Posts Tagged ‘U.S. deficits’

President Eisenhower’s Warning On U.S. Sovereign Debt Default

December 20th, 2009 Comments off

First there was Dubai World, and now Greece. As 2009 comes to a close, the first stirrings that the massive deficits and public debts being accumulated by governments across the globe may pose greater risks in the future are beginning to emerge. Recently, a senior Australian politician even warned that the world should anticipate what was once unthinkable-the U.S. federal government defaulting on its debt.

As the United States, in particular, plans on trillion dollar annual deficits for at least the coming decade, one should recall the warning issued by one of the wisest presidents ever to serve in the White House, Dwight D. Eisenhower.  On January 17, 1961 President Eisenhower  delivered his famous farewell address to the nation. His warning about the dangers regarding the emerging military-industrial complex are well known. Much less recognized was the equally urgent warning Eisenhower  articulated regarding excessive government debt. He believed excessive public debt could lead to national insolvency, which would not only bankrupt the American economy, but also its democratic traditions. Here is his prescient warning, which I believe is more timely than ever:


“As we peer into society’s future, we — you and I, and our government — must avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.”

President Dwight D. Eisenhower
Farewell Address to the Nation; January 17, 1961



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U.S. Deficit Projections Soar

August 23rd, 2009 Comments off


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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