After closing the 2009 fiscal year, the United States federal government hit a record milestone by holding a budget deficit of $1.4 trillion, which is actually $162 billion smaller than what the White House projected.
As the United States economic crises continues, the government released their own fiscal numbers and reports show that the 2009 fiscal year gave the United States budget a deficit of $1.4 trillion, according to Reuters. Although it is $962 billion higher than last year’s, it is $162 billion smaller than Augusts’ projection from the White House.
On Friday, officials blamed the current financial disaster for the budget deficits because of the fiscal stimulus spending to jolt the economy and bailouts. The deficit amounted to 10 per cent of the US Gross Domestic Product, which is the highest since the end of World War II.
US Treasury Secretary Timothy Geithner and White House budget chief Peter Orszag issued a statement on Friday, “The financial year 2009 deficit was largely the product of the spending and tax policies inherited from the previous administration, exacerbated by a severe recession and financial crisis that were underway as the current administration took office.”
Geithner also emphasized, according to AFP, that the budget deficit is lower because the administration is fighting this economic downturn “at a lower cost to taxpayers.” Orszag further added that it is “critical” to bring the nation’s economy back to where it was one year earlier, “As we move from rescue to recovery, the president recognizes that we need to put the nation back on a fiscally sustainable path.”
The opposition continues to state that the President should delay key reforms to many domestic areas within the nation because, as the Republican Party argues, the US can’t spend money it doesn’t have.
US Senate Republican Leader Mitch McConnell said, “Congress simply can’t continue acting like a teenager on a spending spree with his parent’s credit card with no regard to who pays the bill.”
Nevertheless, John Spratt, House of Representatives Budget Committee Chairman, believes it would be quite damaging to the nation if Washington were to attempt to balance the budget at a time when many Americans are suffering and the US hasn’t recovered yet. “So as the economy recovers, we will need to turn our focus back to deficit reduction.”
However, financial analysts are concerned, such as Mark Zandi, Chief Economist at Moody's Economy.com, who recently said, according to the Associated Press, “We should be desperately worried about deficits of this size. The economic pain will be felt much sooner than people think, in the form of much higher interest rates and much higher rates of inflation.”
Currently, the US national debt is $12 trillion.