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 that 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 percent 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 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 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.
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 government on an unsustainable path that will force the president and Congress to consider politically unpopular measures, including tax increases and cuts in programs.
Comprehending a trillion dollars
In 1981, the trillion-dollar figure was such a novelty that President Ronald Reagan declared it incomprehensible. “If you had a stack of thousand-dollar bills in your hand only 4 inches high, you’d be a millionaire,” the president said then. “A trillion dollars would be a stack of thousand-dollar bills 67 miles high.” Now consider the mileage in this:
• Today, the government faces nearly a $1.6 trillion deficit in the fiscal year that ends Sept. 30, according to government budget officials.
• It faces a cumulative 10-year deficit of about $9 trillion. That’s $30,000 for each man, woman and child in the United States.
• Its publicly held debt is projected by the White House budget office to total $17.5 trillion by 2019 — three-quarters of the nation’s entire economy — sending Reagan’s stack of thousand-dollar bills into satellite orbit.
10%
Peak unemployment rate in coming months, the Congressional Budget Office and White House Office of Management and Budget say, but the White House says it will begin to drop in 2010, while the CBO says it will average 10 percent for all of 2010.
2.5%-2.8%
Contraction of the economy this year, more than doubling the prediction from earlier this year; both agencies expect the economy to grow next year by 1.7 percent to 2 percent and continue expanding in 2011 at a 3.5 percent clip.
