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**Frazzled**

Oabama's proposed US budget deficit next year under current proposals. We just became a banana republic.

http://www.whitehouse.gov/omb/assets/fy2010_new_era/A_New_Era_of_Responsibility2.pdf

**Zzzzzz**

Don't worry. Even if you find the rubbish piling up in the streets, eventually someone will clear it all up.

**avantgarde**

The irony is so tangible I'm getting lock jaw from the rust.

**skipmcne**

quote the text not just the image fraz!
"Another manifestation of irresponsibility is
the large budget deficits we are inheriting. These
deficits, over time, will harm economic growth
and impose burdens on our children and grandchildren.
For the past eight years, in a time of economic
growth, the Government spent recklessly
on tax cuts for the few and hand-outs for the well off
and well-connected, mismanaged billions of
dollars in taxpayer money, and failed to honor the
responsibilities we have to future generations.
Massive new programs have routinely been omitted
from the Budget to mask their true cost, while
a new entitlement program and massive tax cuts
were proposed and signed into law without any
attempt to pay for them. Between 2000 and 2008,
real Government outlays increased at a 3.6 percent
annual average rate, three times the 1.2 percent
annual average rate between 1992 and 2000.
This has helped turn a surplus of $236 billion at
the end of the Clinton Administration, that was
projected to grow still larger over time, into a deficit
of more than $1 trillion in 2009. (see Figure
12, Surpluses Have Turned to Deficits). Furthermore,
the amount of debt held by the public has
nearly doubled to $6.4 trillion from 2001 to 2008.
We are now living with the fallout of this deep fiscal
irresponsibility"

**grizgrin**

oh wow let the games begin.

**Da Boss**

Yeah, this is the essential point.

**Frazzled**

Mmmm good point
http://www.reuters.com/article/businessNews/idUSTRE51O6JA20090226?feedType=RSS&feedName=businessNews&rpc=23&sp=true

Obama budget plan forecasts $1.75 trillion deficit
Thu Feb 26, 2009 12:12pm EST
By Caren Bohan and Jeff Mason

WASHINGTON (Reuters) - President Barack Obama forecast the biggest U.S. deficit since World War Two in a budget on Thursday that urges a costly overhaul of the healthcare system and would spend billions to arrest the economy's freefall.

An eye-popping $1.75 trillion deficit for the 2009 fiscal year is projected in Obama's first budget. That is equal to 12.3 percent of U.S. gross domestic product -- the largest share since 1945 when the country ran a shortfall of 21.5 percent of GDP.

The budget was scheduled to be released at 11 a.m. EST but the White House released it early after details began to leak out in the news media.

In 2010, the deficit would dip to a still-huge $1.17 trillion, but Obama promised to get the red ink under control within a few years through a combination of tax increases and spending cuts.

"While we must add to our deficits in the short term to provide immediate relief to families and get our economy moving, it is only by restoring fiscal discipline that we can produce sustained growth and shared prosperity," Obama said at the White House.

The proposed $3.55 trillion spending plan for the 2010 fiscal year that begins October 1 provides the broad outlines of a more detailed one to be released in April.

The soaring deficit figure sent U.S. Treasury bond prices lower and yields up to three week highs on Thursday.

Gold prices slid to their lowest level in more than a week, after testing all time highs over $1,000 an ounce earlier this month. Stock prices rose.

The budget requires passage by Congress to take effect.

While Obama, a Democrat, has broad support with both chambers in Congress controlled by his party, he could face a fight as the sticker shock of huge deficits lead to wariness about more spending for goals such as the healthcare overhaul.

FEDERAL SPENDING SOARING

Federal spending is skyrocketing as officials try to jolt the recession-hit economy with public-works spending and tax cuts and bail out the troubled financial industry.

The deficit number reinforced concerns the government will need to sell record amounts of debt to pay for programs aimed at pulling the economy out of a deep recession.

"The budget issue is definitely one for Treasuries because it means greater funding going forward, it means that there is going to be a lot of supply that has to be taken on board by the market," said Orlando Green, fixed income strategist at Calyon in London.

Obama, who took office on January 20, has pledged to slash the deficit he inherited from former Republican President George W. Bush in coming years, bringing it down to $533 billion, or 3 percent of GDP by 2013.

Higher taxes on wealthier Americans and a planned drawdown of U.S. troops from Iraq are expected to help rein in the shortfall.

Obama is seeking an additional $75.5 billion for wars in Iraq and Afghanistan for the rest of the current fiscal year.

He is requesting $130 billion for military operations in the two wars for 2010, which would be down from the roughly $140 billion he expects will be needed this year.

Washington spent about $190 billion on the wars in 2008. Obama looks likely to order U.S. combat troops to withdraw from Iraq over about 18 months, according to U.S. officials. At the same time, he is ramping up the U.S. military effort in Afghanistan.

Obama's budget proposal lays out spending cuts in farm subsidies and other areas to meet the deficit-reduction goal.

But spending would increase to meet key objectives.

The budget sets aside $250 billion as a "placeholder" if Obama decides to ask Congress for more money in the current 2009 fiscal year to help the ailing U.S. financial system. No such decision has been made yet, officials said in a briefing with reporters on Wednesday.

The officials said that if the government were to spend $250 billion to inject money into the banking system, that would finance about $750 billion in asset purchases.

HEALTHCARE OVERHAUL

Meanwhile, Obama has signaled he has no intention of delaying his campaign promise of expanding healthcare to the 46 million people who are uninsured in the United States

The budget includes a 10-year, $634 billion reserve fund to help pay for the president's proposed healthcare reforms.

The budget includes billions in revenues, starting in 2012, from a greenhouse gas emissions trading system, one of Obama's key proposals to fight global warming.

The $1.75 trillion budget deficit forecast for this year reflects shortfalls accumulated under Bush as well as new spending proposals under the $787 billion economic stimulus package the Democratic president signed earlier this month.

While Obama remains highly popular with Americans, his stimulus package and other efforts to revitalize the economy have done little to win over Wall Street.

U.S. stocks prices hit 12-year lows this week.

The United States has experienced 14 months of recession triggered by a financial crisis that has spread across the world. Obama says a big increase in government spending is crucial to avoid economic catastrophe.

Obama's hopes for finding big savings in programs like farm subsidies may prove optimistic. Such programs tend to be popular with lawmakers from states with big agricultural sectors.

(Additional reporting by Jeremy Pelofsky and Emily Kaiser in Washington and Leah Schnurr in New York, editing by Frances Kerry)

Increased taxes portion
http://blogs.abcnews.com/politicalpunch/2009/02/obamas-budget-a.html

Obama's Budget: Almost $1 Trillion in New Taxes Over Next 10 yrs, Starting 2011
February 26, 2009 12:00 PM

President Obama's budget proposes $989 billion in new taxes over the course of the next 10 years, starting fiscal year 2011, most of which are tax increases on individuals.

1) On people making more than $250,000.

$338 billion - Bush tax cuts expire
$179 billlion - eliminate itemized deduction
$118 billion - capital gains tax hike

Total: $636 billion/10 years

2) Businesses:

$17 billion - Reinstate Superfund taxes
$24 billion - tax carried-interest as income
$5 billion - codify "economic substance doctrine"
$61 billion - repeal LIFO
$210 billion - international enforcement, reform deferral, other tax reform
$4 billion - information reporting for rental payments
$5.3 billion - excise tax on Gulf of Mexico oil and gas
$3.4 billion - repeal expensing of tangible drilling costs
$62 million - repeal deduction for tertiary injectants
$49 million - repeal passive loss exception for working interests in oil and natural gas properties
$13 billion - repeal manufacturing tax deduction for oil and natural gas companies
$1 billion - increase to 7 years geological and geophysical amortization period for independent producers
$882 million - eliminate advanced earned income tax credit

Total: $353 billion/10 years

**Nurglitch**

Looking at that graph, it looks like the surplus was converted to a deficit eight years ago.

Besides, the US has always been a Banana Republic: A step up from Walmart, but never as good as any of the European brands.

**gorgon**

An economic crisis is no time to worry about balancing budgets. I'm for a balanced budget more than most, but we're not going to pull out of this without government spending.

**Frazzled**

when was the last time government spending pulled us out of a recession?

**BloodofOrks**

Is it realistic to think that government will sit back and do nothing while this goes on?

**dietrich**

Frazzled wrote:when was the last time government spending pulled us out of a recession?

The New Deal and World War II.

**Kilkrazy**

Frazzled wrote:when was the last time government spending pulled us out of a recession?

The New Deal of the 1930s?

**Kilkrazy**

I mean, the problem a lot of the world has got now is that consumers aren't spending any money because (a) they haven't got any, (b) they can't borrow any (c) if they have got any, they're scared.

A lot of businesses are in the same situation.

The economy needs to get kick-started by someone.

**gorgon**

Government spending sure didn't hurt during the 1980s, especially if your company had anything to do with the defense sector.

Under ordinary circumstances, government spending and budget deficits are a problem. However, those aren't a Dem problem, they're a system-wide problem. The biggest myth out there is that the GOP is the party of less government spending. Look at the Reagan years and the Dubya years and tell if that's been true.

The Dems and GOP just disagree on HOW to spend, not whether to spend. Neither party has shown interest in restraint, hence my status as an independent.

**stonefox**

We need a fun new buzzword that's like "Reaganomics!" but not as stupid.

**Frazzled**

Kilkrazy wrote:
Frazzled wrote:when was the last time government spending pulled us out of a recession?

The New Deal of the 1930s?

No: WWII. We had a temporary rebound in the mid thirties but were dropping into the worst part as tax rates went through the roof.

Of course I've already suggested this as a remedy:
http://www.dakkadakka.com/dakkaforum/posts/list/231238.page

We've detemined Belgium wil be the European theater, and I'm nominating Brazil for the other theater-come on Sambadrome, everybody Samba Samba Samba!

**Frazzled**

gorgon wrote:Government spending sure didn't hurt during the 1980s, especially if your company had anything to do with the defense sector.

Under ordinary circumstances, government spending and budget deficits are a problem. However, those aren't a Dem problem, they're a system-wide problem. The biggest myth out there is that the GOP is the party of less government spending. Look at the Reagan years and the Dubya years and tell if that's been true.

The Dems and GOP just disagree on HOW to spend, not whether to spend. Neither party has shown interest in restraint, hence my status as an independent.

Agreed on all counts.

**dietrich**

Government deficits are fine, if that's a unique cricumstance. The problem is that the US has been operating at one for about 30 years. If it was just the last few years, and there had a surplus on either side to balance it out, it'd be fine.

Now, if a huge deficit in 2009 and 2010 results in long-term savings, that's working towards a positive goal. My concern is that we won't work back to a surplus and just keep spending.

**Polonius**

All of this spending makes me leery, and I'm not a Keynesian* by any means, but after watching massive government spending on things that may or may not work out to help the US (the war in Iraq and tax cuts for the wealthy) I'm at least willing to give the kids a chance to try a different kid of massive spending that may or may not work (investment in infrastructure, tax cuts to the middle class, relief benefits).

The worrying historical precedent that makes me back the stimulus plan is Japan in the 1990's. They sat through a 10 year period of almost no growth, and the government did very little. There are more than enough differences in the Japanese and US economies to differentiate, of course, but it is a bit worrying.

*The hard part of being a Keynesian is that when times are good you cut back on spending and raise taxes, which is more or less the opposite of what we did from 2002-2007.

**lambadomy**

http://en.wikipedia.org/wiki/United_States_public_debt

Yep, right on our way to a banana republic, heck we almost have as much debt as we did in the 1950's, and we all know Ike was basically the same as Noriega.

And of course the US is so dependent on agriculture...

Anyway of course deficits are going to be high. We just went through 8 years of drunken sailor spending and tax cuts, and ended it in a serious recession. Suddenly stopping the spending doesn't seem like the wisest move.

As for whether or not Keynes and his disciples are right about government spending jump starting the economy...well, you could argue against it, but you'd have to do better than just saying that it's never worked or it's somehow *worse* than, say, doing nothing, or cutting taxes or something (the hoover method in 1932 which...was a disaster).

Anyway, just another sensationalist response to something expected. The real problem isn't deficit spending to pull us out of a recession - the problem is all the deficit spending that was done when we we weren't in a recession. Really, you're supposed to just say "oh, well, we already did the stimulus when it wasn't needed, cut taxes recklessly and started two wars, now that we actually should spend the money it's time to cut back, sorry if the economy tanks!"

**dietrich**

lambadomy wrote:Anyway of course deficits are going to be high. We just went through 8 years of drunken sailor spending and tax cuts, and ended it in a serious recession. Suddenly stopping the spending doesn't seem like the wisest move.

That's insulting to drunken sailors! More like 8 years of drunken air-national-guard-so-he-wouldn't-get-shot-at-in-Vietnam spending!

Of course, if Kerry had won, then it would have been 4 years drunken sailor spending. But, Kerry looks too serious to get drunk.

**grizgrin**

Kerry fits the Ferris Bueller definition of uptight.

**gorgon**

Kerry gets high on life.

**Ahtman**

lambadomy wrote:
And of course the US is so dependent on agriculture...

I can't tell if this is sarcasm or not. Just in case: Agriculture is a hugely important market in the US as the US is one of the largest producers of food in the world. So, yeah, we are dependent on agriculture somewhat. Then of course there is the whole needing to eat part of life so even inside the US we depend on agriculture. I hear people outside the US also need to eat as well, but I think it is propaganda or something.

**Da Boss**

Ahtman wrote: I hear people outside the US also need to eat as well, but I think it is propaganda or something.

That got a laugh.

**lambadomy**

Hah, yes it's sarcasm - a "banana republic" is specifically a small country that is dependent economically on a single export commodity (hence the "banana" in banana republic) and typically run by a military dictatorship.

I was just commenting on how that isn't actually true - obviously agriculture is important to our economy, I should have been more clear on what I was specifically commenting on.

As for people outside the US, they only need to eat if their eating helps them produce oil.

**Kilkrazy**

gorgon wrote:Government spending sure didn't hurt during the 1980s, especially if your company had anything to do with the defense sector.

Under ordinary circumstances, government spending and budget deficits are a problem. However, those aren't a Dem problem, they're a system-wide problem. The biggest myth out there is that the GOP is the party of less government spending. Look at the Reagan years and the Dubya years and tell if that's been true.

...
...
)

The same thing was true in the UK looking at the record of the Conservative government.

As long as government spending goes into productive infrastructure it's a good thing.

**Envy89**

Its CHANGE you can belive in.

**Frazzled**

Kilkrazy wrote:
gorgon wrote:Government spending sure didn't hurt during the 1980s, especially if your company had anything to do with the defense sector.

Under ordinary circumstances, government spending and budget deficits are a problem. However, those aren't a Dem problem, they're a system-wide problem. The biggest myth out there is that the GOP is the party of less government spending. Look at the Reagan years and the Dubya years and tell if that's been true.

...
...
)

The same thing was true in the UK looking at the record of the Conservative government.

As long as government spending goes into productive infrastructure it's a good thing.

But its not and thats a flaw. Some is old school infrastructure, some with tax breaks but a lot is multiple year porkbarrel spending that will be difficult to get out of if Congress desired. Such important things as a frisbee golf course in Austin. Yea.

Again its bypartisan. They all suck.