White House: Budget Deficit Will be $2 Trillion Higher than Projected

Aug 25, 2009 9:30am

ABC News' Karen Travers reports: As was reported last week, the Obama administration announced today that it has revised its 10-year cumulative budget deficit projection to around $9.051 trillion, up from its February projection of $7.1 trillion. Administration officials said Monday that these numbers put their projection in line with the Congressional Budget Office’s June projection. These out-year deficits are about 4 percent of GDP, which the administration says is "higher than desirable." The new forecast is based on new data that reflect "how severe the economic downturn was" at the end of last year and first half of this year. Read the White House fact sheet HERE. Council of Economic Advisers Chair Christina Romer said the forecast was locked in in early June, so even at this point, the data for the projection is "some two months old." Getting these deficits under control is a "top priority of the administration," said Peter Orszag, director of the Office of Management and Budget. "We are in the midst of the policy process surrounding the FY 2011 budget, and that process will include proposals to put the nation on a fiscally sustainable path." Orszag would not comment on what those proposals would be or any details of the FY11 budget process. Romer also said the administration predicts the unemployment numbers will peak in the fourth quarter of 2009 and first quarter of 2010 and will hit 10 percent “for some months or some quarters” in that time period. She said the annual average of the unemployment rate for 2009 will be 9.3 percent and 9.8 percent in 2010. Romer added that these unemployment figures reflect two things: the deterioration of the GDP forecast (“the recession was simply worse” than they thought) and the fact that this is an “unusual recession for labor market.” One semi-positive projection is that the size of this year’s deficit has fallen by almost $262 billion (about 1.7 percent of GDP) and is projected to be $1.58 trillion (11.2 percent of GDP), since less money than once anticipated has been needed to stabilize the financial system. The Obama administration pointed the finger at the Bush White House for not following PAYGO rules, and says the projected 10-year deficit would be $5 trillion smaller if they had.  “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,” a fact sheet from the White House Office of Management and Budget stated. The White House numbers come as President Obama today nominated Federal Reserve Chairman Ben Bernanke for a second term. Bernanke has had his share of controversy but he is likely to be confirmed by the Senate as he has earned the support of both Democratic and Republican lawmakers. — Karen Travers

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