U.S. Budget Gap Is Revised to Surpass $1.8 TrillionAnyone want to start a pool on whether or not we can break the $2 trillion mark this year? That's a deficit equaling almost 13% of our GDP...

Economists generally agree a country’s annual deficits should not exceed 3 percent of economic output. Mr. Obama, in his 10-year budget outline in February, projected the United States would fall just below that level in the last months of his term, in the 2013 fiscal year. Many analysts consider his economic assumptions too rosy, however, which casts doubt on his deficit forecast.
"Many analysts" would be right, since they've already exceeded their projections on spending and tax revenue estimates have already been revised down. Then there's Obama's plans for universal healthcare, which I'm sure will come in under budget- just like Medicare has.

So... should we worry yet?

Here's a very uplifting article I read recently, entitled: US Credit Rating Under Fire
But what's troublesome is that estimates of the deficit continue to skyrocket, and now stand at more than $2 trillion for 2010, which is a nearly 30% increase in just a few months.

These numbers make George Bush's deficits look like chump change, and the problem isn't so much the number as it is the direction and velocity of change.

As government continues to deficit spend they inevitably "crowd out" private borrowing and spending, as taxes must rise dramatically in order to fund the spending.

Treasury has responded to these pressures by shortening duration which makes the intermediate and longer-term much worse, because now you get to add "rollover risk" to the picture as well. Currently, the $12 trillion or so in US Debt has an average duration around 4 years - the shortest on record. This has been undertaken in an attempt to manage interest costs, but that game cannot continue forever, and when it reverses it has the risk of doing so at breakneck speed, dramatically increasing interest cost for the government and doing even more budgetary damage.

Simply put, America's choices for government at the federal level is unsustainable; the ability and demand to spend in a deficit-ramping fashion on a sustained basis, as has happened every year since WWII, cannot continue.

There are solutions but they're bitter medicine: The Treasury must be refilled, deficit spending must cease, and those private parties that have led us into this mess believing these would be rescued with public funds must instead be left out in the cold.

Will we as a nation take these options now, or will the market force them upon us in a few years when it is no longer willing to fund the profligate and even fraudulent cover-ups by attempting monetarily "paper over" the ripoffs and scams perpetrated upon us by the so-called "masters of the financial universe"?

That is the question facing America, and its being asked now.