by Michael Muskal
The federal budget for fiscal year 2010 will show a deficit of $1.35 trillion, the Congressional Budget Office announced this morning, the latest number to be injected into what is more of a political issue than an economic one.
The number, coming just a day before President Obama gives his State of the Union address, highlights the politics of federal spending in this mid-term election year.
Obama, who is under pressure to show that he is serious about curbing outlays, is proposing a freeze on discretionary spending, a relatively minor step.
The president is also seeking a bipartisan task force to recommend steps to curb the deficit, but the fate of the proposal in the Senate is doubtful.
Economically, the CBO found that if no laws or policies change, the federal budget would show a deficit of $1.349 trillion, about 9.2% of Gross Domestic Product in this fiscal year. This would be down from the 9.9% of GDP, or $1.4 trillion posted in 2009, the largest since World War II by percentage.
While this seems good, there are a lot of ifs. On the revenue side, the projections assume that major provisions of the tax cuts enacted in 2001, 2003, and 2009 will expire as scheduled and that temporary changes that have kept the alternative minimum tax from affecting many more taxpayers will not be extended.
On the spending side, it is dependent on Congress not enacting costly legislation in an election year when a new jobs package is already expected and there will likely be added costs associated with the wars in Iraq and Afghanistan.
According to the CBO, the recession that began two years ago appears to have ended in the middle of 2009, but economic growth in the next few years will probably be "muted." GDP numbers this week are expected to be a ray of light for the Obama administration and job creation is expected by June, though the nation's unemployment rate will continue around 10% -- about twice what it was before the recession.
Consumer spending, more than two-thirds of the economy, is expected to be hemmed in by slow growth of income, lost wealth and a tough borrowing market, the CBO said.
Politically, Obama will formally announce his freeze during the State of the Union. But the three-year freeze also applies to a $477-billion portion of the $3.5 trillion federal budget. Excluded are defense and social spending such Medicare, Medicaid and Social Security.
Republicans have already begun throwing cold water on the freeze for being too little.
Sen. John McCain, (R-Arizona) who faces a challenge from his right this year said today on ABC's "Good Morning America," that Obama "has got to veto bills that are laden with pork-barrel spending, earmarks," a frequent refrain for the former presidential candidate.
The budget deficits accumulate into the federal debt.
At the end of 2009, debt held by the public was $5.8 trillion, or 53% of GDP, the CBO said. By the end of 2020, debt is projected to climb to $15 trillion, or 67% of GDP. The last president to pay off the federal debt was Andrew Jackson.
Comments
Thanks, Bush&Cheney, we still feel your incompetency. It is hurting our entire nation, but I bet neither of you are missing a meal or a vacation. You and your Fringe, the Republican-Libertarians, sure did a number on America and got away with it !! Now, you want us to re-elect more incompetence !! That is priceless !!
SUPPORT OUR TROOPS, BRING THEM HOME, ALIVE AND WHOLE. NOW.
Posted by: Don Fitzgerald, IL | January 26, 2010 11:13 AM
There is real anger at government spending and the deficit, no matter that Obama himself is responsible for only a small amount. That's why the spending freeze was the only political move the White House could make to give Dems a chance this fall.
http://www.political-buzz.com/
Posted by: matt | January 26, 2010 11:19 AM
This report is not good news. Very slow economic growth, unpredictable tax revenues due to the business downturn, high unemployment, and huge budget deficits are hurting the country greatly. My question is during a major business downturn would budget freezes and elimination of tax cuts that would aid individuals and businesses hurt the economy more? Although many Democrats have always said the Bush Tax Cuts benefited only the very wealthy, they also benefited the average taxpayer. If they are allowed to expire the Middle Class Taxpayer will have smaller pay checks. And that will mean less money to spend in a major business downturn. We are in trouble and I do not know what the answer is. Before our elected leaders do anything rash that may make more of an economic mess it might be a good idea to establish a Bi-Partisan Task Force to study this very serious problem.
Posted by: Depot- Jim | January 26, 2010 11:45 AM
President Obama should fire his entire Cabinet. I do not believe they have been giving him good economic advice. Tell me, what the difference between raising the budget deficit limit and asking for an additional $20K on your credit card when you are all ready maxed out? With Obama’s background, I did not expect him to have the knowledge and business sense to pull this country out of these economic crises. However, I did expect his Cabinet to give him good advice and clear guidance. It’s like a baseball team and Obama is the manager. If your line-up is not hitting, you need to replace them. We the people deserve better. Finally, I’m tired of pointing fingers in this country. Lets start moving forward.
Posted by: Richard Owens | January 26, 2010 12:04 PM
That's what happens when someone finally has to pay for tax cuts for the rich, Iraq war, and Afghanistan wars. These were never paid for by the previous administration.
Posted by: bill r. | January 26, 2010 12:26 PM
Deficits don't matter.
Posted by: martin | January 26, 2010 12:30 PM
I’m tired of pointing fingers in this country. Lets start moving forward.
Posted by: Richard Owens | January 26, 2010 12:04 PM
Priceless!!!
Posted by: bill r. | January 26, 2010 12:30 PM
Obama signed a stimulus bill that costs us as much as the total for both wars since 2001. His welfare for the lazy has done nothing for unemployment, nothing to stimulate growth in the economy and propped up a housing market that was clearly overinflated. We do get thousands of earmarks, deficits that are outrageous even with the rosy GDP growth projections and nothing to address the real backbreakers, SS and Medicare.
Keynes has been proven wrong again and this lawyer who hasn't a clue how capitalism works, can only come up with new ways to encourage people to have kids they can't afford.
Posted by: Hans | January 26, 2010 1:20 PM
"That's what happens when someone finally has to pay for tax cuts for the rich."
Posted: by bill r.
~~~~~~~~~~~~~~~~~~~~~~
86% of all federal income taxes are paid by the top 25% of income earners.
Source: I.R.S
That socialist leftist mantra has been put to bed a long time ago billy r.
Paulo
Posted by: Paulo | January 26, 2010 1:32 PM
Seems that the democrats (like the first poster) just can't open their eyes to look at their incompetent president that they elected. Still blaming bush for every little thing they can - thank god it's now falling on deaf ears.
obama is a liar, his promises are just empty rhetoric and it's a shame that being a canidate and spewing lies and feel good messages without a shred of ability to accomplish a thing isn't a paying job.
I think an empty seat would be better than one with a liberal chicago politician in it!
Posted by: worsethanbefore | January 26, 2010 1:39 PM
Don Fitz, Who are you thanking? I can't sell my house for 2 years. I am not blaming Bush, two people are to blame and they are both Dems. Barney Frank & Chris Dodd. People were getting loans who had no business getting them. You people can cry about Wall Street all you want, the real reason the banks are screwed up is because socialist weasels gave money to people who had no business getting it and could not make their payments!
But if you are an Obama supporter, he should buy everyone a house right?
Here in crook co. our property tax bills just came in. Guess what? They are higher. This state is broke.
CA is broke. The dems are only good at spending, wasting
and stealing our money. There's your change we can't live with.
The whole point of this is to state these spending packages are going to bleed everyone, not just the people making over 200K. Because guess what, the people making over 200K are going to get their money by laying you off or freezing your salary. There's your change, the only hope is the spending stops now.
Posted by: wingnut master | January 26, 2010 1:43 PM
I bet you voted for those politicians in your Crook County. You have nobody to blame, but yourself. Your head is turned by sweet talk or lapel pins and you think you did your homework, concerning the candidates. That's farcical. You have the same, old-time politicians still pulling the strings of everyone, yes, everyone, in both of those Houses. That doesn't seem to bother you, it does, me. That is why, I will be writing in my choices for the state offices, up for election, shortly. I hope more will stand-up against these entrenched politicians, who have destroyed our state to maintain their fiefdoms !! I doubt it, though. Too many voters, look for favors, in return for votes. That's not democracy, that's bribery. Pay your taxes and enjoy the benefits of America !!
SUPPORT OUR TROOPS, BRING THEM HOME, ALIVE AND THOUGHT. NOW.
Posted by: Don Fitzgerald, IL | January 26, 2010 2:26 PM
I wonder if the MSM will call these budget cuts as they did back in 1995 when the GOP just cut the rate of growth of spending. For you loons, that really means spending went-up as compared to the prior year.
BillyR,
The wars will end, didn't BO already put time tables on them, but the deficits will still persists.
FITZ is blaming Bush and Cheney for BO's own budget for 2010. Is you kool-aid spiked?
Posted by: Terry | January 26, 2010 7:06 PM
Couple more things on the freeze.
Last year these departments that will have the freeze had double digit increases, so a freeze at the current level is not real a sacrifice.
Second, only some departments will have their budgets frozen. What will happen is there will be a lot of shifting of programs from say the Transportation department (a frozen department) to the Homeland Security Dept (an unfrozen department).
Here is a good analysis of this smoke and mirrors.
http://www.heritage.org/Research/Budget/wm2780.cfm
Posted by: Terry | January 26, 2010 10:44 PM
How much of the deficit is from Bush never paying for his two lied about, unprovoked BS "wars"? ALL was put onto a credit card that never came due while he was in office. It is due now. We know the deficit is not all, and not mostly from the Obama administration. Bush--the most fiscally irresponsible, credit oriented and indebted president ever. Bush never gave a damn. He was always in his worthless, self-absorbed bubble. Why didn't he ever do a cost analysis for his BS unprovoked "wars" from the congressional budget office? Bush never had the guts to include the cost of his "wars" in his yearly budget deficit debt count. Bush--the biggest SOB wus of a Prez ever. And, where the heck was Greenspan from the beginning of the seven years of "emergency" war funding for the Bush BS "wars"? Greenspan didn't need a crystal ball to see what was going to happen. The BS "wars"--and the siphoning of $$$--and the useless killing continue. The Bush unprovoked "wars" were the straws that broke this nation's back--right along with him giving the most wealthy the biggest tax breaks in the world for their income bracket. Obama continues the Bush BS "wars".
*
I'm still waiting to hear why all the big banks went down at the exact same time, in the exact same way. There was collusion and planning at the highest level for this unpresedented "coincidence" This will never be forgotten. It should never be moved on from--in order to "move ahead"--without finding the who, why and how in order to fix the foundation--and to see justice done. Wall Street's boy, Geithner, needs to go right now--yesterday. I have no faith when I see Geithner's face talking about our finances. He was in on the biggest rip-off (or at least perpetuating it) in the history of the world. Geithner is now fear mongering about Bernake's reappointment--or lack of it. We are all weirded out that Obama and Emanuel still want Geithner. (I'm still weirded out that Obama wants Emanuel.) We would be better off with Bernard Madoff in Geithner's position.
Posted by: Vivian | January 27, 2010 11:37 AM
Vivian,
Some facts - President Bush never budgeted for the wars, but he did pay for them. These amounts, like all other expenditures, are inlcuded in the deficits that Bush incurred - as shown in this graph. Yes debt was issued to pay for some of the Bush expenditures. However, you state Bush as the most fiscally irresponsible - I think the graph below shows differently.
As you will notice the deficits go out until 2019 - long after BO has promised to pull US troops from Iraq and Afghanistan. Therefore, the wars are not the casue of BO's deficits.
http://blog.heritage.org/2009/03/24/bush-deficit-vs-obama-deficit-in-pictures/
Posted by: Terry | January 27, 2010 6:44 PM
Terry--Bush put the wars on our credit card. What do you think emergency war funding is? It is the nation's deficit--the Bush "wars" added greatly to our deficit. How old are you? Bush tax cuts to the most wealthy = 2 T. Iraq and Afghanistan = out of this world. How old are you, and do you have a memory for reality?
Posted by: Vivian | January 27, 2010 8:46 PM
Vivian,
Cash is a fungible good. During the Bush years, the expenditures that exceeded the revnues were covered by debt. Some of those expenditures were for the war, some was social security, some was for medicaid, etc...
The Bush Tax Cuts were to all income tax payers, not just teh rich. Quit parroting the ignorant party-line. The tax cuts, as history proved with JFK and Reagan, hel;ped spur the economy to a 73 month expansion - 5th longest in American history.
Honey, I have a pretty good memory, its you that have no grasp of the facts.
Posted by: Terry | January 27, 2010 10:24 PM