WASHINGTON -- The federal government will have to borrow $1.6 trillion this year to finance its operations, the highest single-year budget deficit in the post-World War II era, the Congressional Budget Office said in a mid-year update Tuesday.
New spending by Congress since the CBO last updated its projections in March prompted it to raise its estimate of the total deficit from 2010-19 by $2.7 trillion, the CBO said in its update. That 10-year cumulative budget deficit is now expected to reach $7.137 trillion, the CBO said.
Much of that 10-year deficit increase is accounted for by additional appropriations to finance the Iraq and Afghanistan wars. About half of the increase in the 10-year deficit is a result of lowered revenue expectations as the economy continued to struggle, and additional interest costs to finance the national debt.
The U.S. public debt will exceed 61% of gross domestic product by the end of 2010, the CBO said, with that figure rising to 68% of GDP by the end of 2019.
The $1.6 trillion deficit now projected by the CBO for 2009 is $80 billion less than it projected in its March update. That decrease is mostly due to lowered projections of how much the government will spend on its Troubled Asset Relief Program to rescue the banking sector.
The CBO's estimates are broadly in line with new deficit figures released by the Obama administration Tuesday. The White House Office of Management and Budget also slightly reduced its deficit estimate for 2009, to $1.58 trillion. The White House estimates the 10-year deficit at $9 trillion.
Write to Martin Vaughan at martin.vaughan@dowjones.com
The United States Office of Management and Budget (OMB) is predicting that the national debt of the US will double in 10 years. Meanwhile, the Congressional Budget Office (CBO) has raised its forecast of the 10-year cumulative budget deficit to US$7.137 trillion, due to increased spending. Both offices released reports on Tuesday.
OMB
"Over all, it underscores the dire fiscal situation that we inherited and the need for serious steps to put our nation back on a sustainable fiscal path," wrote Peter R. Orszag, President Barack Obama's budget director.

"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 said in a conference call.

The CBO report predicts that public debt will exceed 61% of gross domestic product (GDP) by the end of 2010 while continuing to rise to 68% of GDP by the end of 2019.

"If anyone had any doubts that this burden on future generations is unsustainable, they're gone," said Senator Mitch McConnell, the Senate minority leader.

"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 the chairman of the Senate Budget Committee, Kent Conrad.

"While the U.S. health care system does need to be reformed, we cannot ignore the fiscal realities of our situation," said Senator Judd Gregg who is also on the Senate Budget Committee. "We must proceed with extreme caution before putting in place a huge and costly new program that will threaten our economy and the future of our children."

"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," commented Douglas Holtz-Eakin, a former director of the CBO. "I'm stunned at how hard they have worked to bury this."