Kaufman sees US budget deficits up to $800 billion

Following the US government's huge planned bailout for the financial system, federal budget deficits of between $700 billion and $800 billion will be commonplace, said veteran Wall Street economist Henry Kaufman on Wednesday. Kaufman, who is president of financial consulting firm Henry Kaufman & Company, Inc was delivering prepared remarks before the World Leadership Forum of the Foreign Policy Association in New York.
"US budget deficits of $700 billion to $800 billion will be the norm. Federal tax revenues will slow appreciably and federal spending increase," Kaufman said.
"The government take-over of Fannie Mae and Freddie Mac will make additional demands on US Treasury financing, and so will the just-announced mammoth bail-out program," Kaufman said. As the US government buys lower quality fixed income assets and issues more debt itself, "yields on all obligations eventually will increase, and yield spreads between high and low quality will narrow somewhat," Kaufman said. "Our economy will see yet another round of financial consolidation that will contribute to future systemic risks," he said.