Welfare spending, unemployment balloon deficit
By Jerome R. Corsi
NEW YORK – The federal government will have to issue record levels of debt in the next two years – up to $2.5 trillion in 2009 and as much as $4 trillion in 2010.
The record federal debt financing is required to fund the social welfare programs called for in the Obama administration’s nearly $1 trillion deficit-spending economic stimulus plan and to overcome a likely shortfall due to falling tax revenues, according to BustedBudget.com, a website dedicated to “tracking the government’s shameful overspending one painful day at a time.”
BustedBudget.com noted that factors leading to the increased federal government borrowing needs include the cost of the Troubled Assets Relief Program, amounting to approximately $700 billion, plus the nearly $1 trillion in deficit-spending that will be required to fund the proposed stimulus package.
Another contributing factor forcing the Treasury to plan for an unprecedented amount of federal borrowing this year is the unanticipated unemployment resulting from the economic downturn, with the resulting drop in employment tax revenues to the U.S. Treasury.
A total of 3.6 million jobs have been lost since the recession officially started in December 2007, according to U.S. Labor Department reports cited in the Wall Street Journal yesterday.
The Wall Street Journal also reported the U.S. unemployment rate for January is expected to grow to 7.5 percent, the highest since 1993, as 525,000 jobs were lost last month, up from the 524,000 shed in December.
The possibility that the U.S. Treasury will be forced to raise as much as $4 trillion in debt in 2010 just to finance the federal budget deficit raises the question of how long the Obama administration can continue to increase social welfare spending unless millions of new jobs are created as a result.
Given the Labor Department’s estimates, the Obama administration will have to create over 3 million new jobs, just to replace the job losses that have occurred since December 2007.
According to the minutes of the U.S. Treasury’s Borrowing Advisory Committee, or TBAC, a key advisory committee to the Treasury Department, Acting Assistant Secretary of the Treasury for Financial Markets Karthik Ramanathan said estimates for Treasury borrowing needs range between $1.5 trillion and $2.5 trillion in the current fiscal year.
The TBAC warned that federal borrowing in fiscal year 2010 could reach levels as high $4 trillion. The U.S. government defines fiscal year 2009 as Oct. 1, 2008 through Sept. 30, 2009.
Whatever the deficit is this year, the Obama administration will be forced to have the U.S. Treasury sell Treasury bills and notes in that amount.
The Treasury debt will be sold largely to foreigners, predominately in China and Japan, the two biggest foreign buyers of U.S. Treasury debt.