WSJ: Budget Deficit Likely Doubled For Fiscal '08

[Monte51Coleman]

Good luck to whoever wins the election.

http://online.wsj.com/article/SB122100526189017309.html?mod=googlenews_wsj

BUDGET DEFICIT LIKELY DOUBLED FOR FISCAL '08

By PATRICK YOEST

September 10, 2008; Page A12

WASHINGTON -- The Congressional Budget Office said the U.S. budget deficit for fiscal 2008 -- $407 billion -- will be more than double the deficit for 2007, hit by the wars and a weak economy, and predicted it is likely to rise further in fiscal 2009.

"The figures make it challenging to avoid playing the dismal economist," said CBO director Peter Orszag in a statement.

The agency foresees an increase to $438 billion by fiscal 2009, which begins Oct. 1, with the government takeover of Fannie Mae and Freddie Mac further complicating budget projections.

The fiscal 2008 budget deficit will rise to 2.9% of gross domestic product this year, according to the agency, up from 1.2% of GDP in 2007. The fiscal 2007 deficit was $161 billion.

"The budget deficit has risen substantially over the past year," Mr. Orszag said. "And according to CBO's updated economic forecast, the economy is likely to experience at least several more months of weakness."

The projections put the government back on track for large deficits after fiscal 2007's relatively low deficit. President George W. Bush in January 2004 pledged to cut the annual deficit, which was $412 billion in fiscal 2004, in half within five years.

The fiscal 2009 deficit is projected to rise to 3% of GDP. Still, the budget deficit as a percentage of GDP has been higher before, in the 1970s and 1980s, reaching 6% in 1983.

Since March, the CBO has increased its estimate of the fiscal 2008 deficit by $51 billion. The agency's report said the increase came as a result of supplemental spending for wars in Iraq and Afghanistan, as well as additional funding for deposit insurance and unemployment payments.

The CBO in March estimated a $207 billion deficit for fiscal 2009, less than half the estimate in its report Tuesday. The report said updated baseline numbers assumed more supplemental spending for Iraq and Afghanistan, as well as higher inflation and lower economic growth over the long haul.

Congressional Democrats pounced on the results, saying they reflected years of the administration's fiscal irresponsibility.

Senate Budget Chairman Kent Conrad (D., N.D.), said "the next president will be inheriting a budget and economic outlook that is far worse than most people realize."

Office of Management and Budget Director Jim Nussle said in a statement that the CBO estimates for fiscal 2008 "are on track with our projections," but the fiscal 2009 figures are unrealistic because they extend emergency war and supplemental spending and don't accurately assess the impact of President Bush's 2001 and 2003 tax cuts.

"The recent increase in the deficit is the result of the slow economy and the bipartisan decision to enact a stimulus package," Mr. Nussle said. "Driving down the deficit and balancing the budget is achievable if we help the economy grow by keeping spending in check."

In its report, the CBO identified health-care spending as the top area that "will put increasing pressure on the budget." While Medicare and Medicaid spending currently account for an estimated 4.6% of GDP, the report said the programs could account for up to 12% of GDP by 2050.

This week's federal takeover of Fannie Mae and Freddie Mac raises new questions about budget projections, since the Treasury Department now plans to take an equity stake in the companies. Mr. Orszag said, "It is our view at this point that Fannie Mae and Freddie Mac should be directly incorporated into the U.S. budget" and that the CBO plans to factor the recent actions into its January baseline estimates.

"If the firms suffer substantial losses as reflected in their own accounts, that would also be reflected to some degree in the federal budget accounts," Mr. Orszag said.

WhileTreasury's plan commits the federal government to provide up to $100 billion for each firm's rescue, the CBO in July estimated a total cost of $25 billion in the event of a bailout.

Rep. Paul Ryan (R., Wis.) said Mr. Orszag "was doing the honest thing" by including the bailout in future budget projections, but that "we don't know the values of the mortgage-backed securities because we don't know how much home values are going to decrease for the length of these portfolios." Rep. Ryan is the ranking Republican on the House Budget Committee.

[JohnLockesGhost]

After leading his country into a war that ruined his country's economy, Wilhelm II was overthrown and sent to the Netherlands where he spent the rest of his days chopping wood.

Let's hope history repeats itself by inserting Bush for Wilhelm and Texas for the Netherlands.

[Ignatius J.]

How about we just insert Bush for Wilhelm?

[FanboyOf91]

Whoever wins is screwed. Washington Mutual or Lehman Brothers have that "treading water in front of a tidal wave" look to them.

[Fifty Gut]

After leading his country into a war that ruined his country's economy, Wilhelm II was overthrown and sent to the Netherlands where he spent the rest of his days chopping wood.

Let's hope history repeats itself by inserting Bush for Wilhelm and Texas for the Netherlands.

Amen my friend.

[Midnight Judges]

I am shocked, SHOCKED that trickle down economics has once again grown a huge deficit.

[ACW]

I am shocked, SHOCKED that trickle down economics has once again grown a huge deficit.

It's not trickle down. It was the fact that he had the tax cuts (which I support), but MASSIVELY INCREASED SPENDING.