How Will McCain, Obama Deal With A Record Budget Deficit?
Last week, I talked about the U.S. national debt. $53 trillion of debt (factoring in long-term liabilities), or $455,000 per American household.
This week, it’s the U.S. budget deficit, which the White House predicts will reach close to half a trillion dollars in 2009. The Associated Press’ Andrew Taylor wrote earlier today:
The government’s budget deficit will surge past a half-trillion dollars next year, according to gloomy new estimates, a record flood of red ink that promises to force the winner of the presidential race to dramatically alter his economic agenda.
The deficit will hit $482 billion in the 2009 budget year that will be inherited by Democrat Barack Obama or Republican John McCain, the White House estimated Monday. That figure is sure to rise after adding the tens of billions of dollars in additional Iraq war funding it doesn’t include, and the total could be higher yet if the economy fails to recover as the administration predicts.
The result: the biggest deficit ever in terms of dollars, though several were higher in the 1980s and early 1990s as a percentage of the overall economy.
Both presidential candidates have proposed new initiatives as part of their campaign platforms. The question is, how will this latest deficit forecast affect their agendas? Taylor noted:
Neither campaign is backing off campaign promises — McCain to cut taxes and Obama to expand health and education programs — in light of the bleaker new figures.
“We can’t afford not to invest in some major initiatives such as health and energy and middle-class tax cuts,” said Obama economic adviser Jason Furman. “And we also can’t afford not to pay for those initiatives.”
Some would disagree with Furman. MarketWatch’s Robert Schroeder wrote today:
Stan Collender, a managing director for Qorvis Communications who formerly worked on both the Senate and House Budget Committees, is skeptical that the next president will have an easy time getting much accomplished as long as the deficit remains high.
“Based on what we now know for sure about next year’s budget, none of the presidential candidates’ promises should be taken seriously,” said Collender. “Unless they, the country, and those lending us money are willing to tolerate much higher nominal deficits and a larger debt than has so far been imaginable, the next president’s options will be severely limited,” Collender wrote Tuesday.
Sources:
“US deficit zooming to half-trillion as Bush leaves”
Andrew Taylor
Associated Press, July 29, 2008
“Deficit projections complicate candidates’ plans”
Robert Schroeder
MarketWatch, July 29, 2008
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