Obama to raise 10-year deficit to $9 trillion

[Shady]

WASHINGTON (Reuters) - The Obama administration will raise its 10-year budget deficit projection to approximately $9 trillion from $7.108 trillion in a report next week, a senior administration official told Reuters on Friday.

Reuters

You're doin a heckuva job Barry, heckuva a job!

[Oleg Bach]

WASHINGTON (Reuters) - The Obama administration will raise its 10-year budget deficit projection to approximately $9 trillion from $7.108 trillion in a report next week, a senior administration official told Reuters on Friday.

Reuters

You're doin a heckuva job Barry, heckuva a job!

It's only money -they can print more!

[August1991]

Japan's government debt to GDP ratio is about 190%. (That is Japanese government debt is almost twice GDP.) The debt of the Icelandic government is about 3.5 times GDP or a 350% government debt-to-GDP ratio.

Under Obama, the worst case scenario for his first term is that in 2012, the US will be around a 90% government debt-to-GDP ratio. (The US federal government debt is now around 50% of GDP and Obama, in a recession, is borrowing at an annual rate of 10% of GDP.)

The US federal government can borrow a heck of alot more. I wouldn't worry about US federal government borrowing; I'd worry about US government spending.

How big do Americans want their federal government to be?

[Oleg Bach]

Japan's government debt to GDP ratio is about 190%. (That is Japanese government debt is almost twice GDP.) The debt of the Icelandic government is about 3.5 times GDP or a 350% government debt-to-GDP ratio.

Under Obama, the worst case scenario for his first term is that in 2012, the US will be around a 90% government debt-to-GDP ratio. (The US federal government debt is now around 50% of GDP and Obama, in a recession, is borrowing at an annual rate of 10% of GDP.)

The US federal government can borrow a heck of alot more. I wouldn't worry about US federal government borrowing; I'd worry about US government spending.

How big do Americans want their federal government to be?

Borrowing is fine - It will be like taking a cash advance on your credit cards and stock piling the money. If you spend as fast as you have it come in there will be no end to the problem- It's really impressive when I take the time to read some of these more technical posts...Makes me feel more secure that we have highly informed people that are not only watching our books but keeping a close eye on American affairs - They are doing the math - If such and such keeps up at such a rate - this will occur. That's called good management..congrats from this rube!

[August1991]

Borrowing is fine - It will be like taking a cash advance on your credit cards and stock piling the money. If you spend as fast as you have it come in there will be no end to the problem-

Uh no, Oleg.

The US federal government has the power to tax (take money from) Warren Buffet, Bill Gates, Steven Spielberg and many other Americans.

Knowing that the US federal government has this power, many foreigners and foreign banks trust the US federal government, and its bonds.

[BubberMiley]

How big do Americans want their federal government to be?

Big enough to have (so far) prevented the second coming of the Great Depression. All signs point that recovery is well underway. If that recovery continues, everyone should agree with the heckuva job part.

Unless they're partisan wingnuts, of course.

Edited August 22, 2009 by BubberMiley

[Oleg Bach]

Depressions come from oppression. The high and mighty can mild the cows in the field to long and for too much - eventually the cow becomes weak in the knees - is depressed and falls to the ground in weary illness..to depress there must be a force pressing and pushing..The keepers of the herd have over stayed their welcome..and had better back off for a while and curb their habitual plundering -then the cow just might recover.

[lictor616]

WASHINGTON (Reuters) - The Obama administration will raise its 10-year budget deficit projection to approximately $9 trillion from $7.108 trillion in a report next week, a senior administration official told Reuters on Friday.

Reuters

You're doin a heckuva job Barry, heckuva a job!

quite simply the end of the US as the dominant world economy.

[Shady]

Japan's government debt to GDP ratio is about 190%.

Yep. And they've been in a decade long recession.

The debt of the Icelandic government is about 3.5 times GDP or a 350% government debt-to-GDP ratio.

Yep. And they went bankrupt not long ago.

What ‘bankrupt’ means is just that: The country cannot pay back its external debts, and the Icelandic currency, the krona, has become essentially valueless in the rest of the world. That means the country can no longer pay for imports.

Link

Are the Japan and Iceland examples suppose to bring comfort?

Under Obama, the worst case scenario for his first term is that in 2012, the US will be around a 90% government debt-to-GDP ratio. (The US federal government debt is now around 50% of GDP and Obama, in a recession, is borrowing at an annual rate of 10% of GDP.)

We're not talking about borrowing during a recession, we're talking about massive deficits piled up year after year, long after the recession is projected to be over.

The US federal government can borrow a heck of alot more. I wouldn't worry about US federal government borrowing; I'd worry about US government spending.

From who will they borrow from? China is already alarmed at the situation, and is very reluctant to make anymore loans. And borrowing more money gobbles up credit that would otherwise be used by the private sector. And the old credit markets of the past, don't exist anymore. We're living in a new credit reality.

Big enough to have (so far) prevented the second coming of the Great Depression.

The 9 trillion figure doesn't refer to recession-era spending. It's for the years after.

All signs point that recovery is well underway

The economy continues to shed 6 figure job totals each month. So perhaps "all signs" should be amended to some signs. Unless they're partisan wingnuts, of course.

[BubberMiley]

So perhaps "all signs" should be amended to some signs. Unless they're partisan wingnuts, of course.

Right. It's the partisan wingnuts who are hoping for full economic collapse rather than see Obama be successful.

[Shady]

Right. It's the partisan wingnuts who are hoping for full economic collapse rather than see Obama be successful.

I agree. However Obama being "successful" and a strong economy aren't necessarily the same thing.

[August1991]

Yep. And they've been in a decade long recession.

Yep. And they went bankrupt not long ago.

What ‘bankrupt’ means is just that: The country cannot pay back its external debts, and the Icelandic currency, the krona, has become essentially valueless in the rest of the world. That means the country can no longer pay for imports.

Link

Are the Japan and Iceland examples suppose to bring comfort?

If Japan is suffering from no-growth, I'm not sure that its government debt-to-GDP ratio is the cause. As to Iceland, it's a small country with a limited population and its government has limited taxing power. But anyway, we can take either Japan (2X) or Iceland (3.5X) as the outside limit on the government debt-to-GDP ratio.

The US is currently at 0.5X (50%) and worst case scenarios (the OP) put that at 1.4X or so in 10 years. That's still very manageable.

I agree with Krugman:

There’s been some hysteria about the administration’s new estimate that the cumulative deficit will be $9 trillion over the next decade. Don’t get me wrong: this is bad. But it’s being treated as an inconceivable sum, far beyond anything that could possibly be handled. And it isn’t.

What you have to bear in mind is that the economy — and hence the federal tax base — is enormous, too. Right now GDP is around $14 trillion. If economic growth averages 2.5% a year, which has been the norm, and inflation is 2% a year, which is the target (and which the bond market seems to believe), GDP will be around $22 trillion a decade from now. So we’re talking about adding debt that’s equal to around 40% of GDP.

Right now, federal debt is about 50% of GDP. So even if we do run these deficits, federal debt as a share of GDP will be substantially less than it was at the end of World War II. It will also be substantially less than, say, debt in several European countries in the mid to late 1990s. (There are some technical issues in comparing these various numbers — gross debt versus net (mainly about Social Security) and overall government debt versus federal, but they don’t change the basic picture.)

Link

Krugman also raises the good point about how one measures government debt. The equivalent in Canada are the unfunded liabilities of our State health system, aside from various budget shenanigans.

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The bottom line is that the US government can borrow a heck of alot more money. The simple reason for this is that governments spend other people's money. This changes entirely the situation.

Now then, how big do Americans want their government to be? The issue is not borrowing; it's spending.

[Riverwind]

The bottom line is that the US government can borrow a heck of alot more money. The simple reason for this is that governments spend other people's money. This changes entirely the situation.

I think you are assuming that the rules that apply to other countries also apply to the US. I am not convinced they do. The biggest problem for the US is it is huge chunk of the world economy and it requires foreign borrowers to fund the debt (unlike Japan). What this means is running a deficit of 10% of the US GDP will likely have a huge negative effect on the world economy as capital from the world is invested in US government bonds instead of more productive investments (of course this might be a good thing if you believe that the US govt can allocate capital more efficiently than the private sector but I suspect you don't believe that). Edited August 24, 2009 by Riverwind