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.
Read the full report here.