For those who are worried about the $1.75 trillion deficit that President Barack Obama projected the government would run in fiscal 2009, wait until you see what the interest on the growing U.S. debt will be.

The U.S. debt is roughly $10.6 trillion and the government spent $253 billion servicing it last year. With the mounting yearly deficits, that cost is skyrocketing.

During the debate over the $787 billion economic stimulus plan aimed at pulling the U.S. economy out of its downward spiral, Republicans argued that the cost was really over $1.1 trillion because of the cost to service the additional debt.

Lest folks think that current low borrowing costs would make the burden a little lighter, Obama’s fiscal 2010 budget projected that during his upcoming four years in office the cost will run roughly $1 trillion.

How does spending $447 billion just in interest payments on the debt in 2013 sound? And $694 billion in 2019 alone? If you want to see those shocking figures in black and white, see page 117 of Obama’s budget. It’s worse than opening your monthly credit card bill and looking at the finance charges on the unpaid balance.

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- Photo credit: Reuters/Jim Young (A government employee looks over a sheet of partially printed U.S. currency.)

U.S. budgets can really bring out the passion in people. So much so that it’s no wonder it’s hard for anyone to agree on how Washington should tax and spend.

When it was released on Thursday, the budget President Barack Obama unveiled sparked a war of words all over the capital. The disagreements were so profound, it’s almost as if people were looking at two entirely different documents.

Take the impact of Obama’s budget on small businesses which, like many in the United States, are reeling from the deep economic recession.

“It is not just misguided, but dangerous to raise taxes on small businesses and families that can’t afford to pay,” warned Eric Cantor, the number-two Republican in the House of Representatives.

His fellow conservative, Representative Mike Pence agreed. “The administration’s budget raises taxes on almost every American. America’s hard-working small businesses, family farms…,” he said.

Obama’s budget calls for raising taxes on those with annual incomes over $250,000.

But Robert Greenstein, executive director of the liberal-leaning Center on Budget and Policy Priorities, said not so fast. 

“This budget is very good for small business. The claim that it hurts small business…is often repeated but inaccurate.”

Greenstein cited data that only nine percent of people with small businesses have incomes over $250,000 a year. And most of those people, he said, “are wealthy investors who invest in the businesses, not those who operate them.”

Instead of reeling from Obama’s budget proposals, Greenstein said small businesses will fall in love with it.

Among benefits he cited: around 90 percent of small business owners would benefit from Obama’s proposed middle-class tax cuts and they also would revel in the elimination of the capital gains tax for small businesses.

Greenstein also said small businesses would benefit from Obama’s plan to expand health insurance to those who cannot afford it.

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- Photo credit: Reuters/Stelios Varias (Copies of Obama’s budget outline.)

Any good book needs a villain, and President Barack Obama’s 2010 budget was quick to try to identify one.
 
It was right on the title page above the words 2010 Budget: “A New Era of Responsibility.”
 
Take that, George W. Bush.
 
“For too long our budget has not told the whole truth about how precious tax dollars are spent,” Obama said in remarks ahead of the release of his $3.55 trillion spending blueprint, which projected a huge $1.17 trillion deficit.
 
“Large sums have been left off the books, including the true cost of fighting in Iraq and Afghanistan. And that kind of dishonest accounting is not how you run your family budgets at home. It’s not how your government should run its budgets either,” he said.
 
A senior official at the White House budget office, speaking anonymously, jumped on the bandwagon.
 
“We’ve inherited a real mess, both fiscally — a trillion dollar deficit — as well as an economic issue, which is severe economic downturn,” the official said. “These are the result of a profound irresponsibility, misplaced priorities and mistaken policies.”
 
Hostile fire rarely goes unanswered.
 
“Trying to mask huge spending increases under the cloak of ‘fiscal responsibility’ is the height of audacity,” said Tony Fratto, Bush’s former White House spokesman specializing on economic issues.
 
“Our budgets were honest, open and transparent. Every dime spent was presented, debated, voted on and counted.”
 
“Putting temporary war spending in supplemental budgets was done to avoid permanently baking those appropriations into the Defense Department’s baseline budget,” Fratto added.

“That’s good budgeting, not a  ‘gimmick.’”

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Photo credit: Reuters/Jim Young (Treasury Secretary Timothy Geithner listens to Obama make budget remarks); Reuters/Stelios Varias (OMB employee Dennis Johnson sits behind a stack of copies of Obama’s 2010 budget)

The Obama administration’s first budget doesn’t officially come out until late morning — but somehow some unnamed senior government officials managed to divulge the basic size and shape of the thing. The big numbers are really big this time: the 2009 deficit forecast is $1.75 trillion, with a T. That’s 12.3 percent of the U.S. gross domestic product, the largest share since World War II.

The new White House team has pledged to cut in half the more than $1 trillion deficit they inherited from the Bush administration by 2012. They say they’ll do that by cutting spending on farm subsidies and other areas. There will also be a 10-year, $634 billion reserve fund to help pay for healthcare reforms.

But there should be hundreds of billions of dollars of revenues starting in 2012 and going forward for years from a cap-and-trade system meant to reduce climate-warming greenhouse gas emissions.

For those outside the Beltway, Budget Day is just a day on the calendar. In Washington DC, it’s a day for keeping score and figuring out who wins and who loses in the proposed financial picture.

Before the official release, there was gloomy news from the Commerce Department. New U.S. orders for durable goods fell for a sixth month in a row, to the lowest level is six years.

President Barack Obama makes his first comments on the budget more than an hour before it’s official release at 11 a.m. EST. At that time, Peter Orszag, the chief of the White House Office of Management and Budget, briefs the media, with other briefings on health and defense spending.

Photo credit: REUTERS/Lee Jae Won (Bank employee counts hundred-dollar bills in Seoul, South Korea, February 26, 2009)

It’s not just U.S. stocks that are on a roller coaster ride in reaction to congressional testimony by Federal Reserve Chairman Ben Bernanke and other top officials.

Fed staff stock plunged on Wednesday when they put their boss in an awkward position during Bernanke’s testimony before Congress on the financial bailout and efforts to stabilize the swooning economy.

Rep. Scott Garrett testily reminded Bernanke that he was still waiting for answers for a letter he sent in December.

“We need to move on some of these issues,” Garrett said.

“You have not received a reply?” Bernanke asked, sounding surprised.  

When Garrett said he had not, the Fed chairman took time out from discussing the narrowly averted global financial meltdown to assure the lawmaker he would crack down on his wayward staff.

“After some concerns about this, I have asked staff to try to put a one-month limit on (response) time.  And so, clearly, that has not been met in this case, and I will check up on the situation,” Bernanke said.

Later, however, Fed bureaucrats received a sort-of compliment from Rep. Michael Capuano, who was upset the government has yet to make clear how it plans to purge the financial system from assets that have lost value because they are linked to delinquent mortgage loans.

Capuano marveled that the government now calls them “legacy” assets instead of “toxic” assets.

“It’s a good term,” Capuano said.   “Whoever made it up, give them a raise, because it sounds much better than toxic assets.” 

Bernanke could not suppress a smile. 

Will that encourage officials to start calling bank nationalization “pre-privatization,” as some observers have suggested?

One decent laugh line in President Barack Obama’s address to Congress had to do with Vice President Joe Biden and his new assignment in the financial crisis. Obama gave Biden the task of overseeing the recovery process. The Capitol Hill audience broke up when the president announced Biden’s new task:

“With a plan of this scale comes enormous responsibility to get it right and that’s why I’ve asked Vice President Biden to lead a tough, unprecedented oversight effort, ’cause nobody messes with Joe.”

That was last night. This morning, Biden made the rounds of the morning talk shows. On NBC’s “Today” program, he said his wife Jill — shown in the gallery during Tuesday’s nationally televised speech — was skeptical about the “nobody messes with Joe” line. But then he got down to business, telling the “Early Show” on CBS television that his first move is to meet with Cabinet members “to make sure I know specifically … what resources they have available, how they’re going to distribute those resources, how we’re going to follow the money.”

It’s a full day at the White House, with Biden’s recovery meeting followed by a late morning news conference by Obama to introduce former Washington state Governor Gary Locke as the new nominee for commerce secretary (the two previous nominees, New Mexico Governor Bill Richardson and Republican Senator Judd Gregg of New Hampshire, withdrew their names from contention).

Then the president meets with Treasury Secretary Timothy Geithner and the top banking honchos from Capitol Hill in the Oval Office, and he’s scheduled to make remarks about the meeting in late afternoon. In the evening, Obama and first lady Michelle Obama host Stevie Wonder at a White House honoring the pop music great, who is to receive the 2nd annual Gershwin Award for Lifetime Achievement from the Library of Congress.

Photo credit: REUTERS/Pablo Martinez Monsivais/Pool (President Obama addresses Congress, as Vice President Joe Biden and House Speaker Nancy Pelosi applaud, February 24, 2009)

Hollywood had its red carpet Oscar night for stars on Sunday. Washington followed two days later with President Barack Obama’s walk down the peacock blue and gold carpet of the House chamber for a speech to a joint session of Congress.

Candycane was the power fashion statement. Obama wore an eye-catching red tie with diagonal white stripes, Gov. Bobby Jindal giving the Republican response wore a red and white tie but his stripes were bigger. (The designers could not be determined by the untrained eye).

But the standing ovations preceded Obama’s entrance into the congressional chamber. First for US Airways Captain Chesley “Sully” Sullenberger who has become a national hero for safely landing a plane in New York’s Hudson River with no fatalities. The simple jewelry of his pilot wings adorned his uniformed breast.

The next power celebrity to get a rise out of fans was U.S. Supreme Court Justice Ruth Bader Ginsburg, who appeared frail after her recent surgery for pancreatic cancer, wearing a delicate white collar around the neck of her black judicial robe. She got a warm hug from the president.

First lady Michelle Obama was a vision in a royal purple sleeveless dress (again the designer could not be determined by the untrained eye) but it was pretty. She blew a kiss at her husband.

Secretary of State Hillary Clinton wore bright rose and gave out lots of diplomatic hugs and kisses.

House Speaker Nancy Pelosi, in olive green, wielded the power gavel as she presided over the event. Vice President Joe Biden, in light blue tie, was seated next to her behind Obama as he spoke.

“Nobody messes with Joe,” Obama said to laughter all around, looking back at his consigliere.

Obama used a lot of hand gestures while he spoke: the finger-point, the two-handed bookend, and the hand chop.

And at the end of the evening he used his hand to sign autographs on the way out of the chamber.

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Photo credit: Reuters/Pool (Obama addresses joint session of Congress)

Obama

They won’t stay dead!

Members of the U.S. Senate grilled Federal Reserve Chairman Ben Bernanke on Tuesday on whether the next gruesome episode in the U.S. economic horror show could include an appearance of “zombie” banks. 

During Japan’s economic stagnation in the 1990s, the government propped up failing banks and firms that came to be known as zombies.  The failure to let such institutions expire prolonged Japan’s agony, many analysts believe.

Now that the U.S. government is struggling to keep the banking system alive, Senator Bob Corker worried aloud that the government is propping up banks that deserve to die.

“It seems to me that — that this has been creating this sort of dead man walking sort of zombie-like banking scenario,” Corker said at a hearing with Bernanke. “It seems to me that what you have explained is a creeping — a creeping nationalism of our banks.  I mean in essence, many of them don’t have appropriate capital.”

Banks which the government determines don’t hold adequate capital will receive public funding to meet that capital requirement just to keep them going, he argued.

Bernanke sought to calm fears that government efforts to resuscitate the banking system would create ghouls of the sort featured in the 1968 horror film, “Night of the Living Dead.” In that movie, which was shot in rural Pennsylvania, recently dead people are mysteriously reanimated and go on a macabre rampage.

“I think zombie was not an appropriate description of any of the banks,” the Fed chairman said. “I think they all have substantial franchise value, they are all lending, they’re all active, they have substantial international franchise.”

Even as the government puts capital into struggling banks to help them lend, it will pressure them to restore themselves to profitability and draw private capital, he said.

Photo credit: Reuters/Jonathan Ernst (Fed Chairman Bernanke at Senate banking hearing)

Republican Norm Coleman, who is in a court battle against comedian and Democrat Al Franken over who won the Minnesota Senate seat in November’s election, decided to visit his old stomping ground on Tuesday, dropping by the weekly Republican policy luncheon.

A mere 25 steps or so from the Senate floor, Coleman entered the luncheon with the new head of the Republican National Committee Michael Steele and told reporters he was just popping in to catch up with his brethren.

“Everyone understands how important this race is, how important this seat is. Folks have been supportive and are still engaged,” Coleman told reporters before the lunch. ”We were ahead on election night, ahead when the recount began and I expect that when all is said and done.”

If Franken prevails, Democrats would then have a 59-41 majority in the Senate, one vote shy of the 60-vote minimum needed to overcome procedural hurdles in the chamber.

Franken, a comedian who gained prominence from his appearances on the satiric Saturday Night Live television show, was declared the winner by a 225-vote margin by Minnesota state officials in early January.

However, Coleman has challenged the outcome in court, arguing in part that some votes were counted twice.  He said his side of the case will be finished later this week and while Franken’s presentation could take a couple of weeks, Coleman said he thought it could be shorter.

Coleman declined to rule out further legal challenges if he did not win the current court case.

“I’m still confident in the end we got the most votes on election night and when all the legally cast votes are counted and any votes that are double counted are taken out we’ll be okay,” he said. “I’m not ruling in or ruling out. Let’s see what the court does and hopefully they’ll do the right thing.”

In the meantime, Coleman has been doing some consulting for the Republican Jewish Coalition.

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- Photo credit: Reuters/Eric Miller (Observers watch judges recount ballots in Minnesota back in November.)

It’s not an official State of the Union speech, but President Barack Obama’s Tuesday night address to Congress is showing all the signs of a major event. The pre-game show started late Monday, with an extraordinary free-wheeling question-and-answer session at the White House with U.S. senators and members of the House of Representatives. It continued on morning television, where Obama spokesman Robert Gibbs managed to hit ABC, NBC, CBS and CNN.

Obama plans to offer “a sober assessment about where we are and the challenges that we face,” Gibbs told ABC’s “Good Morning America.” Does Obama favor nationalizing U.S. banks? No, he told NBC’s “Today”: “Our banking system has always been private but regulated.” To all questioners, he gave some version of what he told “Today” — “We understand there are brighter days ahead.”

Before he heads for Capitol Hill for the 9 p.m. EST address, Obama has a morning meeting with Japanese Prime Minister Taro Aso. The global economic crisis tops the agenda, with other key topics expected to include Afghanistan and North Korea.

Elsewhere in Washington, NASA announced that a satellite meant to monitor global climate-warming carbon emissions failed to reach orbit after a pre-dawn launch from California.

Not much of a Fat Tuesday visible from the Front Row.

Photo credit: Reuters/Jason Reed (Combo image of White House Press Secretary Robert Gibbs at January 23 White House briefing)