CBO report foresees much deeper deficits

WASHINGTON - President Obama's budget would produce $9.3 trillion in deficits over the next decade, more than four times the amount for Republican George W. Bush's presidency, congressional auditors said yesterday.

The new Congressional Budget Office figures offered a far more dire outlook for Obama's budget than the new administration had predicted just last month - a deficit $2.3 trillion worse. It's a prospect even the president's own budget director called unsustainable.

In his White House run, Obama assailed the economic policies of his predecessor, but the eye-popping deficit numbers threaten to swamp his ambitious agenda of overhauling health care, exploring for new energy sources, and enacting scores of domestic programs.

The dismal deficit figures, if they prove to be accurate, inevitably raise the prospect that Obama and his Democratic allies who control Congress may have to consider raising taxes after the recession ends or else pare back his agenda.

By the CBO's calculation, Obama's budget would generate deficits averaging almost $1 trillion a year from 2010 to 2019.

The CBO says the deficit under Obama's policies would never go below 4 percent of the size of the economy, figures that economists agree are unsustainable. By the end of the decade, the deficit would exceed 5 percent of gross domestic product.

White House budget chief Peter Orszag said that the CBO's long-range economic projections were more pessimistic than those of the White House, private economists, and the Federal Reserve. He said he remained confident that Obama's budget, if enacted, would produce smaller deficits.

Orszag acknowledged that if the CBO projections proved accurate, Obama's budget would produce deficits that could not be sustained.

"Deficits in the, let's say, 5 percent-of-GDP range would lead to rising debt-to-GDP ratios that would ultimately not be sustainable," Orszag told reporters.

Deficits so big put upward pressure on interest rates as the government offers more attractive rates to attract borrowers.

"I think deficits of 5 percent are unsupportable," said Mark Zandi, chief economist at Moody's Economy.com. "It will lead to higher interest rates to the point where it will force policymakers to make changes."

Republicans immediately piled on.

"This report should serve as the wake-up call this administration needs," said House Minority Leader John A. Boehner of Ohio. "We simply cannot continue to mortgage our children and grandchildren's future to pay for bigger and more costly government."

Obama insisted yesterday that his agenda was on track.

"What we will not cut are investments that will lead to real growth and prosperity over the long term," he said. "That's why our budget makes a historic commitment to comprehensive health-care reform. That's why it enhances America's competitiveness by reducing our dependence on foreign oil and building a clean-energy economy."

Obama's $3.6 trillion budget for the 2010 fiscal year, beginning Oct. 1, contains ambitious programs to overhaul the health-care system and initiate new "cap-and-trade" rules to combat global warming.