One of the starkest indicators is that the number of people who have been unemployed for 27 weeks or more reached two million in September. That's 21% of the total unemployed, and approaching the prior peaks of about 23% in 2003 and 1992.

[...]

And while the unemployment rate is at a five-year high at 6.1%, a broader measure of weakness that includes people who have stopped looking for work or whose hours have been cut to part-time is 11% -- the highest in 15 years.

The jobs numbers sure look like we're in a recession, but here's the thing:

During the so-called "jobless recovery" following the 2001 recession, jobs continued to be shed after it was officially declared over. But the current weakness comes as the country heads into a recession that is now forecast to be deeper and longer than previously thought.

"No one thinks we are anywhere near the bottom of this, and we're already rivaling these other recessions," says Heidi Shierholz, an economist at the Economic Policy Institute, a left-leaning think tank in Washington.

Yikes!

But with Fed Chair Ben Bernanke supporting a second stimulus measure, President Bush signaling he is "open" to it, and Senate Minority Leader Mitch McConnell (R-KY) climbing onboard (CongressDaily, $), chances of Congress passing something in November are increasing.

Treasury Secretary Henry Paulson took time out of his busy schedule nationalizing recapitalizing banks to announce with OMB Director Jim Nussle that the federal budget deficit for FY 2008 was $455 billion or 3.2 percent of GDP. The deficit- a record in nominal dollars -- had been projected by the Congressional Budget Office last week to be $438 billion.

At $455 billion, the deficit for FY 2008 was $293 billion higher than the deficit for FY 2007. The deficit increased to 3.2 percent of GDP, up from 1.2 percent of GDP for FY 2007. As a percentage of GDP, the FY 2008 deficit was the largest since the deficit of 3.6 percent of GDP in FY 2004, but below the peak postwar deficit in FY 1983 (6.0 percent).

Joint Statement of Henry M. Paulson, Jr., Secretary of the Treasury, and Jim Nussle, Director of the Office of Management and Budget, on Budget Results for Fiscal Year 2008

Some said it couldn't be done. Others doubted his resolve. But it looks as though President George Bush has broken his own record this week - the largest budget deficit on record. Woohoo! The Congressional Budget Office (CBO) has released new estimates on the federal budget deficit for FY 2008 - which they believe will come in at an incredible $438 billion, or 3.1 percent of GDP. This shatters Bush's previous record set in 2004 of $413 billion.

CBO Director Peter Orszag blogged about the estimates yesterday:

CBO released its Monthly Budget Review today. Based on data from the Daily Treasury Statements, CBO estimates that the federal budget deficit was about $438 billion in fiscal year 2008, $276 billion more than the shortfall recorded in 2007. (The Treasury Department will report the actual deficit for fiscal year 2008 later this month.)

Relative to the size of the economy, that deficit was equal to 3.1 percent of gross domestic product, up from 1.2 percent in 2007. (The average deficit over the preceding five years, 2002-2006, was 2.6 percent of GDP.) The $438 billion figure is about $31 billion more than the $407 billion deficit CBO projected this summer, primarily because revenues are lower than we anticipated and spending for defense and deposit insurance is turning out to be higher.

An Associated Press article published today rips into President Bush and his administration's fiscal record, noting "virtually every administration promise on the deficit has failed to come to pass," and "a later promise to cut the deficit in half by the time Bush leaves office is in tatters, and virtually no one takes seriously his proposed path to a balanced budget by 2012." Ouch!

Related Resources:
AP Story: U.S. Budget Deficit Hits Record $438 Billion For Year
CBO Blog: Monthly budget review: FY 2008 deficit of $438 billion
Statement of Senate Budget Committee Chair Kent Conrad (D-ND)

Stan Collender ponders the bottom line of the Troubled Asset Relief Program (AKA "TARP", AKA "Wall Street Bailout", AKA "financial rescue", AKA "Just Trust Us") and what it means for the next administration inthis week's Fiscal Fitness column.

Because of TARP, my estimate is that the budget deficit could easily reach or exceed $1 trillion this year. This includes my estimate of a $600 billion? deficit before TARP and an additional $400 billion afterwards. A deficit of? that size would be between and 6 percent and 7 percent of gross domestic? product, a level that hasn't been reached since fiscal 1942-1946 when the? United States was fighting and paying for the direct costs of World War II.

But the bigger cost of TARP may well be less in dollar terms than in? making progress in other areas. A $1 trillion, 7-percent-of-GDP deficit? likely will chill most of the spending and taxing plans of whoever is? elected as hoped-for tax cuts and spending increases have to be delayed.? There could even be a big push for deficit reductions if the market reacts? very negatively to the 1-year, 10 percent increase in the national debt and? interest rates are pushed higher by the bond market vigilantes that were so? evident at the start of the Clinton administration.?

In a stark reversal of Monday's vote, the House approved the Senate-passed version of a financial market rescue bill. By a vote of 263 to 171, the House passed a $700 billion plan to buy up troubled financial assets, patch the AMT for a year, and extend dozens of expiring tax cuts (some for a year, some for two). While the final cost to taxpayers of the bailout is impossible to estimate, the tax portion of the bill will reduce revenues by $107 billion.

Moments after passage, President Bush signed the bill into law.

President Bush signs the Emergency Economic Stabilization Act of 2008 in the Oval Office after the House passed the $700 billion financial bailout bill at the White House in Washington, Friday, Oct. 3, 2008. (AP Photo/Charles Dharapak)

Citizens for Tax Justice released a timely report yesterday examining the special tax breaks and subsidies that are currently handed out to Wall Street firms (and other companies). One in particular this report dissects is the special low rate on capital gains and dividends.

The report's introduction frames the relationship between current proposals to cut capital gains further as a solution to alleviate the financial turmoil:

Americans are in no mood to subsidize Wall Street. This became clear Monday, when the House of Representatives rejected the financial rescue plan that was supported by leaders from both parties as well as the President. Reasonable people can differ on whether the government should step in to prop up the financial system right now. There are progressives and conservatives on both sides of that issue. But what seems indisputable is that Wall Street has mismanaged its affairs and Americans are in no mood to pay for its mistakes.

...

Oddly, the conservative Republicans who say they oppose the financial rescue plan because they don't want to subsidize Wall Street have simultaneously called for more subsidies for Wall Street in the form of a further reduction in taxes on investment profits! We think these GOP conservatives are seriously confused.

The report concludes by citing a reform proposal that would go a long way to make the tax code more simple, fair, and progressive - a reform that happened to be supported by Ronald Reagan:

If House Republicans are sincere about protecting middle-income taxpayers and not giving away the store to Wall Street, then they should abandon their proposed tax cuts for Wall Street. Instead, they should join us in advocating a return to President Reagan's approach of taxing investment profits at the same income-tax rates as wages and other kinds of income.

Last night, the Senate approved a financial rescue (or Wall Street bailout) bill, HR 1424, by a 74-25 vote. As we noted yesterday, the package includes not only a provision that grants the Treasury Secretary $700 billion to purchase troubled financial assets, but also a package of tax cuts passed previously by the Senate.

According to the Congressional Budget Office (CBO), the ten-year cost of the tax cuts, which include a fully-offset set of tax incentives for renewable energy production; an extension of dozens of miscellaneous individual and business tax cuts; and a $64 billion patch for the Alternative Minimum tax, would total $107.1 billion. The CBO, however, indicates that the cost of the asset purchase program is "impossible at this point to provide a meaningful estimate of the ultimate impact on the federal budget from enacting this legislation," but would be "substantially smaller than $700 billion." Nor can CBO estimate the cost of increasing FDIC limits on insured deposits.

Congressional Budget Office: Letter to Honorable Christopher J. Dodd (estimated budgetary effects)
Joint Committee on Taxation: Estimated Budget Effects of the Tax Provisions Contained in an Amendment in the Nature of a Substitute to HR 1424

Neil Gordon blogs over at the Project on Government Oversight about a troubling provision in the current debate over a bailout proposal for Wall Street that would give Secretary of the Treasury Hank Paulson the ability to waive provisions and requirements of the Federal Acquisition Register (FAR), the set of regulations that govern how the feds run government contracting. Gordon points out a very disturbing irony of this provision:

This would have enabled the Treasury Secretary to award billions of dollars in sole-source contracts to private asset managers firms and financial consultants, even those with a direct financial interest in the bailout. In addition, the Secretary could waive other FAR provisions that protect taxpayers.

Gordon also points out the fascinating analysis released Monday from the Center for Responsive Politics which showed a relationship between campaign contributions from the finance, insurance, and real estate sectors and the way House members voted on the bailout on Monday. The data might shock you - it shocked me, although I suppose after so many years working in Washington, these things should stop surprising me.

It seems that House members who voted for the bill on Monday have collected about 51 percent more in campaign contributions from the affected industries (finance, insurance and real estate) than those who voted against it. Among Democrats, that discrepancy between bill supporters and opponents is an even more astonishing 88 percent.

I wonder if any of those contributions came from companies who may gain from a government contract to fix this mess? Gulp!