The US deficit: biggest since WWII

The US Deficit

When the economic downturn took hold, many analysts began referring to the recession as "The Great Recession" - a jarring nickname that harked back to The Great Depression of the 1930s.

But now, after one of the worst years in the banking industry's history, with the Obama administration finally closing the books on fiscal year 2009, it is the word depression that sounds all the more accurate.

On Friday, the Obama administration said the government ran a $1.42 trillion deficit in fiscal year 2009. According to data from the Treasury and The White House Office of Management and Budget (OMB), that officially makes 2009 the worst year on record since World War II.

See, it really is depressing.The facts are hard to swallow. With rising unemployment and worldwide economic slowdown, governments across the globe have turned to increasingly desperate measures in an effort to rescue economies from complete collapse. And some attempts, it has been widely reported, have failed massively.

For the US, meanwhile, almost 30 percent of the nation's debt is now in the hands of foreign governments and banks. Reports show that tax receipts for the year fell 16.6 percent overall, while spending soared 18.2 percent compared to fiscal year 2008.

As such, the annual deficit rose by an unfathomable 212 percent to the record dollar amount of $1.42 trillion - that's up from $455 billion just 12 months ago.

Reports also suggest that the incomprehensible rise of the deficit total is also partly down to some of the initiative undertaken by the US government. In fact, the Treasury and the OMB note that the $700 billion Troubled Asset Relief Program (TARP) and the $787 billion American Recovery and Reinvestment Act (ARRA) - some of which still yet to be used - accounted for almost a quarter (24 percent) of the deficit total.

It really is a worrying time, with the US now very near to breaching its so-called "debt ceiling," currently set at $12.1 trillion. As a result, lawmakers are now expected to raise that figure by the end of the fall.

But therein lies the nub of the issue. The ceiling, meant to serve as a brake on spending, is now so close that lawmakers really don't have a choice but to raise the ceiling further - thereby exacerbating the issue even more.

The future

Well, if lawmakers don't raise the ceiling (and they will), the country would go into default on its debt, sparking a feverish domino effect across the nation.

As such, back in August, the OMB projected a 10-year deficit of $9 trillion - but that was assuming President Obama's 2010 budget proposals are put in place.

This also means that the debt held by the public would approach 82 percent of gross domestic product - double the 41 percent recorded in 2008.

And, especially considering how America's fiscal future was already a source of concern before the crisis hit, any forecasts (10-year-ones or otherwise) are now simply considered unreliable.

Like this article? Get the RSS feed: