Over the weekend, President Obama signed into law a bill that suspends the nation's debt limit until March 15, 2015. As some in the GOP labeled it a 'blank check,' it did raise the obvious question - how much will the debt increase during that time?
If we look at the basics on the federal budget of late, the picture has been improving for Uncle Sam, though that's not saying much when the yearly deficit had been above $1 trillion for four years running.
For the fiscal year that started last October, the latest Treasury Department report is that Uncle Sam has run up a shortfall of $184 billion in the last four months - that is about $106 billion below the same period a year earlier, a decrease of 36 percent.
Right now, the Congressional Budget Office is projecting a deficit for Fiscal Year 2014 of $514 billion - less than the $680 billion in red ink for the business year that ended September 30, 2013.
So, a back of the envelope projection at this point might be that for the 13 months of this debt limit extension - if revenues continue to increase, and spending continues at its current levels - then the debt might go up around $450-$500 billion by March of 2015.
CBO has predicted a deficit of $478 billion in Fiscal Year 2015.
Why is the yearly budget deficit getting smaller?
It's a good question, and there are two simple answers.
+ Tax revenues are up by about 8 percent over a year ago, from both individual income taxes and corporate income taxes.
+ Total spending by Uncle Sam was down by about 6 percent in January, as spending dropped for jobless benefits and the Pentagon, and billions are being funneled into the Treasury from profits made by Fannie Mae and Freddie Mac.
As I often say on the radio, there are only three ways to solve the current budget problems in Washington, D.C. - you either bring in more revenue, spend less, or a combination of the two.
Right now, option three is working. How well it works in terms of reducing the deficit will determine how much new red ink is added to the federal debt under this latest debt limit suspension.
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