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U.S. Deficit Projections Soar

August 23rd, 2009


There seems to have been a nuanced calculation behind the Obama administration’s plan to artificially reduce the 2009 projected deficit in the Federal budget, by backing out of their initial forecast certain components, such as provision for added FDIC funds. It should be noted that the FDIC has just shut down several more banks, taking the number of failed banking institutions so far this year to over 80. However, there was worse news from the White House’s own Office of Management and Budget.
According to an anonymous source in the OMB, the ten year forecast for projected U.S. deficits will increase by an additional two trillion dollars. This will take the expected cumulative deficit over the next decade to over $9 trillion. Though the reason for this 30% increase in projected U.S. deficits was not provided, my guess is that even the Obama White House realizes that their previous assumptions on long term GDP growth have been unduly optimistic. Lower growth means lower tax revenue. What the OMB is not stating is how will it be possible for the United States to manage both its massive and growing debt service commitments and future Social Security and Medicare obligations?


My prediction: this will not be the last time the OMB significantly hikes its projected deficits forecast.



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