I linked to this story on the previous thread, but it bears repeating:
W.H. hikes deficit estimate by $2 trillion

The White House is likely to dramatically increase its projected 10-year budget deficit estimate next week by nearly $2 trillion, senior administration officials said Friday.

Obama administration officials have concluded the economy was much worse last year — and tax revenues much lower — than they had initially assumed, which means that the estimated budget deficit will increase from $7 trillion to about $9 trillion over the coming decade.

The planned revision was first reported by Reuters, and White House officials confirmed that account for POLITICO.

There’s no doubt the revision will be interpreted as bad news for an administration whose deficit spending has emerged as a political Achilles’ heel.

Implications of this:

1. You can forget about the “public option” in health care. No way they can get votes for the deficit monster now.

2. Interest rates are going to jump. This will start the “crowding out” effect I have talked about in the past, discouraging private capital investment.

3. The Fed is going to have to start jacking rates up.

4. Figure on at least a “W” shaped recession.