White House, CBO Project Record Budget Deficit
The U. S. budget deficit is expected to balloon to a record $1.6 trillion this year and the national debt will nearly double over the next decade, according to reports released Tuesday by the White House budget office and the nonpartisan Congressional Budget Office.
In separate, mid-year reviews, the offices predicted that spending on retirement and medical benefits would continue to push the deficit upward. But the more optimistic CBO analysis assumed that increased tax revenues would restrain the total deficit over the next ten years to $7.4 trillion, nearly $2 trillion less than the projection by the White House Office of Management and Budget.
The national debt, which now stands at $11.7 trillion, could hit $20 trillion or more in the next ten years.
Peter Orszag, the White House budget director, acknowledged that the backlash over the bleak financial report could hurt efforts to overhaul the health care system. But Orszag maintained the overhaul would reduce health care costs, which are a big factor in the growing deficit.
"I know there are going to be some who say that this report proves that we can't afford health reform," he said. "I think that has it backwards. The size of the fiscal gap is precisely why we must enact well-designed and fiscally responsible health reform now."
The White House forecast a $1.58 trillion deficit in fiscal 2009, matching the numbers of the CBO. White House analysts put the deficit at $1.5 trillion in 2010, slightly higher than the $1.48 trillion projected by the CBO.
Both offices predict the U.S. deficit will begin to decline quickly as the economy returns to growth next year.
Obama economic adviser Christina Romer predicted unemployment would hit 10 percent this year, then begin a slow decline next year. She estimated the jobless rate would average 9.3 percent in 2009 and 9.8 percent in 2010.
Orszag and Romer blamed the bleak forecast on the severe recession.
"This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter," Romer said.
Consumer Confidence Up
Still, a survey released Tuesday showed that U.S. consumers are regaining confidence in the economy.
The New York-based Conference Board's consumer confidence index rose to 54.1 in August from 47.4 in July. It was a bigger jump than most analysts had forecast — but well below 90, the minimum figure that indicates people believe the economy is healthy.
The measure has become an increasingly important data point in recent years with the U.S. relying ever-more heavily on consumer spending as an engine of growth. It now accounts for nearly three-quarters of all economic activity.
The Board's "Present Situation Index" was up slightly on consumers' assessment of a better job market, despite White House predictions that jobs will remain scarce.
Home Prices Climb
Meanwhile, home prices were beginning to show signs of improvement.
The Standard & Poor's/Case-Shiller index showed an increase of nearly 3 percent in home prices during the second quarter, though the index is still down 15 percent from last year.
The index is a composite of monthly prices in 20 major markets and appears to show a recovery through most of the country. Of those major markets, only Las Vegas and Detroit continued to decline in June.
Nationwide, housing prices now stand at the same level as early 2003.
Last week, the National Association of Realtors said existing home sales increased for the fourth straight month as buyers rushed to take advantage of a first-time home-buyer tax credit that expires in November.
Improved home sales give economists hope that the country has moved past the worst of the recession.
NPR's Deborah Tedford and wire services contributed to this report
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