What!? The Deficit Is Greater Than Expected!?

In January of 2009, the Congressional Budget Office (CBO) director Douglas W. Elmendorf projected a $1.2 trillion deficit for this year. The CBO director has posted a revision of the deficit on his blog that the deficit is now projected at $1.8 Trillion for 2009 which is 50% greater than previously expected. What this means is that the US government is borrowing 50 cents for every dollar it spends.

However, the fact that projected deficit is 50% higher is only half of the shocking news. In reading the CBO Director's blog, we learn several interesting things which are highlighted in bold:

• As estimated by CBO and the Joint Committee on Taxation, the President’s proposals would add $4.8 trillion to the baseline deficits over the 2010–2019 period. CBO projects that if those proposals were enacted, the deficit would total $1.8 trillion (13 percent of GDP) in 2009 and $1.4 trillion (10 percent of GDP) in 2010. It would decline to about 4 percent of GDP by 2012 and remain between 4 percent and 6 percent of GDP through 2019.
• The cumulative deficit from 2010 to 2019 under the President’s proposals would total $9.3 trillion, compared with a cumulative deficit of $4.4 trillion projected under the current-law assumptions embodied in CBO’s baseline. Debt held by the public would rise, from 41 percent of GDP in 2008 to 57 percent in 2009 and then to 82 percent of GDP by 2019 (compared with 56 percent of GDP in that year under baseline assumptions).
• Proposed changes in tax policy would reduce revenues by an estimated $2.1 trillion over the next 10 years. Proposed changes in spending programs would add $1.7 trillion (excluding debt service) to outlays over the next 10 years. Interest costs associated with greater borrowing would add another $1.0 trillion to deficits over the 2010–2019 period.
• Our estimates of deficits under the President’s budget exceed those anticipated by the Administration by $2.3 trillion over the 2010-2019 period. The differences arise largely because of differing projections of baseline revenues and outlays. CBO’s projection of baseline deficits exceeds the Administration’s estimate (prepared on a comparable basis) by $1.6 trillion.

Those of us who have been fiercely opposed to bailouts and other excessive government spending are justified in saying, "see I told you so!" We warned that deficit spending would get us deeper in debt and increase the public debt and take up a larger share of the GDP. Our predictions have come true and if our government continues this path of irresponsible spending, things will only get worse.