com

President Barack Obama plans to announce in next year's State of the Union address that he wants to focus extensively on cutting the federal deficit in 2010 - and will downplay other new domestic spending beyond jobs programs, according to top aides involved in the planning.

On the practical side, Obama has spent more money on new programs in nine months than Bill Clinton did in eight years, pushing the annual deficit to $1.4 trillion. This leaves little room for big spending initiatives.

US government deficit hit a record for October

2009-11-13T21:22:00.000-08:00

From Boston.com

The US government deficit hit a record for October as the new budget year began where the old one ended: with the government awash in red ink.

The deficit for the 2009 budget year set an all-time record in dollar terms of $1.42 trillion. That was $958 billion above the 2008 deficit, the previous record.

“I Went Against My Free-Market Instincts”

2009-11-13T21:21:00.000-08:00

From Abcnews.com

That’s what former President Bush said today in explaining why he signed off on the bailout for Wall Street…calling the decision “one of the most difficult of his presidency.”

The former President made the remarks at the unveiling of the George W. Bush Presidential Center at Southern Methodist University.

“I went against my free-market instincts and approved a temporary government intervention to unfreeze the credit markets so that we could avoid a major global depression,” Bush said.

Federal Government will happily take donations to balance national budget

2009-11-13T21:20:00.001-08:00

From Collegenews.com

If you have extra money, and want to help pay down the enormous national debt, an under-the-radar law from 1961 lets you do just that. The federal government will accept contributions that are directly applied to government debt--which, of course, are tax deductible.

On average, most donations are less than $100, though there have been a few substantially large contributions since the law was enacted. According to CNN Money, the largest such gift occurred in 1992, in the amount of $3.5 million.

So far, total contributions for 2009 are slightly over $3 million. Though this number is significantly higher than any yearly total in the last 10 years, it pales in comparison to total donations in 1994, which were just shy of $21 million.

While every little donation does help, the contributions are not doing much to really reduce the amount of debt. “We might have to finance a tiny bit less that week,” Mckayla Braden, a spokesperson for the Bureau of the Public Debt, said to CNN Money.

Why America Is Flat Broke

2009-11-13T21:08:00.000-08:00

From Worldcurrencywatch.com

First, let’s start with some facts.
As of today, the U.S. National Debt is nearly $12 Trillion dollars. That’s a monster in itself, but it’s nothing compared to what the U.S. really owes…

Do You Have $344,000 to Pay Uncle Sam? Well You Should.

You see most people have no idea what the U.S. government owes on “unfunded obligations”. That’s government-ese for entitlement programs like Medicare, Social Security, etc.

Right now, the total unfunded obligations sits at $106 Trillion dollars! That’s 780% MORE than the “national debt.”
Now, let’s do a little math…
If you charged Americans for the national debt, each citizen would have to shell out $38,940. If you just charged taxpayers, that tab would climb to $104,000 per person.

Our nation’s Total Assets now stand at $74 Trillion dollars, or $240,000 per citizen.

Now add in the “unfunded obligations” at $106 Trillion, and every citizen would have to shell out $344,000 to keep us afloat.

In other words…as a country, we are flat-broke!

By the way, if you don’t believe me, you can go to the National Debt Clock website and see for yourself. But I warn you don’t go there if you have a weak stomach.

This Crisis Is Not a Market Failure. It’s a Monumental Policy Failure!

2009-11-11T17:54:00.000-08:00

From Marketoracle.co.uk

"Economic history is being written right before our eyes. Hence, I refer to this episode as the largest economic experiment since the implementation of communism. And here’s what really frightens me: None of the experimenters saw this crisis coming, but all of them claim to know the remedy!"

US set to hit national debt limit in December

2009-11-09T23:04:00.000-08:00

From Google.com

The United States is poised to hit the debt limit in December and Congress will need to raise the ceiling to keep the federal government functioning, the Treasury Department said Wednesday.
The national debt ceiling authorized by Congress is 12.104 trillion dollars, more than 80 percent of 2008 US economic output.
"Based on current projections, Treasury expects to reach the debt ceiling in mid to late December," the department said in a quarterly report on refinancing the federal government's debt.
"Treasury is working with Congress to pass legislation to increase the debt ceiling," it said.
National debt has ballooned as the government borrows money to fund massive stimulus and bailout measures to support the recession-stricken economy.
US national debt topped the 10.0 trillion-dollar milestone in late 2008.
In February, Congress raised the debt limit to 12.104 trillion dollars as the government launched a 787-billion-dollar stimulus program to help pull the economy out of recession that began in December 2007.

Why Wouldn’t the U.S. Just Print its Way Out of Debt?

2009-11-09T22:58:00.000-08:00

From Wallstreetpit.com

Governments are running breathtaking deficits…and accumulating alarming debts. Japan has a national debt of nearly 200% of its GDP. Where did that debt come from? It came from 20 years of trying to buy its way out of a slump with borrowed money. Of course, it didn’t work. But now, Britain and America are following the Japanese lead…and the Japanese are still at it! At the present rate, Japan’s government debt will grow to 300% of GDP in 10 years. America’s debt could grow to 100%…and then 200% of GDP…over the next decade (depending on whose projections you believe). And Britain, if we read the report in The Financial Times correctly, will have debt equal to 200% of GDP within 3 years.

How the Government Is Swallowing the Economy

2009-11-09T22:43:00.000-08:00

From Usnews.com

By one measure, the government already plays an outsize role in our so-called free-market economy—and it has little to do with the recession. Economist Gary Shilling has calculated that 58 percent of the population is dependent on the government for "major parts of their income," including teachers, soldiers, bureaucrats, and other government employees; welfare and Social Security
recipients; government pensioners; public housing beneficiaries; and people who work for government contractors. By 2018, Shilling estimates, an astounding 67 percent of Americans could be dependent on the government for their livelihood. The implications aren't comforting.

Geithner: Deficit reduction has to wait

2009-11-02T08:11:00.000-08:00

From Money.cnn.com

Economic growth and job creation remain the government's top priority, despite a federal deficit that is "too high," Treasury Secretary Timothy Geithner said in an interview broadcast Sunday

Promise Broken

2009-11-02T08:08:00.000-08:00

From Foxnews.com

SPENDING

Pledge: "When George Bush came into office, our debt -- national debt was around $5 trillion. It's now over $10 trillion. We've almost doubled it. ... But actually I'm cutting more than I'm spending so that it will be a net spending cut." -- Obama, during an Oct. 7, 2008, debate in Nashville

Verdict: Promise Broken. The federal budget deficit for fiscal 2009 tripled to a record $1.4 trillion, according to a Congressional Budget Office estimate out in early October. That's nearly $1 trillion more than the $459 billion deficit recorded in President Bush's last full year. The recession-driven declines in revenue accounted for a large part of Obama's red ink, but so did increases in spending -- on everything from the economic stimulus to Wall Street bailouts (sealed before Obama took office). Though Obama still says he wants to bring the deficit down significantly before the end of his first term, projections show the fiscal 2010 deficit will also exceed $1 trillion. Even if Obama does make major changes to fiscal policy and cut the deficit in half, that's still hundreds of billions of dollars every year to the national debt.

Lemonade Stand Raises Awareness of National Debt

2009-11-02T07:54:00.000-08:00

From Kbtx.com

"Free lemonade to help pay down the national debt!" shouts an A&M student in front of the Wehner building on A&M University's West Campus.

A&M students got creative today trying to raise awareness of the rising national debt. Offering free lemonade in exchange for an I-O-U to pay 25 cents toward the $11 trillion deficit.

Cost vs. Price

2009-10-30T11:35:00.000-07:00

From Financialsense.com

It would probably be rather hard to find a single American that didn’t know the price tag of the stimulus bill. $787 billion has been included in nearly every news piece regarding the topic. What most people are not aware of, however, is that $787 billion only represents that amount of money actually put into the economy by the feds. It comes nowhere near addressing the actual cost of the program. A good recent example of this miracle of government accounting is the Medicare part D prescription benefit program. The price tag was $394 billion, but the cost is much higher – around $8.7 trillion and counting depending on which numbers you want to use. Granted this represents the net present value of the cost of these ongoing benefits over a 75-year period, but you get the idea.

Fortunately for taxpayers, the stimulus package is not an ongoing expenditure (yet), and as such consists of predefined outlays. Despite this, the total cost of the bill as compiled by the Congressional Budget Office is approximately $3.27 trillion. Amazing in this is the fact that we’ll pay nearly as much for debt service on the stimulus bill ($744 billion) as the measure was supposed to provide to the economy! Talk about sticker shock. The gory details are here.

The question now becomes one of return on investment. What exactly are we going to get for our $3.27 trillion? It had better be good too, because nearly all of it is borrowed from someone – either foreigners or the Fed. Unfortunately, such is not the case. Using the $3.27 trillion projected cost, the ROI for the stimulus bill stands at a whopping -415%. In the private sector, such a revelation would result in a project being killed instantly in the concept phase. Not so in the hallowed halls of Congress where the laws of economics and common sense do not apply.

U.S. deficit tops $1.4 trillion

2009-10-28T13:25:00.000-07:00

From Examiner.com

The Obama administration released new deficit numbers last week, and they are more than three times the record deficit set last fiscal year. The deficit for Fiscal Year 2009, which ended Sept. 30, is a record $1.42 trillion. And the Office of Management and Budget predicts future deficits to total $9.1 trillion in the coming decade.

Obama's $250 Bonus Turns Social Security into Welfare

2009-10-28T13:24:00.000-07:00

From Heritage.org

Since Social Security recipients will get no cost-of-living adjustment (COLA) next year, President Obama wants to give each of them $250, a move supported in principle by the Republican House and Senate leadership. However, this move is not only unjustified; it makes a fundamental change to Social Security's structure and starts the process of converting the program from an earned benefit funded by a worker's own contributions to a welfare program.

Bernanke says the extremes mean 'global imbalances may reassert themselves'

2009-10-28T12:45:00.000-07:00

From Washingtonpost.com

The United States must reduce its budget deficit and Asian nations must encourage more consumption in order to prevent a recurrence of the global imbalances that contributed to the financial crisis, Federal Reserve Chairman Ben Bernanke said Monday.

Bernanke, speaking at a conference on Asia and the financial crisis, attributed the global crisis in part to a long-standing pattern in which Asians saved too much and spent too little, while Americans spent too much and saved too little. As the global economy starts to recover, the Fed chairman said that "global imbalances may reassert themselves."

To keep that from happening, the United States must "increase its national savings rate," Bernanke said at the conference, sponsored by the Federal Reserve Bank of San Francisco. The best way to do that, he added, is to reduce the federal budget deficit.

$1.42 trillion shortfall may hike interest rates, inflation

2009-10-19T13:47:00.000-07:00

From Usrep.co.za

What is $1.42 trillion (R10.4 trillion)? It is more than the US's total national debt for its first 200 years and more than $4 700 for every American man, woman and child.

It is also the 2009 US federal budget deficit, three times more than any other deficit before. Some economists warn that unless the government start to cut spending or raise taxes, it could sow the seeds of another economic crisis.

Treasury figures released on Friday showed that the government spent $46.6 billion more than it received in September, a month that normally records a surplus. That boosted the shortfall for the full fiscal year that ended last month to $1.42 trillion. The previous year's deficit was $459 billion.

As a percentage of US economic output, it's the biggest deficit since World War II.

Forecasts of more red ink mean the federal government is heading toward spending 15 percent of its money by 2019 just to pay interest on the debt, up from 5 percent this year.

President Barack Obama has pledged to reduce the deficit once the great recession ends and the unemployment rate starts falling, but economists worry that the government lacks the will to make the hard political choices to get control of the imbalances.

Friday's report showed that the government paid $190bn in interest over the last 12 months on Treasury securities sold to finance the federal debt. Experts say this tab could quadruple in a decade as the size of the government's total debt rises to $17.1 trillion by 2019.

Cato’s Tanner: Medicare Will Be Cut

2009-10-19T13:39:00.000-07:00

From Newsmax.com

Medicare benefits will be cut regardless of whether Democrats or Republicans have their way, says Michael Tanner, a senior fellow at the Cato Institute.

“Democrats would have us believe that they can cut $500 billion from Medicare spending over the next 10 years without anyone getting less of anything,” Tanner wrote in a Cleveland Plain Dealer opinion piece.

“They are going to save that money, the president says, by eliminating ‘fraud, waste and abuse.’ Undoubtedly that would be the same fraud, waste and abuse that presidents have been eliminating since at least, say, Ronald Reagan.”

The Growing Risk Of The Dollar

2009-10-19T13:34:00.000-07:00

From Nuwireinvestor.com

The unsustainable growth of the national debt that has risen to about $120,000 per household is a significant threat to the value of the US dollar. Porter Stansberry from Daily Wealth argues that the debt could grow to $20 trillion in the next 8 years, which will lead to high inflation and destroy an unprecedented amount of wealth held in dollars.

At the end of last year, I began writing about what I saw happening as the Federal Reserve started assuming the liabilities of the investment banks and the federal government began deficit spending at an unprecedented pace.

I've been calling these changes the "End of America" because I believe the fiscal policies of the U.S. will result in a massive devaluation of the dollar and the end of the U.S. dollar as the world's reserve currency.

TAKING THE NATIONAL DEBT SERIOUSLY

2009-10-19T13:33:00.000-07:00

From Ncpa.org

The interest on the national debt makes our future unstable. The exploding size of that burden suggests that, short of devaluing the dollar and taking a large bite out of the middle class through inflation and taxation, there is no way to ever pay down that bill, says Lawrence Kadish, a real estate investor and a trustee of the Claremont and Hudson institutes.
Consider:
As of Sept. 30, 2009, the national debt was almost $12 trillion and interest on that debt was $383 billion for the year, according to the Treasury Department's Bureau of the Public Debt.
The Congressional Budget Office on Oct. 7 estimated the 2009 budget deficit to be almost $1.4 trillion (about 10 percent of GDP).
In August, the White House Office of Management and Budget (OMB) estimated total government revenues at about $2 trillion; the revenue estimate included $904 billion from individual income taxes.
This means the cost of interest on the debt represented more than 40 cents of every dollar that came in from individual income taxes.
Except for a few years in the late 1990s, for decades Washington has spent more than it has taken in each year and borrowed the rest, says Kadish. Taxpayer dollars that could have paid off debt each year have instead been spent on interest to finance debt. Unfortunately, that's a vicious cycle that will likely only get worse, says Kadish:
The OMB projects deficits of about $9 trillion over the next 10 years.
If that occurs, the national debt will be almost $21 trillion by 2019, however, the actual amount could be much higher.
The OMB also optimistically projects $13.5 trillion of revenue increases over the next decade, while minimizing the inevitable rise in interest rates that will come with an expanding national debt.
Left unchecked, this destructive deficit-debt cycle will leave the White House and Congress with either having to default on the national debt or instruct the Treasury to run the printing presses into a policy of hyperinflation. It is against this background that Washington is now debating whether to create social programs it can't afford, says Kadish.

President Obama has a spending problem

2009-10-19T13:32:00.000-07:00

From Examiner.com

President Obama has once again proposed more spending that will increase our countries debt. In recent news Mr. Obama has suggested a $13 billion plan to pay seniors since they will not get a raise in their social security. This equates to about $250 each for 50 million elderly citizens. The problem with this is that added on to other high cost programs out national deficit is skyrocketing out of control. Proposed healthcare reform, tax increase, possible troop increases and other proposed or ongoing government programs are spending money as if we had an unlimited supply.

Plunging greenback clouds US optimism

2009-10-19T13:31:00.000-07:00

From Watoday.com.au

But the sense of relief has been clouded by growing fears about the future of the US dollar, as the massive growth in the US national debt fuels an exodus from the world's reserve currency.

The US dollar soared in the first months of the crisis, as investors flocked to what they saw as a safe haven. But since March it has fallen more than 10 per cent against other global currencies - and 30 per cent against the Australian dollar - as investors fear it will not remain safe.

As reported in Business Day yesterday, central banks globally added $US413 billion to foreign currency reserves in the June quarter, a six-year high. But 63 per cent of that growth was in euros and yen, and just 37 per cent in the US dollar.

High jobless rate adds billions to deficit

2009-10-19T13:29:00.000-07:00

From Thehill.com

High unemployment means more unemployment checks and less tax revenue, costing the government roughly $100 billion annually, said Stan Collender, a former congressional budget aide. Those costs will persist for the next couple of years, if economists are correct in predicting the jobless rate will average more than 9 percent through 2011.
Unemployment compensation rose from $47 billion in fiscal 2008 to $120 billion in 2009, a 156 percent jump.

How the U.S. Economy Could Prosper Again

2009-10-19T13:20:00.000-07:00

From Reuters.com

In order for our country to have a chance of prospering, we need the market
place and financial system to truly be free. Americans need the ability to
walk into any U.S. bank across the country and have an option of storing their
pay check in U.S. dollars, Canadian dollars, Australian dollars, Euros, Yen,
or any other currency in existence. There should be no foreign currency
transaction fees, it should be as simple as filling out a deposit slip and
checking off what percentages of your pay check you want to be deposited in
each currency. If you don't want a currency but instead you want real money,
you should be able to store your money at any U.S. bank in gold and silver.
You should also be able to withdraw any amount of any foreign currency, as
well as physical gold and silver, at any time from your bank with no questions
asked.

Trillions More in Debt with Nothing Good to Show for It

2009-10-05T08:21:00.000-07:00

From Blogcritics.org

It is easy to get caught up in all the hype of the media pundits, Ben Bernanke, Joe Biden and Barack Obama that the economy is slowly but surely recovering from the worst recession since the 1930s. It’s not. And what is even worse is that we are deeper in debt with nothing good to show for it.

U.S. Begins Fiscal Year $11,776,112,848,656.17 in Debt

2009-10-05T08:19:00.000-07:00

From Cbsnews.com

It was as if a fiscal tsunami struck and flooded the nation with red ink.

By the time the final numbers are in for the fiscal year just ended, the federal deficit will have hit an all-time high in the range of $1.580-trillion. That's 11.2 percent of the total economy (GDP). The previous year's deficit was – by today's standards – nearly inconsequential at $459-billion. That was only 3.2 percent of GDP.

Over the course of FY'09, the National Debt soared as well from $10.124-trillion on October 1, 2008 to $11,776,112,848,656.17 as of Tuesday, the latest figure from the Bureau of Public Debt. That's an increase of $1.652-trillion – the single largest increase ever in a fiscal year.

Poll: National Debt Hurting The Country

2009-10-05T08:18:00.000-07:00

From Foxnews.com

Most Americans -- 78 percent -- think the national debt is so large it is hurting the future of the country, including majorities of Democrats (64 percent), Republicans (92 percent) and independents (85 percent).
Moreover, nearly two-thirds (65 percent) think the Obama administration is proposing more government spending than Americans can afford. Some 29 percent disagree.
The political divide is striking: 90 percent of Republicans and 74 percent of independents think the Obama administration is proposing more spending than taxpayers can afford. Among Democrats, that number drops to 39 percent, while over half disagree (55 percent).

How bad is the U.S. budget deficit?

2009-10-05T08:10:00.000-07:00

From Marketplace.publicradio.org

Well if this doesn't stop -- and I don't think it will -- we're going to discover that the rest of the world is going to want higher interest rates to lend money to the United States than it now is demanding. And a lot of this money that we're paying in interest basically leaves the country as opposed to, say, World War II -- where the deficits as a percent of the economy were much bigger, but we financed them pretty much inside the country so the interest payments that the government was making stayed inside the country and the money was recycled. And now it's going to leave. And that is not a good thing.

Early retirements strain Social Security

2009-10-01T20:37:00.000-07:00

From Examiner.com

In the latest sign the Social Security ticking time bomb is almost ready to explode, an unexpected spike in the number of early retirement claims will cause the entitlement program to run a deficit as early as 2010, nearly a decade ahead of earlier projections.
The system has suffered not only a 23% increase in early retirement applications, but the severe recession has resulted in the loss of 6.9 million jobs. In this negative feedback loop, older employees lose their jobs and thus stop paying into the system while applying for early retirement benefits when they are unable to secure a new job.

President Obama's Agenda Would Bring $13 Trillion in Budget Deficits, Not $9 Trillion

2009-09-25T14:01:00.000-07:00

From Heritage.org

President Obama's budget will likely produce $13 trillion in deficit spending over the next 10 years--nearly $4 trillion more than forecast. The White House figures are based on unrealistic estimates of discretionary spending, interest payments, and interest rates. The White House also used budget gimmicks to hide the full cost of certain entitlements and failed to account for the full costs of cap-and-trade energy legislation and health care reform.

Americans believe Washington squanders half of every tax dollar

2009-09-25T14:00:00.000-07:00

From wsj.com

If you want to know why Americans are so fearful of a government takeover of the health-care system, take a look at the results of a new Gallup poll on government waste released Sept. 15. One question posed was: "Of every tax dollar that goes to Washington, D.C., how many cents of each dollar would you say is wasted?" Gallup found that the mean response was 50 cents. With Uncle Sam spending just shy of $4 trillion this year, that means the public believes that $2 trillion is wasted.

In a separate poll released on Monday, Gallup found that nearly twice as many Americans believe that there is "too much government regulation of business and industry" as believe there is "too little" (45% to 24%).

Perhaps most significantly, in both of these polls Gallup found that skepticism about government's effectiveness is the highest it's been in decades. "Perceptions of federal waste were significantly lower 30 years ago than today," say the Gallup researchers. Even when Ronald Reagan was elected president in 1980 with the help of the antigovernment revolt of that era, Americans believed only 40 cents of every dollar was wasted, according to Gallup.

Coming next year: Cash deficits in Social Security

2009-09-25T13:56:00.000-07:00

From Kansascity.com

Pretty soon all the people who talked about the "money" in the trust fund will learn otherwise. The CBO projects that the first cash deficits since the 1980s will show up next year and 2011. Ed Morrissey has the details at Hot Air.

During the Bush administration, opponents of reforming the system constantly repeated the refrain that when payroll taxes can no longer provide enough for Social Security outlays, the program will simply tap Treasury securities in the trust fund.
But that's when we'll find out those bonds are like IOUs you wrote yourself after tapping your kids' college fund. They can't be redeemed without doing what you would have to do if they didn't exist: Raise taxes, borrow more or cut spending.
The cash shortfall wasn't supposed to happen until 2017, but thanks to the weak economy, the problem is showing up a lot sooner.

Recipients will still receive their payments, but much of that money will come from the general fund, not payroll taxes.

Treasury to Shrink Financing Program

2009-09-18T09:10:00.000-07:00

From Wsj.com

The Treasury Department is expected to begin winding down a temporary program created at the height of the financial crisis to address a new problem -- the government's rapidly expanding debt.
According to people familiar with the matter, the step is being taken to help the Treasury avoid hitting the $12.1 trillion debt ceiling that was expected to be reached by mid-October. The decision could also be controversial, since the program was put in place to help blunt any inflationary impact from emergency actions taken by the Federal Reserve.

Since last year, the Treasury has been selling special short-term securities and placing the proceeds in an account at the Fed. The program, known as the Supplementary Financing Program, reached about $560 billion late last year, but has since fallen to about $200 billion, where it has remained throughout 2009.

Government officials estimate that decreasing the size of the Supplemental Financing Program could give the U.S. as much as six weeks of additional time.

China Asks Citizens to Buy Gold and Silver

2009-09-18T09:08:00.000-07:00

From Ethiopianreview.com

China currently owns more than a trillion dollars of the government's debt. The Chinese have lent the United States money in the past, because they felt it was in their best interest. Because they have such a large investment in our finances, they have in the past lent to us. As they lose confidence in the US economy, they are less eager to lend money. In February, Luo Ping, who is a director-general for the Chinese Banking Regulatory Commission, stated "we hate you guys" when referring to the US government's spending binge. They are clearly not happy about lending to the US government, because it has failed to clean up its spendthrift ways.

Getting out of Dollars

Although the Chinese government is still buying dollars, they are slowly divesting of their investments, spending more dollars than they are buying. At the same time that China has been slowly reducing their dollar holdings, the country has been
investing in gold by investing in gold mines. The Chinese must believe that it is in their best interest for their citizens to buy gold, or they wouldn't be pushing their citizens to do so.

If the Chinese government continues to dump US dollars, they will have less of an incentive to keep the dollar afloat. This could result in inflation, or perhaps even hyperinflation, for the dollar. By encouraging the citizens of the most populous country in the world to purchase precious metals, the supply of gold and silver could become limited, causing an increase in the price.

Senate urged to raise $12T debt cap

2009-09-18T09:03:00.000-07:00

From Politico.com

Six major trade associations urged Senate leaders to quickly to raise the $12.1 trillion cap on the national debt, a move that will undoubtedly cause political headaches for Democrats facing serious questions about the cost of health care reform.

Treasury Secretary Timothy Geithner warned Congress at the beginning of August that the current limit on how much the federal government can borrow could be hit as early as mid-October.

How Much Debt Is Too Much?

2009-09-18T09:00:00.000-07:00

From Forbes.com

The latest budget projections show the national debt rising from $5.8 trillion last year to $7.6 trillion this year and $14.3 trillion in 2019. According to the Congressional Budget Office (CBO), the debt will rise from 40.8% of the gross domestic product in 2008 to 53.8% in 2009 and 67.8% in 2019.

Today the total US debt to GDP is approx 425%.

2009-09-18T08:52:00.001-07:00

From Marketoracle.co.uk

The question is, can this debt reach 100% of GDP at around $13 trillion. Putting things into context…before the Great Depression in 1929 the US Govt debt was only 15% of GDP! To make matters even worse, the US in 1929 was a creditor nation. Today the US is a debtor nation. Comparing the current situation to the situation prior to the Great Depression total US debt (individual, business,local, state and federal) was approx 170% of GDP.

Today the total US debt to GDP is approx 425%.

Could the US ,the UK as well as the rest of the world be entering a crisis worse than the Great Depression? I state this because of the amount of debt that in all reality can not be paid back. I am not even mentioning all the trillions of derivatives floating around, that are virtually WORTHLESS! Can the situation really get worse because the whole world is in the same boat? The interwining of the global economy is unprecedented in world history.

I believe in real assets. I have never heard of any country has ever solved a credit crisis by printing more money. When countries print money…eventually inflation ( the wealth destroyer) raises it ugly head. We saw first hand in 1998 Debt Deflation in East Asia brought on tremendous inflation. Nothing ever changes.

2009-09-18T08:51:00.001-07:00

Social Security is Broke

2009-09-10T11:50:00.000-07:00

From Thehill.com

The CBO now projects that Social Security’s costs will exceed tax income in 2010 (next year!) and 2011, with cash surpluses returning over the 2012-2015 period and becoming negative again beginning in 2016 and later. In their March 2009 estimates, the CBO projected that the cash surplus would be positive through 2016. Keep in mind that these projections are based on what many economists of all stripes believe are far-too-rosy White House budget numbers. It's a very real possibility that a positive cash surplus may not occur at all.

Deficits don't matter, until they do.

2009-09-10T11:44:00.000-07:00

From Times.com

For a time last year, it appeared that this deficit-ignoring bliss might end. Chinese officials said repeatedly that they were uncomfortable holding so many U.S. securities. Interest rates on Treasuries inched up. And another billionaire launched an assault on deficit spending — this time private-equity kingpin Peter Peterson, who took most of the $1.9 billion he made from the 2007 initial public offering of his Blackstone Group and put it into a foundation devoted to raising fiscal awareness.

Then came the Panic of '08. Investors saw Treasuries as a safe haven and poured money into them, driving down interest rates. Officials in Washington spared no expense in battling the crisis. The result is a deficit of unprecedented size but with no perceptible pressure from financial markets to reduce it. No pressure so far, at least. The federal debt, at $7.6 trillion, is now above 50% of GDP and rising. The government faces commitments to Social Security and Medicare that dwarf that figure. Republican congressional leaders have decided they care about deficits again — and seem to be making headway in public opinion. The prevailing winds will shift one of these days. Because deficits don't matter, until they do.

2009-09-10T11:40:00.000-07:00

From AP:

President Barack Obama used only-in-Washington accounting Wednesday when he promised to overhaul the nation's health care system without adding "one dime" to the deficit. By conventional arithmetic, Democratic plans would drive up the deficit by billions of dollars.
The president's speech to Congress contained a variety of oversimplifications and omissions in laying out what he wants to do about health insurance.
A look at some of Obama's claims and how they square with the facts or the fuller story:
OBAMA: "I will not sign a plan that adds one dime to our deficits either now or in the future. Period."
THE FACTS: Though there's no final plan yet, the White House and congressional Democrats already have shown they're ready to skirt the no-new-deficits pledge.
House Democrats offered a bill that the Congressional Budget Office said would add $220 billion to the deficit over 10 years. But Democrats and Obama administration officials claimed the bill actually was deficit-neutral. They said they simply didn't have to count $245 billion of it — the cost of adjusting Medicare reimbursement rates so physicians don't face big annual pay cuts.
Their reasoning was that they already had decided to exempt this "doc fix" from congressional rules that require new programs to be paid for. In other words, it doesn't have to be paid for because they decided it doesn't have to be paid for.

Obama administration adding $3 million per minute to national debt

2009-09-03T09:05:00.000-07:00

From Examiner.com

The Obama administration released in the past 2 weeks revised projections that the 2009 deficit will amount to just shy of $1.6 Trillion dollars and that their long term budget projections will create $9 Trillion dollars of deficits in the next ten years. More than a year ago for another organization, I excoriated the Bush Administration for years of unchecked government spending culminating in the single largest deficit in US history. At the time, that budget deficit of half a Trillion dollars amounted to over $1 million dollars a minute in new national debt; an debt level that simply is not sustainable. With no balance of power in Washington this year, the drunken spending of politicians has tripled the record breaking Bush deficit, creating a phenomenal $3 million of new national debt every single minute (not total government spending, but new government debt). As a result, during the 8 hours of time you will spend at work today, the US government will go more than $1.4 billion into debt.
Just how much debt does $3 million a minute equate to? Consider the fact that the average American earns approximately $40,000 a year. As a result, the Obama administration's $1.6 trillion deficit is equivalent to the total earnings of 37.5 million Americans. What is even scarier, is that the deficit is projected to remain level next year, even without the addition of health care, immigration, education and tax reforms that remain on the President's agenda.
Our government cannot continue to operate in the fashion it currently is. During the Bush presidency we saw the national debt double and now the Obama administration is projecting that it will nearly double the national debt again. Depending on whether you read the Administrations estimates, the Congressional Budget Office projections or other non-partisan projections, the national debt is expected to rise to between $18 trillion and $23 trillion by 2019. Again the numbers seem staggering and unfathomable, but I can shed some light on just how much money that is. Considering our population of 300 million citizens, a $19 trillion debt in ten years would amount to $63,333 of national debt for every man, woman and child in the US. If our population was to grow to 450 million people by 2019, then the national debt would amount to $47,499 for every citizen. In other words, your personal share of the national debt will be the equivalent of some Americans current mortgages. Even more stunning is the realization that if wages were to grow at a 3% rate, the average American's share of the national debt would be more that their annual wages.

Campaign to Raise Awareness About Soaring National Debt

2009-09-03T09:03:00.000-07:00

From Foxnews.com

A nonprofit advocacy group has launched a multimillion-dollar campaign to raise awareness about America's soaring federal debt.
The multimedia campaign is trying to hammer its message on all fronts. It includes a Web site -- Defeatthedebt.com, which features a rolling odometer showing the red ink at over $11 trillion -- and a startling new TV ad. The ad shows school children pledging allegiance to the national debt.
"And to the Chinese government that lends us money, and to the interest, for which we pay, compoundable, with higher taxes and lower pay until the day we die," the school children in the ad say.
Organizers say it's a critical educational campaign to inform the public of the real-world consequences of owing so much on the national credit card.
"We're also trying to get people to understand who we owe all this debt to, and the leverage that foreign governments and foreign banks have over this country when they start to accumulate that much debt," said Rick Berman, executive director of the Employment Policies Institute, the conservative group behind the campaign.
Taken together, this year's $787 billion economic stimulus package, the ongoing rescue of American automakers and new proposals to spend $1 trillion reforming health care may make it tempting, to some, to blame President Obama for the sea of red ink. The projected federal deficit this year is $1.6 trillion.

2009-09-03T09:01:00.000-07:00

President Barack Obama’s borrow and spend policies

2009-09-02T11:21:00.000-07:00

From Heritage.org

While President Obama claims to have inherited the 2009 budget deficit, it is important to note that the estimated 2009 budget deficit has increased by $400 billion since his inauguration, and the whole point of the “stimulus” was to increase deficit spending to nearly $2 trillion based on the unproven notion that would it alleviate the recession.
The 22 percent spending increase projected for 2009 represents the largest government expansion since the 1952 height of the Korean War (adjusted for inflation). Federal spending is up 57 percent since 2001.
In 2009, Washington will spend $30,958 per household–the highest level in American history–and under President Obama’s budget, the figure will rise above $33,000 by 2019.
The White House brags that it will cut the deficit in half by 2013. The President does not mention that the deficit has nearly quadrupled this year. Merely cutting it in half from that bloated level would still leave budget deficits twice as high as under President Bush.
The public national debt–$5.8 trillion as of 2008–is projected to double by 2012 and nearly triple by 2019. Thus, America would accumulate more government debt under President Obama than under every President in American history from George Washington to George W. Bush combined.

How was this seemingly impossible feat accomplished?

2009-09-02T11:17:00.000-07:00

From Newsbusters.org

You read that right: A government-run gambling monopoly has gone broke, after losing money for years.

How was this seemingly impossible feat accomplished? There are clues in stories at Reuters and Bloomberg
From here, it seems that OTB probably has hired too many people, paid the people they hired too much, provided overly generous benefits, couldn't eliminate unprofitably outlets, and perhaps fell behind on technology and investment in the future. All in all, as a government operation, it has turned what should be a fairly simple-to-run money pot and into a money pit.

As Budget Deficit Grows, So Do Doubts on Dollar

2009-08-27T14:04:00.000-07:00

From Wsj.com

The U.S. economy may be showing signs of recovering from the financial crisis, but the jury is still out on the future of the U.S. dollar.
While many analysts expect the dollar to strengthen in coming months as the crisis fades and the U.S. economy turns toward growth, a growing chorus of investors is expressing concern about the longer-term outlook for the greenback.

In a new twist to an old refrain among economists, who have long worried about the effects of growing U.S. debt, they say that the huge liabilities the U.S. is taking on to dig its way out of crisis could ultimately undermine faith in the dollar.

"There has been a lot of disappointment with the way the U.S. credit crisis was handled," says Claire Dissaux, managing director of global economics and strategy for Millennium Global Investments Ltd., a London investment firm specializing in currencies. "The dollar's loss of influence is a steady and long-term trend."

On Tuesday, the Obama administration added fuel to concerns about the dollar, saying the U.S. will run a cumulative budget deficit of $9 trillion over the next 10 years, $2 trillion more than it had previously projected.

"That's going to be negative for the dollar," says Adam Boyton, a currency analyst at Deutsche Bank AG in New York. President Barack Obama also reappointed Federal Reserve Chairman Ben Bernanke, whose efforts to rescue the economy have won praise, but have also entailed pumping large amounts of freshly created dollars into the financial system.

Investors and economists have long harbored concerns about the dollar's decline, especially in the beginning of this decade as the federal government and consumers ran up their debtloads to finance everything from foreign wars to flat-screen TVs. Last fall's financial crash suggested that such fears may be overblown: As markets plunged in the wake of the collapse of Lehman Brothers Holdings Inc., investors scrambled to stash their cash in U.S. Treasury bills, perceiving them to be the safest investments. That boosted the value of the U.S. dollar against many of its major counterparts.

Time to Stop Digging

2009-08-27T14:02:00.000-07:00

From Heritage.org

The new budget spending estimates are alarming and absolutely unsustainable--and are the true cause of these appalling levels of deficit and debt. President Obama has proposed massive tax increases that still cannot keep up with the historic spending increases he has proposed. The result will be highest level of spending--and debt--in American history. Within a decade, Washington would have to spend nearly $800 billion annually just to pay the interest on the national debt.

In this budget context, the President's and Congress's brazen proposals to create a $1 trillion health care entitlement are reckless and unaffordable. Lawmakers should focus on capping federal spending, restraining entitlements, and eliminating wasteful and lower-priority programs.