United States Budget Deficit is Exploding
The United States budget deficit is exploding according to a New York Times article published earlier this week. The article states that the US budget gap has been recently revised upward by Obama administration officials, and that this year’s federal deficit is now expected to reach a staggering $1.8 trillion. That shortfall, in relation to United States gross domestic product, is 12.9% of GDP.
Thus, this deficit projection is the highest in more than 60 years, in relation to GDP. And, the 12.9% of GDP deficit is more than four times greater than the general consensus of economists that deficits should not exceed more than 3% of domestic output. Anyway you slice it, government expenditures are greatly and alarmingly outpacing government revenues as deficits reach huge proportions and the national debt continues to grow.
Many factors are contributing to the mammoth federal deficit. Chief among them is the $787 billion economic stimulus package that was enacted in February. Other deficit-raising factors include the cost for bank bailouts, mortgage relief for some homeowners, tax cuts for all but the highest earners and increasing healthcare costs for government programs (Medicare and Medicaid). Given that healthcare now constitutes approximately 1/6 of our national economy, the Obama administration is planning to pare these deficits by reining in healthcare costs.
Predictably, both political parties are assessing blame outward as they try to explain and cope with the alarming federal deficit figures. Obama and his administration’s officials are quick to blame the Bush administration for digging this economic hole while Republican leaders lament lavish government spending and unrealistic, rosy economic projections.
In short, the days of government surpluses that existed in the 1990’s under President Clinton are long gone and alarming federal deficits seem to be certain for the foreseeable future. President Obama sees some glimmers of economic hope, but these huge deficits seem to threaten that enthusiasm.