Budget Mess

The CBO projects that fiscal year 2008 will end with a $407 billion deficit, which is more than double last year's deficit and only a little less than double what the CBO was predicting we'd end up with back in January.

Keep in mind also that the federal government just acquired the gigantic institutions of the American housing market, otherwise known as Fannie Mae and Freddie Mac. The CBO doesn't think that this will impact the deficit too much - but it still means that tax payers are taking on a lot of risk they didn't have before.

None of this should be surprising - we're in a recession. Governments are supposed to run deficits during recessions. Still, though - I think I'd be more comforted by that traditional Keynesian logic if we hadn't been running deficits before the recession too!

This is going to tie up any big-spending, big-tax-cutting plans that either candidate has for January (or at least it should tie up those plans). Thankfully, the candidates' proposals so far have been fairly modest; some additions to the deficit, but not an egregious amount. Still - we need to do better than "not egregious".

One more thing - When I was looking for this report on the CBO website, I discovered that Peter Orszag - the director of the CBO - actually has a blog! Pretty cool, huh? It's weird though - it looks like you're not able to comment on any of the posts! Which basically makes it a website, not a blog - but it's still kind of cool that an organization like the CBO actually has one.