Obama’s Deficit Projections Off by $2.3 Trillion, Congressional Budget Office Says
March 23, 2009 - 9:43 PMThe nonpartisan Congressional Budget Office (CBO) says that President Obama's budget and deficit projections are too low. The budget will incur $9.3 trillion in federal deficits between 2010 and 2019 --$2.3 trillion higher than Obama had originally claimed.
The CBO’s latest analysis, released Friday, showed that the president’s proposed budget will increase the deficit to $1.8 trillion in 2009; $1.4 trillion in 2010; and $970 billion in 2011 -- falling to $658 billion in 2012 before rising again to $1.2 trillion in 2019.
The total deficit from 2010 to 2019 was pegged at $9.3 trillion. The deficit is nort expected to fall below a floor of $500 billion for the foreseeable future, the report pointed out.
In fact, the budget office found that Obama’s projected deficits are more than double what they would be if the president had merely stuck with the current spending and taxation proposals left by the Bush administration.
Under current spending proposals, including the $787 billion stimulus spending and $410 billion omnibus spending bills, the deficit would total $4.4 trillion over 10 years, not the $9.3 trillion Obama’s budget incurs.
Obama’s record deficits mean a record national debt – one that totals $17 trillion, up from the current $6.7 trillion.
By 2019, the CBO said, a whopping 82 percent of the nation’s gross domestic product (GDP) will go to pay down the national debt. This means that in future years, the government could owe its creditors more than the goods and services that the entire economy can produce.
White House budget chief Peter Orszag, in a March 20 conference call, admitted that deficits in the range of 5 percent of GDP are not sustainable. The CBO analysis, however, said the Obama budget would incur a debt-to-GDP ration of 5.3 percent for the Fiscal Year 2010 to Fiscal Year 2019 period.
“Deficits in the let's say 5 percent of GDP range would lead to rising debt-to-GDP ratios in a manner that would ultimately not be sustainable,” Orszag explained.
The CBO analysis also shows that Obama’s deficits will require an extra $1 trillion in interest payments over the next decade, meaning that the country will pay a total of $4.8 trillion in interest to finance the record levels of spending and borrowing Obama proposes.
Spending under Obama will remain higher than the average 20 percent of GDP throughout the next decade, peaking at 28.5 percent this year before leveling out at about 23 to 24 percent of GDP after 2011. Entitlement spending grows by 4.7 percent annually according to CBO, outpacing GDP itself over the next decade.
Obama’s budget does contain some spending cuts, about $88 billion according to CBO, but these come mostly from reduced Iraq spending and the temporary provisions of the stimulus package.
Other spending cuts include reducing health and life insurance payments for the postal service and about $13 billion in reforms to the congressionally popular farm subsidy programs such as crop insurance direct payments to farmers and agribusinesses.
In total, CBO differs with the administration’s estimates for each of the 10 years examined, finding that Obama’s economic outlook is too rosy and his spending proposals more costly than under CBO’s calculations, which assume modest economic growth of 3.6 percent from 2012 through 2015.
Christina Romer, president of the President’s Council of Economic Advisors, defended Obama’s budget on Fox News Channel’s “Fox News Sunday,” saying that the economy would grow much faster once Obama’s health-care, education, and energy initiatives took full effect.
“What's going to make those be bigger is if we invest in our kids and do good things with education, if we get off foreign oil and get a more vibrant domestic energy system,” she said.
However, Sen. Judd Gregg (R-N.H.), who withdrew his name from consideration for Obama’s Cabinet after seeing the new president’s budget proposals, said that the CBO’s analysis showed an unsustainable budget -- one which he compared to a plane running out of fuel.
“These numbers are not only startling, they're devastating. They're not sustainable,” the Senate Budget Committee ranking Republican said.
“It is as if you were on an airplane and the fuel light came on and said that you had 15 more minutes of fuel, but the pilots just kept flying on as if there was fuel for another hour,” Gregg said Sunday on CNN’s State of the Union.
“Well, the plane crashes and our country will crash and we’ll pass on to our kids a country that’s not affordable,” he added.