Record U.S. deficit projected this year
Thursday, January 27, 2011
The still-fragile economy and fresh tax cuts approved by Congress last month will drive the federal deficit to nearly $1.5 trillion this year, the biggest budget gap in U.S. history, congressional budget analysts said Wednesday.
The grim forecast from the nonpartisan Congressional Budget Office came hours after President Obama called in his State of the Union address for Republicans and Democrats to work together to rein in record deficits that are pushing the national debt into uncharted territory. At $1.5 trillion, the deficit would equal 9.8 percent of the economy, the CBO said, making it one of the largest by that measure since the end of World War II.
Lawmakers scrambled on Wednesday to respond to the darkening budget picture, with Republicans pressing their call for sharp and immediate cuts in domestic spending. Twenty-one Senate Republicans, meanwhile, unveiled a plan to amend the Constitution to require balanced budgets, a top priority of the tea party movement.
Democrats resisted both initiatives, arguing that amending the Constitution, a lengthy process that requires a vote in all 50 state legislatures, would do little to address the current problem. They dismissed as "drastic" a proposal by House Republicans to slash $100 billion from the current budget, arguing that cuts of that magnitude would endanger a million jobs on public- and private-sector payrolls at a time when the unemployment rate already stands at 9.4 percent.
"We have to cut government, but Republicans are going at this with meat ax when what is needed is a sharp, precise scalpel," said Sen. Charles E. Schumer (D-N.Y.).
As the two sides bickered in dueling news conferences, a small band of senators from both parties was trying to heed Obama's call, with talks aimed at advancing a bipartisan blueprint for deficit reduction developed last month by Obama's fiscal commission. That blueprint goes far beyond cuts in domestic programs to tackle the biggest and fastest-growing parts of the federal budget, including cherished tax breaks such as the deduction for home mortgage interest and popular entitlement programs such as Social Security and Medicare.
The effort includes four senators who sat on the deficit commission and rank as some of the most influential voices in their parties on budget matters, including Tom Coburn (R-Okla.); Mike Crapo (R-Idaho); Kent Conrad (D-N.D.), chairman of the Senate Budget Committee; and Richard J. Durbin (D-Ill.).
Conrad said discussions are focused on two tracks: a move to present the commission's recommendations as a fully drafted bill for a Senate vote and an alternative path that could incorporate the panel's ideas into the annual budget process or into legislation needed to raise the legal limit on government borrowing.
The group had hoped to meet for dinner Wednesday at the Alexandria home of Sen. Mark R. Warner (D-Va.), but the gathering was canceled because of snow.
The commission's recommendations are "very good," said Durbin, the No. 2 Democratic leader in the Senate. "We want to work with other members to see if we can come to a bipartisan approach in the Senate to the budget."
Conrad said the new deficit numbers released Wednesday in the CBO's twice-yearly budget outlook served "as another wake-up call" and added to the urgency around the group's work. After two years of record deficits hovering around $1.4 trillion, policymakers had hoped that an improving economy would begin to narrow the gap between spending and revenue.
Instead, the CBO forecast that the budget gap is widening again and is on track to remain above $1 trillion in 2012, the fourth year in a row.