AP WASHINGTON – Nine months into the fiscal year, the federal deficit has topped $1 trillion for the first time.
The imbalance is intensifying fears about higher interest rates and inflation, and already pressuring the value of the dollar. There’s also concern about trying to reverse the deficit — by reducing government spending or raising taxes — in the midst of a harsh recession.
The Treasury Department said Monday that the deficit in June totaled $94.3 billion, pushing the total since the budget year started in October to nearly $1.1 trillion.
The deficit has been propelled by the huge sum the government has spent to combat the recession and financial crisis, combined with a sharp decline in tax revenues. Paying for wars in Iraq and Afghanistan also is a major factor.
The country’s soaring deficits are making Chinese and other foreign buyers of U.S. debt nervous, which could make them reluctant lenders down the road. It could force the Treasury Department to pay higher interest rates to make U.S. debt attractive longer-term.
“These are mind boggling numbers,” said Sung Won Sohn, an economist at the Smith School of Business at California State University. “Our foreign investors from China and elsewhere are starting to have concerns about not only the value of the dollar but how safe their investments will be in the long run.”
Great Depression and an unemployment rate that has climbed to 9.5 percent.is on the rise to address the worst financial crisis since the
Congress already approved a $700 billion financial bailout and a $787 billion economic stimulus package to try and jump-start a recovery, and there is growing talk among some Obama administration officials that a second round of stimulus may be necessary.
This has many Republicans and deficit hawks worried that the U.S. could be setting itself up for more financial pain down the road if interest rates and inflation surge. They also are raising alarms about additional spending the administration is proposing, including its plan to reform health care.
President Barack Obama and other administration officials, including , have said the U.S. is committed to bringing down the deficits once the country has emerged from the current recession and financial crisis.
As if a deficit of more than $1 Trillion wasn’t bad enough, “Debt Day” (the point in the fiscal year when government spending exceeds revenue) was less than three months ago. Zero to -1 Trillion in less than three months.
How much deeper in debt can we go? A lot deeper if the federal government insists on going through with Cap & Trade, Universal Health Care, and maybe – just maybe – another round of stimulus.
Shhh – you can almost hear the Chinese from here…Spend, baby, spend!