Inside the United States How Bad is it?
It’s pretty bad. All of a sudden, the recovery has almost officially become "fragile" in the US. The official version was stated in the Fed’s press release following the FOMC meeting on June 22-23. "Financial conditions have become less supportive of economic growth on balance", they said. Indeed they have. A recent report from a department of the US Treasury shows just how bad they have become.
Until this month, the Treasury was predicting that US funded debt would climb to $US 19.6 TRILLION by the end of fiscal 2019. That has been "revised". On June 4, the Treasury released a report to Congress stating that the climb to $US 19.6 TRILLION would take place by 2015, four years earlier. They also predicted that this would be 102 percent of US GDP by that time. As of June 23, with fiscal 2010 nearing the end of its third quarter, the Treasury’s "debt to the penny" stood at $US 13.042 TRILLION.
The report said that the debt would reach $US 13.6 TRILLION by the end of fiscal 2010 on September 30. If it does, it will have grown by $US 1.7 TRILLION in fiscal 2010. And there was more. The Treasury projects that "publicly traded debt", the debt held by entities outside the US government itself, will almost double from its present level of $US 7.48 TRILLION to $US 14 TRILLION by 2015.
Ten years ago, the US Treasury was talking about paying off ALL government debt by 2012. Five years ago, they were talking about returning to "balanced budgets" at or about that date and all talk of "reducing" debt had vanished. Look at what they are talking about now. As we said, it’s pretty bad.
"Greece On The Pacific":
That is the new description of the US state of California, once touted as the eighth largest economy in the world. California - the headline state, the biggest state in terms of its internal economy - is facing the necessity of budget cuts which make the ones undertaken by the European Club Med nations look benign.
Like most US states, California has a fiscal year which ends on June 30. Like ALL US states, California is barred by law from running a budget deficit. The problem is that California is staring at a $19 Billion "deficit" in the year which ends at the end of June and a $US 37 Billion deficit over the year that ends in June 2011. Given a budget of about $US 125 Billion, that’s a 2010-11 shortfall of almost 30 percent.
Almost all US states are in the same predicament, only the size differs. So far, their budget deficits have been papered over by Mr. Obama’s stimulus plan of 2009, but that money has mostly already been spent. Having built their "budgets" on the real estate bubble, their revenues are diving as their costs, especially for "social services" skyrocket. Almost every report on the fiscal carnage going on in the US states has a variation on this theme: "The US government will inevitably have to come to the rescue". If you think the recent EU "sovereign debt" bailout was big (and it was), wait until you see THIS one!
"Austerity" In The US Congress!:
The US "Jobs Bill", a scaled down version of President Obama’s 2009 $US 787 Billion "stimulus package", has hit the wall. The Democrats in Congress have been trying to pass it for months. The 2010 version is seen as "essential" as it includes an extension of weekly unemployment benefits for millions of Americans who have been out of work more than six months. On top of that, the 2010-2011 fiscal year budgets prepared by most of the 50 states built the federal money included in this bill into their calculations. On June 24, the bill did not receive the 60 votes necessary to prevent a Republican filibuster. With the latest failure to pass the bill, 1.2 million Americans are going to see their "jobless benefits" end by the end of the week and the states will NOT be getting the federal money they were counting on. For a US Congress to reject such a bill is unheard of. As we said, it’s pretty bad.