April 15: Government Revenue Day

“Wednesday’s statement from Ben Bernanke, the chairman of the U.S. Federal Reserve, that there is a “moderate economic recovery”. News on American retail sales and euro zone industrial production was also good. ‘In particular, the Administration and the Congressional Budget Office (CBO) project that the deficit will recede somewhat over the next two years as the temporary stimulus measures wind down and as economic recovery leads to higher revenues. Thereafter, however, the annual deficit is expected to remain high through 2020, in the neighborhood of 4 to 5 percent of GDP. Deficits at that level would lead the ratio of federal debt held by the public to the GDP, already expected to be greater than 70 percent at the end of fiscal 2012, to rise considerably further. This baseline projection assumes that most discretionary spending grows more slowly than nominal GDP, that no expiring tax cuts are extended, and that current provisions that provide most taxpayers relief from the alternative minimum tax are not further extended. Under an alternative scenario that drops those assumptions, the deficit at the end of 2020 would be 9 percent of GDP and the federal debt would balloon to more than 100 percent of GDP.⁵ ‘
"But outside of China, the economic news does not yet seem to be good enough for Bernanke and his fellow central bankers to increase policy interest rates, making financing more expensive for investors. Or for governments to cut down on deficit spending any faster than absolutely necessary.
"the same monetary and fiscal ease which helps markets now is increasing the risk of global crises later. Greece is already on the edge of a precipice, and its problems could spread. It will take a strong and steady recovery to get the biggest sovereign debtors, including the United States and UK, out of the danger zone. Even the U.S. trade deficit, a sign of global imbalance, is once again rising.
"If the world is very fortunate, growth will become self-sustaining before the financial burdens become unbearable. But a new financial crisis could arrive even before rates go up.