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U.S. deficit will soar to $1.5 trillion

Far from slowing, the government's deficit spending will surge to a record $1.5 trillion flood of red ink this year, congressional budget experts estimated Wednesday, blaming the slow economic recovery and last month's tax-cut legislation.

The report was sobering new evidence that stemming the nation's extraordinary budget woes will take more than President Obama's proposed freeze on some agencies. Republicans say they want big budget cuts but so far are light on specifics.

Wednesday's Congressional Budget Office estimates indicate the government will have to borrow 40 cents for every dollar it spends this fiscal year, which ends Sept. 30. Tax revenues are projected to drop to their lowest levels since 1950, when measured against the size of the economy.

The budget estimates will add fuel to the already raging debate over spending and looming legislation that would allow the government to borrow more money as the national debt nears the $14.3 trillion cap set by law. Republicans controlling the House vow not to raise the limit without significant budget cuts, starting with a government funding bill that will advance next month.

Democrats and Republicans agree that stern anti-deficit steps are needed, but neither Obama nor his resurgent GOP rivals on Capitol Hill are -- so far -- willing to propose cutting such popular benefit programs as Medicare, farm subsidies and Social Security. The need to pass legislation to fund the government and prevent the first default on U.S. debt obligations seems sure to drive the two sides into negotiations.

Although the analysis predicts the economy will grow by 3.1 percent this year, it foresees unemployment remaining above 9 percent.

Dauntingly for Obama, the nonpartisan agency estimates a nationwide jobless rate of8.2 percent on Election Day next year. That's higher than the rates that contributed to losses by Presidents Jimmy Carter(7.5 percent) and George H.W. Bush (7.4 percent). The nation isn't projected to be at full employment -- considered to be a jobless rate of about 5 percent -- until 2016.

The latest deficit figures are higher than previous estimates because of bipartisan legislation passed last month that extended tax cuts enacted during the George W. Bush administration and unemployment benefits for the long-term jobless. It also provided a 2 percentage point Social Security payroll tax cut this year.

That measure added almost $400 billion to this year's deficit, the budget office says.

The deficit is on track to beat the record of $1.4 trillion set in 2009.

The chilling figures were released the day after Obama called for a five-year freeze on optional spending in domestic agency budgets passed by Congress each year.

Republicans were quick to blame Obama for the rising red ink. Rep. Jeb Hensarling of Texas, chairman of the House Republican Conference, said the report "paints a picture that is more dangerous than most Americans could anticipate."

"What is our leader in the White House doing about it? Asking Congress to raise the debt ceiling, proposing new spending and sticking future generations with a multi-trillion dollar tab," Hensarling said.

Sen. Kent Conrad, chairman of the Senate Budget Committee, pointed to a problem lawmakers are sure to keep facing:

"When the American people are asked what they want done and to prioritize what they want, they want the deficits and debt dealt with. But when they are asked very specifically, will they support changes in Social Security, the polls say no. Changes in Medicare? The polls say no. Changes in defense spending? The polls say no."

"I would've liked very much if the president would have spent a bit more time helping the American people understand how really big this problem is," added Conrad, a North Dakota Democrat.

Republicans are calling for deeper cuts in education, housing and the FBI -- among many programs -- to return them to the 2008 levels in effect before Obama took office.

But those nondefense programs make up just 12 or so percent of the $3.7 trillion budget, which means any upcoming deficit reduction package -- at least one that begins to significantly slow the gush of red ink -- will require politically dangerous curbs to popular benefit programs. That includes Social Security, Medicare, the Medicaid health care program for the poor and disabled, and food stamps.

Obama has steered clear of the recommendations of his deficit commission, which called last month for such difficult moves as increasing the Social Security retirement age and reducing future increases in benefits.

It also proposed a 15-cents-a-gallon increase in the gasoline tax and eliminating or scaling back tax breaks -- including the child tax credit, mortgage interest deduction and deduction claimed by employers who provide health insurance -- in exchange for rate cuts on corporate and income taxes.

The budget office predicts that the deficit will fall to$551 billion by 2015 -- a sustainable 3 percent of the economy -- but only if the Bush tax cuts are wiped off the books.

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