MercoPress. South Atlantic News Agency

US 2010 budget deficit estimated at 9.2% of GDP, second highest

President Obama is expected to make important fiscal announcements in his State of the Nation speech

The United States Congressional Budget Office, CBO released Tuesday its 10 year budget projections which includes a deficit for this fiscal year of 1.3 trillion US dollars, equivalent to 9.2% of GDP.

The announcement comes a day after the White House said it would seek a three-year freeze in “non-security” spending, which was described by CBO Director Doug Elmendorf as a “small step” toward fiscal discipline.

The CBO also projects 10-year federal deficits under current law will exceed 6 trillion USD. “In sum, the outlook for federal budget is bleak,” Elmendorf said.

This year's deficit is only slightly smaller than last year's shortfall of 1.4 trillion. The 2009 deficit was the largest as a percentage of GDP (9.9%) since World War II. This year's deficit will be the second largest as a percentage of GDP.

The White House anticipated its three-year freeze on non-security discretionary spending would save 250 billion over 10 years. Elmendorf said it could not validate these projections, but called the savings a “small share” of future spending.

“It's a step in the right direction, but a small step,” Elmendorf said.

President Obama is expected to use his State of the Union address to propose a spending freeze of 447 billion on “non-security” spending. It would also exempt entitlements such as Social Security, Medicare, and Medicaid.

Security spending that would not be touched by the freeze would include Afghan and Iraq wars spending as well as all other spending for the Pentagon, veterans benefits, homeland security and foreign aid.

During the 2008 campaign, Obama criticized spending freezes as a blunt instrument to impose fiscal discipline.

“I think that's a way of punting responsibility” Obama said of an across-the-board “non-security” spending freeze on Sept. 28, 2008. ”The president has to make choices. And those choices mean that when you deal with the budget, you don't take an axe to it; you use a scalpel.