National Deficit - More Tea Leaves

Reading more coverage of the SOTU, I realized that I had dozed off at the precise moment the President said "high speed rail." Because of that, I was probably more charitable towards his speech than I might have been otherwise, because I missed all the shiny new spending proposals; shiny new trains and shiny new solar panels on our shiny new reflective homes to reduce global warming.

Meanwhile Paul Ryan hit exactly the right tone in his response, to which, I listened but can't remember anything except the realization that we are really screwed on the debt and deficit situations. Right on cue, the WSJ headlined that the deficit is actually worse than projected. It's like losing your home to a flood, only to find you've bought insurance from a phony outfit. So here is the even more disturbing picture:

WASHINGTON—The federal budget deficit will reach a record of nearly $1.5 trillion in 2011 due to the weak economy, higher spending and fresh tax cuts, congressional budget analysts said, in a stark warning that will drive the growing battle over government spending and taxation.
. . .
The forecast will no doubt frame the coming months of debate. The first real tests of Mr. Obama's spending priorities will come when the White House releases its 2012 budget Feb. 15, spelling out proposed spending increases and cuts.

Paul Ryan will be using the spending numbers to drive a limit on spending. The government is operating under a "Continuing Resolution," so any failure to compromise at least leaves spending at last year's levels. The good news is that failure means that spending won't go up. The bad news is that the deficit will continue to grow the deficit at more than a trillion dollars per year, as in $1,000,000,000,000.00. In fact the above graphic puts the deficit at $1.48 trillion, but for reasons that are still not clear to me, the debt will grow by closer to $2 trillion.

Meanwhile, fellow blogger and reader KT, points out some more disturbing news in the comments section of a previous post. Japan, the largest holder of U.S. government debt has just had its own credit rating cut. Bush's and now Obama's policies have us heading down the same road that Japan started on 20 years ago. Further, if the Japanese have further fiscal troubles would they not dump U.S. Treasuries, putting upward pressure on interest rates? That's an actual not rhetorical question, because I am not sure about all of the forces at work, but KT is sure they're going to sell.

The hour is late, we have to cut spending, Krugman be damned. Peggy Noonan bears repeating:

The second thing is the clock. Here is a great virtue of the tea party: They know what time it is. It's getting late. If we don't get the size and cost of government in line now, we won't be able to. We're teetering on the brink of some vast, dark new world—states and cities on the brink of bankruptcy, the federal government too. The issue isn't "big spending" anymore. It's ruinous spending that they fear will end America as we know it, as they promised it to their children.

Amen.