Tag: national debt

CBO on Obama Debt Orgy

This week the Congressional Budget Office released its analysis of the president’s FY2011 budget. The CBO projects that combined deficits for 2011-2020 under the president’s budget will be $1.2 trillion (for a total of $9.7 trillion) higher than the Office of Management & Budget’s forecast.

The CBO projects that debt held by the public as a percentage of GDP will be significantly higher:

One major reason why the CBO projects higher deficits than the OMB is because the CBO projects that cumulative revenue over the period will be lower (its economic growth assumptions aren’t as rosy as the OMB’s).

But a lack of revenues isn’t the big problem. The CBO projects that revenues as a percentage GDP would rebound from 14.5 percent in FY2010 to 19.6 percent in FY2020. The big problem is that spending as a percentage of GDP is projected to remain at post-war record highs throughout the decade:

If There’s Money, We Want It! (Whatever “It” Is.)

There seems to be a real trend in Washington to declare support for a bill now, but actually have the bill exist later. It’s been most obvious in the health care marathon, where often purely notional pieces of legislation have been boisterously celebrated or bemoaned for months. It’s also the case with the Student Aid and Fiscal Responsibility Act, which may or may not be tacked on to health-care reconcilation because supporters don’t, you know, want to actually debate the thing. Currently, there is no Senate version of SAFRA, and it’s unclear what changes would need to be made to the House version to make it reconcilable.

So why are so many people willing to take big chances on legislation that only exists in the fertile minds of congresspeople? As this Inside Higher Ed article on community colleges illustrates, it’s often because they want taxpayer money – $12 billion is the community colleges’ hoped for windfall – no matter what:

Sensing the urgency of the moment on Capitol Hill, many community college advocates believe that budget reconciliation is the most likely route for passage of the AGI this year. They argue that time is of the essence for those community college trustees and presidents visiting town for the summit to lobby their representatives and senators without focusing on quibbles over the bill.

“I know there’s a lot of discussion for many of you [about] what’s in the program,” said Jee Hang Lee, ACCT director of public policy. “‘What’s in the final program for SAFRA? What’s in the final program for AGI? What is it going to look like?’ What we’ve heard is that, for the most part, the House and Senate staffs and the White House have something in place. I don’t know what it looks like. I don’t know many people who do know what it looks like. But they have a broad agreement on the structure of these programs, so that’s nice to know that they have because that means it’ll likely get funded.”

Still, he advised visiting trustees and presidents to be direct in their support for the bill and wait until later to work out potential kinks in its specific provisions.

“My point is that you just need to press hard to get this money and get it passed, and we can work out some of the details, I guess, later, I guess through the negotiated rule-making period,” Lee said.

Hmm. And I guess money grabs like these explain a good bit of why the national debt is now approaching $12.6 trillion.

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

What’s a Trillion Dollars Among Friends?

If you’re Barack Obama, money is no object. The national debt exceeds $11 trillion. We’ve had about $13 trillion worth of bail-outs over the last year. The deficit this year will run nearly $2 trillion. The Congressional Budget Office warns of a cumulative deficit of some $10 trillion over the next decade.

Now Obama-style health care “reform” will add another $1 trillion in increased spending over the same period. And the ultimate cost likely would be higher, perhaps much higher. Reports the Congressional Budget Office:

According to our preliminary assessment, enacting the proposal would result in a net increase in federal budget deficits of about $1.0 trillion over the 2010-2019 period. When fully implemented, about 39 million individuals would obtain coverage through the new insurance exchanges. At the same time, the number of people who had coverage through an employer would decline by about 15 million (or roughly 10 percent), and coverage from other sources would fall by about 8 million, so the net decrease in the number of people uninsured would be about 16 million or 17 million.

These new figures do not represent a formal or complete cost estimate for the draft legislation, for several reasons. The estimates provided do not address the entire bill—only the major provisions related to health insurance coverage. Some details have not been estimated yet, and the draft legislation has not been fully reviewed. Also, because expanded eligibility for the Medicaid program may be added at a later date, those figures are not likely to represent the impact that more comprehensive proposals—which might include a significant expansion of Medicaid or other options for subsidizing coverage for those with income below 150 percent of the federal poverty level—would have both on the federal budget and on the extent of insurance coverage.

Then there is the more than $100 trillion in unfunded Medicare and Social Security benefits.

Just who is going to pay all these bills?

Don’t worry, be happy.

Who’s Going to Buy Your Debt, Mr. President?

The administration’s presumption that America can borrow its way to prosperity has taken a couple of big hits over the last couple days.

First, just as the Third World debt crisis destroyed the belief among international bankers that countries don’t go bankrupt, so is the West’s borrowing binge ending the belief among international investors that the U.S. and other Western nations are safe economic bets.

Reports the Wall Street Journal:

Britain was warned by Standard & Poor’s Ratings Service that it may lose its coveted triple-A credit rating, triggering a drop in U.K. bonds and sparking global fears about the consequences of massive debts being incurred by the U.S. and other major nations as they try to dig out from the economic crisis.

The announcement quickly sent waves across the Atlantic. Investors initially dumped U.K. bonds and the pound, heading for the relative safety of U.S. Treasurys. But within hours, worries about an onslaught of new U.S. bond sales and the security of America’s own triple-A rating drove down the prices of U.S. Treasurys.

The yield of the benchmark U.S. 10-year bond, which moves in the opposite direction to the price, rose by 0.15 percentage point from Wednesday to 3.355%, its highest level in six months.

The relative gloom about the U.K. and the U.S. was apparent Thursday in the market for credit-default swaps, where investors can buy and sell insurance against sovereign defaults. Five years of insurance on $10 million in U.K. debt jumped to around $81,000 a year, from $72,000 earlier in the day. U.S. debt insurance cost the equivalent of $37,500 — in the same range as France at $38,000, and Germany at $35,000.

A shot across the bow of the American ship of state, some analysts have called it.

But shots also were being fired from another direction:  East Asia.  The Chinese are starting to have doubts about Uncle Sam’s creditworthiness.  Reports the New York Times:

Leaders in both Washington and Beijing have been fretting openly about the mutual dependence — some would say codependence — created by China’s vast holdings of United States bonds. But beyond the talk, the relationship is already changing with surprising speed.

China is growing more picky about which American debt it is willing to finance, and is changing laws to make it easier for Chinese companies to invest abroad the billions of dollars they take in each year by exporting to America. For its part, the United States is becoming relatively less dependent on Chinese financing.

Financial statistics released by both countries in recent days show that China paradoxically stepped up its lending to the American government over the winter even as it virtually stopped putting fresh money into dollars.

This combination is possible because China has been exchanging one dollar-denominated asset for another — selling the debt of government-sponsored enterprises like Fannie Mae and Freddie Mac in a hurry to buy Treasuries. While this has been clear for months, new data shows that China is also trading long-term Treasuries for short-term notes, highlighting Beijing’s concerns that inflation will erode the dollar’s value in the long run as America amasses record debt.

The national debt is over $11 trillion.  This year’s deficit will run nearly $2 trillion.  Next year the deficit is projected to be $1.2 trillion, but it undoubtedly will run more.  The administration projects an extra $10 trillion in red ink over the coming decade.

Fannie Mae and Freddie Mac need more money.  The Pension Benefit Guaranty Corporation is in trouble.  The FDIC will need more cash to clean up failed banks.  The effectively nationalized auto companies will soak up more funds.  Then there’s the more than $70 trillion in unfunded Social Security and Medicare liabilities.

But don’t worry, be happy!

Congressional Priorities and the FY2010 Budget Resolution

Yesterday the House and Senate passed a bloated $3.5 trillion budget blueprint for fiscal year 2010.  According to House Speaker Nancy Pelosi (D-CA), “What is important to us as a nation is reflected in this budget. It’s a very happy day for our country.”

Included in the blueprint is language that calls for an equal pay raise between military employees and civilian federal employees.  President Obama had originally proposed slightly higher pay for members of the armed services.  The exact pay raise for bureaucrats will be determined in the appropriations process, but it’s likely to be a hike of anywhere from 2.9% to 3.9%.  This would come on top of last year’s 3.9% raise.

Omitted from the blueprint was language included in the Senate version by Sen. Tom Coburn (R-OK) that would have “required agency managers to report to Congress within 90 days of the bill’s passage on any programs that are ‘duplicative, inefficient or failing, with recommendations for eliminating and consolidating these programs.‘ “  A simple report to be issued by the agencies themselves. That’s it.  There would be no guarantee that anything would actually be cut or consolidated.

Is it really a happy day for our country when Congress passes a blueprint to add another $1 trillion plus to the skyrocketing national debt?  Is it really good for the struggling economy that the parasitic bureaucrats already living comfortably at the expense of the productive members of society are going to get another fat pay raise?  Is it really “important to us as a nation” to make sure federal agencies are not instructed to pick out the particularly woeful programs under their watch?

It may be a happy day for politicians and bureaucrats, but it’s another kick in the teeth for taxpayers.

Federal Debt Per Household

This afternoon, a congressional office asked me what the estimated national debt in President Obama’s fiscal year 2010 budget submission would be on a per-U.S.-household basis.  I think the answer is worth sharing with C@L readers:

According to the president’s budget, the estimated national debt (debt held by the public) in fiscal year 2010 would equal approximately $81,000 per U.S. household. 

But no worries, “we owe it to ourselves”!