Can the U.S. Government Finance its Budget Deficit at Current Interest Rates?
by Nora Omarova, Senior Quantitative Analyst As the U.S. government gears up to meet the challenges of the current financial crisis and deepening recession with an unprecedented stimulus plan, it faces daunting financing requirements. Projections for the fiscal 2009 deficit range from $1.45 trillion by primary dealers, as reported by Securities Industry and Financial Markets Association (SIFMA), to $1.85 trillion or 13% of GDP by the Congressional Budget Office (CBO). Looking forward, the CBO expects a further $1.4 trillion deficit (9.6% of GDP) for fiscal 2010, followed by smaller deficits of between 4% and 6% of GDP through 2019. Under this scenario, U.S. government debt held by the public would rise from 41% of GDP in 2008 to 57% in 2009 and then to 82% by 2019. The SIFMA figure, the more conservative of the two for 2009, implies at least a $120 billion per month financing requirement, more than triple that of the previous year. The Federal Budget Deficit Is Set To Increase Almost T
