Bailouts for financial firms and billions in tax revenue lost because of the recession drove the deficit to a record $1.3 trillion in July, according to the independent Congressional Budget Office (CBO).
Tax receipts that have fallen due to the poor economy and increased spending to save car companies, banks and mortgage firms were major contributors to the federal deficit, according to CBO, which provides official budget numbers for Congress. The federal deficit grew by another $181 billion in July.
Falling tax receipts and increased spending on bailouts for auto companies and the financial sector and for the economic stimulus package added to the deficit, according to CBO.
Spending through July of 2009 has increased by $530 billion, which is 21 percent over the same period in 2008. The bailout money for Freddie Mac and Fannie Mae accounted for almost half of the spending increase. Unemployment benefits have more than doubled, Medicaid spending has grown by a quarter and Medicare spending has increased by 11 percent.
Tax revenue for the first three quarters of 2009 has fallen by approximately $350 billion, or 17 percent compared to the same period last year, due mostly to the effects of the recession on payroll, income and corporate taxes. A third of the decline is due to tax breaks in the stimulus, including the middle-class tax cut that President Obama campaigned on during last year’s election.
The independent budget scorekeeper has projected the deficit to reach $1.8 trillion by the end of the fiscal year, Sept. 30. The deficit in 2008 reached $455 billion, which was a record at the time.
The latest deficit projections come as Democrats in Congress and the White House are pushing for healthcare reform criticized by Republicans as too costly.
House Speaker Nancy Pelosi (D-Calif.) stressed during a town-hall meeting in Colorado this week that the healthcare bill won’t add to the deficit or restrict benefits and instead will increase access to care. But lawmakers have yet to settle on a way to pay for the bill, expected to cost roughly $1 trillion over the next decade. Pelosi has supported an income surtax on the highest earners, those making more than $280,000, while senators are considering a tax on insurance companies that offer expensive health plans.
Sen. Judd Gregg (N.H.), the top Republican on the Budget Committee, said that Democrats in Congress aren’t doing anything to address the record deficit and are instead pushing ahead with “wildly expensive” healthcare legislation.
One poll released last week suggests that the GOP attacks are starting to work. A Rasmussen survey of likely voters found that 71 percent believe Obama’s policies have increased the deficit. While most — 54 percent — blamed the recession that started during the Bush administration for the country’s fiscal situation, 39 percent blamed Obama’s policies.
(Source: The Hill)
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5 Responses
Well, that is what happens when you spend more than you are taking in, and especially if you are increasing expenses while revenues are falling.
There’s no “hiddush” in this.
Given the massive amount of money removed from the system by the collapse of housing and security prices, it might not prove to be inflationary at least until consumers “feel good” enough to resume spending, and especially until they return to the “shop until you drop” philosophy of a few years ago. Regardless of how much money is printed, if consumers don’t demand things, prices won’t rise (and after the crash of 1929-1939, it was a generation before consumers became irresponsible again).
Hey Mr. President, are you kvelling? Shepping Nachas?
What a disaster. Obama may be merely delaying the collapse of America. It has been my thought lately that Bush did not kill capitalism, nor did Obama. I am thinking it is the people who benefitted the most that killed capitalism. The greed and deception brought this country down and it is possible if Obama does not spend money we dont have, or hand out monopoly money and make it legal tender, that the bitter, tragic truth will be, heaven forbid, devastating for Americans. We may have been lead to becoming a third world country by our blue chip companies. If that is the case would you THEN want government to intervene and put those companies in their place, if we could turn the clock back?
#2 – Remember that Obama is from a background where you had to live within your means (look at his grandmother who is the one who really raised him, and his wife’s background). While economic theory suggests the government can and should liberally print money to end (or prevent) a depression, and that depressed demand with constant supply will not be inflationary, it is counter-intuitive to any normal human being – no matter what the PhD’s in economics theorize. Since President Obama has a very limited background in economics (he’s a lawyer by trade, mostly spent as a professor of constitutional law), he appears concerned about deficits – even if his economic advisers tell him not to worry (analogy: the doctor prescribes powerful drugs and major surgery, but tells you not to worry — a doctor might find this routine, but no one else will).
akuperma, he is not from a background that you need to live within your means. His mother was a professor. He was taught by a Marxist by the name of Frank. He went to a madrassa in Indonesia and the Occidental College in California. He did this on the public dole without any type of realization how much it would cost taxpayers.
I can’t stop noticing how you are always defending the President and trying to paint an unrealistic rosy picture of him. By the way, I can’t get over your blog name. Does it have anything to do with the acronym for the Association for Communities’ Organizing Reform Now?