White House Says Deficit Will Be $90B Higher Than Expected
In his blog this morning, White House budget director Peter Orszag said that the federal budget deficit will actually be $90 billion higher than expected in February.
"OMB projects that the deficit will be about $90 billion higher in FY 2009 and also in 2010 than it did in February. The deficits in these years, now projected to be 12.9 percent and 8.5 percent of GDP, respectively, are driven in large part by the economic crisis inherited by this administration," Orsazg writes.
The phrase "inherited by this administration" appears to be boilerplate for all releases emanating from the Obama White House.
Orszag writes that the higher deficit figure is caused by what he calls "technical revisions in light of new information regarding the collection of receipts, financial stabilization efforts, and other federal programs."
What that means: Orszag is saying that today he knows more than he did in February about how much money the government will get from taxpayers this year and next and how much this recovery will cost. And the new information points to a higher deficit.
He says the higher deficit is not caused by "changed assumptions about major macroeconomic variables, such as the size of the economy, the rate of inflation, or the unemployment rate."
In other words: Orszag is saying that despite knowing more than he did in February about how bad the economy is, he has not changed his favorable forecast for how the economy will recover.
The raw dollar amounts of the new budget deficits are less important than their percentage of GDP. This year, the deficit is expected (as of now) to consume 12.9 percent of GDP, and lower to 8.5 percent next year.
Economists get really worried when deficits push the total national debt close to 100 percent of GDP. It now stands at about 40 percent, but if you add in government obligations such as Social Security, it is about 70 percent.
Some budget analysts believe the White House's forecast for economic growth this year and next is too rosy.
"The administration’s projection that the U.S. economy will expand at a 3.5 percent annual rate by year’s end is almost twice the 1.8 percent fourth-quarter growth estimate in the monthly Blue Chip Economic Indicators survey released May 10," Bloomberg writes this morning.
Orszag's blog posting on the new, higher deficit elicited criticism from Republicans.
"So revised figures out this morning show that the deficit will grow by $89 billion more than what was predicted just three months ago. So, in other words, a recent reassessment added more than five times the amount to the deficit than the administration proposed saving ($17 billion) last week," Don Stewart, spokesman for minority leader Sen. Mitch McConnell (R-Ky.), told The Post's Lori Montgomery.
"The deficit is growing at a rate five times faster than the administration is trying to cut it?" Stewart added.
May 11, 2009; 11:57 AM ET
Categories: The Ticker | Tags: Peter Orszag, White House budget director, budget, deficit
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