The projected shortfall for this year alone, at $1.6tn, would be the largest in US history and amount to 11.2 per cent of GDP.
Obama and rivals can share blame on huge deficits
With the Ides of August finally behind us, and with faith in US President Barack Obama felled as much by his own hand as by those of his enemies, let us consider the price of America's spendthrift ways and its late-summer expression of public inanity. Last week, the White House announced that its budget deficit would be US$2 trillion (Dh7.34tn) higher over the next decade than it had originally estimated, for a cumulative 10-year deficit of $9tn.
The projected shortfall for this year alone, at $1.6tn, would be the largest in US history and amount to 11.2 per cent of GDP. By 2019, the public debt - the amount the US borrows to keep its economy running - will be 100 per cent of GDP and the interest rate required to service that burden would add another $1tn to federal obligations, according to the Concord Coalition, a think tank that monitors America's fiscal condition.
Predictably, critics in the opposition Republican Party are mining a rich seam of popular concern over Mr Obama's promiscuous spending habits. With justification, they blame him for more than a trebling of the budget gap and warn his plan to reform health care, estimated to cost some $1.2tn, will only deepen a liability that could indenture future generations to decades of wrenching austerity. But they do so in disregard of their own recent history, and of a looming crisis that the credit crunch has done much to hasten.
In no small part, the president has brought this opprobrium on himself. He allowed the Democratic Party-controlled Congress to load his healthcare proposal with all manner of excess, then tried to pitch it to voters as "budget neutral". When the non-partisan Congressional Budget Office (CBO) exposed that canard as a tawdry sleight of hand, the White House fumbled the initiative and has yet to get it back.
In rowdy, sometimes violent town hall meetings across the country, Mr Obama has been rendered as both a communist and a fascist - apparently his detractors cannot distinguish between the two - and his presidency is in jeopardy of becoming grist for the late-night comedy mill. Unless Mr Obama can come out of this crisis with a respectable compromise agreement at the very least, he might find himself on the defensive from now until next year's midterm elections. A cornered US president can be a dangerous thing; anyone who cannot imagine the genteel Mr Obama trying to distract attention from a major political defeat with some spectacular gesture - say, an attack on Iran's nuclear facilities - does not know US history. (See "Operation Desert Fox, Iraq" under "Clinton, Bill".)
Fortunately for the White House, it has an inept opposition with which to compare itself. Republican leaders may possess a Jacobin-like faculty for derailing someone else's agenda, but they are incapable of cobbling one of their own. While in control of both the White House and the Congress for all but the last quarter of former president George W Bush's eight years in office, ostensibly free-market Republicans increased subsidies to farmers and steel makers, passed a $700 billion prescription drug benefit as a favour to the pharmaceutical industry, slapped import duties on Chinese imports and applauded as former vice president Dick Cheney declared that "deficits don't matter".
Having failed to control spending while fetishising tax cuts, Republicans abetted a culture of leverage and entitlement that was straining the economy's borrowing capacity long before Mr Obama arrived. Having nurtured a welfare state of their own, albeit one that relieves industry and corporations rather than the poor and underprivileged, and having stood by as the weight of exotic and highly geared financial instruments finally sundered credit markets, Republicans are in no position to condemn Mr Obama's bailouts of Wall Street bucket shops and Detroit's cut-rate car makers.
However sorry America's fiscal position, demographic trends will make the US a permanent ward of foreign lenders without thorough entitlement reform, starting with health care. As members of America's "baby boom" generation retire, the demands on the medical sector will exceed resources. America's uninsured already cost the economy hundreds of billions of dollars a year, a figure that is expected to rise exponentially.
Economists estimate that, without aggressive reform, half of US households will by 2016 need to spend nearly half their income on health insurance, about double the current outlays. Health care is not the only minefield. America's national pension fund and medical programmes for the poor and the aged will soon be running deficits as the nation's retirement population mushrooms. Left untended, these fixed entitlements will generate funding gaps in the tens of trillions of dollars. The CBO released a study this month that projected spending shortfalls relative to output of up to 136 per cent of GDP in 20 years, and 321 per cent by 2050.
That is assuming Bush-era tax cuts are allowed to expire, which doctrinaire Republicans will fight even as the ship of state slips into an abyss of red ink. email@example.com