Washington plans to spend even more money it doesn’t have than recent forecasts indicated. From Simon Black at sovereignman.com:
Yesterday the Office of Management and Budget released a new report called the “Mid-Session Review” of the US federal budget.
It’s something they’re required by law to do– periodically review and update the government’s budget and track the changes.
The last government budget update was released in February. And according to the February budget, the government’s deficit for this fiscal year was going to be a whopping $873 billion.
Now they’re projecting to close this fiscal year (which ends on September 30th) with a deficit of $890 billion… which means they’re over-budget by just under 2%.
2% is actually pretty good. But here’s the problem: when they first unveiled the FY2018 budget in March of last year, they projected the annual deficit to be ‘only’ $440 billion.
So between their initial projections in March 2017, and their current projections in July 2018, this year’s budget deficit increased by more than 100%.
And that’s pretty pitiful.
But it gets worse.
Last March, they projected a total budget deficit of $526 billion for Fiscal Year 2019.
But according to the revised projections they published yesterday, the budget deficit for Fiscal Year 2019 will now be $1.085 TRILLION… 106% worse than projected.
And, whereas last year the government was forecasting DECLINING deficits in Fiscal Years 2020, 2021, etc., until miraculously reaching a positive budget SURPLUS of +16 billion in 2026, their updated projections now show TRILLION DOLLAR DEFICITS next year. And the year after that. And the year after that. Etc.
Bear in mind that even though this revised budget is a colossal train wreck, the projections still don’t factor in the possibility of a recession. War. Major emergency. Natural disaster. Financial crisis.
These forecasts assume that all big picture and macroeconomic trends are going to be fantastic for the next decade.
We’ve lately been talking about the concept of assets being ‘priced to perfection’.
‘Priced to perfection’ is a financial term meaning that assets are valued as if business conditions will be perfect forever.
Investors simply assume that the business plan will be successfully achieved without any difficulty, that sales will be strong, consumers will be happy, the economy will remain robust, etc.
And as a result of these pie-in-the-sky assumptions, investors pay record high prices for assets.
Well, these budget projections are priced for perfection.
To continue reading: Government’s already-dismal budget forecast just got 106% worse