Too Many Fridays in April: U.S. Posts 19th Straight Monthly Budget Deficit

The U.S. full-year deficit this year is projected at $1.5 trillion on top of a $1.4 trillion shortfall last year. The combined genius of the great economist, Barack Hussein Obama and his treasury department blame it on too many Fridays in April. I hate when that happens.

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ABC News

WASHINGTON

The United States posted an $82.69 billion deficit in April, nearly four times the $20.91 billion shortfall registered in April 2009 and the largest on record for that month, the Treasury Department said on Wednesday.

It was more than twice the $40-billion deficit that Wall Street economists surveyed by Reuters had forecast and was striking since April marks the filing deadline for individual income taxes that are the main source of government revenue.

Department officials said that in prior years, there was a surplus during April in 43 out of the past 56 years.

The government has now posted 19 consecutive monthly budget deficits, the longest string of shortfalls on record.

For the first seven months of fiscal 2010, which ends September 30, the cumulative budget deficit totals $799.68 billion, down slightly from $802.3 billion in the comparable period of fiscal 2009.

Outlays during April rose to $327.96 billion from $218.75 billion in March and were up from $287.11 billion in April 2009. It was a record level of outlays for an April.

Department officials noted there were five Fridays in April this year, which helped account for higher outlays since most tax refunds are issued on that day.

But for the first seven months of the fiscal year, outlays fell to $1.99 trillion from $2.06 trillion in the comparable period of fiscal 2009, partly because of repayments by banks of bailout funds they received during the financial crisis.

Receipts in April -- mostly from income taxes -- were $245.27 billion, up from $153.36 billion in March but lower than the $266.21 billion taken in during April 2009.

Receipts from individuals, who faced an April 15 filing deadline for paying 2009 taxes, fell to $107.31 billion from $137.67 billion in April 2009.

The U.S. full-year deficit this year is projected at $1.5 trillion on top of a $1.4 trillion shortfall last year.

White House budget director Peter Orszag told Reuters Insider in an interview on Wednesday that the United States must tackle its deficits quickly to avoid the kind of debt crisis that hit Greece.

(Reporting by Glenn Somerville, Editing by Diane Craft)

$221 Billion Deficit in one month? One Month?

US budget deficit hits record $221 Billion for one month, February. That is a record and what is the Obama Administration doing about it?


For the record the US deficit for all of 2008 was $459 Billion.

The US government recorded a budget deficit of $221 Billion in February. Since the beginning of the fiscal year in October we are now at a negative $651.6 Billion.

That puts it on track to beat last year's record annual budget deficit of $1.4 Trillion.

Treasury Secretary Timothy Geithner called the deficit "unsustainable".

However, he maintained that running the deficit was helping the US continue its recovery from the recession in the short-term.

Analysts called the figures "frightening".

Earlier this year, the Congressional Budget Office (CBO) said it expected the budget deficit to fall this year as the recovery takes hold.

And the Obama Administration and the Democrats are continuing their dash over the cliff to create a massive new entitlement expansion of health care.

BBC

The National Debt explained in a way we can all understand.

Economic theory suggests that reasonable levels of borrowing by a developing country are likely to enhance its economic growth. Countries at early stages of development have small stocks of capital and are likely to have investment opportunities with rates of return higher than those in advanced economies. As long as they use the borrowed funds for productive investment and do not suffer from macroeconomic instability, policies that distort economic incentives, or sizable adverse shocks, growth should increase and allow for timely debt repayments. These predictions hold up even in theories based on the more realistic assumption that countries may not be able to borrow freely because of the risk of debt repudiation.

Why do large levels of accumulated debt lead to lower growth? The best-known explanation comes from "debt overhang" theories, which show that if there is some likelihood that, in the future, debt will be larger than the country's repayment ability, expected debt-service costs will discourage further domestic and foreign investment and thus harm growth. Potential investors will fear that the more a country produces, the more it will be "taxed" by creditors to service the external debt, and thus they will be less willing to incur costs today for the sake of increased output in the future. This argument is represented in the debt "Laffer curve" (Chart), which posits that larger debt stocks tend to be associated with lower probabilities of debt repayment. On the upward-sloping or "good" section of the curve, increases in the face value of debt are associated with increases in expected debt repayment, while increases in debt reduce expected debt repayment on the downward-sloping or "bad" section of the curve.



more at the IMF

The best of all possible worlds.

If you believe in windmills, smart cars, elevated trains, election financing reform, cap and trade, balanced budgets, tort reform and Santa Claus, you will love the idea that health care reform will pay for more deficit spending. It is too absurd to waste time stating what should be obvious. It will not happen.

I have come to the conclusion that General Motors is the model for the US government. The government, as is GM, simply cannot reform itself. As GM will need to be dismantled with large parts of it liquidated, the same will be true for the government. It will take longer, be more painful and come with many unexpected consequences. The corrupted system has proven itself incapable of sensible and planned reform. Too many lobbyists. Too many lawyers. Too many alliances. Two many voters that do not pay federal taxes. All in all, too bad.

Obama inherited a $1.2 trillion deficit and pushed it up to $1.8 trillion. The best is yet to come.

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May 15, 2009

Fiscal Suicide Ahead

By DAVID BROOKS NY Times

Barack Obama came to office with a theory. He believed that the country was in desperate need of new investments in education, energy and many other areas. He also saw that the nation faced a long-term fiscal crisis caused by rising health care and entitlement costs. His theory was that he could spend now and save later. He could fund his agenda with debt now and then solve the long-term fiscal crisis by controlling health care and entitlement costs later on.

In essence, health care became the bank out of which he could fund the bulk of his agenda. By squeezing inefficiencies out of the health care system, he could have his New New Deal and also restore the nation to long-term fiscal balance.

This theory justified the tremendous ramp-up of spending we’ve seen over the last several months. Obama inherited a $1.2 trillion deficit and has quickly pushed it up to $1.8 trillion, a whopping 13 percent of G.D.P. The new debt will continue to mount after the economy recovers. The national debt will nearly double over the next decade. Annual deficits will still hover around 5 percent or 6 percent of G.D.P. in 2019. By that year, interest payments alone on the debt are projected to be $806 billion annually, according to the Congressional Budget Office.

Obama believes these deficit levels are tolerable if he can fix the long-term fiscal situation, but he hasn’t been happy about them. He’s been prowling around the White House prodding his staff to find budget cuts. Some of the ideas they have produced have been significant (Medicare reforms), some have been purely political (asking cabinet secretaries to cut $100 million in waste, fraud and abuse), and many have been gutted on Capitol Hill (cap and trade, proposed changes in charitable deductions, proposed changes to the estate tax).

In any case, these stabs at fiscal discipline haven’t come close to keeping up with the explosion in spending. The government now borrows $1 for every $2 it spends. A Treasury bond auction earlier this month went poorly, suggesting the world’s hunger for U.S. debt is not limitless. President Obama has been thrown back on his original theory. If he is going to sustain his agenda, if he is going to prevent national insolvency, he has to control health care costs. Health care costs are now the crucial issue of his whole presidency.

Obama and his aides seem to understand this. They have gone out of their way to emphasize the importance of restraining costs. The president has held headline-grabbing summits with business and union leaders. Unlike just about every other Democrat on the planet, he emphasizes cost control as much as expanding health coverage.

So what exactly is the president proposing to help him realize hundreds of billions of dollars a year in savings?

Obama aides talk about “game-changers.” These include improving health information technology, expanding wellness programs, expanding preventive medicine, changing reimbursement policies so hospitals are penalized for poor outcomes and instituting comparative effectiveness measures.

Nearly everybody believes these are good ideas. The first problem is that most experts, with a notable exception of David Cutler of Harvard, don’t believe they will produce much in the way of cost savings over the next 10 years. They are expensive to set up and even if they work, it would take a long time for cumulative efficiencies to have much effect. That means that from today until the time President Obama is, say, 60, the U.S. will get no fiscal relief.

The second problem is that nobody is sure that they will ever produce significant savings. The Congressional Budget Office can’t really project savings because there’s no hard evidence they will produce any and no way to measure how much. Some experts believe they will work, but John Sheils of the Lewin Group, a health care policy research company, speaks for many others. He likes the ideas but adds, “There’s nothing that does much to control costs.”

If you read the C.B.O. testimony and talk to enough experts, you come away with a stark conclusion: There are deep structural forces, both in Medicare and the private insurance market, that have driven the explosion in health costs. It is nearly impossible to put together a majority coalition for a bill that challenges those essential structures. Therefore, the leading proposals on Capitol Hill do not directly address the structural problems. They are a collection of worthy but speculative ideas designed to possibly mitigate their effects.

The likely outcome of this year’s health care push is that we will get a medium-size bill that expands coverage to some groups but does relatively little to control costs. In normal conditions, that would be a legislative achievement.

But Obama needs those cuts for his whole strategy to work. Right now, his spending plans are concrete and certain. But his health care savings, which make those spending plans affordable, are distant, amorphous and uncertain. Without serious health cost cuts, this burst of activism will hasten fiscal suicide.

Topple the dollar, and with it goes American power.

The Barack Obama vision of a more social-democratic country was conceived almost without reference to the greatest economic catastrophe to hit America for 80 years.

Obama's house of prosperity may yet be a castle in the air

He feels like the right man to be President, but has he come at the right time, asks Charles Moore in Washington.

Charles Moore The Telegraph
Last Updated: 7:51PM BST 17 Apr 2009

The best way to arrive in Washington is by rail. You leave the platform and enter the magnificent main hall of Union Station. Then, through the glass doors, you see the Capitol proud on the hill in front of you. When I came that way this week, and saw it all in the blossom-filled spring sunlight, I momentarily felt the slightly insane optimism that grips James Stewart when he first claps eyes on the same view in the classic film Mr Smith Goes to Washington. He is the tall, thin, young senator whose innocence, against all the odds, prevails.

Until January, Barack Obama was a tall, thin, young senator, and one reason he is President of the United States today is because he answered – in modernised form – that American yearning for purity and simplicity. He knows that his appeal is still strong, which explains why, virtually every day, he makes a speech.

On Tuesday, at Georgetown University here in Washington, Mr Obama spoke about the economy. I was told that the White House, hypersensitive to conveying the wrong visual message, insisted that the university's device, which includes the initials IHS, the traditional, particularly Jesuit, abbreviation for Jesus Christ, be obliterated from the backdrop. But the President invoked the Sermon on the Mount all the same.

He reminded his audience of how the well-meaning attempt to spread home-ownership in America had been perverted into forms of debt so ill- or unsecured that they had provoked the world financial crisis. He repeated Jesus's parable of the two houses. One was built on "a pile of sand", and so fell when the rain came. The other was built upon a rock. "We must build our house upon a rock," said the President.

The house that Barack wants to build is architecturally grand. It will have five pillars, he announced. The first is that Wall Street will have new rules to reward "drive and innovation, not reckless risk-taking". The last is that "new savings in the federal budget… will bring down the debt for future generations". Sandwiched between these pillars are the other three. Each of these involves "new investments" – education, renewable energy, and health care. This, said Mr Obama, would be the "new foundation".

How rock-like is that foundation likely to be? Back in Britain, we still await Alistair Darling's Budget, to find out how he proposes to restore financial order to government, but in America, Mr Obama's is already there for all to read. I am grateful to Larry Lindsey, former economic adviser to three Presidents, for drawing my attention to Table S.9. It states that the total "required to be borrowed from the public" (the PSBR, in British-speak) in the fiscal year 2009 is $2.562 trillion. That is 18 per cent of American GDP. Fiscal 2009 ends on September 30. Given what the federal government needs to borrow in the time that remains, the sum works out at between $6 and $10 billion per day. I make that roughly the entire British annual defence budget in one week.

Normally, a country borrowing on that scale faces collapse, and has to call in the IMF. America is not a normal country, of course: it is the axis on which the world turns, with the currency to which people resort for safety. In the past, its huge deficits have never produced the catastrophe predicted for them. Perhaps they will not do so this time, although what the nation faces today is more than twice as big as the largest previous deficits in US history (under Ronald Reagan). But it does make one wonder whether the President's five-pillared house is a castle in the air.

Like New Labour, Mr Obama likes to speak – he used their favourite phrase again in Georgetown – of "tough choices". So when he offers his social reforms to the American people, he argues that they will be financially as well as morally virtuous. He says he is attacking entitlements – what Tony Blair and later David Cameron called "the bills of social failure" – and he rightly castigates the waste and fraud in existing US medical provision. But it is not clear that these choices are actually going to be made. What is clear – it is publicly stated – is that an extra $634 billion has been allocated in the Budget to begin to create his new health-care system. When Aneurin Bevan set up our own dear NHS, one of his beliefs was that better health care, by making people well, would lead to lower health spending. To say that these savings did not materialise is the understatement of the century.

Two thoughts occur.

The first is to ask what markets will think of this as it sinks in. Suppose, for example, that this burden of debt crowds out the economic recovery that Mr Obama is trying to engineer. Suppose that the small stirrings of life showing just now disappear in the third quarter as nervous Americans continue to save, not spend, and more people lose their jobs. The world contemplating buying US government debt will understand why it might be worth spending big to repair the banks. Would it feel the same about money borrowed for a US-style NHS and lots of windmills? If the world really doubted America's dedication to its own fiscal and financial order, that would topple the dollar, and with it American power.

The second thought occurred to me because I had made my train journey to Washington from Princeton University. There I had been lecturing, 30 years on, about how Margaret Thatcher confronted economic crisis when she first came to power in 1979. The point that strikes one is that it was the crisis which, above all, galvanised her, captured her intellect, harnessed her energy. Like Churchill in relation to the Second World War, she felt that all her life had been a preparation for that hour. Her vision of what was wrong with her country, and how to put it right, was seen entirely through the prism of the crisis.

The same cannot be said of Barack Obama. This is not merely because he has no previous experience of governing. It is because his idea of what he wants to do is really something quite different from what is actually happening to his country. In his inauguration address, he spoke of the need to get on with the business of "remaking America". For him, that economic stuff is not really part of the remaking, but a distraction from it. His vision of a more social-democratic country was conceived almost without reference to the greatest economic catastrophe to hit America for 80 years. He barely had to argue, or even think about it before or during the campaign. It shows. He says that his education, energy and health reforms must happen so that "such a crisis [the financial one] never happens again", but he merely asserts the link: he does not prove it.

Through his astonishing personal qualities, allied with his ethnicity, Mr Obama feels like the right man to be President. But perhaps he has come at the wrong time.