Obama’s First Two Years Will Boast Two Biggest Deficits Since World War II, Says CBO

January 26, 2010 - 12:52 PM
President Barack Obama's first two years in office will boast the two biggest annual federal budget deficits since World War II, when measured as a share of GDP, says the Congressional Budget Office

President Barack Obama holds a town hall style meeting at Lorain County Community College in Elyria, Ohio, Friday, Jan. 22, 2010. President Barack Obama is seeking to reassure voters that he is determined to create jobs while protecting an architect of the banking bailout who has angered voters but may have helped prevent a financial collapse (AP Photo/Charles Dharapak)

(CNSNews.com) - President Barack Obama’s first two years in office will boast the two biggest annual federal budget deficits since World War II, when measured as a share of GDP, says the Congressional Budget Office.
 
“Last year’s deficit was the largest as a share of GDP since the end of World War II, and the deficit expected for 2010 would be the second largest,” said CBO.
 
“The Congressional Budget Office (CBO) projects that if current laws and policies remained unchanged, the federal budget would show a deficit of $1.35 trillion for fiscal year 2010,” said CBO. “At 9.2 percent of gross domestic product (GDP), that deficit would be slightly smaller than the shortfall of 9.9 percent of GDP posted in 2009.”
 
“Last year’s deficit was the largest as a share of GDP since the end of World War II, and the deficit expected for 2010 would be the second largest,” said CBO.

The estimates were included in the CBO report, "The Budget and Economic Outlook: Fiscal Years 2010 to 2020," which was released today.

The federal deficit in 2009 was also the largest ever in sheer dollar amount. “The budget deficit surged to $1.4 trillion in 2009, the largest shortfall on record in dollar terms and nearly $1 trillion greater than the deficit recorded the previous year,” said CBO.
 
The CBO’s new estimate also indicates that if current federal tax and spending laws are maintained, the U.S. Treasury will need to borrow an additional $6 trillion between 2011 and 2020 to cover expected federal spending.
 
“Under current law, the federal fiscal outlook beyond this year is daunting,” said the CBO report. “Projected deficits average about $600 billion per year over the 2011–2020 period.”

This estimate that the government will borrow an additional $6 trillion from 2011-2020 is based on the assumption that the tax cuts enacted under President Bush in 2001 and 2003 will be allowed to expire, thus raising income tax rates and that Congress will not enact temporary fixes—as it has in the past—to stop the Alternative Minimum Tax from hitting the incomes of middle-class Americans.