Obama budget could bring $9.3 trillion deficits

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(Agencies)
Updated: 2009-03-21 08:28

Obama's $3.6 trillion budget for the 2010 fiscal year beginning Oct. 1 contains ambitious programs to overhaul the US health care system and initiate new "cap-and-trade" rules to combat global warming.

File photo shows a shopper walking through San Francisco. [Agencies]

Both initiatives involve raising federal revenues sharply higher, but those dollars wouldn't be used to defray the burgeoning deficit and would instead help pay for Obama's health plan and implement Obama's $400 tax credit for most workers and $800 for couples.

Obama's budget promises to cut the deficit to $533 billion in five years. The CBO says the red ink for that year will total $672 billion.

Most disturbing to Obama allies like Senate Budget Committee Chairman Kent Conrad, D-N.D., are the longer term projections, which climb above $1 trillion again by the end of the next decade and approach 6 percent of GDP by 2019.

Among about a dozen major changes to Obama's budget, Conrad is looking to curb Obama's 9 percent increase for non-defense appropriations to show short-term progress and insists that the long-term deficit and debt crisis will have to be addressed via a special bipartisan commission.

"The budget that I'll submit will cut the deficit by more than two-thirds over these first five years," Conrad. "These imbalances are just absolutely unsustainable."

The worsening economy is responsible for the even deeper fiscal mess inherited by Obama. As an illustration, CBO says the deficit for the current budget year, which began Oct. 1, will top $1.8 trillion, $93 billion more than foreseen by the White House. That would equal 13 percent of GDP, a level not seen since World War II.

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 CBO's estimate for 2010 is worse as well, with a deficit of almost $1.4 trillion expected under administration policies, about $200 billion more than predicted by Obama.

Long-term deficit predictions have proven notoriously fickle -- George W. Bush inherited flawed projections of a 10-year, $5.6 trillion surplus and instead produced record deficits -- and if the economy outperforms CBO's expectations, the deficits could prove significantly smaller.

Republicans say Obama's budget plan taxes, spends and borrows too much, and they've been sharply critical of his $787 billion economic stimulus measure and a just-passed $410 billion omnibus spending bill that awarded big increases to domestic agency budgets.

The administration says it inherited deficits totaling $9 trillion over the next decade and that its budget plan cuts $2 trillion from those deficits. But most of those spending reductions come from reducing costs for the war in Iraq.

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