In a September 1 USA Today op-ed calling Republicans and Democrats “hypocrites for caring about the deficit,” Jonah Goldberg wrote that “Obama's budget will have, for the first time, a single year deficit of $1 trillion,” adding that “Obama's 2009 budget deficit will be greater than all of the Bush deficits from 2002 to 2007 combined.” Absent from Goldberg's analysis was the fact that before President Obama took office or signed any legislation, the Congressional Budget Office (CBO) projected that, based on actions taken by President Bush and economic conditions at the time, the deficit for fiscal year 2009 would reach $1.2 trillion.
Goldberg: “Obama's budget will have, for the first time, a single year deficit of $1 trillion”
From Goldberg's September 1 USA Today op-ed:
Obama's budget will have, for the first time, a single year deficit of $1 trillion and, according to the Obama administration's own projections, the same stack will be over 600 miles high ($9 trillion) at the end of 10 years, and that might be optimistic. Obama's 2009 budget deficit will be greater than all of the Bush deficits from 2002 to 2007 combined, according to the Heritage Foundation's Brian Riedl. And none of this takes into account that Obama's health care ambitions, nevermind cap and trade, could swell the deficit much more, if realized. Nor does it take into account the fact that unless the economy revives, tax revenues will continue to plummet as they have been (this year saw the greatest drop-off of receipts since 1932), which would make the shortfall even worse.
Based on Bush's actions and economic conditions, CBO projected $1.2 trillion deficit on January 7
The ongoing turmoil in the housing and financial markets has taken a major toll on the federal budget. CBO currently projects that the deficit this year will total $1.2 trillion, or 8.3 percent of GDP. That total, however, does not include the effects of any future legislation. Enactment of an economic stimulus package, for example, would add to the 2009 deficit. In any event, as a percentage of GDP, the deficit will most likely shatter the previous post-World War II record high of 6.0 percent posted in 1983.
A drop in tax revenues and increased federal spending (much of it related to the government's actions to address the crisis in the housing and financial markets) both contribute to the robust growth in this year's deficit. Compared with receipts last year, collections from corporate income taxes are anticipated to decline by 27 percent and individual income taxes by 8 percent; in normal economic conditions, they would both grow by several percentage points. In addition, the estimated deficit includes outlays of more than $180 billion to reflect the cost of transactions of the TARP.
The projected deficit for 2009 also incorporates CBO's estimate of the cost to the federal government of the recent takeover of Fannie Mae and Freddie Mac. Because those entities were created and chartered by the government, are responsible for implementing certain government policies, and are currently under the direct control of the federal government, CBO has concluded that their operations should be reflected in the federal budget. Recognizing the cost of the takeover adds about $200 billion (in discounted present-value terms) to the deficit this year, reflecting the long-term net cost of the more than $5 trillion in credit guarantees issued and loans held by those entities at the start of the fiscal year. In addition, the cost of Fannie Mae's and Freddie Mac's new credit activity in 2009 will total $38 billion, CBO estimates.