WASHINGTON (Reuters) - The Obama administration will raise its 10-year
budget deficit projection to approximately $9 trillion from $7.108
trillion in a report next week, a senior administration official told
Reuters on Friday.
The higher deficit figure, based on updated economic data, brings the
White House budget office into line with outside estimates and gives
further fuel to President Barack Obama's opponents, who say his
spending plans are too expensive in light of budget shortfalls.
The White House took heat for sticking with its $7.108 trillion
forecast earlier this year after the Congressional Budget Office
forecast that deficits between 2010 and 2019 would total $9.1
"The new forecasts are based on new data that reflect how severe the
economic downturn was in the late fall of last year and the winter of
this year," said the administration official, who is familiar with the
budget mid-session review that is slated to be released next week.
"Our budget projections are now in line with the spring and summer
projections that the Congressional Budget Office put out."
The White House budget office will also lower its deficit forecast for
this fiscal year, which ends September 30, to $1.58 trillion from
$1.84 trillion next week after removing $250 billion set aside for
Record-breaking deficits have raised concerns about America's ability
to finance its debt and whether the United States can maintain its
top-tier AAA credit rating.
Politically, the deficit has been an albatross for Obama, a Democrat
who is pushing forward with plans to overhaul the U.S. healthcare
industry -- an initiative that could cost up to $1 trillion over 10
years -- and other promises, including reforming education and how the
country handles energy.
Republicans have pounced on Obama for planning to spend too much when
deficits are so high, and the issue is likely to loom large in next
year's Congressional elections.
Obama, who has promised to halve the deficit by the end of his
four-year term and likes to remind constituents he inherited a $1.3
trillion deficit from former President George W. Bush, says bringing
down healthcare costs is critical to long-term deficit reduction.
Treasury markets have been worried all year about the mounting
deficit. The United States relies on large foreign buyers such as
China and Japan to cheaply finance its debt, and they may demand
higher interest rates if they begin to doubt that the government can
control its deficits.
"It's one of those underlying pieces of news that is liable to haunt
the bond market at some point in the future," said Kim Rupert,
managing director of global fixed income analysis at Action Economics
LLC in San Francisco, referring to the revised 10-year deficit
Many economists think it is unlikely the government can curtail
spending, which means taxes would have to go up to cover the rising
costs of providing retirement and healthcare benefits to aging
Higher taxes, which could slow economic growth, are also a major
concern of voters on both sides of the political divide. Obama has
promised not to raise taxes on Americans making less than $250,000 a
(Additional reporting by Butron Frierson in New York; editing by Chris Wilson)