WASHINGTON - Far from slowing, the government's deficit spending will surge to a record $1.5 trillion of red ink this year, congressional budget experts estimated Wednesday, blaming the slow economic recovery and last month's tax-cut law.
The report was sobering new evidence that it will take more than President Barack Obama’s proposed freeze on some agencies to stem the nation’s extraordinary budget woes. Republicans say they want big budget cuts but so far are light on specifics.
Wednesday’s Congressional Budget Office estimates indicate the government will have to borrow 40 cents for every dollar it spends this fiscal year, which ends Sept. 30. Tax revenues are projected to drop to their lowest levels since 1950, when measured against the size of the economy.
The report also says that after decades of Social Security surpluses, the vast program’s costs are no longer covered by payroll taxes.
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The budget estimates will add fuel to the already-raging debate over spending and looming legislation that would allow the government to borrow more money as the national debt nears the $14.3 trillion cap set by law. Republicans controlling the House say there’s no way they’ll raise the limit without significant budget cuts, starting with a government funding bill that will advance next month.
Democrats and Republicans agree that stern anti-deficit steps are needed, but neither Obama nor his resurgent GOP rivals on Capitol Hill are – so far – willing to put on the table cuts to popular benefit programs such as Medicare, farm subsidies and Social Security.
Though the analysis predicts the economy will grow by 3.1 percent this year, it foresees unemployment remaining above 9 percent.
Dauntingly for Obama, the nonpartisan agency estimates a nationwide jobless rate of 8.2 percent on Election Day in 2012. That’s higher than the rates that contributed to losses by Presidents Jimmy Carter (7.5 percent) and George H.W. Bush (7.4 percent). The nation isn’t projected to be at full employment – considered to be a jobless rate of about 5 percent – until 2016.
The latest deficit figures are up from previous estimates because of bipartisan legislation passed in December that extended George W. Bush-era tax cuts and unemployment benefits for the long-term jobless and provided a 2 percentage point Social Security payroll tax cut this year.
That measure added almost $400 billion to this year’s deficit, CBO says.
The deficit is on track to beat the record of $1.4 trillion set in 2009. The budget experts predict the deficit will drop to $1.1 trillion next year, still very high by historical standards.
Republicans focus on Obama’s contributions to the deficit: his $821 billion economic stimulus plan, boosts for domestic programs and his signature health care overhaul. Obama points out that he inherited deficits that would have exceeded $1 trillion a year anyway.
The chilling figures came the day after Obama called for a five-year freeze on optional spending in domestic agency budgets passed by Congress each year.
Republicans were quick to blame Obama for the rising red ink. Rep. Jeb Hensarling of Texas, chairman of the House Republican Conference, said the report “paints a picture that is more dangerous than most Americans could anticipate.”
“What is our leader in the White House doing about it? Asking Congress to raise the debt ceiling, proposing new spending and sticking future generations with a multi-trillion dollar tab,” Hensarling said.
Democrat Kent Conrad, chairman of the Senate Budget Committee, pointed to a problem lawmakers are sure to keep facing:
“When the American people are asked what they want done and to prioritize what they want, they want the deficits and debt dealt with. But when they are asked very specifically, will they support changes in Social Security, the polls say no. Changes in Medicare? The polls say no. Changes in defense spending? The polls say no.”
“I would’ve liked very much if the president would have spent a bit more time helping the American people understand how really big this problem is,” added Conrad, D-N.D.
Republicans are calling for deeper cuts for education, housing and the FBI to return them to the 2008 levels.
But those nondefense programs make up just 12 or so percent of the $3.7 trillion budget, which means any upcoming deficit reduction package – at least one that begins to significantly slow the gush of red ink – will require politically dangerous curbs to popular benefit programs. That includes Social Security, Medicare, the Medicaid health care program for the poor and disabled, and food stamps.
Tax revenues, which dropped significantly in 2009 because of the recession, have stabilized. But revenue growth will continue to be constrained. CBO projects revenues to be 6 percent higher in 2011 than they were two years ago, which will not keep pace with the growth in spending.