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Obama Spending Plan Underestimates Deficits, Budget Office Says Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Brian Faler
March 6 (Bloomberg) -- President Barack Obama’s budget proposal would create bigger deficits than advertised every year of the next decade, with the shortfalls totaling $1.2 trillion more than the administration projected, according to the Congressional Budget Office.
The nonpartisan agency said yesterday the deficit will remain above 4 percent of the nation’s gross domestic product for the foreseeable future while the publicly held debt will zoom to $20.3 trillion, amounting to 90 percent of GDP by 2020. By then, interest payments on the debt will have quadrupled to more than $900 billion annually, the report said.
Deficits between 2011 and 2020 would total $9.76 trillion, the CBO said.
Economists generally consider deficits topping 3 percent of GDP to be unsustainable because that means government debt is growing faster than the ability to pay back the money.
“The news today from CBO is clear: The president’s budget will continue to lead our nation into a fiscal catastrophe -- an ever worse one than the president’s own numbers suggest,” Representative Paul Ryan of Wisconsin, the top Republican on the House Budget Committee, said yesterday.
White House Office of Management and Budget spokesman Kenneth Baer said the report “highlights how sensitive and uncertain budget projections are.”
Baer also said, “What is certain is that the irresponsibility of the past put the country on an unsustainable fiscal trajectory.”
Independent View
The CBO report is designed to give Congress an independent assessment of the administration’s budget request. The difference between the two outlooks is largely attributable to varying economic assumptions that affect projections of how quickly tax revenues will pour into the Treasury.
Revenues will be about $2 trillion less than the administration projects, while spending will be lower by about $600 billion, according to the CBO report.
The administration projected last month the deficit would shrink to as low as 3.6 percent of GDP, with the 10-year shortfall totaling $8.5 trillion. It foresees the debt growing to 77 percent of GDP in 2020.
The deficit for the 2010 fiscal year has been projected to be $1.6 trillion, a record. Obama last month established an 18- member bipartisan panel to suggest to Congress steps that would reduce the shortfalls.
To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net.
Last Updated: March 6, 2010 00:00 EST
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