President Obama announced that he’s reappointing Ben Bernanke as Fed chairman. My take is that Obama needs Bernanke to help him with the deficit financing. Today, the White House and the Congressional Budget Office announced that this year’s budget deficit will be $1.6 trillion.
The gap between spending and tax collections will amount to 11.2 percent of the overall economy, more than tripling last year’s deficit of $459 billion, the CBO said. The yawning gap is almost entirely the result of the severe economic downturn, the CBO said, which produced the sharpest drop in tax collections since the Great Depression and the biggest increase in spending since the Korean War.
The White House said that the economy will decline by 2.8% this year. They also expect the economy to grow by 2% next year and 3.8% in 2011.