Obamanomics--Keeping The Deficit Booming

The May report from the Treasury Department says the federal deficit reached an all-time record high of $189.7 billion for the month. That pushes the total deficit to within spitting distance of $1 trillion, and there are still four months to go before the end of the fiscal year. Obama promised change, and these numbers tend to indicate he is keeping that promise. A little more change, and the economy would be recognizable to Herbert Hoover and Franklin Roosevelt.

The actual figure that the Treasury Department cites as the total to date is $991.9 billion, but what's a few billion here or there? Spending has kept up though. In the first eight months of the fiscal period another landmark was set. The government has spent $2.37 trillion (yes, trillion) during that period. Now before anybody jumps on me, the Bush expenditures for three and a half months are included in that total spending figure, but by far the largest proportion of the spending has occurred during the four and a half months of the Obama administration. That spending figure is up 18% from the comparable period of the prior fiscal year.

A more interesting deficit figure is that for April. It was approximately the same negative figure as May, but normally April shows large surpluses since that is the deadline for taxpayers to hand over their hard-earned cash to the government. Income was down, while spending has gone way up, the latter caused largely by huge increases in unemployment compensation and welfare-related programs, the former caused by the rising unemployment itself.

Here are some more fun figures. The April budget deficit was the first in twenty-six years, the year before the Reagan administration was able to restore an increase in revenue with a corresponding slowdown in the increase in spending. The $991.9 billion deficit for the eight months is more than triple the amount of the deficit of the corresponding prior eight month period. Secretary of The Treasury Timothy Geithner reports that tax revenues have dropped substantially (the "eat the rich" taxes have not yet been finalized by Congress), and he estimates the total year's deficit to end up at $1.84 trillion, followed by an optimistic deficit of a mere $1.26 trillion for fiscal year 2010.

The Treasury Secretary further estimates that the annual deficit will not fall below $1 trillion within the next decade, and places the total deficit from 2010 to 2019 at $7.1 trillion. A further fear is expressed by economists who believe that large borrowing needs could drive interest rates up with investors (particularly foreign investors) demanding a higher return for propping up the government.

The best Geithner could offer our Chinese bondholders was the promise that the administration will get serious about getting control of the deficits once the economic downturn and financial crisis have passed. But his deparment's own figures show that he expects no such thing until at least 2019. That's one helluva long downturn. It appears that Obama intends to follow the lead of FDR by turning a depression into a Great Depression. Frankly, I'd prefer just a "run-of-the-mill" depression. Better yet, how about no depression at all, and a swift economic recovery?