The federal budget deficit has taken an alarming turn for the worse.
In October, the first month of the federal fiscal year, the government ran a record deficit of $237.2 billion, close to the deficit the government ran for the entire year of 2006.
The deficit for this year could run over $1 trillion, dwarfing the record deficit of $454.8 billion we set in the fiscal year just ended. The accumulated budget deficits make up the national debt, which now stands at over $10.6 trillion.
The debt is more than an economic abstraction; it has practical political implications. Congress must appropriate the money to pay the interest on that debt each year, and that rapidly growing interest payment competes with other government programs.
The Treasury said that interest on the national debt in fiscal 2008 was $451 billion, coming close to the $500 billion or so in core defense spending. (That excludes the wars in Iraq and Afghanistan, which are funded separately.)
The record one-month deficit reflected the first payouts under the $700 billion bailout fund and the $21.5 billion the Bush administration pumped into the mortgage market.
There are three acceptable ways of dealing with deficits: economic growth, spending cuts, tax increases — or some combination thereof. We’re not going to grow our way out of the deficits anytime soon because we’re in the midst of a recession. And raising taxes and cutting spending would only exacerbate the recession. So we’re stuck.
In 1998, thanks to a healthy tension between a Democratic president and a Republican Congress, the country began running budget surpluses. That lasted until George W. Bush took office. He saw a projected 10-year federal surplus of $5.6 trillion as a problem, a sign that taxpayers had been "overcharged." He certainly solved that problem.