The 1.2 Trillion Dollar Budget Deficit

“The US budget deficit will hit nearly $1,200 [billion] this fiscal year even without the cost of Barack Obama’s planned fiscal stimulus, Congress’s budget watchdog warned on Wednesday.” (Financial Times, UK, 7 January, 2009)

Things, of course, could radically change over the next two years. But, thank God, it will be a “Change We Can Believe In.” If you buy that line, let me know so I can send you a 50%- off gift certificate (good at any location), courtesy of your local Randle Patrick McMurphy Memorial Outpatient Lobotomy Clinic.

With that aside, let’s get back to the potential $2,000 billion deficit (Note: the figures are given in the traditional European form, where 1,000 billion = 1 trillion).

In 2007, the Real Gross Domestic Product (RGDP) for the United States was $13,811,200 billion. Assuming that the RGDP will grow to $15,000 billion in two years, and if we take the low-end estimate of the cost of President-elect Obama’s economic plan to be $775 billion, the federal budget deficit could conceivably grow to $1,975 billion. This would mean that the deficit would be equal to ~13% of the United States’ Real GDP. If that doesn’t impress you, consider the following numbers.

Between the end of World War II and 2005, the largest budget deficit as a percentage of the RGDP was ~6% (1983) against an average of ~2% during the George W. Bush Administration (as of 2007). The percentage of the deficit to the RGDP during the Vietnam War (1964-1975) was only ~4%. For those too young to remember the economy in the post-Vietnam War era, I will briefly summarize: IT SUCKED! Between double digit inflation, double digit interest rates, and single digit IQs in the Carter Administration, it was nothing short of a miracle that American economy didn’t simply collapse.

Can you imagine what a deficit three times as great has the potential to cause, even with Ben Bernanke in control at the Federal Reserve?

What is really scary is that the American public, along with the news media, seems to have its head in the sand, or inserted into a part of their anatomy usually associated with the last stage of digestion. In support of my contention, consider what the Fox News Channel considered to be Monday morning’s top news stories:

1) Ponzi-schemer Bernard Madoff can remain free on bail (how stupid can a judge be, even a New York judge?),
2) the Stock Market is in the toilet again (that’s news?) and,
3) convicted wife murderer Scott Peterson has a new girl friend (how stupid can that woman be?).

When tripe such as the above is served to a public that cares more about what this month’s pick will be from Oprah’s Book Club than an impending economic disaster, to paraphrase Adlai Stevenson, they get the economy that they deserve.