Setting Records

Deficit grew by $181 billion in July

Bailouts for financial firms and billions in tax revenue lost because of the recession drove the deficit to a record $1.3 trillion in July, according to the independent Congressional Budget Office (CBO).

Tax receipts that have fallen due to the poor economy and increased spending to save car companies, banks and mortgage firms were major contributors to the federal deficit, according to CBO, which provides official budget numbers for Congress. The federal deficit grew by another $181 billion in July.

Falling tax receipts and increased spending on bailouts for auto companies and the financial sector and for the economic stimulus package added to the deficit, according to CBO.

Spending through July of 2009 has increased by $530 billion, which is 21 percent over the same period in 2008. The bailout money for banks, Freddie Mac and Fannie Mae accounted for almost half of the spending increase. Unemployment benefits have more than doubled, Medicaid spending has grown by a quarter and Medicare spending has increased by 11 percent.

Geithner Asks Congress to Increase Federal Debt Limit

U.S. Treasury Secretary Timothy Geithner asked Congress to increase the $12.1 trillion debt limit on Friday, saying it is “critically important” that they act in the next two months.

Mr. Geithner, in a letter to U.S. lawmakers, said that the Treasury projects that the current debt limit could be reached as early mid-October. Increasing the limit is important to instilling confidence in global investors, Mr. Geithner said.

The Treasury didn’t request a specific increase in the letter.

“It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations,” Mr. Geithner said in a letter to lawmakers.

Mr. Geithner said the that it is “clearly a moment in our history” that requires support from both Democrats and Republicans for the increase.

“Congress has never failed to raise the debt limit when necessary,” Mr. Geithner said.

See also:
July U.S. Budget Deficit Grows by $181 Billion, Receipts Tumble
CBO: July saw federal deficits grow by $181 billion
Federal deficit continued to grow last month
U.S. Deficit Grew by $181 billion
Lawmakers Urged to Raise Nation’s Debt Limit
Debt, Debt And More Debt
Geithner asking Congress: Increase the Debt Limit
U.S. National Debt Clock

At a certain point, the interest payments on the debt alone will become so large that they will overwhelm the Federal budget and make it literally impossible for us to pay off the debt, immediately turning the United States into a third world country. We’re broke and the current levels of debt and spending are unsustainable. The obvious solution would be to stop digging the hole and start cutting spending.

But reality doesn’t seem to apply to Obama and the Democrats. If George Bush spent reclessly, they can spend three times as recklessly! Trillions more for nationalized health care? No problem! How about a second stimulus, a few extra Gulfstream G5s . . .?

/and when the Chinese abrubtly stop buying our debt?