Budget Deficits | timiacono.com

The Shrinking Deficit

It’s been a rough stretch for the GOP lately and news like this isn’t making it any easier to sell the American public on the idea that, somehow, they have a better plan for the U.S. economy moving forward (if that’s what they call what has been happening in recent years).

That first paragraph is like a dagger to the heart for folks like Rand Paul, Marco Rubio, and others who have aspirations to succeed President Obama in just a couple years: “… the federal budget deficit fell more sharply than in any year since the end of World War II”

Of course, the Federal Reserve has been doing most of the heavy lifting in their multi-year low interest rate/money printing extravaganza that has succeeded in re-inflating asset prices and, for the moment at least, making everyone forget about what happened the last time the central bank artificially inflated the price of stocks and real estate.

That’ll only be a problem when it’s a problem.

Why Interest Rates Can Never Rise

Among many other interesting projections in the latest budget outlook from the Congressional Budget Office comes this look at the cost of servicing the U.S. debt that is expected to top the $21 trillion mark at the end of the 10-year budget window.

Here’s what the CBO projects that curve to look like via this story at CNN/Money.

Interest on the debt

The current year budget deficit was reported the other day at somewhere around $500 billion, with interest on the debt accounting for less than half that total.

For obvious reasons, the CBO deems the situation above to be unsustainable, however, it becomes much less unsustainable if interest rates remain at or near their current low levels, rather than rising steadily over this period as the group projects.

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Angst Over Park Closures

Living so close to Yellowstone (“the park” as they call it around here), we’ve been hearing a lot about the impact of the government shutdown on local businesses as well as on those visiting from far away, the latest being this story in the local paper about newlyweds who were planning to take some wedding photos inside the park but, instead, had to settle for the Roosevelt Arch at the North entrance.

Roosevelt Arch wedding

The park superintendent’s daughter is supposed to be married inside the park on Sunday and, based on this report about the Federal government allowing state governments to pay for keeping the parks open, she’s probably hopeful about this weekend.

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The Stock Trading Computers are Happy

In this interview with Reuters from a short time ago (when they were talking about a six week delay), Steve Bell, senior director for economic policy at the Bipartisan Policy Center tosses a little cold water on the stock market euphoria about a deal to temporarily raise the debt ceiling, noting that this is anything but a done deal in the Republican House.

According to this related report, there has been no progress in ending the government shutdown and, as such, I’d have to agree with Bell that what you see in the stock market today is just one computer’s high-frequency trading algorithm bidding against another.

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