From The Heritage Foundation
The "bold and swift" action Obama is referring to is the currently priced $825 billion economic stimulus package that the House introduced last week. Everybody expects that number will only go up after the Senate introduces their own bill, but let's crunch the numbers on Obama's plan as is. If Congress passes an $800 billion, two-year stimulus bill, the deficit in 2009 could stand at $1.31 trillion and could be $1.27 trillion for FY 2010. As a percent of GDP, the FY 2009 deficit will be 9.2% of GDP, and the FY 2010 will be 8.7% of GDP. Moving to the total obligations of the federal government, if the stimulus passes our national debt will be $13 trillion in FY 2009 (92% of GDP) and $14 trillion in FY 2010 (95% of GDP).
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We could in theory service a much larger debt, just like my mortgage is more than 1x my income. But it is a troubling sign. It will be a magic number as far as external confidence in the dollar is concerned, so expect it to start seeing more and more moves away from the dollar after 2010 (already starting). Euro anyone?
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