Here’s your Quote of the Day, from The New York Times’s story on the Financial Crisis Inquiry Commission report.

Wall Street historian Steve Fraser:

“For a historian, it’s a baffling moment,” he said. “All the stars seemed aligned to produce real, fundamental change in the direction of public policy, and yet here we are with an administration itself bending over backwards to make friends with the financial industry.”

I wouldn’t call it baffling—we know why it’s happening (kaching). But it’s still stunning that an industry that almost took down the world two years ago is still able to exercise the power that it does over a government elected in no small part to stand up to it.

— Reuters Breakingviews writes that Demand Media’s hot IPO yesteray is the latest evidence of a second tech bubble. Add it to the $50 billion Facebook deal and the $15 billion to $20 billion potential Groupon IPO.

Google’s search results have gone way downhill lately in large part because of junk purveyors like Demand and Google says it will crack down on these content farms. We’ll see, but it’s one more reason to think a company like Demand might be overvalued at $1.5 billion. I don’t quite understand how Demand’s junk—and that of its competitors—gets ranked so high in search results. Who links to this stuff?

Breakingviews:

Moreover, the company’s accounting practices look aggressive. Demand says its content has a lifespan of five years, so it amortizes the cost of creating it over this period. If enough articles such as “How to be a hipster in Chicago”, have a shorter shelf-life, the result would be high revenues up front and costs spread out over an unrealistic period. That would suggest current margins are inflated and its losses understated.

Let’s hope it doesn’t live five years.

— The Wall Street Journal goes page one with news that Obama’s deal with Republicans to preserve tax cuts for the rich in exchange for extending unemployment benefits for the not-rich will mean a record deficit for next year: $1.5 trillion.

Here’s the headline and subhed:

Deficit Outlook Darkens

Stark Warning for 2011 Fuels Battle Over Government Spending and Taxation

But things don’t seem quite so catastrophic if you look at the WSJ’s own chart, which doesn’t get mentioned in the story:

Looks like the deficit shrinks dramatically after this year, dropping to a sustainable level by 2013 or so and staying there at least through 2020.

Indeed, here’s what the CBO says on its site:

Under current law, CBO projects, budget deficits will drop markedly over the next few years—to $1.1 trillion in 2012, $704 billion in 2013, and $533 billion in 2014. Relative to the size of the economy, those deficits represent 7.0 percent of GDP in 2012, 4.3 percent in 2013, and 3.1 percent in 2014. From 2015 through 2021, the deficits in the baseline projections range from 2.9 percent to 3.4 percent of GDP.

It might have been worth pointing out in the Journal’s story about budget projections that the days of huge deficits are projected to end in a year and a half or so.


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Ryan Chittum , a former Wall Street Journal reporter, is deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.