Because of TARP [the Troubled Assert Relief Plan, aka the bailout], my estimate is that the budget deficit could e..." /> How Will the Bailout Effect the Budget? - Blog - OpenCongress

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How Will the Bailout Effect the Budget?

October 7, 2008 - by Donny Shaw

Still, nobody knows for sure. But seasoned budget expert Stan Collender makes an educated guess today in his “Fiscal Fitness” column:

>Because of TARP [the Troubled Assert Relief Plan, aka the bailout], my estimate is that the budget deficit could easily reach or exceed $1 trillion this year. This includes my estimate of a $600 billion
 deficit before TARP and an additional $400 billion afterwards. A deficit of
 that size would be between and 6 percent and 7 percent of gross domestic
 product, a level that hasn’t been reached since fiscal 1942-1946 when the
 United States was fighting and paying for the direct costs of World War II.
>
>But the bigger cost of TARP may well be less in dollar terms than in
 making progress in other areas. A $1 trillion, 7-percent-of-GDP deficit
 likely will chill most of the spending and taxing plans of whoever is
 elected as hoped-for tax cuts and spending increases have to be delayed.
 There could even be a big push for deficit reductions if the market reacts
 very negatively to the 1-year, 10 percent increase in the national debt and
 interest rates are pushed higher by the bond market vigilantes that were so
 evident at the start of the Clinton administration.


(h/t OMB Watch)

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