In its 2011 budget, which the White House Office of Management and Budget (OMB) released Feb. 1, the administration projected a 10-year deficit total of $8.53 trillion. After looking it over, CBO said in its final analysis, released Thursday, that the president’s budget would generate a combined $9.75 trillion in deficits over the next decade.

“An additional $1.2 trillion in debt dumped on [GDP] to our children makes a huge difference,” said Brian Riedl, a budget analyst at the conservative Heritage Foundation. “That represents an additional debt of $10,000 per household above and beyond the federal debt they are already carrying.”

The federal public debt, which was $6.3 trillion ($56,000 per household) when Mr. Obama entered office amid an economic crisis, totals $8.2 trillion ($72,000 per household) today, and it’s headed toward $20.3 trillion (more than $170,000 per household) in 2020, according to CBO’s deficit estimates.

That figure would equal 90 percent of the estimated gross domestic product in 2020, up from 40 percent at the end of fiscal 2008. By comparison, America’s debt-to-GDP ratio peaked at 109 percent at the end of World War II, while the ratio for economically troubled Greece hit 115 percent last year.

“That level of debt is extremely problematic, particularly given the upward debt path beyond the 10-year budget window,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget.

For countries with debt-to-GDP ratios “above 90 percent, median growth rates fall by 1 percent, and average growth falls considerably more,” according to a recent research paper by economists Kenneth S. Rogoff of Harvard and Carmen M. Reinhart of the University of Maryland.

CBO projected the 2011 deficit will be $1.34 trillion, not much different from the administration’s estimate of $1.27 trillion. However, CBO’s estimate of the 2020 deficit at $1.25 trillion significantly exceeds the administration’s $1 trillion estimate.

Read More: Washington Times

But now the problem of mounting national debt is worse than it ever has been before with — potentially dire consequences for taxpayers, according to a report by the nonpartisan Peterson-Pew Commission on Budget Reform.

“It keeps me awake at night, looking at all that red ink,” said President Obama in Nashua, N.H., on Feb. 2. “Most of it is structural and we inherited it. The only way that we are going to fix it is if both parties come together and start making some tough decisions about our long-term priorities.”

Obama will sign an executive order tomorrow that establishes a bipartisan National Commission on Fiscal Responsibility and Reform to make recommendations on how to reduce the country’s debt.

Over the past year alone, the amount the U.S. government owes its lenders has grown to more than half the country’s entire economic output, or gross domestic product.

Even more alarming, experts say, is that those figures will climb to an unprecedented 200 percent of GDP by 2038 without a dramatic shift in course.

“Within 12 years…the largest item in the federal budget will be interest payments on the national debt,” said former U.S. Comptroller General David Walker. “[They are] payments for which we get nothing.”

Economic forecasters say future generations of Americans could have a substantially lower standard of living than their predecessors’ for the first time in the country’s history if the debt is not brought under control.

Government debt, which fuels the risk of inflation, could make everyday Americans’ savings worth less. Higher interest rates would make it harder for consumers and businesses to borrow. Wages would remain stagnant and fewer jobs would be created. The government’s ability to cut taxes or provide a safety net would also be weakened, economists say.

While much attention has been focused on the government’s deficit-spending surge during the recession, many economists agree short-term budget overruns — as ominous as they may seem — are not particularly problematic.

“What threatens the ship are large, known and growing structural deficits,” said Walker, a problem that few politicians seem eager and readily able to fix.

In a recent ABC News poll, 87 percent of Americans said they are concerned about the federal budget deficit and national debt, and most strongly disapprove of how their political leaders are handling the situation.

But public dissatisfaction has not proven enough to compel members of Congress or current and previous Administrations to set aside their partisan differences to achieve a balanced budget.

Most Republicans don’t want to raise taxes; most Democrats don’t want to cut spending. The result is a stalemate on how to put America back in the black.

Keep Reading: ABC NEWS

Day by day, fears are growing that Greece or another weak country may default on its sovereign debt obligations, forcing the richer countries in Europe to ride to the rescue or risk having one or more of its most vulnerable members leave the 16-nation euro zone.

Many European economists discount such a fracture as a remote possibility. But that doesn’t mean Europe has safely emerged from crisis.

Instead, it faces a longer-term challenge to restore the fiscal credibility of at least half the countries that use the euro. The true test for the world’s largest common currency zone, analysts say, will be whether it can withstand the economic, political and social strains once the European Central Bank begins to raise interest rates in response to economic improvements in Germany, France and other Northern European countries.

At that point, the laggards on the union’s fringe — Portugal, Ireland, Italy, Greece and Spain (the so-called Piigs) — will face even tougher choices to cope with what looks like several more years of stagnant economies, high unemployment and gaping budget deficits.

“If inflation picks up in France and Germany, the smaller economies will be left behind in stagnation and deflation,” said Jordi Galí, a Spanish economist recognized for his work on business cycles who heads the Center for Research in International Economics in Barcelona. “Such an asymmetric recovery is pretty likely, and if the E.C.B. raises rates, it could get very ugly.”

Mr. Gali, like a number of other European experts, takes the view that the euro zone’s resilience has been underestimated. He says the recent convulsions are more the result of trigger-happy ratings agencies that have downgraded the sovereign debt of Greece and others in atonement for having failed to foresee the subprime mortgage crisis.

Still, he says, there is no escaping this emerging growth divide, and he points out that the mandate of the European Central Bank is to ensure broad price stability in the union, not to look out for the interests of individual nations.

France and Germany have already emerged from the recession. Business confidence in Germany, Europe’s largest economy, has hit a 17-month high.

Yet on the periphery, the hangover from more than five years of a credit-infused boom shows little sign of diminishing.

Ireland, the first economy to stumble, has taken the most severe fiscal action, cutting public wages sharply. A new Greek government, punished by the rough treatment of bond investors no longer willing to countenance soft promises of reform, is just now promising steep spending cuts. But it is not clear whether the political system in Greece will accept them.

Meanwhile, Spain, to the frustration of many major lenders, seems to be putting off difficult fiscal questions in the hope that its economy will soon recover.

Critics of the euro zone contend that weak governments in the peripheral economies, facing high unemployment and restive voters, will not have the stomach to hold down wages, pensions and public expenditures.

“Are these people serious about reform, or are they just telling people what they want to hear?” asked Edward Hugh, a British-trained macroeconomist who lives in Barcelona and has been critical of Spain’s unwillingness to take difficult economic decisions.

Paradoxically, the very dysfunction of a struggling two-tier Europe may represent the best chance for recovery if it leads to devaluation of the euro against the dollar, which many see as long overdue.

Already, in the last month, the euro has lost more than 5 percent of its value against the dollar. Many economists predict that the currency will weaken more as the growth gap between the core and peripheral states creates further disharmony.

Then, it will be the type of export-led recovery that has helped the United States and is likely to soon help Britain that could bring Europe’s economies closer to convergence.

“If there are fears now that a breakup of the euro zone will lead to weakening of the euro, then that is good news,” said Paul De Grauwe, an economist based in Brussels who advises the president of the European Commission, José Manuel Barroso. “So we should congratulate Greece for getting us out of this anomaly of having a euro that is too overvalued.”

Any such recovery will not be rapid, however. In Ireland, where prices are falling by 5 percent, reordering the economy from its deep reliance on construction and property will take years. And an already unpopular Irish government, along with others on Europe’s periphery, will have a difficult time explaining to recession-bruised voters why they must accept an central bank’s decision to raise interest rates — a move that may protect German and French savers from inflation but that does little for the many millions of citizens out of work.

Yet the painful, historic steps taken by Ireland offer a ray of hope, says Philip Lane, a professor of international macroeconomics at Trinity College Dublin who oversees the widely read Irish Economy blog.

He points to signs of wage compression in the hard-hit service, property and government sectors as proof that there is a recognition that recovery, distant as it may seem, must occur inside the euro zone, not outside.

“It takes a crisis to learn a lesson,” Mr. Lane said. “Could it be that by getting countries to change their behavior you might get improved cooperation within the euro zone?

“What does not kill you,” he added, “often makes you stronger.”

via: NY Times

Maria: What about copper and things that are tied to the global economy?

Jim: I think I’d rather buy agriculture. If your good at it you can buy futures. If your not you can buy stocks that trade right here on the New York Stock Exchange, but maria, become a farmer. I’m saying your should become a farmer, go learn to drive a tractor.

Inventories of food are the lowest the’ve been in decades. Not years, but decades. We have a shortage of farmers here too.

Jim also commented on Washington and the Federal Reserve’s actions during the financial crisis.

Jim: Like everyone else I’m pessimistic on the dollar. Everyone is pessimistic so maybe there will be a rally. But, gigantic spending and incompetence in Washington…I see nothing that is going to turn the dollar around.

The federal reserve has tripled its balance sheet, full of garbage. Which you and I are going to have to pay for. Why do we want to have the FED, they’re bad for everybody. Mr. Geithner is a very smart person, but he’s been wrong about everything for the last 15 years.

Why are we listening to him, why are we listening to any of those guys down there? They are making our situation worse. They said it in writing just yesterday.

“The solution to our problem is to spend more money, to spend our way out of this.”

Isn’t that what got us into this problem, too much debt, too much spending, and now we’re going to fix the problem with more debt and more spending. Its making the situation worse, and we’re all going to pay the price for this in one or two or three years.

Next time we have problems in the economy, which will be not too long. We don’t have any bullets left, we’ve shot all our ammo, and we don’t have anything left. What are they going to do, quadruple the debt again. Print more money?

We don’t have even have any more trees left.

The ceiling was set at $12.104 trillion dollars. The latest posting by Treasury shows the National Debt at nearly $12.135 trillion.

A senior Treasury official told CBS News that the department has some “extraordinary accounting tools” it can use to give the government breathing room in the range of $150-billion when the Debt exceeds the Debt Ceiling.

Were it not for those “tools,” the U.S. Government would not have the statutory authority to borrow any more money. It might block issuance of Social Security checks and require a shutdown of some parts of the federal government.

Pending in Congress is a measure to increase the Debt Limit by $290 billion, which amounts to six more weeks of routine borrowing for the federal government. (The House just passed the increase, though the Senate has yet to act. It is expected to approve the measure.)

Republicans and conservative Democrats blocked moves by House leaders to pass a $1.8 trillion dollar increase in the Debt Limit so the Democratic majority would not have to face the embarrassment of raising the Debt Limit yet again before next November’s midterm elections.

The Debt Limit has been raised about a hundred times since 1940, when it was $49 billion – about five days worth of federal spending now.

The White House projects a record $1.5 trillion dollars deficit this year alone, and a 5-year deficit total of $4.97 trillion.

The Debt figure goes up and down on a daily basis based on government borrowing and revenue. Technically, not all of the National Debt is subject to the Debt Limit – a small percentage is exempt.

CBS News

“We’ve incurred this debt. We have to pay our bills,” House Majority Leader Steny Hoyer told POLITICO Wednesday. And the Maryland Democrat confirmed that the anticipated increase could be as high as $1.8 trillion — nearly twice what had been assumed in last spring’s budget resolution for the 2010 fiscal year.

House Appropriations Committee Chairman Dave Obey, who is pursuing job-related measures insisted that the debt issue is a “leadership call” alone. But the Wisconsin Democrat showed no sign of opposition to the strategy outlined by Hoyer.

“It is December. We don’t really have a choice,” Obey told POLITICO. “The bill’s already been run up; the credit card has already been used. When you get the bill in the mail you need to pay it.”

Though Treasury can buy itself time by moving assets around, it is already coming close to the current debt ceiling of $12.1 trillion. Last spring, the Democratic-backed budget proposed to raise this to about $13 trillion, but given the current pace of borrowing, no one now expects that will be sufficient to get through 2010.

In fact, fiscal year 2009 ended Sept. 30 with a $1.4 trillion deficit, which demanded higher-than-expected Treasury borrowing. Most of that was due to the downturn in the economy and spending commitments in place before Barack Obama took office. And as much as Republicans point to the president’s economic recovery bill last February as the culprit, only a small share of that $787 billion package was spent by Sept. 30.

The picture in 2010 is different. The administration is predicting the stimulus will hit its stride with much more spending. And there will be a steady escalation of outlays driven by back-to-back increases in 2009 and 2010 appropriations for domestic agencies.

The White House has vowed to be more deficit conscious in its forthcoming 2011 budget due out in February. But the House could vote as early as Thursday on a $446.8 billion year-end package covering more than a dozen Cabinet departments and agencies and representing a 9 percent to 10 percent increase over current spending for the same accounts.

For example, transportation and housing resources would grow by 12 percent, including $2.5 billion for high-speed-rail investments on top of the $8 billion already added by the White House to the giant stimulus bill in February. A $163.5 budget for the Departments of Labor, Health and Human Services, and Education would add an additional $8.6 billion to annual spending, and Veterans Health Administration spending would grow to $45.1 billion, a $4.1 billion increase.

Source: Politico

The White House wants an increase of at least $1 trillion to $1.5 trillion, according to a person familiar with the deliberations between lawmakers and the administration. Record budget deficits are pushing the national debt closer to the $12.1 trillion statutory limit.

The administration’s request, higher than a proposed increase already passed in the House of Representatives, would get the government through the November 2010 midterm congressional elections without needing another increase. Earlier this month, Treasury officials acknowledged they’ll need more borrowing room by year-end to avoid market disruptions.

Read More: Bloomberg