CBO Estimated a $1.2 Trillion FY09 Deficit Today

The Congressional Budget Office estimated the U.S.'s first trillion dollar deficit today in its Budget and Eonomic Outlook: Fiscal Years 2009 to 2019. The numbers are truly staggering.  CBO estimated the public debt would rise by $1.4 trillion by the end of FY09 on September 30, 2009 versus a year earlier.

Remember that CBO is constrained by the Budget Act to only count present law spending and tax policies with a few exceptions.  That means it assumed only the spending already appropriated for the war, that the Bush tax cuts would expire, and that no relief will be forthcoming from the Alternative Minimum Tax.  CBO supplied estimates of more realistic assumption on all three that add up to a much higher outyear deficit path than it projects officially as you can see in my chart below.  I have also included my own estimate of the $775 b. second stimulus bill.  The bottom line is that we will add over $2 trillion to the public debt this year (if you drop CBO's assumption that $297 b. of money Treasury borrowed on behalf of the Federal Reserve will be recouped this year, highlighted in light blue below) and another trillion in 2010.  That's on top of the $5.8 trillion public debt we started out this fiscal year with on October 1, 2008.