I try my hardest not to be all doom and gloom here at UrbanWorkbench, but someone tell me who is going to lend the US Federal Government a Trillion dollars a year?
Analysts predict that the federal deficit will hit a new record of at least $1 trillion this year, which would be not only be more than double the previous record in 2005, but would also overtake the previous record for deficit as a share of the gross domestic product…
Most economists agree that Mr. Obama and the Congress have no choice except to ignore short-term deficits and place top priority on fighting the country’s worst economic downturn in at least a half-century. But the short-term budget short-falls are big enough to pose serious headaches in themselves, especially if bond investors start demanding higher interest rates.
In just the first three months of the 2009 fiscal year, which began on Oct. 1, the government spent $408 billion more than it took in. About one-third of that short-fall stemmed from the Treasury Department’s rescue program of injecting capital into banks, which the government will book as an “investment’“ rather than “spending.”
The recession itself will add hundreds of billions of dollars to the deficit. Even before Congress adds any new stimulus measures, higher outlays will climb for existing unemployment benefits, food stamps and other social programs. Tax revenues will fall because of rising unemployment, falling corporate profits and huge investment losses in the stock and bond markets.
I’m sorry folks, but something doesn’t seem right about this situation. Is this the same as baling out a leaky boat as you watch the hole get bigger. Not suggesting that everyone should jump ship, but a change in course from Club Med to Club-grow-your-own veg might help.
How this will hit us in Canada, probably harder than we expect.