Federal Deficits

Federal deficit spending will rise to $1.5 trillion this year, according to a report released Wednesday. Federal deficit spending will rise to $1.5 trillion this year, according to a report released Wednesday. The report comes on the heels of President Obama's State of the Union address and in the midst of a burgeoning debate in Washington over federal budget cuts and spending, a front-line argument between Obama and congressional Republicans. The report from the Congressional Budget Office said federal debt over the next decade will continue to balloon to unsustainable levels unless federal tax and spending policies change.

The federal deficit hit a new record in the just-completed 2008 budget year under the latest estimates from the Congressional Budget Office. The record $438-billion shortfall for the budget year that ended last week is up from $162 billion posted last year. The previous record of $413 billion was posted in 2004. The CBO said Tuesday that with the economy in a slump, revenues dropped by almost 2%. Corporate income receipts dropped by $65 billion, or nearly 18%.

President Clinton took credit for another drop in the federal budget deficit Monday in a final swing through three Midwestern states, where he mocked GOP opponent Bob Dole's warnings about voter apathy. Whirling through a battleground region where polls show he clearly holds the upper hand, Clinton hailed newly released figures showing that the federal budget deficit will close 1996 at $107.3 billion, a decline of 63% from its 1992 level and the lowest figure in 15 years.

Worries about out-of-control state deficits, underfunded municipal pension plans and rising interest rates have been kicking the teeth out of the municipal bond market lately, with prices plunging and yields soaring. And that's got some contrarians saying that now may be the time to jump into the market. "This is a great time to get into munis for anyone looking for income in their portfolio," said Mark R. DeMitry, senior portfolio manager at the Oppenheimer Funds. "If you have a long-term horizon and can withstand the ups and downs of the market, it seems like there's a great opportunity.

If public debate and policy making about the federal budget deficit ever move beyond slogans and political posturing, some of the credit should go to Robert Eisner, professor of economics at Northwestern University. For several years now, in academic journals and on Op-Ed pages, Eisner has been doggedly analyzing the deficit in order to show that much of what presidents and politicians and the rest of us think we know about the subject is simply wrong.

Noticeably ignored in the continuing economic debate is the ballooning budget deficit, which will expand to a record of nearly $400 billion this year. All the action in Washington instead has focused on tax relief for the middle class--a political quick hit with no real long-term economic return. The monstrous deficit and lack of investment--not taxes--are the biggest drags on the economy. The President vetoed the Democratic tax-cut legislation, which Congress passed last Friday.

Talking about tax increases in an election year may strike terror in the hearts of most politicians, but not Rep. Anthony C. Beilenson. Angry about the massive federal budget deficit and what he says is a leadership vacuum in Washington that has left the problem unresolved, the outspoken Los Angeles Democrat this week renewed his call for higher taxes. "This nonsense about not being able to raise taxes is just that--it is nonsense," Beilenson said at a breakfast meeting with reporters Monday.

Amid traditional pomp and circumstance, the 99th Congress convened at noon today with leaders of both chambers vowing an all-out effort to trim the nation's $200-billion federal deficit. Some lawmakers suggested that even Social Security benefits may be cut. "We're all pretty much on the same wavelength," said the Senate's new majority leader, Robert J. Dole of Kansas. "We want to trim the deficit. We want to get out front. We want to tell the President not to pull us. We want to go."

Franco Modigliani of the Massachusetts Institute of Technology, won the 1985 Nobel Prize in economics today for theories he developed 30 years ago on personal savings, including how people provide for old age, and the value of businesses. At a news conference after announcement of the award, the Italian-born professor blasted President Reagan for the "disastrous federal deficit" and called for a tax increase and a reduction in military arms spending.

The federal government ran a $12.08-billion budget deficit last month, down 18% from the red ink rolled up a year ago, the Treasury Department reported Tuesday. The department said the December deficit compared to an imbalance between revenues and spending of $14.66 billion in December, 1985. For the first three months of this fiscal year, the deficit totals $64.34 billion.