Generational Dynamics
	Forecasting America's Destiny ... and the World's
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Generational Dynamics Web Log for 8-Oct-2009

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Budget deficit triples (yes, triples!) in 2009

Budget deficit triples (yes, triples!) in 2009

One of the major causes is falling tax revenues.

A year ago, I wrote the article, "One, Two, Three ... Infinity," in which I compared to the ever-increasing government spending plans to a book by George Gamow that I read in school in the 1950s. (Paragraph corrected - 1-Jan-10)

My use of that particular phrase was to convey the idea that American debt was on an exponential growth path that would not be stopped except by a major financial collapse and crisis.

As if to prove the point, the Congressional Business Office has announced that for the fiscal year ending on September 30, 2009, the budget deficit was $1.4 trillion, more than tripling the record 2008 deficit of $459 billion. There is absolutely no reason to believe that any steps will be taken to prevent the deficit from doubling or tripling again next year.

Annual tax revenues (Source: CNN)

One major reason is the collapse in tax revenues. As I wrote two months ago in "US tax revenues fall sharply, the most since 1932," tax revenues for fiscal 2009 have fallen by almost 50% from last year.

Other reasons include the bailouts and stimulus packages.

Stein's Law: If something cannot go on forever, then it won't.

It is mathematically impossible for this rapid exponential growth to continue indefinitely. It is politically impossible to end this rapid exponential growth without a major financial crisis. Therefore, it will be stopped only by a major financial crisis that includes a major stock market crash.

(Comments: For reader comments, questions and discussion, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (8-Oct-2009) Permanent Link
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