Record deficits projected

WASHINGTON (AP) — The federal government faces exploding deficits and mounting debt over the next decade, White House and congressional budget officials projected Tuesday in competing but similar economic forecasts.

Both the White House Office of Management and Budget and the nonpartisan Congressional Budget Office predicted the budget deficit this year would swell to nearly $1.6 trillion, a record, and far above the then-record 2008 budget deficit of $455 billion.

But though figures released by the White House foresee a cumulative $9 trillion deficit from 2010 to 2019, $2 trillion more than the administration estimated in May, congressional budget analysts put the 10-year figure at a lower $7.14 trillion.

One reason for the difference: The CBO projection is based on an assumption that all the tax cuts put into place in the administration of former President George W. Bush will expire on schedule by 2011 as dictated by current law. President Barack Obama’s budget baseline, however, hews to his proposal to keep the tax cuts in place for families earning less than $250,000 a year.

Beyond the 10-year forecast, the nation will face further challenges posed by rising health-care costs and the aging of the population, the CBO said. “The budget remains on an unsustainable path” over the long term and will require some combination of lower spending and higher tax revenues, it said.

Both forecasts see unemployment rising to 10 percent before falling, and both suggest growth will return to the economy later this year but that recovery will be slow after the longest and deepest recession since the 1930s.

“This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter,” said Obama economic adviser Christina Romer.

She predicted unemployment could reach 10 percent this year and begin a slow decline next year. Still, she said, the average unemployment will be 9.3 percent in 2009 and 9.8 percent in 2010. The CBO had similar figures.

Both budget offices see the national debt — the accumulation of annual budget deficits — as more than doubling over the next decade. The total national debt, made up of amounts the government owes to the public, including foreign governments, as well as money it has borrowed from itself, stood Tuesday at a staggering $11.7 trillion.

Congressional Budget Office director Douglas Elmendorf said if Congress doesn’t reduce deficits, interest rates will likely rise, hurting the economy. But if Congress acts too soon, the economic recovery — once it arrives — could be thwarted, he said.

“We face perils in acting and perils in not acting,” Elmendorf told reporters.