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Aug 20, 2009

US deficit US$1.58 trillion this year

The deficit this year is three times that of last year

WASHINGTON: The White House plans to announce the federal deficit is about $262 billion less than officials predicted early this year, in part because the Obama administration has provided less aid than expected to Wall Street.

The deficit still will be three times bigger than last year's.

The federal deficit this year will total $1.58 trillion, a senior White House official said late Wednesday.

The official spoke on condition of anonymity to discuss the report before its release Tuesday when President Barack Obama will be on vacation in Massachusetts.

The nonpartisan Congressional Budget Office is expected to release its midsession review the same day.

It estimated in June that it expected a deficit of $1.825 trillion.

The report for the budget year that ends Sept. 30 also would predict Washington to spend $3.653 trillion this year, the official said.

Revenue, however, would reach only $2.074 trillion.

The new deficit numbers are record-shattering, but would give the administration the opportunity to say that its policies have avoided a more extreme financial crisis and eliminated the need for further bank infusions.

Still, the deficit amount is a tremendous obstacle for an administration trying to undertake massive policy overhauls in health care and the environment.

"Whether it's $1.6 trillion or $1.8 trillion, it's pretty bad," said Robert Bixby, executive director of the bipartisan fiscal watchdog The Concord Coalition.

"I hope no one tries to spin that as good news."

But Stan Collender, a former congressional budget staffer, said the White House's new deficit numbers cannot be blamed on Obama.

Collender, now with Qorvis Communications, a Washington consulting firm, noted that the deficit estimate when President George W. Bush left office was $1.2 trillion and that did not include a tax adjustment and additional spending for operations in Iraq and Afghanistan, approved this year, that Bush also would have sought.

The midsummer report was supposed to have been released by mid-July but was delayed, which led to speculation the White House was delaying the bad news until Congress left on its August recess.

Other administrations delayed releasing similar reports during their first year in office.

Obama's budget had included a $250 billion placeholder for a second bailout of the nation's troubled banks but did not ask Congress for it because of the fear that the administration was spending too heavily.

The administration also had anticipated failures of more banks, but the survival of most banks saved billions for Washington.

The report comes during a rough patch for Obama's presidency.

The rancor surrounding the Democrats' proposed health care overhaul also provides a distraction during a monthlong break when much of Washington is in a lull.

The administration predicted this year that unemployment would peak at about 9 percent without a big stimulus package and 8 percent with one.

Congress passed a $787 billion two-year stimulus measure, yet unemployment soared to 9.4 percent in July and appears headed for double digits.

The nation's debt, the total of accumulated annual budget deficits, now stands at $11.7 trillion.

In the scheme of things, that is more important than talking about the "deficit," which only looks at a one-year slice of bookkeeping and ignores previous indebtedness that is still outstanding.

Even so, the administration has projected that the annual deficit for the current budget year will hit the $1.58 trillion figure, more than three times the size of last year's deficit of $455 billion.

Economists predict that an improved economic climate could help reduce the deficit in the 2010 fiscal year to $1.3 trillion.

Obama has promised to reduce the budget to $533 billion in the 2013 fiscal year.

"The deficit is obviously very large and a problem," said economist Mark Zandi of Moody's

"But it's not quite as bad as what expectations were a few months ago."

Earlier this year, Zandi, whose observations are frequently cited by administration and congressional officials, had predicted that the administration would have to get congressional approval for additional rescue funds for financial institutions.

"It's working out better than I anticipated," he said.

Source : STAR
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