As of this week, total US debt is $11.3 trillion and rising rapidly. The Obama
Administration projects that to rise another $1.85 trillion in 2009 (13% of
GDP) and yet another $1.4 trillion in 2010. The Congressional Budget Office
projects almost $10 trillion in additional debt from 2010 through 2019. Just
last January the 2009 deficit was estimated at "only" $1.2 trillion. Things
have gone downhill fast.
But there is reason to be concerned about those estimates, too. The CBO assumes a
rather robust recovery in 2010, with growth springing back to 3.8% and then up
to 4.5% in 2011. Interestingly, they project unemployment of 8.8% for this year
(we are already at 8.9% and rising every month) and that it will rise to 9%
next year. It will be a strange recovery indeed where the economy is roaring along
at 4% and unemployment isn't falling. (You can see their spreadsheets and all
the details if you take your blood pressure medicine first, at
www.cbo.gov.)
Just a few quick thoughts. This year the proposed administration plan is to borrow 50% of every dollar spent. The CBO projects than nominal GDP will grow by about 50% over the next 10 years (which is historically reasonable), but also that revenues will double, which suggests massive tax increases in relation to GDP. Interestingly, the International Monetary Fund says growth next year will be tepid at best (more below). The deficit in 2010 is almost 10% of GDP. The average proposed deficit is almost a $1 trillion average for the next ten years. Ten years from now, the deficit is projected to be $1.2 trillion. And that is if government costs do not go up and inflation only averages 1.1% for the next six years.
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