For the federal government, the sharply lower revenues and elevated spending deriving from the financial turmoil and severe drop in economic activity—combined with the costs of various policies implemented in response to those conditions and an imbalance between revenues and spending that predated the recession—have caused budget deficits to surge in the past two years. The deficits of $1.4 trillion in 2009 and $1.3 trillion in 2010 are, when measured as a share of gross domestic product (GDP), the largest since 1945—representing 10.0 percent and 8.9 percent of the nation's output, respectively.
Uh, no. First, calendar years guys. Second, here's the chart:
There's the real numbers, from Treasury itself. Those are not estimates, they're actual daily figures.
For 2011, the Congressional Budget Office (CBO) projects that if current laws remain unchanged, the federal budget will show a deficit of close to $1.5 trillion, or 9.8 percent of GDP.
That's $500 billion more than previously estimated. I wrote about it at the time, since when the FICA tax reductions were passed the "contribution" to the deficit (which was easily calculable at about $450 billion, all in) were trivially able to be figured. This of course meant that the alleged $1 trillion would not be $1 trillion, but rather would be $1.5 trillion, and that's if you believe the CBO's alleged "Deficit" numbers, which are bogus - as they account for cost-shifts and off-balance-sheet games.
In point of fact you have to look at the actual numbers "as borrowed"; when you do this you wind up with $1.7 trillion for calendar year 2010, and this means we're rather likely to post a $2 trillion number for calendar year 2011.
That is, if we get away with it, and I don't believe we will. From the Annual Ticker:
We're not going to get away with spending another $450 billion in deficits on top of the $1.6 trillion we blew last year. $2 trillion in deficits? Not a prayer.
The CBO now agrees with me on the size of the deficit. They were late, but better late than never.
The deficits in CBO's baseline projections drop markedly over the next few years as a share of output and average 3.1 percent of GDP from 2014 to 2021. Those projections, however, are based on the assumption that tax and spending policies unfold as specified in current law. Consequently, they understate the budget deficits that would occur if many policies currently in place were continued, rather than allowed to expire as scheduled under current law.
There will be no "expiration" as that term assumes we will get to 2014-2021 before this entire fraudpile blows up in our faces.
That's not going to happen, and the orgasmic reaction you're seeing in the market to the supposed "liquidity-driven rally" is amusing. Let's face reality here folks - liquidity is debt, not growth.
Debt has to be paid back - or defaulted.
Guess which one we'll be doing?
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
Looking for "The Best of Market Ticker"? Check out Ticker Classics.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
Market Ticker content may be reproduced or excerpted online provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media.
Submissions may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.
Leads on stories of current economic and political interest are always welcome. Our fax tip line is 850-897-9364; please include contact information with your transmission.