The cost of President Obama’s stimulus plan has jumped another $75 billion, the Congressional Budget Office said Tuesday, and part of the reason is more people are getting unemployment benefits because they’ve lost jobs the bill was supposed to preserve.
The nonpartisan CBO, in a new report looking at the country’s financial outlook, also found that the country faces giant budget deficits for the foreseeable future and has the biggest debt problem it has seen since just after World War II. The report is designed to give Congress guidance as it prepares to receive President Obama’s budget for fiscal year 2011.
The CBO now says the stimulus package, passed by Congress last February, will cost $862 billion over 10 years because of the added unemployment-related costs. The program had originally been estimated to cost $787 billion when Mr. Obama signed it in February.
Some $21 billion of that increase comes from higher unemployment compensation payments, CBO analysts said. The rest of the increase comes from higher food assistance payments and increased federal payments to help states and localities pay interest on taxable government bonds they issued.
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The Obama administration had predicted that unemployment would not exceed 8 percent if the stimulus bill were passed. Instead, the rate has climbed into double-digits, leading Republicans to argue the measure was a failure. But Democrats said the economy was worse than they imagined, and said stimulus spending has actually helped head off a full-scale depression.
With the decline in expenses related to the Wall Street bailout, some lawmakers had hoped spending would decline on its own. But the CBO said spending from the stimulus package Congress passed last February will increase to $404 billion in 2010, which will keep spending levels near record highs.
Already, the deficit for fiscal year 2010, which began in October, is likely to reach $1.3 trillion — the second largest deficit on record, behind 2009’s final $1.4 billion. And Congress still has eight months left in the fiscal year to boost spending and top last year’s record, CBO warned.
The numbers are likely to fuel an already heated debate over the pace of spending, which has grown dramatically over the last decade even as taxes were cut.
In an effort to begin to address the problem Mr. Obama is poised to call for a freeze on some discretionary spending programs in Wednesday’s State of the Union address, White House officials said..
But the CBO analysis showed that the major increases in spending over the long term will come from entitlement programs such as Medicare, Medicaid and Social Security, which Congress has proved reluctant to cut.