When Obama took office in 2009, the projected US 10-year deficits stood at $8 trillion. In one year, the figure’s jumped to $16.2 trillion. Is Obama on a fatal track?
Is Uncle Sam attempting a fiscal suicide? Or is US pushing itself to redefine the very levels of sanity that a budget can present? Far-fetched thoughts, but quite possible too! These are precisely the questions that several economists are asking today, keeping in mind the federal budget for FY2011 announced on February 1, 2010, by the US President Barack Obama. So what makes this budgetary document read more like a financial exotica menu? One element, and one only – it foresees colossal budgetary deficits till 2020! What more? The pandemic starts this very fiscal, with budgetary estimates pegging the federal deficit for FY2010 at a mind boggling $1.6 trillion, adding to Uncle Sam’s already gigantic heap of debts. This figure of $1.6 trillion is way above the ‘combined’ budgets of advanced European countries like Switzerland, Belgium & Norway put together. And as far as US is concerned, the danger is that this shortfall represents almost 10.6% of its total annual output – the highest levels the nation has reached since World War II.
In a communiqué to B&E, sources at the US Department of the Treasury accept that, “Deficit trends of this level are not sustainable. Beginning to correct them will require cutting deficits enough to stabilise the debt-to-GDP ratio at a manageable level so it is no longer rising.” Several economists have already raised the danger flag of unsustainable deficits. They feel that US can only sustain a deficit of 3% of total output if it is to remain healthy. However, considering the proposed budgetary allocations made by Obama, the projected deficits don’t seem to fall any lower than 3.6% over the next 10 years! This grim forecast certainly adds to the challenges faced by Obama, who is not only emphasising a message of fiscal discipline, but is also seeking stimulus measures to boost the struggling economy in the short term. In fact, on the day President Obama took charge, the budget deficit (for 2009) stood at $1.3 trillion (9.2% of GDP) and the projected deficits for the following 10 years were $8 trillion. Today, the total deficit for the next decade (till 2020) stands at $16.2 trillion – 100% more than the figure forecasted last year. Can one man achieve so much in so short a time? As per experts, the Bush Administration’s decision to enact large tax cuts and a prescription drug bill will add up to $5.8 trillion to the total deficit over the next 10 years. Then there is the administration’s spending on safety net programmes, including the controversial TARP, which will increase deficit figures by about $2.4 trillion by 2020.
Is Uncle Sam attempting a fiscal suicide? Or is US pushing itself to redefine the very levels of sanity that a budget can present? Far-fetched thoughts, but quite possible too! These are precisely the questions that several economists are asking today, keeping in mind the federal budget for FY2011 announced on February 1, 2010, by the US President Barack Obama. So what makes this budgetary document read more like a financial exotica menu? One element, and one only – it foresees colossal budgetary deficits till 2020! What more? The pandemic starts this very fiscal, with budgetary estimates pegging the federal deficit for FY2010 at a mind boggling $1.6 trillion, adding to Uncle Sam’s already gigantic heap of debts. This figure of $1.6 trillion is way above the ‘combined’ budgets of advanced European countries like Switzerland, Belgium & Norway put together. And as far as US is concerned, the danger is that this shortfall represents almost 10.6% of its total annual output – the highest levels the nation has reached since World War II.
In a communiqué to B&E, sources at the US Department of the Treasury accept that, “Deficit trends of this level are not sustainable. Beginning to correct them will require cutting deficits enough to stabilise the debt-to-GDP ratio at a manageable level so it is no longer rising.” Several economists have already raised the danger flag of unsustainable deficits. They feel that US can only sustain a deficit of 3% of total output if it is to remain healthy. However, considering the proposed budgetary allocations made by Obama, the projected deficits don’t seem to fall any lower than 3.6% over the next 10 years! This grim forecast certainly adds to the challenges faced by Obama, who is not only emphasising a message of fiscal discipline, but is also seeking stimulus measures to boost the struggling economy in the short term. In fact, on the day President Obama took charge, the budget deficit (for 2009) stood at $1.3 trillion (9.2% of GDP) and the projected deficits for the following 10 years were $8 trillion. Today, the total deficit for the next decade (till 2020) stands at $16.2 trillion – 100% more than the figure forecasted last year. Can one man achieve so much in so short a time? As per experts, the Bush Administration’s decision to enact large tax cuts and a prescription drug bill will add up to $5.8 trillion to the total deficit over the next 10 years. Then there is the administration’s spending on safety net programmes, including the controversial TARP, which will increase deficit figures by about $2.4 trillion by 2020.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)
