Fiscal 2009 Federal Deficit Could Hit $1 Trillion

For fiscal 2008, the federal deficit hit a record $455 billion, which ended Sept. 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.

President-elect Barack Obama said at a news conference Tuesday, November 25, that the government's first obligation 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 2009. The focus of this stimulus package will definitely be on the personal consumption side.

Any type of government stimulation package will only prolong the economic suffering. Government spending increases consumption and discourages savings and investment. What is needed is less consumption and more saving, which will lead to a quicker recovery. If the government continues on its current polices of propping up financial institutions by forgoing the market resolution of liquidating malinvestments and stimulating consumption while discouraging savings, the economic pain of all will be exacerbated. I don't know about you, but if I am going to have to endue pain; I would rather get it over quickly rather than having to endue decades of it.