Surging US deficit under scrutiny
WASHINGTON: The staggering fiscal deficit plaguing President Barack Obama's administration comes under focus Tuesday as the White House and a financial scrutiny arm of Congress provide new government budget estimates and updated economic forecasts.
The White House Office of Management and Budget will release at 9:30 am (1330 GMT) Tuesday the mid-term review of the federal government budget for fiscal year 2010 beginning October 1, the OMB said in a statement Monday.
The Congressional Budget Office, a statutory watchdog which plays a critical support role to lawmakers by providing cost estimates, said it would give its own update on the budget and economic outlook about half an hour after the White House released its report.
The White House is expected to project a further increase of two trillion dollars in its 10-year budget deficit forecast even as it trims the current budget estimates, Obama administration officials said.
The projected streak of red ink could further push up national debt levels as the nation reels from an economic crisis and adds pressure on Obama to scale back his ambitious healthcare overhaul plan.
"The budget deficit is apt to become a greater political concern," said Goldman Sachs economist Alec Philips said in a report Friday.
Voluntary response polls, which ask voters to name any one issue they are most concerned about, have begun to register concern about the deficit after many years of little worry, he noted.
Administration officials project another two trillion dollars will be added to the government's 10-year budget deficit forecast, bringing it to approximately nine trillion dollars, an OMB official said Friday, on condition of anonymity.
The updated 2010-2019 projection will supercede the previous deficit forecast of about 7.1 trillion dollars.
However, the estimated budget deficit for the current fiscal 2009 ending September 30 will be trimmed to 1.58 trillion dollars, around 262 billion dollars lower than forecast.
In May, the administration projected a 3.998 trillion dollar budget for 2009 with a deficit of 1.841 trillion dollars, reflecting swollen spending amid the worst economic crisis on record.
The 2009 update is expected to show the 1.58-trillion-dollar deficit will clock in at around 11.2 percent of gross domestic product (GDP) in an overall budget of 3.65 trillion dollars.
The new budget figures are expected to fuel a fierce political debate over the fiscal situation and rising national debt as Obama's Republican critics redouble calls for him to abandon his plans to remake US health care and fight climate change.
"Bottom line: the budget outlook is worse, and dangerous," said the office of John Boehner, the Republican leader of the House of Representatives, on Monday ahead of the budget forecast reports.
It accused the Democratic Obama administration of "using budgetary gimmicks" to claim a lower federal deficit than previously forecast for this year.
The Congressional Budget Office (CBO) is also expected to revise upwards its long-term government deficit forecasts because of projected lower growth and higher unemployment over the coming decade, US economist Dean Baker said.
"The real story in the new CBO projections should be the more dire economic outlook," said Baker, co-director of The Center for Economic and Policy Research, in the TPM blog.
He speculated that the CBO would expect the unemployment rate to be near 10 percent through most of 2010 and only return to "more normal levels" in 2013 or even 2014, more than six years after the collapse of the housing bubble threw the US economy into recession.
Obama has vowed to cut the gaping budget deficit he inherited from predecessor George W. Bush's administration in half by the end of his mandate in 2013.
But the new president has watched his poll ratings dip sharply over recent months in the face of stiff Republican attacks and mounting public concern over how to pay for the health reform plan.