- The Washington Times - Friday, August 21, 2009

WASHINGTON (AP) — The White House plans to announce the federal deficit will be about $262 billion less than officials predicted earlier this year, but it still will total a massive $1.58 trillion and pose a tremendous obstacle for a president seeking policy overhauls in health care and the environment.

The decrease in the estimate comes in part because the administration has provided less aid than expected to Wall Street, but the revised figure still is three times last year’s deficit, a White House official said late Wednesday. The official spoke on the condition of anonymity to discuss the report before its release next Tuesday while President Barack Obama will be on vacation in Massachusetts.

The new deficit numbers are record shattering, but would give the Obama administration the opportunity to say that its policies have avoided a more extreme financial crisis and eliminated the need for further bank infusions.

The nonpartisan Congressional Budget Office also is expected to release its mid-session review on Tuesday. It estimated in June that it expected a deficit of $1.825 trillion.

The report for the budget year that ends Sept. 30 also will predict Washington to spend $3.653 trillion this year, the official said. Revenue, however, would reach only $2.074 trillion.

“Whether it’s $1.6 trillion or $1.8 trillion, it’s pretty bad,” said Robert Bixby, executive director of the bipartisan fiscal watchdog The Concord Coalition. “I hope no one tries to spin that as good news.”

But Stan Collender, a former congressional budget staffer, said the White House’s new deficit numbers can’t be blamed on Obama. Collender, now with Qorvis Communications, a Washington consulting firm, noted that when President George W. Bush left office the deficit estimate for this fiscal year was $1.2 trillion and that didn’t include a tax adjustment and additional spending for operations in Iraq and Afghanistan, approved this year, that Bush also would have sought.

The midsummer report was supposed to have been released in mid-July, but was delayed, leading to speculation the White House was delaying the bad news until Congress left on an August recess. Other administrations delayed releasing their versions of this report during their first year.

Obama’s budget had included a $250 billion placeholder for a second bailout of the country’s troubled banks but did not ask Congress for it amid concerns the administration was spending too heavily. The administration also had anticipated more banks failing, but the survival of most banks saved billions for Washington.

The report comes during a rough patch for Obama’s presidency. The rancor surrounding the Democrats’ proposed health care overhaul came during a monthlong break when much of Washington is in a lull.

The administration earlier this year predicted that unemployment would peak at about 9 percent without a big stimulus package and 8 percent with one. Congress did pass a $787 billion two-year stimulus measure, yet unemployment soared to 9.4 percent in July and appears headed for double digits. Most of that stimulus will occur in the coming fiscal year.

The country’s debt now stands at $11.7 trillion. In the scheme of things, that’s more important than talking about the “deficit,” which only looks at a one-year slice of bookkeeping and ignores previous debt that is still outstanding.

Economists predict that an improved economic climate could help reduce the deficit in the 2010 fiscal year to $1.3 trillion, though White House economists had forecast a slightly smaller figure of $1.26 for the next fiscal year. Obama has promised to reduce the budget deficit to $512 billion in the 2013 fiscal year.

“The deficit is obviously very large and a problem,” said economist Mark Zandi of Moody’s Economy.com. “But it’s not quite as bad as what expectations were a few months ago.”

Earlier this year, Zandi, whose observations are frequently cited by administration and congressional officials, had predicted that the administration would have to get congressional approval for additional rescue funds for financial institutions.

“It’s working out better than I anticipated,” he said.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.


Click to Read More

Click to Hide