From the Financial Times:
By Edward Luce
Published: June 25 2009 19:53 | Last updated: June 25 2009 19:53
Back in February, Barack Obama’s presidency suffered an early setback when Judd Gregg, the Republican senator from New Hampshire, withdrew as his nominee for commerce secretary. Mr Gregg, who was to be the most high-profile exhibit of Mr Obama’s bipartisan credentials, decided he could not belong to an administration that would preside over such high budget deficits.
The figure then being projected for this year was above the $1,000bn mark for the first time. But in the few short months since, the number has rocketed much further–to $1,800bn (1,106bn pounds, 1,291bn euros) or 13 per cent of gross domestic product.
The Congressional Budget Office, a nonpartisan watchdog, forecasts that the US will post deficits in excess of a trillion dollars in each of the next 10 years. Even on its relatively optimistic assumptions for economic growth, moreover, the CBO predicts national debt will double to 82 per cent of GDP in the next decade–a level not seen since the second world war.
This would push the US close to the chronic debt levels seen in Japan and Italy. “People used to talk about America’s long-term fiscal crisis,” says Douglas Elmendorf, head of the CBO. “That crisis is now.”
Once merely a worthy subject of concern, America’s fiscal outlook has rapidly become the object of widespread alarm. “Aside from weapons of mass destruction and terrorism, America’s fiscal situation is the most dangerous challenge facing the country,” says Mr Gregg. “Unchecked, it will reduce growth, weaken the dollar and ultimately undermine America’s global leadership role.”