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Federal Deficit Hits Record $1.42 trillion

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Posted on Oct 16, 2009
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If you thought last year’s federal budget deficit was pretty big, you were right—and it’s three times as big now! Thanks to the magic of the recession, as well as the government’s attempts to rescue various sectors of the economy (and throw money at others, or so it appeared), the deficit for the 12 months ending last month was a whopping $1.42 trillion.  —KA

An unemployment rate that’s projected to exceed 10 percent may further hurt revenue, even as a recovery from the recession increases receipts from corporate taxes. The country’s lagging labor market is a central reason government and private forecasters don’t expect the deficit to narrow in the current budget year.

“Corporate and business income-tax collections have fallen off a steep cliff, and the old-time ‘prime-the-pump’ budget expenditures to fight recession are hitting new records,” Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report.

An estimate released Aug. 25 by President Barack Obama’s administration predicted a deficit of $1.5 trillion in fiscal 2010. According to a monthly Bloomberg News survey of economists, the shortfall as a percentage of gross domestic product will run at 9 percent in fiscal 2010.

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By liecatcher, October 19, 2009 at 5:30 pm Link to this comment

Printing $trillion of fiat money is all part of the

plan to destroy America. Sooner rather than later the


replace the dollar with the AMERO to celebrate the

the enslavement of North America.

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By Miatadon, October 17, 2009 at 10:41 am Link to this comment

There are alternatives to borrowing more trillions.  Tax the rich, and tax ‘em high.  The progressive income tax has been ruined, and the wealthy are absconding with massive undeserved riches.  The rest of us are forced to pay fees and sales taxes and social security taxes, all of which hurt the middle class the most.  Massive federal borrowing will undermine the US dollar and then we’ll all be taxed indirectly as our spending power erodes away.  People on fixed incomes will be affected the most when this ultimately happens.  We need a president that has a backbone and will stand up to the moneyed interests.  Obama might as well be a Republican based on what he has done so far.

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Fat Freddy's avatar

By Fat Freddy, October 17, 2009 at 9:18 am Link to this comment

Unfortunately, as a country, we’re just going to have to suck it up, for now. No politician, in their right mind, would even consider raising taxes or cutting spending during a recession. Add to that, the Federal Reserve’s unwillingness to raise interest rates and reduce cash flow, we’re headed for some serious inflation. As soon as unemployment numbers drop, the Fed will have no choice but to raise interest rates. The government will raise taxes. It’s the 1970s all over again.

The government should allow the giants that made bad decisions to fail, and encourage the others to divest. GE selling NBC to Comcast is not divesting. Divesting would be for GE to sell off GE Capital and cut their losses, even if it means taking 30 cents on the dollar. Then, they could sell off NBC to make up some of those losses. That’s the way Capitalism is supposed to work.

Look at it this way. Let’s say I own several properties which I rent or lease space. On one of those properties I made some bad decisions and put too much money into it, or leased to people who defaulted, or just got stuck with a bad location, whatever. The property is losing money.

Another property I own is making me a lot of money. I made all the right decisions and I can basically sit back and watch the money roll in. The other properties I own provide moderate income.

Instead of throwing more money into the bad property, I would be inclined to try to sell it off and take the hit. Even if it means selling it for less than what it may be worth. I can consider this because I own another property which I can sell, hopefully, for a nice profit, in the hopes that it will offset the losses incurred by the bad property. And, I still have several other properties which I can still make money from.

By selling the bad property, at less than what it’s worth, I’m giving somebody an opportunity to turn it around and make it profitable. The good property will provide a sound investment to someone not looking to take a big risk. Both transactions help the overall economy, in the long run, and generate tax revenues for state, local and federal governments.

The problem with my little analogy is, that I don’t really “own” any of the properties. I am “over-leveraged”. That means, basically, I financed all of properties with “interest only” loans. In the time that I’ve owned these properties, I’ve only been paying interest on the loans, and haven’t been paying any principle. There’s no “savings”.

This ties in to what some economists and investors see as a future crash in the commercial real estate market. Much of the commercial retail and office space market has taken a hit due to the economy. There’s a shitload of empty spaces out there. Property owners are making little or no profit. Many of these properties have been financed with interest only loans. So, when these loans come up for refinancing, if the owner doesn’t like the terms, or can’t get any refinancing, he can simply walk away with little or no liability, and nothing to show for all the time and effort he put into the property. The bank assumes ownership.

So, the bank gets stuck with an unprofitable property that it can only sell for 30 cents or so on the dollar, and the owner gets left with nothing. Bad, bad, bad for the economy.

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By G.Anderson, October 17, 2009 at 8:14 am Link to this comment

Just remember when you get that letter from IRS, or the State Tax Franchise board, examining the taxes you paid for the last 4 or 5 years, that our government needs money, desperately.

It’s easier to try and get it from you, because they know that most people will go ahead and pay it, even if they don’t owe it, simply because they are afraid.

Doing it this way, will avoid them fighting the people en masse for a tax increase, and also avoiding nasty headlines, and letters to their representatives by angry tax payers.

Because when they get you into court you’ll be all by yourself, unless of course you can afford a tax attorney.

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By bogi666, October 17, 2009 at 5:44 am Link to this comment

The budget for the fiscal year just ended with a record deficit was prepared by the Bush/Cheney administration and although Republicans will whine that it’s Obama’s doing they actually voted for the deficit since it was submitted by Bush. Also, it’s curious that as soon as Bush left office, the stock markets rebounded dramatically although the reasons are dubious at best.

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By stcfarms, October 16, 2009 at 3:39 pm Link to this comment

The government threw away the one chance to save the economy by not
building a million windmills with the money. Of course the decision to save the
bankers that caused the problem took precedence because they paid for the
campaigns of the congresscrooks. If they had built the windmills it would have
provided jobs for 10 years and energy for generations. As it is we have made a
few criminals wealthy, I am sure that we can all get behind that..

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