Free Markets, Free People


CBO: Obama budget deficit 9.8 Trillion over next 10 years

How can you tell when claims of budget hawkishness and fiscal responsibility are all talk and no walk?  When you put deficit commissions together with no power and propose trillion dollar a year deficits for the next 10 years as the Obama administration has:

A new congressional report released Friday says the United States’ long-term fiscal woes are even worse than predicted by President Barack Obama’s grim budget submission last month.

The nonpartisan Congressional Budget Office predicts that Obama’s budget plans would generate deficits over the upcoming decade that would total $9.8 trillion. That’s $1.2 trillion more than predicted by the administration.

Any idea of where we’d get the money? We certainly don’t have it. And if you guessed China, et. al., yes, you’re right – for all intents and purposes we’d become a wholly owned subsidiary of the PRC.

The new report predicts that debt held by investors, including China, would spike from $7.5 trillion at the end of last year to $20.3 trillion in 2020. That means interest payments would more than quadruple — from $209 billion this year, to $916 billion by the end of the decade.

So, we’d be paying almost a trillion a year in interest (with even more money we don’t have). You can imagine what a debt like that would do to us, not only the economy but in terms of national security.

The deficit picture has turned alarmingly worse since the recession that started at the end of 2007, never dipping below 4 percent of the size of the economy over the next decade. Economists say that deficits of that size are unsustainable and could put upward pressure on interest rates, crowd out private investment in the economy and ultimately erode the nation’s standard of living.

And is the White House concerned? Well, other than lip service, it has moved decisively to address the problem /sarc.

“While the president is intent on ramming through Congress a new trillion-dollar health-care entitlement, he appears far less concerned with addressing the looming crisis of entitlement spending already on the books,” said Rep. Paul Ryan of Wisconsin, the top Republican on the Budget Committee. “Instead, he delegates this task to a ‘Fiscal Commission’ — which would not even report until after the next election.”

Other than make recommendations, the “Fiscal Commission” has absolutely no power. And the White House has shown no real interest, other than the usual lip service, in addressing the huge deficits projected for the next 10 years. I’ll be interested to see if the White House continues to treat the CBO’s reports as the gold standard after this one saying the administration has proposed an even higher debt than it claimed.

And, of course, one of the rather large points is the effect of having countries like China holding 20 trillion in US debt instruments and the amount of control that grants such countries over what we can or can’t really do – economically, in foreign policy, militarily, etc. That much debt becomes a weapon, whether the administration or others want to admit it or not. It’s an economic bomb and detonating it would have a profound negative effect on us and our economy and our enemies know it. It reminds me of the saying about how a capitalist will sell you the rope by which you hang him. That’s precisely what we’re doing with this debt problem and our desire to spend what we don’t have.

The time for a sane fiscal policy which cuts spending and the size and scope of government is long past due. And even if the politicians don’t recognize it yet, it is the public’s understanding that the time has come that is driving this discontent manifested in the Tea Parties and the overwhelming “wrong track” majorities to be found in polls which track whether or not people believe the country is on the right track or the wrong track. Democrats thought the public believed the country was on the wrong track during the last administration because of Bush. But after a year of Obama, those same numbers are even higher.

The people may not really like the fact that such measures must be taken, but they are prepared for them. They understand that this spending addiction, if continued, has no acceptable outcome and that the longer it continues the worse the outcome will be.

Step one is getting sanity back into the federal budget. And adding 9.8 trillion to an already huge debt while pretending to be concerned about deficit spending isn’t how that is done.

~McQ

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25 Responses to CBO: Obama budget deficit 9.8 Trillion over next 10 years

  • Darn you. Had my hopes up with the title.

    Obama budget 9.8 Trillion over next 10 years. (which would be amazingly good)

    But then I read:

    Obama’s budget plans would generate deficits over the upcoming decade that would total $9.8 trillion (which is really bad)

  • More evidence that passing a test on business math and statistics should be a pre-requisite for getting on the ballot.

    Unless…

    I’ve assumed my whole life that almost all the people on the left who seem determined to drive society over a cliff are just uninformed or misinformed. That is, it’s never seemed reasonable to me that most of them genuinely understand the expected outcomes of their policies. As McQ puts it, these policies are not sane to an informed person. Interest on debt is exponential, and exponential curves all have the same shape. Even people in my calculus class that passed with a C got that much out it.

    Folks like Martin tell us we’re naive to believe them uninformed. He believes their goal is just different. They don’t care that society goes over a cliff as long as they get to control it. The nomenklatura can still live well, and they get to indulge their darkest elitist desires for control of others.

    I’m still not ready to buy into that, perhaps because it is the polar opposite of the kind of attitude that I think of as “American”. But at this point, I’m no longer willing to say he’s wrong. Obamaco seems determined to furnish supporting evidence for his thesis every week.

    • Note that all the dithering over tactics and the actual particulars of the health care monstrosity are just to keep heads spinning.  He’s never taken his eye off of the final goal and never cared what people thought about it. Remember, he and his proxies spent months attacking critics of the health care as racists, fringe groups, and stupid. That’s the majority of Americans he has treated like that.

      I don’t know what you do with a leader like that, who has it in for the country he hold power over. But he’ll do as much damage as he can, for sure, between now and the election, and he’ll adjust and do more damage whatever the election results are.

  • frightening and unsustainable,  I really don’t know what happens now.

  • How about we just stop taxing people and just print dollars.  It’s about the same.

    • Hmph.  Don’t give them any ideas.  Although, come to think of it, that’s sort of what they ARE doing.  How many Americans pay no federal income tax at all?  And doesn’t the left always claim that we wouldn’t have these financial woes if we made rich people “pay their fair share”?

  • I’m not convinced that China and Japan will continue to buy our debt in that sort of magnitude. Just because Obama wants to spend does not mean the credit card company will continue to let him keep his line of credit.

  • Don, you are correct. But it isn’t that the credit card company doesn’t want to extend credit, it’s that it can’t. I’ve been saying since the “crisis” began that with all this deficit spending, the rest of the world is tapped out — there just isn’t enough excess money to cover what the feds are spending, so the Fed has to create new money.
    As my friend Michael Pollaro has recently written, the Fed is monetizing debt at levels we haven’t seen since the Chinese started financing a good chunk of our federal debt (using the trade surpluses that began after our trade liberalization with them). Pay particular attentionto where he says, “Take note of the last few years.  Clearly, as foreign creditors have pulled back, the Federal Reserve has stepped up its purchases of U.S. government debt.” It’s true the Fed in the past has monetized debt at these levels, but we’re looking at a sudden spike that is far from temporary. This huge increase in deficit spending isn’t going away anytime soon.
    Some years back, I predicted in my senior thesis that the U.S. current account deficit would begin “correction” not because foreigners didn’t want to continue investing in the U.S., but because they had no more excess money to invest more. At the time, who could have imagined it would ever apply to federal debt?

    • What I was saying was that China would cut back on buying our debt. I expect the “print more money” solution is the one we will follow.

  • We’re f*cked.  Plain and simple.

    The obvious course of action is to cut spending, cut it now, and cut it sharply.  That’s not going to happen.  Quite aside from the fact that politicians from both parties have become accustomed (addicted) to buying votes, prestige, and a certain sense of efficacy by spending our money at an ever-increasing rate on an ever-increasing variety of projects, the American people WANT THEM TO DO IT.  Oh, not everybody, and not on everything, but the fact is that there is a huge number of people who’ve got a budgetary ox that they absolutely will not allow to be gored.  Look at California or Illinois or any of the other states / cities that are in financial crisis.  What do we hear?  “Cut spending… just not on anything that’s important to ME!”

    A question for the economics gurus: the Red Chinese use a fiat currency just like we do, no?  In other words, they are very likely doing the same thing that we are, i.e. printing money; they are lending us money that they don’t actually have.  So, it’s all a numbers racket, an exercize in fantasy.  Anyway, what will they do if we default?  Sue us?  Good luck with that.

    I suspect that this is in the back of many minds in DC: “The US is too big to fail.  So, keep on spending the money, boys!  It’s not like its’ real in the first place.”

    • The yuan is technically fiat, in that the People’s Bank of China can print more. It’s backed, however, by the central bank’s reserve holdings of foreign securities. I should point out that China’s holdings of U.S. Treasuries by the end of December 2009 had dwindled to $894 billion from a September-October 2009 peak of $938 billion. They know what’s coming.
      The dollar has recently rallied against the euro, but I don’t see it continuing for long. I don’t see Greece as bad enough to bring down the euro, especially when the dollar is being so inflated as we speak. (Check out the link to my friend’s writings, you’ll be blown away.) What else will the world use as the principal reserve currency? The yuan has been suggested but is impossible. China’s corrupt banking system is still in shambles, hence why it’s needed to back its currency with other nations’. The yen is impossible because of Japan’s own problems (besides persistent deflation, the Bank of Japan will intermittently intervene to keep the yen from getting too strong against the dollar, and Japan’s population is growing older).
      The thing keeping trade afloat with China is that they don’t have to print money to lend our federal government. They’re lending our federal government the surplus of money that American consumers paid the Chinese for their products. So Liberal Louie pays Wen for a widget, and Wen lends the money to Louie’s Uncle Sam, who will later coerce Majority Taxpayer Tommie into repaying Wen plus interest. It’s worked because Wen has been willing to accept a pretty low interest rate, Uncle Sam has all this extra money to Louie , and Tommie is the one really paying the taxes but has no choice but to put up with the situation.
      It’s because of all the money China and other major trading partners have lent our federal government that the Federal Reserve no longer had to monetize so much of federal debt. But as I said, our foreign lenders are tapped out. Even if they wanted to, they just don’t have the money to lend us for all the new spending Obama wants.

      • “Uncle Sam has all this extra money to Louie ,” should have read, “Uncle Sam has all this extra money to spend on Louie’s welfare state.”

      • Thank you.  It does really seem that it’s just a numbers game, doesn’t it?  Red China gets money from American consumers that they don’t really have to loan to the US government because it doesn’t really have any money, either, to give to Americans who turn right ’round and give it back to the Red Chinese.

        Monopoloy money has more reality: at least there’s a real limit to how much is in the box.

        • Well, the American consumers do have the money, by definition, otherwise they wouldn’t be able to buy the Chinese-made goods in the first place. Whether they should be buying these goods, rather than saving more money, is the question. So far, even in these troubled economic time, American consumers still have enough income to afford all these goods. If/once we have a real collapse, then China’s done, and our federal borrowing will be done too. At that point the Fed will have to monetize our debt even more, or as I say, “Welcome to Zimbabwe.”

          BTW, even official Monopoly rules allow for inflating the money supply (creating new bills from slips of paper or whatever else is convenient) when the bank has no more cash. In fact, the new version has a fully electronic bank, I’ve read. But our Federal Reserve still has that beat.

    • Look at all the Greeks, who seem upset that there welfare is cut, and don’t seem to grasp that there is no money to pay for it.

      The rioting university students in the US are another good example.

      Even in the town hall meetings, much of the angst was that medicare might be cut to pay for Obamacare.

  • What no one realizes is that this, along with the economy, is what will do in The Clown™ in 2012.

    Remember Ross Perot? He ran because he was fed up with deficit spending. The Tea Party is the outlet for that frustration now, and it will all be directed at The Clown™ and his Party of Do-Nothings.

    Here is something I heard today: if The Clown’s™ job approval ratings (JARs) are in the tank in 2011/12, and he is headed for defeat in 2012, watch as he torpedoes Joe “Where is my Toupee” Biden, and he names Hillary Clinton as his running mate, to try to get the female vote in a vain attempt to win a race he is destined to lose.

    • I’ve got some bad news for you, James. Obama doesn’t give a damn about 2012. His intention is to do as much damage as he can before the November elections this year. Then, after that, he’ll adjust his tactics according to the results, but don’t expect there to be much of what you think the United States is to be left by 2012. And expect all sorts of shit to happen between now and November, and expect Obama to be omnipresent throughout. He wants the country exhausted and depleted and ready to turn to him when it is driven to despair. It’s not a new script.

  • The gears of economic recovery are starting to turn. Obama is ready to throw as many monkey wrenches into them as it takes. Recovery might help him as a typical politician, but it will be disasterous to him as a revolutionary socialist. He sees himself as the latter. He can best feed off of economic catastrophe, and if you just take what he’s done so far and what he’s trying to do at no more than face value, that seems to be his goal. In fact, I believe that it is his goal. A return to serious growth and prosperity will be a terrible distraction for his plans.

  • If anyone believes that $9.8T number, derived from a STATIC projection, I’ve got some prime desert real estate to sell you. :-(

  • So now that I have enough rice, beans, and ammo…   where should I buy gold from?

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