WASHINGTON
The federal government's budget gap is huge -- but by some measures, it's been bigger in the past.
The annual budget deficit reached $1.4 trillion in fiscal year 2009, the Obama administration said yesterday, a record sum by far in dollar terms. It's the result of both a huge jump in spending and a sharp drop in tax revenue.
In effect, the federal government went on a spending binge at the same time it received a sharp pay cut.
And if, like an overextended consumer, Washington doesn't mend its ways, it will pay more and more in interest. Interest payments could balloon to $799 billion in 2019 from $191 billion in 2009, according to an estimate by the nonpartisan Congressional Budget Office.
The budget gap reached 10 percent of gross domestic product in fiscal 2009, which ended Sept. 30. GDP is the broadest measure of the economy's output.
That's the largest proportion since World War II, when it was much higher. The 1943 deficit, for example, equaled 30.3 percent of the economy.
The total national debt is projected to worsen over the next 10 years unless major changes are made to tax and budget policies. According to the CBO, publicly held national debt -- which represents the accumulation of annual deficits -- would reach 81.7 percent of the economy by 2019, from about 51 percent in fiscal 2009. Still, that's below the record of 113 percent in 1945.
And that level of debt could drive interest rates higher.
Email
Facebook
Google
Twitter
Favorites
More
Advertisement