James Pethokoukis

The U.S. budget deficit is even worse than you think

August 25, 2009

Oh yes, America’s fiscal situation is a dreadful mess.

The White House says the federal government will run a $9 trillion budget deficit over the next decade. As a percentage of the total economy, the United States looks to have an astounding debt-to-GDP ratio of 11 percent this year, with that number declining to around 4 percent from 2015 though 2019. And total debt held by the public will rise to 68 percent of GDP by that year versus 33 percent in 2001.

Obama: 64 percent of budget deficit is my handiwork

August 25, 2009

From the Office of Management and Budget:

The Administration contemporaneously acted to address the financial crisis and get credit flowing again through the Financial Stability Plan, and worked to help homeowners facing foreclosure through the Homeowner Affordability and Stability Plan. In addition, the Administration took action to forestall the failure of two of the Nation’s largest automobile manufacturers and to strengthen the non-bank credit market. All together, these efforts—along with the ARRA—increased the deficit in the short run. In fact, 64 percent of the current deficit is directly attributable to rescue and recovery efforts and other countercyclical programs that were essential in preventing a deeper and more costly recession.

What would the deficit be if McCain were president?

August 25, 2009

Bruce Bartlett, who has a new booking coming out, was nice enough to run some budget numbers so I wouldn’t have to:

Budget deficits may be twice as bad as White House is predicting

August 25, 2009

More to come on this, but the WH is predicting that as a percentage of GDP, annual budget deficits will decrease to around 4 percent over the next decade from 11 percent in 2009. Or will they? The Congressional Budget Office has some doubts (via the Director Doug Elmendorf’s blog):

The strange Republican embrace of Medicare

August 24, 2009

Chris Edwards over at the Cato Institute is also unsettled by how the GOP is endorsing the status quo with Medicare spending to score political points:

White House: 10-year deficit up $2 trillion to $9 trillion

August 21, 2009

My Reuters colleagues break the news that the White House is revising upward its ten-year budget forecast to $9 trillion from $7 trillion:

America’s new love affair with Treasury bonds

August 18, 2009
The always perspicacious Andy Busch of BMO Capital Markets notes how US households are suddenly into bonds — and then looks around the corner:
This has been the major, major shift in the structure of the US Treasury market that was unanticipated. From Q1, US households held $643.9 billion in Treasury debt and that is up from $256.6 billion in Q4 2008. Households bought an astounding 84% of new US Treasury issuances in Q1. The total holdings represent about 1% of US household assets. According to the WSJ, “Although that is the highest since 2001, Treasurys regularly made up 5% of assets in the 1950s, and as recently as 1995 they were 2.6% of assets. History suggests there is plenty of room for households to increase their holdings.”

Cash for clunkers, a new government entitlement?

August 4, 2009

The great Stan Collender over at Capital Gains and Games makes a point I wish I would have concerning cash for clunkers:

More on the dangerous dollar …

July 24, 2009

It is the last part of this bit from Brad DeLong that really caught my attention (bold is mine):

The chances of a US debt default

July 17, 2009

This is one way of showing the change in America’s fiscal situation — what it costs to ensure against a debt default (via Brookings) using credit default swaps: