The Congressional Budget Office has released preliminary deficit numbers, which indicate that for the first half of 2009 the deficit has already hit $1 trillion, $640 billion more than the comparable 2008 period, when the deficit was $313 billion.
While the outlays can be explained by the massive TARP spending and other stimulus programs, the scariest piece of information is that receipts for March were $125 billion, $54 billion lower than the previous March. Additionally, receipts for H1 2009 were $986 billion, $160 billion lower than $1,146 billion in H1 2008.
It will be interesting how this massive drop on the income side of the budget will be explained by the photogenic President Obama.
In what should likely be a much more publicized piece of information, the Congressional Budget Office doubled the projected cost of the TARP bailout plan to $356 billion, versus an earlier estimate of $189 billion: an increase of $167 billion on the taxpayer's dime. According to the March CBO report, the total revised deficit under the Obama budget will hit $1.8 trillion in 2009 (and then never go negative pretty much in perpetuity, in other words deficit forever):
Among the main adjustments in the inner projection years (2009 and 2010) is the increased assumption in TARP costs: $152 billion in 2009 and $15 billion in 2010. Curiously, the CBO is also projecting a substantial increase in FNM and FRE costs: $52 billion and $5 billion in the respective years.
On page 8 of the CBO report, the reason for the astounding increase in TARP costs is given:
Troubled Asset Relief Program.
Since January, CBO has raised its estimate of the net cost (on a present-value basis) of the transactions covered by the TARP by $152 billion for 2009 and by $15 billion for 2010. Those revisions stem from three factors—changes in financial market conditions, new transactions, and a small shift in the anticipated timing of disbursements. Since CBO’s previous estimate was completed, market yields on securities issued by the firms that have received TARP funds have increased, thereby boosting the estimated subsidy cost of the Treasury’s purchases of preferred stock, asset guarantees, and loans to automakers. Also, the Treasury announced additional deals with Bank of America and American International Group (AIG) as well as participation of up to $50 billion in the Administration’s foreclosure mitigation plan, all of which involve subsidy rates that are higher than the averages in the previous baseline.
If it took a mere couple of months for projected TARP costs to double for taxpayers, ZH can't wait to see what the final cost will be as calculated by the CBO will be in another 9-12 months.
I recommend readers flip through the entire CBO report not only for the pretty charts, but to see the slow motion trainwreck our economy is becoming, based on current insane spending projections, which dig the economy into a hole so deep that there is nothing in conventional finance that could possibly pull it out absent eventual hyperinflation or sovereign default.
