Friday, August 21, 2009

White House: $2 trillion higher deficit projected

Last month - in a post entitled "White House hiding bleak news from lawmakers until they depart for summer recess" - I cited the following report from the AP:
July 20, 2009 - The administration's annual midsummer budget update is sure to show higher deficits and unemployment and slower growth than projected in President Barack Obama's budget in February and update in May, and that could complicate his efforts to get his signature health care... proposal[s] through Congress.

[Hence], the release of the update — usually scheduled for mid-July — has been put off until the middle of next month, giving rise to speculation the White House is delaying the bad news at least until Congress leaves town on its August 7 summer recess.

The administration is pressing for votes before then on its $1 trillion health care initiative, which lawmakers are arguing over how to finance...
Well, now that congress has left town for summer recess, Obama has decided to finally let the cat out of the bag.

From the AP - August 21, 2009:
The Obama administration expects the federal deficit over the next decade to be $2 trillion bigger than previously estimated, White House officials said Friday, a setback for a president already facing a Congress and public wary over spending.

The new projection, to be announced on Tuesday, is for a cumulative 2010-2019 deficit of $9 trillion instead of the $7 trillion previously estimated. The new figure reflects slumping revenues from a worse economic picture than was expected earlier this year. The officials spoke only on the condition of anonymity ahead of next week's announcement...

The higher number will likely create political difficulties for President Barack Obama in Congress and could create anxiety with foreign buyers of U.S. debt...

The 10-year projection, represents a huge obstacle for an administration trying to undertake massive policy overhauls in health care and the environment...

Earlier long-term estimates released in February and May relied on now-outdated projections of economic growth. Then, the White House predicted the economy would shrink by 1.2 percent this year, but the economy shrank 6.4 percent in the first quarter, the worst in nearly three decades....

The deficit could easily exceed 4 percent of GDP, even after cost-cutting efforts or new revenues claimed in Obama's budget.

Such deficits have always prompted Congress and the White House to take politically painful steps to curb them, such as former President Bill Clinton's tax-heavy 1993 deficit reduction plan. A companion effort by Obama could force him to break his promise to not raise taxes on individuals making more $200,000 a year or more.
$200,000? I thought Obama wasn't going to raise taxes on individuals making more than $250,000 a year?

Well, anyway, at least we now know that the federal deficit will reach $9 trillion over the next decade, instead of the $7 trillion initially projected by the Obama administration.

Apparently, since lawmakers are on vacation and Obama's health care proposal has been stalled for the time being, the administration felt that now would be as good a time as any to let the cat out of the bag. And, of course, leaking out the news over the weekend - before the report is officially released on Tuesday - was a pretty clever idea too. By the time the new week rolls around, public outrage over the projected $9 trillion deficit will have already dissipated, which will allow the president to once again refocus his energy on pushing through his budget-busting health care proposal.

Hey, another few trillion added to the federal deficit is really no big deal. American tax payers will be more than happy to foot the bill. After all, paying taxes is the "patriotic" thing to do!

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