WASHINGTON – In a chilling forecast, the White House is predicting a 10-year federal deficit of $9 trillion — more than the sum of all previous deficits since America's founding. And it says by the next decade's end the national debt will equal three-quarters of the entire U.S. economy.

But before President Barack Obama can do much about it, he'll have to weather recession aftershocks including unemployment that his advisers said Tuesday is still heading for 10 percent.

Overall, White House and congressional budget analysts said in a brace of new estimates that the economy will shrink by 2.5 to 2.8 percent this year even as it begins to climb out of the recession. Those estimates reflect this year's deeper-than-expected economic plunge.

The grim deficit news presents Obama with both immediate and longer-term challenges. The still fragile economy cannot afford deficit-fighting cures such as spending cuts or tax increases. But nervous holders of U.S. debt, particularly foreign bondholders, could demand interest rate increases that would quickly be felt in the pocketbooks of American consumers.

Amid the gloomy numbers on Tuesday, Obama signaled his satisfaction with improvements in the economy by announcing he would nominate Republican Ben Bernanke to a second term as chairman of the Federal Reserve. The announcement, welcomed on Wall Street, diverted attention from the budget news and helped neutralize any disturbance in the financial markets from the high deficit projections.

The White House Office of Management and Budget indicated that the president will have to struggle to meet his vow of cutting the deficit in half in 2013 — a promise that earlier budget projections suggested he could accomplish with ease.

"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.

The deficit numbers also could complicate Obama's drive to persuade Congress to enact a major overhaul of the health care system — one that could cost $1 trillion or more over 10 years. Obama has said he doesn't want the measure to add to the deficit, but lawmakers have been unable to agree on revenues that would cover the cost.

What's more, the high unemployment is expected to last well into the congressional election campaign next year, turning the contests into a referendum on Obama's economic policies.

Republicans were ready to pounce.

"The alarm bells on our nation's fiscal condition have now become a siren," said Senate Minority Leader Mitch McConnell of Kentucky. "If anyone had any doubts that this burden on future generations is unsustainable, they're gone — spending, borrowing and debt are out of control."

Even supporters of Obama's economic policies said the long-term outlook places the federal government on an unsustainable path that will force the president and Congress to consider politically unpopular measures, including tax increases and cuts in government programs.

"The numbers today portend the biggest budget fight we've probably had in decades in the United States," said Stan Collender, a former congressional budget official.

The summer analyses by the White House budget office and by the Congressional Budget Office reached similarly bleak conclusions. The CBO's 10-year deficit figure was smaller — $7 trillion — but that is because it assumes that all tax cuts put into place in the administration of former President George W. Bush will expire on schedule by 2011. 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.

Both budget offices see the national debt — the accumulation of annual budget deficits — as more than doubling over the next decade. The public national debt, made up of amounts the government owes to the public, including foreign governments, stood Tuesday at a staggering $7.4 trillion. White House budget officials predicted it would reach $17.5 trillion in 2019, or 76.5 percent of the gross domestic product. That would be the highest proportion in six decades.

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

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

David Walker, former head of the Government Accountability Office, said the numbers illustrated the need for a national commission that would review spending and taxing options and present lawmakers with a deficit reduction plan that Congress could approve or reject.

"We're going to have to do a hard course correction once we turn the corner on the economy," Walker, now president and CEO of the Peter G. Peterson Foundation, said.

Both Romer and Obama budget director Peter Orszag said this year's contraction would have been far worse without money from the $787 billion economic stimulus package that the president pushed through Congress as one of his first major acts.

At the same time, the continuing stresses on the economy have, in effect, increased the size of the stimulus package because the government will have to spend more in unemployment insurance and food stamps, Orszag said. He said the cost of the stimulus package — which spends most of its money in fiscal year 2010 — will grow by tens of billions of dollars above the original $787 billion.

The White House also credited the $3 billion cash-for-clunkers auto program for contributing to recent economic growth.

Orszag, anticipating backlash over the deficit numbers, conceded that the long-term deficits are "higher than desirable." The annual negative balances amount to about 4 percent of the gross domestic product, a number that many economists say is unsustainable.

But Orszag also argued that overhauling the health system would reduce health care costs and address the biggest contributor to higher deficits.

"I know there are going to be some who say that this report proves that we can't afford health reform," he said. "I think that has it backward."

At the same time, 10-year budget projections can be "wildly inaccurate," said Collender, now a partner at Qorvis Communications. Collender noted that there will be five congressional elections over the next 10 years and any number of foreign and domestic challenges that will make actual deficit figures very different from the estimates.

http://news.yahoo.com/s/ap/20090826/ap_on_go_pr_wh/us_obama_economy


The part that gets me the most is they don't know where the money to pay for health reform is coming from or how much it is, yet it's not going to add to the debt.

$9 trillion dollar deficit.. don't think that was the "change" the obama supporters were wanting!

Here's some more change for you. In Chicago they just approved the highest sales tax in the history of the United States. Three dollars on spirts and beer. To pay for heath programs , like we are ever going to see that.

posted this yesterday off fox news... glad to see other outlets are showing it too.

We can implement health care reform, end the war and recoup what we are losing now.

Health care reform is doable. The daunting numbers are estimates and are not putting into account the saving that will come from it.

I have been cringing for a few months now to the point I just want to get through the next few years with something intact.

He did promise change though didn't he. Some change...

Do I believe health care should be reformed..Yes, not like this. this is the worst type of joke there is.

Now there is no pay increases to the seniors on their SS and yet they are going to increase Medicare deductions.


Somehow I never have been able to spend my way out debt and yet that is what they are telling us.. yeah right..

what next

Sorry didn't see that. Well atleast this might make the fox news haters believe it is a real story then.

Then before they try and push it through then end the wars,oh wait Obama broke his campain promise on that so it's not gonna happen anytime soon.

yes they are estimates and yes they don't know what savings will come from it , but with how they were off on their estimates by 2 or so trillion dollars with the deficite why should we believe any numbers they throughout for what are they calling it now oh yea "health reform"

here's what a trillion dollars looks like...in plain English...you could spend $600.00 a second...for 2900 years...or...$36,000 every minute for 2900 years...

$9 Trillion?

That's nothing.. We can do another stimulus, healthcare, and whatever else Obama can dream up until his 1 and done presidency comes to an end..

for those keeping score at home, the total federal deficit from Washington to Bush 43 was somewhere around $11 trillion.

Barry's only been in office for a few months and his first budget projection is on pace to nearly double that figure over the next 10 years??

I guess Hope and Change means different things to different people..

Bankrupt America? Yes We CAN!!

I dont think its such a sky is falling crisis

its high but not unsurvivably high.

in terms of absolute money of course it the most ever. we have more money. The more you make the more you can afford to go in debt. bigger house nicer car

in terms of a percentage of our economy it high but not that bad

people will show you this and try to scare you






but then they wont show the whole picture