October deficit bigger than expected

posted at 12:15 pm on November 13, 2009 by Ed Morrissey

What better way to kick off Barack Obama’s first full budget year as President than with a deficit that exceeded the White House’s own projections as well as analysts’ expectations?  The federal government busted the budget worse than last October by $20 billion with a deficit of $176.36 billion for the month.  That used to be considered a decent deficit target … for an entire year:

The federal government kicked off fiscal year 2010 by posting its widest-ever October budget deficit, the Treasury Department said Thursday.

The $176.36 billion gap is more than $20 billion wider than the shortfall recorded in October 2008, driven up by lower tax receipts, stimulus-related revenue reductions and consistently high government outlays.

Treasury’s monthly budget statement shows receipts were $135.33 billion in October, down 18% from a year earlier and at the lowest level since October 2002. Meanwhile, outlays were $311.69 billion, down 3% from a year earlier and at their second-highest monthly level on record.

When revenues drop 18% and outlays only drop 3%, it’s not hard to hit record deficits.  It’s roughly four times as large as September’s deficit, which closed out FY2009 with an annual deficit just under $1.4 trillion.  September’s deficit of $46 billion will serve as a nostalgia point in the coming months of the FY2010 budget.

Higher deficits mean more borrowing.  More borrowing means more debt service.  As deficits continue to rise, the federal government will have to direct more and more of its revenues to paying the interest on the accumulated debt.  In September, that came to over $17 billion — just for the interest, not for principle reduction.  Investors Business Daily warns that Obama’s spending spree will eventually force Washington to spend 40% of its revenues on debt service:

Here is one key datapoint: From 2008 to 2019, federal revenues are projected to grow by $1.45 trillion, but extra interest payments on the public debt of $550 billion will soak up nearly 40% of those extra tax dollars.

Here is another: Consider that in 2008, Washington spent about half as much on interest payments ($253 billion) as it did on the nondefense programs that it budgets on an annual basis ($508 billion).

Those nondefense outlays cover homeland security, education, job training, housing assistance, veterans’ health, science, workplace safety, transportation, the environment and foreign aid.

But by 2019, interest costs would reach $800 billion under the Obama budget compared with $720 billion in spending on nondefense discretionary programs.

From 2008 to 2019, interest costs are projected to grow more than twice as fast as the economy, from 1.8% of GDP to 3.8%. That extra 2% of GDP is roughly equal to the projected cost of Medicaid in 2019.

In other words, we’ve created a new entitlement program equal to Medicare, and with about the same financial stability.  And the problem will get worse as government creates new programs in health care, energy production, and more.  The inefficiencies of government programs will force the government into ever-increasing borrowing.

Obama now says he wants to attack the deficit, but without serious spending cuts and reduction in the size of government, any such reductions would have to rely on heavier taxation — which would kill the economy, reduce federal revenues, and put us even further behind on debt reduction.  The only way to fix the problem is to dismantle Leviathan, and unfortunately Obama is headed in the opposite direction.


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BadgerHawk on November 13, 2009 at 12:46 PM

It’s tough for people to take what you say seriously when you have that many typos.

BadgerHawk on November 13, 2009 at 1:12 PM

It seems the Americans could at least begin considering the possibility of means-testing for voting rights. And by “means” I mean intelligence. Your countrymen elected this government, and half of your countrymen have a double-digit “IQ.”

Kralizec on November 13, 2009 at 1:14 PM

OK, who goes under the bus?
Mason on November 13, 2009 at 1:08 PM

Taxpayers

DamnCat on November 13, 2009 at 1:15 PM

As the deficit grows, interest rates are going to start going up. The Fed sells bonds with many maturities, everything from 30 days to 30 years. Everytime there is a Fed auction, they not only sell new bonds, but they have to roll over all the bonds that are maturing. Over the last 15 years or so, the collapse in interest rates have enabled the Fed to reduce the amount of money it pays to carry the debt. WHen those low interest bonds mature, they will have to be reissued at higher rates. So not only is the amount of debt increasing, but the average interest rate paid on that debt will start climbing soon.

MarkTheGreat on November 13, 2009 at 1:15 PM

Obama now says he wants to attack the deficit

Yes he does. In the same way an alcoholic wants to attack his drinking problem – I’ll cut back drinking at some time in the future – trust me – but for now give me another case of Vodka.

MB4 on November 13, 2009 at 1:15 PM

His articulate leadership is paying dividends. Just don’t know who for!

bluegrass on November 13, 2009 at 1:16 PM

Want my tax money?

Come get it.

noblejones on November 13, 2009 at 1:17 PM

Investors Business Daily warns that Obama’s spending spree will eventually force Washington to spend 40% of its revenues on debt service….

But you’ll be paying for Chinese retirements, so it won’t simply be bad for everyone.

Kralizec on November 13, 2009 at 1:17 PM

Either Obama is either doing a national seppuku, or a great kamikaze…but for who?

portlandon on November 13, 2009 at 12:27 PM

As Biden would say: “Three words: Cloward-Piven.”

Aviator on November 13, 2009 at 1:18 PM

bluegrass wrote:

His articulate leadership is paying dividends. Just don’t know who for!

George Soros: Brazilian oil; shorting American stocks; gold; distressed real estate

China: the dollar

noblejones on November 13, 2009 at 1:19 PM

You got the headline wrong. Should say:

Much to Obama’s delight, October deficit bigger than expected

PrincipledPilgrim on November 13, 2009 at 1:20 PM

Yes, but it was all budgeted for this year, doesn’t that mean it doesn’t carry forth to this year?

lorien1973 on November 13, 2009 at 1:08 PM

It was allocated in the past fiscal year, but it doesn’t count towards the deficit until it is actually spent. Most of the Porkulus money will be spent in the next year.

MarkTheGreat on November 13, 2009 at 1:24 PM

Who could have seen this coming?

JeffinOrlando on November 13, 2009 at 1:28 PM

I just can’t wait for the next State of the Union address.

Dhuka on November 13, 2009 at 1:32 PM

October deficit bigger than expected

Of course, this was predicted by conservatves, but what do we know.

Johan Klaus on November 13, 2009 at 1:34 PM

When I was younger, an expert correctly guessed.

jukin on November 13, 2009 at 1:35 PM

I would like to point out that today is Friday 13th. Those of you have triskaidekaphobia did not need to have this reminder but those of you who have a vague feeling of unease or unexplained “bad luck” today now know what is happening.
.
Triskaidekaphobia : Fear of the number 13 is related to the forboding experienced through paraskevidekatriaphobia, fear of Friday the 13th (not the movie, the calendar date).
.
Gioachino Rossini died on this date in 1868; Rossini had a fear of both the number 13 and Fridays.
.
Is it any wonder we get bad news of an October deficit report on today’s date? What else can go wrong?

ExpressoBold on November 13, 2009 at 1:37 PM

Obama now says he wants to attack the deficit, but without serious spending cuts and reduction in the size of government, any such reductions would have to rely on heavier taxation — which would kill the economy, reduce federal revenues, and put us even further behind on debt reduction.

The only good news out of this is that it will be harder to get Obamacare through the Senate with the current mood concerning jobs and the economy. Could it be that it is dithered on so far into next year that it dies in the heat of the election year politics?

highhopes on November 13, 2009 at 1:37 PM

but for now give me another case of Vodka.

MB4 on November 13, 2009 at 1:15 PM

An appropriate drink for the communist, “what are in charge”.

Johan Klaus on November 13, 2009 at 1:39 PM

I just can’t wait to see how they’re going to spin this as the result of Bush’s failed policies. That calls for some popcorn.

scalleywag on November 13, 2009 at 1:39 PM

Aviator on November 13, 2009 at 1:18 PM

Spew Worthy !!!

ExpressoBold on November 13, 2009 at 1:41 PM

The “Treasury” presents summary figures in documents linked from this page:

http://www.fms.treas.gov/mts/index.html

Note that the deficit for the 2009 fiscal year was about 40% of the total outlays. The deficit was equal to some 67% of receipts. In many months of fiscal 2009 and in the first month of fiscal 2010, the deficit was larger than receipts. The “Department of the Treasury” is so-called merely for a historical reason: “Well, um, that’s what we’ve always called it.” From now on, I will put “Treasury” in quotation marks, as I have been doing with “federal.”

Kralizec on November 13, 2009 at 1:43 PM

The only good news out of this is that it will be harder to get Obamacare through the Senate with the current mood concerning jobs and the economy. Could it be that it is dithered on so far into next year that it dies in the heat of the election year politics?

highhopes on November 13, 2009 at 1:37 PM

There’s a reason Obama wanted this thing passed back in July before the August recess. As far back as this summer, he’s been openly admitting that double digit unemployment was inevitable. Although he and all his economic “experts” weren’t anticipating 10% until next year, so they may have no choice at this point but to ram Obamacare through.

Doughboy on November 13, 2009 at 1:44 PM

Shock! The unemployed pay no payroll deductions. Company’s making less product and selling less product have smaller revenue and pay less quarterly tax.

This obvious issue is only missed by the people living in their own minds known as liberals and socialists. They live in happy rainbow land.

dogsoldier on November 13, 2009 at 1:48 PM

So wait, I spent eight years hearing that a $250B deficit was horrible from the left. Now, it looks like Obama is going to rack up somewhere around $2T. Where are all those leftists that railed against Bush?

18-1 on November 13, 2009 at 1:48 PM

And Ed, I enjoy digging up links, like the preceding one, to documentary sources. However, doing so would seem more certainly worthwhile, if you sometimes then included them in the post as an update, so readers would be sure to see them. I acknowledge that it’s your post, though, and that you’ll do whatever you think is good.

Kralizec on November 13, 2009 at 1:52 PM

No problem here…the printing presses are still working…

JIMV on November 13, 2009 at 1:53 PM

It seems the Americans could at least begin considering the possibility of means-testing for voting rights. And by “means” I mean intelligence. Your countrymen elected this government, and half of your countrymen have a double-digit “IQ.”

Kralizec on November 13, 2009 at 1:14 PM

Its not a question of intellegence. Some of Obama’s biggest backers are highly educated idiots; the beneficiaries of the best education (someone else’s) money can buy. Its more a question of what one is taught, at home and at school. Leftist influence on the cultural and on the educational establishment in particular, is at an all time high, here.

james23 on November 13, 2009 at 1:57 PM

the stock market seems to be out of sync with everything else here. Specifically, it goes up when the dollar goes down. Can anyone explain why?

james23 on November 13, 2009 at 12:35 PM

I strongly urge everyone on this board to read Karl Dennigers Market Ticker site. He lays out why this is happening.

Basically, the Fed lending to the banks at 0% causes a weak dollar. This influx of dollars is looking for a home, and it ain’t in home mortgages. So, the money flows to the stock market. Also, a weak dollar is good for US companies that export product. It cost fewer euros, for example, to buy the same goods as before. These export sales result in higher dollar denominated sales and look good on financial statements, but are economically neutral as more dollars only buy the same or less goods domestically.

I may be a little shaky on this so anyone correct me if I am. The Financial Times, Investors Business Daily, and now even the WSJ have all addressed this problem.

Most agree that the government can “extend and pretend” for an unspecified period of time, but that ultimately the system collapses.

Geithner lied the other day about supporting a strong dollar. What he supports is a gradual devaluation of the dollar and government intervention to prevent a catstrophic collapse.
The system is totally broken now, most people just don’t realize it yet, and the government is working hard to attempt a soft landing instead of a crash. This means supporting crooks in the banking industry with tax monies and lying to the public about the state of the nations finances.

/rant off

riverrat10k on November 13, 2009 at 1:59 PM

October deficit bigger than expected

And CNN.com’s headlines?

‘Going Rogue’ reignites Palin divide

…and…

NASA finds ‘significant’ water on moon

cntrlfrk on November 13, 2009 at 2:01 PM

The word is out. Democrats don’t file and pay taxes and it seems to be spreading. Geithner effect for future Econ Text books.

seven on November 13, 2009 at 2:03 PM

It seems the Americans could at least begin considering the possibility of means-testing for voting rights. And by “means” I mean intelligence. Your countrymen elected this government, and half of your countrymen have a double-digit “IQ.”

Kralizec on November 13, 2009 at 1:14 PM

Intelligence tests would be too subjective and too easy to skew.

Now, if we want to get serious about a return to limited government, a far better restriction on the franchise would be your status as a taxpayer or tax beneficiary.

Essentially, if you draw more money from the government then you pay in taxes, you don’t get to vote. This would include all non-military government employees. In this way, politicians would have no reason to waste taxpayer funds buying off bureaucrats and the underemployed. We’d see a balanced budget in a short order and a much smaller level of government interference in our lives.

The beauty of this is that it is a completely voluntary system. If you believe the franchise is important, don’t take government handouts. If you believe the handouts are more important, don’t expect to get to decide how much you get to take from the taxpayers.

18-1 on November 13, 2009 at 2:04 PM

How’s that 1 trillion dollar Commiecare looking now Senators?

gophergirl on November 13, 2009 at 2:05 PM

You all know that the people that voted for Obama do not follow the news don’t you? They just go about their lives unaware of the finacial destruction in the wind.

royzer on November 13, 2009 at 2:05 PM

The deficit is only bigger than Obama and his minions expected. The sane people of the country already knew.

orlandocajun on November 13, 2009 at 2:10 PM

You all know that the people that voted for Obama do not follow the news don’t you? They just go about their lives unaware of the finacial destruction in the wind.

royzer on November 13, 2009 at 2:05 PM

It depends on how you define news. Looking at yahoo news, for example, we see Obama looking presidential at Fort Hood, Palin is a ‘whiny’ teabagger, some obscure minister convicted for sex crimes, and nothing about the deficit.

If you rely on the news that gets spoon fed to you, Obama truly is awesome.

18-1 on November 13, 2009 at 2:10 PM

Going to serf city. Serf city here we come. (No, I did not misspell it)

SKYFOX on November 13, 2009 at 2:12 PM

Although he and all his economic “experts” weren’t anticipating 10% until next year, so they may have no choice at this point but to ram Obamacare through.

Doughboy on November 13, 2009 at 1:44 PM

The mood of the electorate would be toxic if the filthy lying coward and his corrupt party ram through state seizure of healthcare in the midst of record deficits and unemployment. Since it doesn’t effect the filthy lying coward directly, I wouldn’t be surprised at such an attempt but do you really see Harry Reid or Chris Dodd or Barbara Boxer taking one for the team with an election in less than a year?

highhopes on November 13, 2009 at 2:15 PM

The mood of the electorate would be toxic if the filthy lying coward and his corrupt party ram through state seizure of healthcare in the midst of record deficits and unemployment.
highhopes on November 13, 2009 at 2:15 PM

This is an interesting case. The electorate has strongly signaled it does not want Obamacare. However, because of the games the State Media played in 2008, Obama might be able to ram it through anyway. This is actually unheard of in the US.

Yes, the courts have done this sort of thing, but not the elected branches. Essentially this is a test that goes to the core of our system of government. Can elected leaders ram through something the electorate does not want and does care deeply about? If yes, our republic is truly dead. If no, how will these outrages be reversed? As many have pointed out, rolling back Obamacare, even will healthy majorities (no guarantee) would be tough…

18-1 on November 13, 2009 at 2:28 PM

This is a great economics lesson for the stooges on the left.

marklmail on November 13, 2009 at 2:30 PM

Hey, I’ve got an economic solution for this $176 Billion – one month problem: Let’s raise taxes, increase Federal regulation, increase the cost of energy, and increase the cost of Federally-mandated employer-funded health insurance!

Nothing could possibly help with a top line tax revenue problem more than a series of government mandates to decrease taxable earnings!

One of the buttsniffing liberals in the press who tout O’Baaama as a world class intellect need to ask him a question about basic business management and economics. Something really simple that every single one of the tens of millions of state college business program graduates in the U.S. knows off the top of his/her head; something from Econ 101 or Management and Marketing 120. Supply and Demand, for example.

I continue to stand behind my oft-repeated assertion about this effing asshole: that he is simply the most spectacular intellectual fraud in modern American history. He is Eddie Haskell on nuclear-powered steroids. He doesn’t know anything about anything, other than how to fool people into believing his bullshit.

It is no wonder that conspiracy-theory types like Beck, Levin, Savage and to a lesser extent Limbaugh all think he’s a manchurian-type uber-mole of Marxism. You almost couldn’t design a better plan to eff up the economy if you were trying.

Jaibones on November 13, 2009 at 2:30 PM

Am I missing something?

lorien1973 on November 13, 2009 at 12:20 PM

Incompetence, wishful thinking, and bald-faced lying?

Loxodonta on November 13, 2009 at 2:35 PM

I’m sorry….is this the 70′s or 2009?

search4truth on November 13, 2009 at 2:37 PM

That’s unpossible.

There must be some kind of mistake.

Barack Obama promised us, during one of his debates against McCain, that under his administration, we’d see a “net spending cut”.

Why….why…it’s almost as if he was doing nothing for 16 months but blowing smoke out his ass to trick people into voting for him

Bruce in NH on November 13, 2009 at 2:56 PM

No, no, no! These numbers are all wrong, or it shows that Bush is still to blame.

Cybergeezer on November 13, 2009 at 3:01 PM

Jug Ears ought to have a rubber stamp with the Caption: OOOOOOOOPS.

MaiDee on November 13, 2009 at 3:01 PM

just keep digging that hole Barack

fiscal conservatism is a TIDALWAVE in ’10 and ’12

reap the whirlwind baby :)

ginaswo on November 13, 2009 at 3:02 PM

I just can’t wait for the next State of the Union address.

Dhuka on November 13, 2009 at 1:32 PM

Since I refuse to watch or listen to him (way before he took office), I’ll just read the transcript.

The only occasion that I’d be willing to watch/listen would be “The Adios Speech”–enraptured, I’ll be.

betsyz on November 13, 2009 at 3:09 PM

Since I refuse to watch or listen to him (way before he took office), I’ll just read the transcript.

The only occasion that I’d be willing to watch/listen would be “The Adios Speech”–enraptured, I’ll be.

betsyz on November 13, 2009 at 3:09 PM

My feelings exactly; That’s why this needs posting again.

Cybergeezer on November 13, 2009 at 3:14 PM

The economic genius of these guys and gals in the white house is amazing. I’m sure they’re thinking a 100% tax rate is all that’s needed to fix things properly.

ClanDerson on November 13, 2009 at 3:56 PM

Whats that whooshing sound!

sonnyspats1 on November 13, 2009 at 5:29 PM

Time to crank up the printing presses.
-
Does anyone think there will not be massive inflation in another year.
-
Check the Darth Vader video on hyperinflation.
-
http://www.youtube.com/watch?v=vbPLdup_kDE

esblowfeld on November 13, 2009 at 5:39 PM

The raising of taxes is going to come hard and fast.

albill on November 13, 2009 at 5:47 PM

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