It appears the budget deficit is going to be bigger than either the White House or the Congressional Budget Office had predicted.
That's not surprising considering federal revenues were 18% below projections. At least it didn't surprise me considering Congress and the White House ignored the Law of Diminishing Returns: Once you raise taxes and fees above a certain point the amount of revenue you collect will fall. It's a perfect example of the Laffer Curve in action.
On the other hand government spending hasn't dropped off nearly enough (only about 3%) to make up for the revenue shortfall. I have no doubt Congress will act to correct the problem...by raising more taxes and fees. This will have the effect of causing an even greater falloff in revenue. Congress shouldn't be raising taxes during a deep recession. They also shouldn't be spending money we don't have, either. But I don't expect Congress or the White House to do the necessary things to stem this flood of red ink.
Here in New Hampshire the state is seeing a similar falloff in revenues, being short about $38 million so far. A number of people within the New Hampshire legislature warned that revenue projections were unrealistic, particularly in light of the hefty increase in taxes and fees. This is the second budget cycle where the Democrat dominated legislature overestimated revenues and used those projected revenue figures to increase state spending by amounts that far exceeded the inflation rate. Over four years state spending has increased by 30%, but revenues haven't come anywhere near to covering the larger expenditures.
The state ended it's last budget cycle (New Hampshire has a two-year budget) over $100 million in the red. The legislature still has that budget gap to fill and has been trying to do so by raiding $110 million in surplus insurance premiums being held by the state chartered Joint Underwriting Association, a private organization created by the state to ensure doctors, medical practices, hospitals, and other medical facilities and personnel could get malpractice insurance. So far the state has failed in its attempts to confiscate those funds. A Belknap Count judge ruled in a suit filed by the JUA that the state had no rights to those funds because the law that set up the Association states surplus funds must be returned to the policy holders, past and present. The judge also ruled the state had no other claims to the funds because the JUA is a private entity, particularly in light of the fact that no state funds or state personnel are used to administer the Association. The state disagreed and has taken the case to the New Hampshire Supreme Court.
You know it's getting bad when the state legislature figures it can raid private funds to plug a budget gap. I believe that's called theft. Of course the Democrats in the legislature see it as monies being withheld from them by greedy doctors when the state can make far better use of that money. Never mind that state law says otherwise. Never mind that the money isn't theirs to begin with.
It's going to be interesting (in the old Chinese curse definition) to see how the financial situation at the federal and state level will play out.