U.S. deficit pre­dic­tion low­ered but ex­pected to set record

Austin American-Statesman - - WORLD & NATION - By Helene Cooper

WASHINGTON — The Obama ad­min­is­tra­tion on Fri­day trimmed its es­ti­mate of the fed­eral bud­get deficit for this year but said the weak econ­omy had led it to in­crease its deficit pro­jec­tion for next year.

The White House’s Of­fice of Man­age­ment and Bud­get pro­jected that the deficit for the fis­cal year end­ing Sept. 30 would be $1.47 tril­lion, $84 bil­lion lower than it es­ti­mated in Fe­bru­ary — but still a record in dol­lar terms. Much of the re­duc­tion stemmed from lower than an­tic­i­pated out­lays for un­em­ploy­ment in­surance.

Mea­sured as a per­cent­age of to­tal eco­nomic out­put — the gauge that econ­o­mists say is most mean­ing­ful — the deficit would be 10 per­cent of gross do­mes­tic prod­uct. That is about the same as last year, a level that can’t be sus­tained over the long run with­out en­dan­ger­ing the econ­omy, but well be­low the records set dur­ing World War II.

For next year, the White House pro­jected a deficit of $1.42 tril­lion, $150 bil­lion more than it had es­ti­mated in Fe­bru­ary. Next year’s pro­jected deficit would be 9.2 per­cent of the econ­omy.

The new es­ti­mates also pre­dict that un­em­ploy­ment will drop only slightly next year, to 9 per­cent from 9.5 per­cent now. The job­less rate is ex­pected to fall to 8.1 per­cent in 2012, the re­port said.

“The econ­omy is still strug­gling; too many Amer­i­cans are still out of work, and the nation’s long-term fis­cal tra­jec­tory is un­sus­tain­able, threat­en­ing fu­ture pros­per­ity,” the re­port said.

For Pres­i­dent Barack Obama, the fal­ter­ing econ­omy com­bined with the huge deficit may be a po­lit­i­cal li­a­bil­ity, pos­si­bly pos­ing a short-term threat to the Demo­cratic ma­jor­ity in Congress, and a long-term threat to his own prospects for re-elec­tion in 2012.

Repub­li­cans were quick to jump on the re­vised bud­get num­bers to crit­i­cize the pres­i­dent’s pol­icy, in­clud­ing the stim­u­lus pack­age and other govern­ment spend­ing, which many blame for the bal­loon­ing deficit.

“Our way of life is be­ing threat­ened by an econ­omy with too much debt be­cause of a govern­ment that spends too much and taxes too much,” said Rep. Eric Can­tor, R-Va. “Repub­li­cans are ready to gov­ern and put a check on the Obama ad­min­is­tra­tion’s un­prece­dented spend­ing binge so that Amer­i­cas can get back to work and our chil­dren have more op­por­tu­nity, not a big­ger bill be­cause our gen­er­a­tion failed to lead re­spon­si­bly.”

Democrats quickly sought to re­mind vot­ers that the bud­get gap is due pri­mar­ily to the ef­fects of the re­ces­sion, which de­pressed tax rev­enue and forced pol­i­cy­mak­ers to throw hun­dreds of bil­lions of dol­lars into eco­nomic res­cue pro­grams.

“That fed­eral re­sponse, in­clud­ing ac­tions by the Fed­eral Re­serve, ef­forts to sta­bi­lize the fi­nan­cial sec­tor started by the Bush ad­min­is­tra­tion, and last year’s eco­nomic re­cov­ery pack­age, has suc­cess­fully pulled the econ­omy back from the brink,” said Sen. Kent Con­rad, D-N.D. “Al­though the econ­omy re­mains frag­ile and the un­em­ploy­ment rate is still far too high, eco­nomic and job growth have be­gun to re­turn.”

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