The projected federal deficit keeps going up, and is now expected to be four times the previous record.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.

Just a few days ago, Obama touted an administration plan to cut $17 billion in wasteful or duplicative programs from the budget next year. The erosion in the deficit announced Monday is five times the size of those savings.

For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration's plan. In 2010, it would borrow 35 cents for every dollar spent.
...
Annual deficits would never dip below $500 billion and would total $7.1 trillion over 2010-2019. Even those dismal figures rely on economic projections that are significantly more optimistic -- just a 1.2 percent decline in gross domestic product this year and a 3.2 percent growth rate for 2010 -- than those of private sector economists and the Congressional Budget Office.

As a percentage of the economy, the measure economists say is most important, the deficit would be 12.9 percent of GDP this year, the biggest since World War II. It would drop to 8.5 percent of GDP in 2010.

I have to wonder how long the bond and currency markets can absorb this kind of deficit spending.
On a related note, treasuries are having a huge rally today. It seems contrary to the above news until you understand why.

Yields on Treasuries have risen at a faster pace than rates on mortgage securities. “While U.S. Treasury yields are significantly higher than recent lows, MBS yields and primary mortgage rates are only slightly above recent lows,” wrote Brett Rose, a mortgage bond analyst at primary dealer Citigroup Inc. in New York, in a note to clients.

BlackRock Inc., American Century Investments, Federated Investors and Pioneer Investment Management say it’s time to purchase Treasuries because the Fed will need to expand its buybacks to keep down consumer borrowing costs.

Treasury yields have “moved above the level that the Fed is comfortable with,” said Richard Clarida, a strategic adviser at Pacific Investment Management Co., the world’s biggest bond- fund manager.

“I wouldn’t be surprised it at some point the Fed doesn’t increase its program,” Clarida said in a Bloomberg Television interview. “If rates go up, that’s going to really, really hurt the economy.”

In the World of Wall Street, massive deficits are a great reason to buy low-yielding treasuries. This sort of idiotic, short-term thinking won't last long.