Deficit Projected To Soar With New Programs

10-Year Estimate of $9 Trillion Fuels Critics of President's Agenda

Washington Post Staff Writer
Wednesday, August 26, 2009

The nation would be forced to borrow more than $9 trillion to support President Obama's initiatives and other federal programs over the next decade, the White House said Tuesday, a sharp increase in projected deficits that provided fresh ammunition to critics of the president's sweeping proposal to expand health coverage to the uninsured.

In their traditional summertime budget review, administration officials acknowledged that they relied on overly optimistic assumptions about the economy when they forecast in March that Obama's budget plans would generate deficits of $7.1 trillion over the next 10 years. After factoring in the severity of the recession and the prospect of a more sluggish recovery, the White House concluded that the budget outlook is significantly worse.

White House budget director Peter Orszag played down the grim forecast as unsurprising, saying the update merely brings White House projections in line with those of outside experts. He noted that this year's deficit is now expected to approach $1.6 trillion -- the highest on record and the biggest as a percentage of the economy since the end of World War II, but slightly smaller than officials had feared.

Still, with town hall meetings across the country erupting with bitter complaints about rising federal spending and the fear of greater government intrusion into people's lives, the new projections are likely to complicate Obama's ambitious legislative agenda when Congress returns in September.

Republicans seized on the forecast, arguing that a nation so deeply mired in red ink can ill afford an overhaul of the health-care system projected to cost as much as $1 trillion over the next decade. Although Democrats have vowed to pay for health reform with spending cuts and tax increases, the packages under discussion would drive up future deficits by $240 billion or more.

"Americans are deeply shaken -- and increasingly angered -- by the explosion of spending and debt coming from Washington," said Rep. Paul D. Ryan (Wis.), the senior 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."

Added Rep. Dave Camp (Mich.), the senior Republican on the House Ways and Means Committee: "If the House Democrats' unaffordable $1 trillion health-care bill wasn't dead before, it should be now."

Orszag said the president will press forward on health care despite the yawning budget gap, arguing that reform is essential to reining in the skyrocketing costs of government programs such as Medicare and Medicaid, which threaten to drive deficits even higher as the baby-boom generation retires.

"I know there are going to be some who say that this report proves that we can't afford health reform. I think that has it backwards," Orszag told reporters. "The fiscal gap is precisely why we must enact well-designed and fiscally responsible health reform now. . . . Given the long-term nature of that problem, we simply can't afford to wait."

Orszag acknowledged, however, that health-care reform alone cannot solve the nation's budget problems, and he said deficit reduction will be "a top priority" when the president presents his next budget proposal to Congress in February.

A $1.6 Trillion Gap

As the White House released its budget update, the nonpartisan Congressional Budget Office released a similar report Tuesday, confirming the administration's projection that this year's deficit will soar to nearly $1.6 trillion, about 11.2 percent of the overall economy and more than triple last year's deficit of $459 billion. The chasm is almost entirely the result of the severe downturn, the CBO said, which produced the sharpest drop in tax collections since the Great Depression and the biggest increase in spending since 1952, the height of the Korean War.

Still, this year's deficit is lower than officials expected, thanks in large part to reduced spending on the bailout of financial firms. The Troubled Assets Relief Program cost $133 billion this year, the CBO said -- about $200 billion less than projected.

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