One More Thought about the Debt Limit

I’ll be honest, I don’t have  a ton of time to surf the CBO webpage to find what I’m looking for. By the “best” estimates I can find, we’re projected to have a $1.65 trillion deficit in FY11. Somehow, the same folks who provide that estimate claim the deficit will be about $1.1 trillion in FY12 – with a significant rise in revenue and a drop in spending. Of course, nobody really believes this, but it’s the information that gets out there.

My thought tonight. A $1.65 trillion deficit at an annual rate burns through the new $2.4 trillion in additional debt “limit” in 531 days. Election day is only 461 days away. This was the driving force behind negotiations from the Democrats – they don’t want to go through this again before the election. So, 70 days – this would seem to be a good cushion, right? It’s a shade over 15%.

But what if the projections are wrong? What if we see a 10% slide in revenues due to economic downturn? From 2002 to 2003 revenues dropped by nearly 7%, and over 16% from 2008 to 2009. How much does spending go up if we see such a drop? It would mean more people on unemployment, an automatic increase in spending.

OK, I’m not a CBO wonk. I imagine the folks in the White House are smart enough to push for more than enough cushion. If they didn’t, well, this would be the ultimate undoing of the Obama presidency. Honestly, if October 2012 got here and we had this debate again, 14 or 15 months after agreeing to a massive $2.4 trillion increase – Obama might not break the Mendoza line … err, the Carter line of 41% of popular vote.

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s