On Pace for $512 Billion

Yesterday's release from the Treasury Department showed a $128 billion dollar deficit in the first quarter of fiscal year 2004. The Federal government is on pace to rack up a $500 billion deficit. John Snow says it doesn't matter because, the deficit, as a percentage of GDP (4.5%) is still smaller than it was during the Regan years (around 5%). Dick Cheney, (if you believe Paul O'Neill), says Reagan proved deficits don't matter at all. They might, especially to voters...and to the bond market. Total government spending will hit around $2.3 trillion this year. That's 20% of GDP. GDP is $11.1 trillion. Remember, this is just the Federal government we're talking about. Total government spending as a percentage of GDP (including state and local government) is nearing 30% of GDP-- a level it has not reached since the Great Depression. So...government at all levels is doing everything in its fiscal power to get the economy going....the Federal Reserve keeps short-term interest rates at a 45-year low...and Bush even throws in a tax cut over a $1 trillion in 2003. Isn't it just a little odd that the nation's monetary authorities are resorting to historic measures...and yet no one in the stock market seems to think things are terribly different or intersting right now? The budgetary picture is awful...and yet yesterday the dollar rises against the euro to make it's first weekly gain in a month, bond prices go up, and Fed President Robert McTeer said he's ``in no hurry'' to raise rates. Does anyone care about deficits anymore?