Transcripts

2009 May Be The Year of the Trillion Dollar Deficit

SUSIE GHARIB: Get ready for a trillion dollar budget deficit. The U.S. Congressional Budget Office said today that the Federal deficit will balloon to nearly $1.2 trillion in fiscal 2009. And that number is likely to rise sharply once President-Elect Obama announces his much anticipated stimulus package to revive the economy. The Obama recovery plan could cost as much as $800 billion over the next two years. But as Washington bureau chief Darren Gersh reports, many analysts are beginning to think that stimulus figure may be too small.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Economist Mark Zandi says the argument for a bigger stimulus package is pretty simple. The economy is likely to shrink by about a trillion dollars this year and something has to fill that hole.

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: So as peoples' forecasts grow darker -- and they are growing consistently darker -- the price tag for this stimulus continues to rise and there are a growing number of voices saying, you know, $750 billion-$800 billion isn't going to cut it. We need something greater than that.

GERSH: Asked whether his stimulus would come close to the $1.3 trillion some economists are recommending, the president-elect said no.

PRESIDENT-ELECT OBAMA: It will be on the high end of our estimates, but will not be as high as some economists have recommended because of the constraints and concerns we have about the existing deficit.

GERSH: And what a deficit it is -- $1.2 trillion is the latest estimate from the Congressional Budget Office and the pressure on the budget is growing as the tough economy forces more people to seek government benefits. Spending on Social Security, Medicare and Medicaid is projected to grow 8 percent this year, hitting roughly $1.4 trillion. Medicare's chief actuary has warned the trust fund used to pay hospital bills could be insolvent in seven years. Obama said he'd have more to say about ways to tame all that entitlement spending when he reports a budget outline in February.

OBAMA: The key is going to be medium term and long term, how do we bend the curve so we start getting these deficits down to a manageable level and entitlements are going to be a part of that.

GERSH: This year the deficit is projected to hit 8 percent of the nation's gross domestic product. That shatters the infamous 6 percent record set in the Reagan years. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.