The budget submitted today by the Obama Administration sets a new standard in governmental denial. The President may talk as if he believes the country has a fiscal problem, but his budget certainly shows no such concern.
Even if all of the rosy 10-year projections contained in the budget came to pass, (economic growth stays steady, unemployment comes down, Obamacare actually reduces health care costs, interest rates stay extremely low, inflation does not accelerate) and there are no unforeseen economic shocks (recessions, natural disasters, or terrorist attacks) and there are no 2012 extensions of the Bush tax cuts to the wealthy (couples making more than $250,000), then the federal government will still add another $8 trillion to the national debt by the end of the current decade!
However, as we have seen again and again, long term budget projections are always overly optimistic. If major changes aren't undertaken immediately, we are likely to double the $14 trillion national debt long before 10 years have passed. The President has even completely ignored the proposals made by his own bi-partisan Deficit Reduction Commission. In the meantime, he is still proposing the largest deficit ever ($1.5 trillion) for the current fiscal year. It is likely that this level of red ink will be the base line, not the high water mark, for the remainder of the current Administration.
The economy is taking on debt faster than a sinking ship is taking on water. But Obama and even Congressional Republicans have proposed that we bail ourselves out using Dixie cups. Unless we put the cups down and pick up some huge buckets, the ship is going to sink. The urgency is as plain as day, but Washington continues to pretend it doesn't exist and that its Dixie cup approach is sufficient.
The bigger question is not how much the President or Congress has planned to spend, but how much America's creditors have budgeted to lend. Last week it was announced that a record 71% of 10 year Treasury bonds were purchased by indirect bidders (comprised primarily by foreign central banks). If these percentages hold up, it would mean that the rest of the world will likely need to lend us an additional $6 trillion dollars over the course of the coming decade, even if the rosiest of our projections came true. I do not see this happening. It will be much more likely that our continued gargantuan debts will force a currency crisis sooner rather than later.