Another Record Monthly Deficit Will Be Recorded At 2 PM Tomorrow

At 2 PM tomorrow, the Treasury Department will report a deficit of approximately $171 b. for the month of November according to a preliminary estimate by the Congressional Budget Office.  October's deficit was $237 b., so the federal deficit will reach $408 b. for the first two months of FY09.  That's well on the way to the first trillion dollar deficit ever recorded.  The first official estimate of a trillion dollar FY09 deficit is expected when CBO releases its annual report in February.  The President's Office of Management and Budget is expected to release an abbreviated budget with a similar estimate in February or March.

These deficits reflect OMB's scoring of Troubled Asset Relief Program expenditures totaling $191 b. in October and November as dollar for dollar outlays.  Under the Budget Act, CBO would score them on a net present value basis as an outlay of $50 b., not $191 b., assuming future interest payments and asset sales would offset much of the cost.  This is no small difference.  It will all depend upon whether CBO's assumption that 74% of TARP outlays will be recouped.  The reason we're in the current financial crisis is that banks and other financial institutions don't believe estimates of the value of TARP assets enough to trade in them.  CBO is taking a conservative guess, but it is a guess until the interest payments and asset sales actually occur in the future.

So we're stuck in a neverland of record deficits, which Treasury may be overstating if CBO's estimates prove accurate.  We'll probably set record deficits anyway this year and next, and we'll spend the next decade trying to restore budget balance as we face severe and expensive challenges to revive the economy, end the war, become more energy independent, and fix our broken health care system.  It's going to be a long time before I can feel secure that my generation has left our children's generation better off as every generation before us has done.