The recent fiscal year just ended last Sept 30, 2009. Although this year’s deficit is slightly lower than previously forecast by the Congressional office and White House budget, US$1.4 trillion is still the largest shortfall relative to the size of the economy since 1945. The accumulation of annual deficits is near $12 trillion which is now the current US national debt. This number is projected to increase even more by about $9 trillion over the next decade.
Generally, it is agreed among economists that annual deficits should not be more than 3% of the nation’s GDP. Obama had vowed to reach this level by the end of his term in 2013. However, a few factors such as subsequent spending, tax cuts and unexpectedly low revenues has pushed the forecast of Obama’s deficit to 4.6% of the GDP by then. Currently, the 2009 deficit is at 10% of the GDP which is the highest since the end of World War II when it was 21.5%.
At this point, it seems that everybody is starting to get worried. Foreign investors who are basically financing the US debt are eager to see signs that the government will finally regain control over its budgets. These foreing investors include China and Brazil, who are two of the top 15 holders of the US national debt.
In the meantime, polls show that more and more Americans are increasingly worried as well. They are especially raising concerns about Mr. Obama’s ambitious domestic agenda, which includes his signature health care overhaul. At the same time, many Americans are demanding further help, confronting forecasts that job losses will not peak until mid-2010.
Senator Kent Conrad stated that, “Today’s deficit announcement again highlights the fiscal mess handed to the Obama administration.” But representative John A. Boehner of Ohio, the Republican minority leader in the House, rejected that position. “It is irresponsible for Democrats to continue spending taxpayers’ money we don’t have to fund an agenda that would destroy the jobs we need to get our economy moving again,” Mr. Boehner said.
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