Saturday, March 21, 2009

Staggering numbers released Friday show President Obama‘s new budget will nearly double the cumulative deficit over the next decade to $9.3 trillion, damaging the president’s ambitious plans to overhaul health care and boost spending on alternative energy.

As a result of a worsening economy and new spending, the fiscal 2009 deficit will reach $1.8 trillion - four times the record set last year and $400 billion more than projected two months ago, according to a new analysis by the Congressional Budget Office (CBO) that showed substantial deficits for the next decade.

Democratic leaders and liberal surrogate groups said the red ink is a reason to double-down on the president’s plans, arguing that spending will produce a better economy. But they face a revolt from Republicans and conservative-leaning Democrats weary of new spending after already passing a $787 billion stimulus bill and a $410 billion catch-all spending bill in the past two months.

“We have to secure our economy in the short term, but we cannot run trillion-dollar deficits forever,” said Rep. Charlie Melancon, Louisiana Democrat and a leader of the Blue Dog coalition that pushes for fiscal restraint.

The CBO said the economy is weaker than predicted just two months ago, and now projects the deepest recession since World War II, though the budget office also expects a faster recovery in 2010 and 2011 than most other analysts.

The White House said the numbers don’t change the overall goals of getting Congress to act on health care, global warming and education, and Office of Management and Budget Director Peter R. Orszag said the White House believes Congress is still on track to do that.

“No one ever had an expectation [Congress] would just take our budget,” he said.

Mr. Obama’s plan assumes much stronger economic growth over the long run than does the CBO, and Mr. Orszag said there’s “significant uncertainty” about CBO’s projections.

He said there’s a chance things will be better than the numbers now indicate.

Still, the budget director acknowledged that annual deficits topping 5 percent of gross domestic product - which the CBO projects for most of the 10-year time frame - are unsustainable.

Mr. Obama released his budget outline earlier this month, and his allies are pushing hard to boost his plans, but members of both parties have already balked at his plans to impose a carbon emission cap-and-trade program, to cut farm payments and to pay for part of his health care plan by reducing the tax deduction the wealthy can take for charitable donations.

Facing those questions, his allies are beginning to pressure reluctant Democrats.

“Now is the time to take action,” said Anna Burger, secretary-treasurer of the Service Employees International Union. “American families cannot afford to wait for the change that is necessary to reform our economy and broken health care system. We cannot let opponents of change stand in the way. Our choice is clear: Change or more of the same.”

Mr. Obama has said he is actually reducing the deficit lower than it would have been if President Bush’s tax cuts were all extended. He also says he’s ended Mr. Bush’s accounting gimmicks that, he said, hid the real size of the deficit.

“Because of the massive deficit we inherited and the cost of this financial crisis, we are having to go through the books line by line, page by page, so that we can cut our deficit in half by the end of my first term and reduce it by $2 trillion over the next decade,” Mr. Obama told the National Conference of State Legislatures on Friday.

He also said he will not cut programs he said are long-term investments.

Despite facing questions on Capitol Hill, the president does have significant boosters outside of Washington.

Pennsylvania Gov. Edward G. Rendell, a Democrat, California Gov. Arnold Schwarzenegger, a Republican, and New York Mayor Michael R. Bloomberg, an independent, met with the president Friday. Mr. Schwarzenegger pronounced the three men “100 percent” behind Mr. Obama.

House and Senate budget committees are expected to produce outlines next week, and House Budget Committee Chairman John M. Spratt Jr., South Carolina Democrat, said his panel would “follow President Obama’s lead” on the budget.

A spokeswoman for House Majority Leader Steny H. Hoyer, Maryland Democrat, said the numbers weren’t a surprise, but a series of meeting are being organized to rally House Democrats in support of Mr. Obama’s sweeping initiatives.

“We will be talking to our members next week and the following week to make sure they are comfortable with it,” Hoyer spokeswoman Katie Grant said. “I don’t think of it as selling [the Obama budget]. It is a matter of talking about how his budget does what their constituents want and what the American people want.”

She predicted continued “strong Democratic support” for the spending plan.

The CBO says government spending would account for 27.4 percent of all U.S. economic activity this year, which is the highest rate since the country fought World War II.

The 10-year estimate also is $2.3 trillion worse than Mr. Obama’s own budget predicted, prompting lawmakers on Capitol Hill to call the administration unrealistic.

“CBO´s word is the gospel. Congress and the administration need to get the message,” said Sen. Charles E. Grassley, Iowa Republican.

cChristina Bellantoni and S.A. Miller contributed to this report.

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