WASHINGTON (AP) — Far from slowing, the government’s deficit spending will surge to a record $1.5 trillion this year, congressional budget experts estimated, blaming the slow economic recovery and last month’s extension of Bush-era tax cuts.
Daunting for President Barack Obama, the nonpartisan agency estimates a nationwide unemployment rate of 8.2 percent on Election Day in 2012.
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.
The chilling figures came the day after Obama called in his State of the Union address for a five-year freeze on optional spending in domestic agency budgets passed by Congress each year.
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, full of nasty news, also says that after decades of surpluses for the federal Social Security pension program, its vast costs are no longer covered by payroll taxes.
Democrats and Republicans agree that stern anti-deficit steps are needed, but neither Obama nor his resurgent rivals in Congress are — so far — willing to put on the table cuts to popular benefit programs such as farm subsidies and entitlement programs for the elderly like Social Security and Medicare. The need to pass legislation to fund the government and prevent a first-ever default on U.S. debt obligations seems sure to drive the two sides into negotiations.
Though the analysis predicts the economy will grow by 3.1 percent this year, it foresees unemployment remaining above 9 percent.
As Obama looks ahead to next year’s White House race, a predicted jobless rate of 8.2 percent does not bode well: it would be higher that the rates that contributed to losses by Presidents Jimmy Carter (7.5 percent) and George H.W. Bush (7.4 percent). The United States 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.
Republicans were quick to blame Obama for the rising red ink. Rep. Jeb Hensarllng, chairman of the House Republican Conference, said the report “paints a picture that is more dangerous than most Americans could anticipate.”
Republicans are calling for deeper cuts for education, housing and the FBI — among many programs — to return them to the 2008 levels in place before Obama took office.
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 vouchers.
Neither Obama nor his Republican rivals have yet come forward with specific proposals for cutting such benefit programs. Successful efforts to curb the deficit always require active, engaged presidential leadership, but Obama’s unwillingness to thus far take chances has deficit watchers discouraged. Obama will release his 2012 budget proposal next month.
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Associated Press Writer Andrew Taylor contributed to this report.