The US national debt will nearly double over the next 10 years, government forecasts showed on Tuesday, challenging US President Barack Obama’s economic and healthcare overhaul agenda.
The White House mid-session budget forecast and the non-partisan Congressional Budget Office (CBO) both forecast that government revenues will be crimped by a slow recovery from the worst recession since the 1930s Great Depression, while spending on retirement and medical benefits soars.
The White House projected a cumulative US$9 trillion deficit between next year and 2019, while the CBO pegged the total at US$7.1 trillion because it assumed higher revenues as tax cuts expire.
The spending blitz could push the national debt, now more than US$11 trillion, to close to US$20 trillion. The debt is the total sum the government owes, while the deficit is the yearly gap between revenues and spending.
“If anyone had any doubts that this burden on future generations is unsustainable, they’re gone,” Senate Republican leader Mitch McConnell said, adding that economic stimulus funds should be diverted to pay down US debt.
However, both the White House and CBO anticipate that the deficit, now at its highest level as a percent of economic output since World War II, will decline relatively swiftly in the next three years as growth resumes and federal bailout programs shrink.
White House budget director Peter Orszag said the deficit was too high and cited this as a reason to pass Obama’s healthcare overhaul plan, which is in trouble with lawmakers while opinion polls show it losing popular support. Democrats argue that the US$1 trillion plan will stem the growth of healthcare costs.
“I know that there will be some who say this report proves that we cannot afford health reform. I think that has it backward,” Orszag told reporters on a conference call.
The debate is gaining steam as Republicans seek momentum for next year’s mid-term elections, where they hope to chip away at the dominant position Obama’s Democrats enjoy in both the House of Representatives and the Senate.
Congressional Democrats said the country’s fiscal condition was a legacy from former president George W. Bush, who cut taxes while pursuing wars in Iraq and Afghanistan.
They also said spending on retirement and health benefits must be put under control as millions of Baby Boomers retire.
“Today’s budget numbers send a clear signal that the time for putting off tough choices is over and the time to act is now,” said Senate Budget Committee Chairman Kent Conrad, a Democrat.
The White House forecasts a record US$1.58 trillion deficit in fiscal 2009, matching the numbers of the CBO, while it shows the deficit at US$1.5 trillion next year, a touch higher than the US$1.48 trillion projected by CBO.
The estimates for the current fiscal year were reduced from earlier forecasts because of lower anticipated spending on financial bailout programs as markets have stabilized.
The White House has withdrawn a US$250 billion “placeholder” budget request, while the CBO estimates that actual Troubled Asset Relief Program outlays this year will be US$203 billion less than anticipated.
Both estimates, however, show annual deficits staying above US$500 billion every year until 2019, compared with a then-record US$459 billion last year. The White House shows the gap averaging 5.1 percent of gross domestic product per year through 2019, compared with 3.2 percent last year.
By 2019 the ratio of national debt to gross domestic product will rise to 69 percent from 48 percent in 2009 the White House said, closely tracking CBO’s estimates.
“The administration has always said that you have to get deficits under 3 percent of GDP to be safe. They now admit that they will not in the next 10 years,” said Douglas Holtz-Eakin, a CBO chief under Bush and chief economic adviser to Republican Senator John McCain for his presidential bid.
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