MercoPress. South Atlantic News Agency

Release of data on US skyrocketing deficits will mark this week’s markets

The US ten-year budget deficit is anywhere between 7 and 9 trillion US dollars.

United States President Barack Obama's domestic policy proposals will face the reality of skyrocketing deficits on Tuesday when officials release two government reports projecting huge budget shortfalls over the next decade.

The White House budget office and the Congressional Budget Office (CBO), a non-partisan arm of Congress, release updated economic forecasts and deficit estimates on Tuesday, providing further fiscal fodder to opponents of Obama's nearly one trillion healthcare overhaul plan. Many of the figures are already known.

The White House has confirmed that its deficit estimate for the 2009 fiscal year, which ends September 30, will inch down to 1.58 trillion USD from 1.84 trillion USD after eliminating billions of dollars originally set aside for bank rescues. This represents more than 11% of GDP, the highest since World War II.

Looking forward, an administration official told reporters the 10-year budget deficit projection will jump by about 2 trillion to roughly 9 trillion from an original forecast of 7.1 trillion US dollars.

“One message the numbers will send is that the medium- and long-term deficits need to be addressed,” said Chuck Marr, director of federal tax policy at the Washington-based Center on Budget and Policy Priorities, an analysis and research organization.

Obama has said he will cut the deficit in half by the end of his four-year term, and he sees lowering healthcare costs as a key ingredient toward achieving long-term deficit reduction.

But opposition Republicans charge that his proposals to extend coverage to uninsured US citizens and create competition for private insurance providers are too expensive, especially as deficits go up.

“We're still on a long-run trajectory that's not sustainable,” said Rudolph Penner, a fellow at the Urban Institute and former CBO director from 1983-1987.

“In an ideal world they would be doing a lot more to get health costs under control and, in my view, we wouldn't be talking about expanding coverage right now” said Penner, who describes himself as a moderate Republican.

The CBO had previously forecast that deficits between 2010 and 2019 would total 9.1 trillion USD, generating heat for the White House, which stuck to its original 7.1 trillion forecast earlier this year. The new number will bring White House projections into line with the CBO, the official said.

Many economists think it is unlikely that the government can curtail spending, which means taxes would have to rise to cover the increasing costs of providing retirement benefits and healthcare to older people. That could slow economic growth.

Stanford University economics professor John Taylor, an influential economist, told reporters the US budget deficit poses a greater risk to the financial system than the collapse in commercial real estate prices.