Bleak Deficit Numbers Projected Under Obama’s Budget Plan
The CBO also issued gloomier forecasts for the U.S. economy, projecting that it will contract 3 percent in 2009 before growing 2.9 percent next year and expanding 4 percent in 2011.
The report forecasts a record $1.8 trillion deficit for the fiscal year, which ends Sept. 30, under the Obama administration’s budget proposal. The CBO then projected the deficit would ebb some to $1.4 trillion for 2010 — or 9.6 percent of GDP, according to news agencies.
The president’s proposal, which was released last month, outlined a $3.5 trillion blueprint for government spending, the largest ever. It included new spending priorities, such as expanded funding for universal health care initiatives and other programs.
The president’s budget outline to Congress included a forecast of almost $7 trillion in deficits through 2019, falling some $2.3 trillion short of CBO predictions.
Congress has recently passed two huge spending bills, the $787 billion stimulus package and an omnibus funding measure, amid the recent economic downturn.
“Although the economy is likely to continue to deteriorate for some time,” the CBO said, the stimulus package “and very aggressive actions by the Federal Reserve and the Treasury are projected to help end the recession in the fall of 2009.”
The numbers come as a battle brews in Congress over approval of the budget plan. Republicans were quick to voice concern over the new numbers.
“This report should serve as the wake-up call this administration needs,” said House Minority Leader John Boehner, R-Ohio, according to the Associated Press. “We simply cannot continue to mortgage our children and grandchildren’s future to pay for bigger and more costly government.”
White House Budget Director Peter Orszag said that although CBO’s economic projections are more pessimistic than other forecasts, he remained confident that Mr. Obama’s budget, if enacted, would produce smaller deficits.
Among the CBO’s dire predictions: The deficit under Obama’s policies would never go below 4 percent of the size of the economy, figures that economists agree are unsustainable, according to the AP. By the end of the decade, the deficit would exceed 5 percent of gross domestic product, a dangerously high level.
“Deficits in the, let’s say, 5 percent of GDP range would lead to rising debt-to-GDP ratios that would ultimately not be sustainable,” Orszag told reporters.
The 2009 deficit, fueled by the $700 billion Wall Street bailout and diving tax revenues stemming from the worsening recession, is four times the previous $459 billion record set just last year.
The Obama administration, meanwhile, insisted on Friday that the president’s agenda is still on track.
“It doesn’t change what the president’s focus is, in terms of his objectives in making critical investments, and doesn’t change his ability to halve the deficit in four years,” White House Press Secretary Robert Gibbs told reporters.
At a fiscal responsibility summit at the White House last month, President Obama told lawmakers from both parties, as well as leaders of community organizations, he will cut a then-projected $1.3 trillion deficit in half by 2013.
Savings were expected to come in part from a winding down of the war in Iraq and allowing the Bush administration’s tax cuts to expire in 2011.