The Budget Brigade would like to wish you all a great holiday season and a super New Year.

We would also like to thank all of our readers for following our work supporting us in 2008. We will be on vacation until January, but will return in 2009 to continue keeping an eye on things.

Image by Flickr user wan · der · lust used under a Creative Commons license.

The budget situation in the states just keeps getting worse. The Center on Budget and Policy Priorities released another update to their analysis of widespread state budget shortfalls. The total is up to 43 states and the District of Columbia (up from 29 states and DC since CBPP last released an update of this report). It looks like things are continuing to get worse despite efforts by state governments to balance the books:

Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states. Now, their budgets have fallen out of balance again. New gaps have opened up in the budgets of at least 37 states plus the District of Columbia after they struggled to close the largest budget shortfalls seen since the recession of 2001. And these problems are expected to continue into next year.

Below is a great map from the CBPP report showing which states are facing budget problems in 2009 or 2010. The full report is definitely worth a read.

CBPP: STATE BUDGET TROUBLES WORSEN

The Budget Brigade occasionally registers its opposition to adding to the national debt on this blog. Not today.

Investors accepted the zero percent rate in the government's auction Tuesday of $30 billion worth of short-term securities that mature in four weeks. Demand was so great even for no return that the government could have sold four times as much.

In addition, for a brief moment, investors were willing to take a small loss for holding another ultra-safe security, the already-issued three-month Treasury bill.

At 0% (for 30 days), the federal government would be daft to not borrow. The "flight to safety," as investor types are say, is making government borrowing cheap cheap cheap. And if inflation is greater than zero for that the duration of the loan, the government would actually make money by repaying the loan back with fewer real dollars than it borrowed!

Image by Flickr user NCinDC used under a Creative Commons license.

On Friday, the Bureau of Labor Statistic reported the largest job loss numbers since 1974 as the economy lost 533,000 jobs and the unemployment rate pushed higher to 6.7 percent. This news, combined with last week's pronouncement that the U.S. economy is officially in a recession shows that we are now in deep trouble.

On Friday, The Center on Budget and Policy Priorities released a statement on the job loss numbers that underscores the bleak economic outlook, focusing on in impact this downturn will have on individuals and families living in poverty and those who are about to fall into such dire economic circumstances:

Today's report also makes it more likely that unemployment will reach 9 percent by the end of 2009, as Goldman Sachs has predicted. The Center on Budget and Policy Priorities estimates this could swell the number of Americans living in poverty by up to 10 million and the number of Americans in deep poverty, with incomes below half the poverty line, by up to 6 million...

This week the National Bureau of Economic Research determined that a recession began in December 2007. In the ensuing 11 months, employers have shed jobs each month and the losses have accelerated sharply in recent months. Overall labor market trends are grim.

CBPP also points out that the current recession is already one-month longer than the post-World War II average. Yet it feels like we are just getting started with this one. Yikes!

CBPP: STATEMENT ON THE NOVEMBER EMPLOYMENT REPORT
NY Times: U.S. Loses 533,000 Jobs in Biggest Drop Since 1974

The Congressional Budget Office (CBO) has released its Monthly Budget Review for November.

CBO estimates that the Treasury will report a federal budget deficit of $408 billion for the first two months of fiscal year 2009, $253 billion higher than the deficit recorded through November of last year. This estimate includes $191 billion disbursed for the Troubled Assets Relief Program (TARP) during the first two months of the fiscal year.

And CBO still disagrees with the Treasury Department's accounting method for bank stock purchases under TARP.

CBO believes that the equity investments for that program should be recorded on a net present value basis adjusted for market risk, as specified in the Emergency Economic Stabilization Act of 2008, rather than on a cash basis as recorded by the Treasury. Evaluating TARP on a net present value basis, CBO estimates the federal deficit totaled $267 billion through November.

It's felt like it for a while, but the Business Cycle Dating Committee of the National Bureau of Economic Research announced today that we are in a recession and it began in December 200.

The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.

Image by Flickr user Randy Son Of Robert used under a Creative Commons license.