Monday, October 19, 2009

2009 Federal Deficit Surges to $1.42 Trillion

According to the Associated Press, the U.S. Treasure released figures last Friday showing that the Federal government spent $46.6 billion more in September than it took in. To make matters worse, September is historically a month where the government’s revenue exceeds their spending. These numbers brought the fiscal year’s shortfall to $1.42 trillion. For comparison, last year's deficit was only $459 billion.

"The rudderless U.S. fiscal policy is the biggest long-term risk to the U.S. economy," says Kenneth Rogoff, a Harvard professor and former chief economist for the International Monetary Fund. "As we accumulate more and more debt, we leave ourselves very vulnerable."

Forecasts of more red ink mean the federal government is heading toward spending 15 percent of its money by 2019 just to pay interest on the debt, up from 5 percent this fiscal year.

President Barack Obama has pledged to reduce the deficit once the Great Recession ends and the unemployment rate starts falling, but economists worry that the government lacks the will to make the hard political choices to get control of the imbalances.

Friday's report showed that the government paid $190 billion in interest over the last 12 months on Treasury securities sold to finance the federal debt. Experts say this tab could quadruple in a decade as the size of the government's total debt rises to $17.1 trillion by 2019.

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