Tuesday, March 15, 2011

Putting the Federal Budget Deficit in Perspective

Estimates of the cost of Japan’s earthquake-tsunami disaster keep rising (excluding lives and personal injuries).  The highest thus far is US$100 billion put out by Singapore’s DBS Bank.  The damage includes losses to infrastructure, residences, and output.   The insurance industry may have to pay $60 billion in damage claims.

So far, the $100 billion amounts to 2% of Japan’s GDP of about $5.47 trillion.  The $100 billion represents about 11% of Japan’s holdings of U.S. Treasury securities.

In February 2011, the U.S. federal budget deficit was a record $223 billion.  Estimates of the annual deficit have been put at $1.6 trillion.  This means that Japan’s economic losses from the recent natural disaster amount to about 45% of February’s budget deficit, and 6.3% of the current year’s projected deficit.

Does this give some indication of the magnitude of the federal deficit?

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