Budget Blues: White House and CBO Release Summer Outlooks

Aug. 25, 2009 — -- The Obama administration predicted a dire future today for the 10-year federal budget deficit, but the White House projection came in about $2 trillion higher than a separate prediction released today by the nonpartisan Congressional Budget Office.

The White House's Office of Management and Budget this morning projected a staggering $9 trillion dollar deficit from 2010-2019, far higher than it has previously forecast.

The CBO painted a slightly more optimistic picture in its own summer update on the budget and the economy, projecting a $7.14 trillion 10-year budget deficit.

Today CBO director Douglas Elmendorf called the budget outlook "sobering."

Asked to explain why the CBO's deficit estimate is lower than the one released by the White House, he said the CBO is more restricted in how it makes projections because it can't assume any changes in current laws or policies, such as letting all of the 2001 Bush tax cuts expire next year or not adjusting the alternative minimum tax. Elmendorf said the White House Office of Management and Budget had more leeway in making its forecast.

The CBO's update said that, "over the long term (beyond the 10-year baseline projection period), the budget remains on an unsustainable path."

"Unless changes are made to current policies, the nation will face a growing demand for budgetary resources caused by rising health care costs and the aging of the population," it concluded.

The White House said its latest $9.051 trillion projection, far exceeding February's $7.1 trillion projection, is based on new data that reflects the severity of the 2008-2009 economic downturn.

Word had come last week that the numbers would be in a whole new ballpark from previous estimates.

For anticipated long-term struggles, the Obama administration points the finger at the Bush White House, saying the projected 10-year deficit would be $5 trillion smaller if the previous administration had done things differently.

"In other words, more than half of the projected deficits over the next 10 years are directly attributable to the previous Administration's failure to follow the pay-as-you-go principle," states a fact sheet from the Office of Management and Budget.

Elmendorf said a variety of factors could alter CBO's projection -- both positively and negatively.

"Some of the resulting assumptions may underestimate potential deficits," Elmendorf wrote on his blog. "Many other outcomes are possible."