The US federal government's ledger has gone from a surplus just seven years ago to facing a prospect of a $1 trillion deficit next year.
Given those dire financial straits, President-elect Barack Obama said at a news conference yesterday, "Budget reform is not an option. It's a necessity."
But unlike his predecessor, President George W Bush, who in better economic times talked about returning to surplus by 2012, "balanced budgets" were not in Obama's vocabulary.
The government's first obligation, he said, was to spark an economic recovery and put people back to work. To do that, the Democratic-led Congress is expected to have a new stimulus package, costing in the $500 billion range, ready to go when Obama takes office in January.
That is on top of the hundreds of billions already spent or committed by Treasury and the Federal Reserve to revive the moribund financial markets. Yesterday, the government announced two new programs providing $800 billion to help unfreeze the market for consumer debt and to make mortgage loans cheaper and more available.
All that, in the short term, will send the deficit into the stratosphere.
Budget hawks were stunned when the federal deficit hit a record $455 billion in fiscal 2008, which ended September 30, more than double the previous year's deficit. But now, even the fiscally conservative say another doubling, to $1 trillion or more, may be inevitable if the economy is to be rescued.
James Horney, director for federal fiscal policy at the Center on Budget and Policy Priorities, said it was "pretty likely" that this year's deficit will approach $1 trillion.
