The Obama administration, as part of its mid-year budget review, cited rising unemployment and the sluggish pace of economic recovery as reason for the higher forecast. In a conference call with reporters, Christina Romer, head of President Obama’s Council of Economic Advisers, said the revised numbers reflect “new information all forecasters received earlier this year about the severity of the forecast.”
The U.S. national debt now stands at more than $11 trillion.
According to the latest projections, the White House now expects:
— Unemployment to reach as high as 10 percent over the next 18 months, up from an original estimate of 8.1 percent.
— Joblessness to average above 9 percent through 2010.
— A 2.8 percent decline in gross domestic product for 2009, compared to an earlier projection of negative 1.2 percent.
— GDP growth of 2 percent for 2010, down from a rosier forecast of 3.2 percent in February.
— Public debt to hit 66.3 percent of GDP in 2010, more than at any point since the 1940s, when it peaked at 121 percent of GDP.
The White House’s figures exceeded more optimistic budget projections laid out by the nonpartisan Congressional Budget Office, which forecast the federal budget deficit to be $7.1 trillion over the next decade. The budget office only considers policies that are in place when its numbers are compiled, but the administration incorporates the effects of policies it hopes to enact.
The CBO figures assume that tax cuts put in place during President George W. Bush’s administration will expire by 2011. The White House, meanwhile, is factoring in a goal of maintaining the tax cuts for families earning less than $250,000 a year. The administration’s estimate also includes the cost of a health care overhaul.
The projections from the White House and the CBO for the 2009 budget deficit were much closer. After determining it will not need additional bailout money for the nation’s banks, the White House lowered its predicted deficit for the year by roughly $260 billion to $1.58 trillion. The CBO’s estimate puts this year’s deficit at $1.6 trillion.
Republicans used the figures to rally against the president’s plan to overhaul the nation’s health care system.
“Americans are deeply shaken — and increasingly angered — by the explosion of spending and debt coming from Washington,” said Rep. Paul Ryan, R-Wis., the top Republican on the House Budget Committee. “If we continue to pursue this policy of Washington as the answer to every problem, it will cost Americans far more than the obvious burdens of ever-higher taxes, interest rates, inflation, and debt; it will cost us the freedom to run our own lives.”
White House officials used the new numbers to help push the president’s health care overhaul.
“A lot of people will look at this deficit and say we cannot afford health care reform,” said Peter R. Orszag, director of the White House Office of Management and Budget. However, “The size of the fiscal gap is precisely why we mush enact fiscally well designed health care reform now,” he said.
Orszag also insisted the nation’s deficit would have been worse had it not been for the $787 stimulus package signed by the president in February, a view supported by the CBO, as well as many analysts.