Coming on the heels of yesterdays post about the soon empty highway trust fund and infrastructure needs, comes news that the FY2008 federal deficit is projected to be $407B. That more doubles last years deficit and represents the largest deficit, in dollar terms, in the nations history. Ugly now, even worse later: Congress is expected to further restrain the downward creep of the alternative minimun tax. The impact of the lost revenue is projected to push the deficit for next year over $500B. Half a trillion dollars. In a single year. Wow.
In January, congressional budget analysts had estimated the deficit would be only $219 billion by year's end. This summer, however, the White House estimated that that number was likely to spike to $389 billion because of new spending.
Further
complicating the budget picture is this weekend's takeover by the
Treasury Department of mortgage finance giants Fannie Mae and Freddie
Mac. Peter Orszag, director of the Congressional Budget Office, the
official scorekeeper of the nation's revenues and expenditures,
announced that he plans to incorporate the companies directly into the
budget when he reexamines the nation's fiscal picture in January. The
two companies together hold or insure about half of the nation's 12
million residential mortgages and claimed more than $1.5 trillion in
debt at the end of the second quarter. (Link)
To a great extent, the Treasury's hands are somewhat tied, and options that may have been used to address the deficit problems (and should have been considered previously) arenot going to be implemented for fear of the ramifications on the now skaky economy.
If that's not depressing enough, the incentive package completed in the spring had minimal impact. Expect another to be debated and approved in Congress with the White House sheepishly taking a back seat. Any money spent on that stimulus package drops right to the deficit.
It would sure be nice to have some serious debate about how we're supposed to climb out of this big hole.
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