Why the US budget deficit is worse than you think

September 25, 2009

The great Dan Clifton of the Strategas Research finds this gem:

Douglas Elmendorf, director of the Congressional Budget Office, told the National Economists Club that today’s deficits are more troublesome than in the early 1980’s. Projected deficits are twice the deficit in the early 1980’s but more importantly there is a growing disconnect between current law and provisions set to expire which will eventually be extended. Most notably there is (and will be) growing pressure to extend the expiring stimulus provisions in addition to the usual expiring provisions.

Me: See, while tax cuts get sunsetted, spending programs never die. And this is why the $800 billion stimulus is going to cost a lot more than $800 billion.


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There is a huge hidden item on the federal budget now: Massive subsidization of home mortgages. The government is now on its own in propping up the housing market with cheap money–FHA loans, Freddie/Fannie guarantees. They are lending out long term money at barely 1/2 percent over long Treasury rates, with 3.5% down, in the most difficult housing market ever, with NODs and foreclosures at record highs.

But none of this implicit subsidy shows up in the books. Shame on them. The government is in exactly the same lying game that the banks have been in.

Posted by David Roth | Report as abusive

The budget deficit is the most significant issue at the federal level.

Posted by Camron Barth | Report as abusive