Deficit now 9.9% of GDP

These numbers will shock you to the point of possum numb.

The CBO is projecting a $1.4 trillion deficit for 2009 and it's now 9.9% of GDP. (makes ya wonder if they tweaked it to avoid that rounding up to 10%).

CBO Oct budget deficit

From the CBO blog:

CBO estimates, in its latest Monthly Budget Review, that the federal budget deficit was about $1.4 trillion in fiscal year 2009, nearly $1 trillion greater than the shortfall recorded in 2008. Relative to the size of the economy, the 2009 deficit was equal to 9.9 percent of GDP (the highest since 1945), compared with 3.2 percent in 2008. As shown in the table below, both lower revenues and increased spending contributed to the growth in the deficit. Revenues fell by almost $420 billion (or 17 percent) below receipts in 2008. Total revenues in 2009 were about 15 percent of GDP, the lowest level in over 50 years. Conversely, outlays increased by over $530 billion (or 18 percent) in 2009, to nearly 25 percent of GDP, the highest level in over 50 years.

Guess what's eating up the money? You guessed it....TARP, Fannie Mae and Freddie Mac....and the Stimulus package. 60% of the increases are caused by this. More interesting is the CBOs numbers are not the total committments of these measures.

  • TARP - $154B
  • Fannie/Freddie - $91B
  • Stimulus - > $100B

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good question

Defense was $636B, but it doesn't break it down.

Notice that $199B is paying down the debt (interest).

Once again (sigh)

BS numbers. The change in treasury debt held by the public between Sept 30 last year and Sept 30 this year is 1.74 trillion or roughly 340 billion more than the "budget deficit". That puts the real deficit well over 10% of GDP, and that assumes that the GDP numbers are accurate (not massaged to look better than it is). As you note, this doesn't count debt held in that complete mess over at Fannie and Freddie where the fiction continues that these are somehow still private entities. It sort of reminds me of Dick Cheney's argument that the Office of the Vice-President is both Executive and Legislative and therefore answerable to no one. And then there's the Federal Reserve...

It's much like the unemployment numbers. The number of people self-reporting as unemployed increases by 785,000 in September, which is the fourth highest monthly loss recorded during this entire recession. The government conveniently removes 550,000 from the labor force, and presto the heavily manipulated employer survey (and headline report) of "greater than estimated" 265,000 jobs lost bears some resemblance to the household survey and the unemployment rate rises to a mere 9.8% instead of the 10.2% number that would have panicked the markets. Can't have that can we.

And now that we are entering third quarter earnings season, I fully expect Corporate America to be just as candid as the US government. In an unbelievable display of corporate group-think,reported writedowns for the S&P 500 in the second quarter were an aggregate $.02/share. You need to go all the way back to the second quarter of 1993 to find a quarter with a similarly trivial level of writedowns. I guess they must have taken all their writedowns in the 4th quarter of 2008. Sure. What an astounding feat of clairvoyance. And all the massive layoffs and plant closings at Caterpillar and Alcoa and others in the second quarter were virtually cost free. And now that Alcoa is reporting positive earnings, with massive top line losses, the markets should be very happy. Too bad there's almost no one left with money to purchase products anymore. Of course, it doesn't really need to be said here that any correlation between the action of the markets and the real economy are purely co-incidental.

The real issue here is that with everyone gaming their numbers (i.e. lying to make things look better than they are), the government and its corporate masters are (or should be) losing the public trust. Nothing good will come of that.


Nobody believes those numbers. Hell, U6 is as close to the truth we're ever going to get. I suspect we're already in the 20s with regards to unemployment. And it wouldn't surprise me, once we hit bottom, that 1 in 3 will either be unemployed or substinance level partially employed.

worse is weekly initial unemployment claims

Every week it seems they revise upward the previous week to make the initials look like a drop. Then, various financial press blaze the headlines on this magically "drop".

I'm not even posting these anymore once I realized the pattern and compared each past release, saw the upward revisions every week.

I'm not going to claim they are manipulating anything, but I will assuredly claim that metric has way too much noise in it to jump up and down for joy every week.

National debt

The numbers from the Treasury from September 30, 2008, to October 1, 2009.

Increase in national debt: 1,895,794,267,407

Percentage increase: 18.91%

Percentage of GDP: 13.396%

Being conservative

I only used the debt held by the public as opposed to total debt to come up with the 1.74 trillion number. The total debt includes funny money (debt held by Social Security) and so doesn't reflect the balance of all inflows and outflows. Of course, "debt held by the public" doesn't either, but it's much closer to reality. In addition, the correct comparison is Sept 30 to Sept 30 (or Oct 1 to Oct 1). It's especially dangerous (from the point of accuracy) to add a day at this particular time because every year there is a rather large increase in the amount of debt between Sept 30 and Oct 1. As Yves Smith would say "Quelle surprise". It's just more data manipulation.

J Venom made the statement that "nobody believes" the U3 numbers anymore. Unfortunately that should come with the caveat that "Nobody" is generally restricted to those who read financial blogs and pay attention to the actual numbers. I don't know how large that number is, but I rather doubt that as a percentage of the population, it's more than single digits. But reality as experienced on the ground is becoming increasingly disconnected from the numbers. The consumer confidence surveys show an increasingly large difference between "current conditions" and "expectations". I'm not sure what happens when the citizenry at large no longer believes what the government tells them, but we seem to be headed in that direction.