Sunday, October 19, 2008

U.S. deficit rises, and consensus is to let it grow

U.S. deficit rises, and consensus is to let it grow  


By Louis Uchitelle and Robert Pear
Monday, October 20, 2008

Like water rushing over a river's banks, the U.S. government's rapidly mounting expenses are overwhelming the federal budget and increasing an already swollen deficit.

The bank bailout, in the latest big outlay, could cost $250 billion in just the next few weeks, and a newly proposed stimulus package would have $150 billion or more flowing from Washington before the next president takes office in January.

Adding to the damage is that tax revenues fall as the economy weakens; this is likely just as the government needs hundreds of billions of dollars to repair the financial system. The nation's wars are growing more costly, as fighting spreads in Afghanistan. And a declining economy swells outlays for unemployment insurance, food stamps and other federal aid.

But the extra spending, a sore point in normal times, has been widely accepted on both sides of the political aisle as necessary to salvage the banking system and avert another Great Depression.

"Right now would not be the time to balance the budget," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan Washington group that normally pushes the opposite message.

Confronted with a hugely expensive economic crisis, Democratic and Republican lawmakers alike have elected to pay the bill mainly by borrowing money rather than cutting spending or raising taxes. But while the borrowing is relatively inexpensive for the government in a weak economy, the cost will become a bigger burden as growth returns and interest rates rise.

In addition, outlays for Medicare and Social Security are expected to balloon as the first baby boomers reach full retirement age in the next three years... more:


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