The Office of Management and Budget [OMB] and the Congressional Budget Office [CBO] today released their updated budget and economic forecasts. The bottom line is as follows:
Ten-Year Deficits. OMB shows a deficit $1.9 trillion higher over the next 10 years; CBO’s deficit is $1.6 trillion higher. The largest factor in the deficit increase is the economy, with both OMB and CBO showing a weaker recovery in 2010. CBO shows the unemployment rate averaging 10.2 percent in 2010; OMB shows a 9.8- percent average. Note that because of baseline constraints, CBO extends and inflates enacted fiscal year 2009 war funding (including the supplemental) for the entire 10-year period, which causes its “official” deficit increase to be $2.7 trillion. If this is removed, CBO’s deficit increase is $1.6 trillion over 10 years.
The President’s budget deficits are at unprecedented levels, and remain so throughout the decade (see Figure 1).
Deficit in 2009. By both estimates, the fiscal year 2009 deficit will be $1.6 trillion (11.2 percent of gross domestic product [GDP]), more than three times the previous record. OMB’s deficit has declined from $1.8 trillion largely due to withdrawing a $250-billion placeholder for additional Troubled Assets Relief Program [TARP] funds (further described below). CBO did not assume the TARP placeholder in its earlier baseline projection, so its deficit decline is smaller; CBO’s deficit reduction results from a lower estimate of TARP outlays from the enacted program.
Debt. Under the President’s budget, debt held by the public more than doubles in 5 years (to $12.3 trillion) and more than triples in 10 years (to $17.5 trillion), compared to the 2008 levels of $5.8 trillion (see Figure 2).
The following discussion summarizes the projections by the two agencies.