10 Sep 2008

CBO Releases New Deficit Forecast

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On Tuesday the Congressional Budget Office (CBO) released its revised projections of the federal budget; check out this summary table (pdf). Highlights:

* The estimated deficit for the fiscal year ending September 30 is $407 billion.

* Under the baseline assumptions, the projected deficit for the fiscal year running from October 1, 2008 through September 30, 2009, is $438 billion.

* If Congress adjusts the Alternative Minimum Tax (as it probably will) in order to postpone a huge hit to the middle class, the FY 2009 deficit could be up to $82 billion higher, putting it at a record level exceeding $500 billion. Let me put that in other words: If Congress doesn’t allow the default $82 billion tax hike on middle class taxpayers to occur, then next year’s federal deficit will be more than half a trillion dollars. Remember, this is one year’s excess of spending over revenues, and this is all on-budget stuff. I’m not referring to hidden liabilities with entitlements or anything fancy like that.

* The above figures from the CBO only reckon that the recent takeover of Fannie Mae and Freddie Mac will cost the government $20 billion in FY 2009. If the housing market continues to slide, that number could mushroom. (Fannie and Freddie reported combined losses of $11.7 billion from 4q 2007 through 2q 2008.)

Things are getting a bit out of hand. As I have been harping on recently, it’s a darn good thing we didn’t get big government, big spending liberals like John Kerry in there. And if you still think John McCain is going to maintain the Bush tax cuts, well, you must not know the difference between a pit bull and a hockey mom.

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