WASHINGTON – A new assessment of President Obama’s budget released Friday says the White House underestimates future budget deficits by more than $2 trillion over the upcoming decade.

The estimate from the nonpartisan Congressional Budget Office says that if Obama’s February budget submission is enacted into law, it would produce deficits totaling $9.5 trillion over 10 years — an average of almost $1 trillion a year.

Obama’s budget saw deficits totaling $7.2 trillion over the same period.

WHY THE ESTIMATES DIFFER

The difference is chiefly because CBO has a less optimistic estimate of how much the government will collect in tax revenue, partly because the administration has rosier economic projections.

But the agency also rejects the administration’s claims of more than $300 billion of that savings — to pay for preventing a cut in Medicare payments to doctors — because it doesn’t specify where it would come from.

Likewise, CBO fails to credit the White House with an additional $328 billion that would come from unspecified “bipartisan financing” to fund transportation infrastructure projects such as high-speed rail lines and road and bridge construction.

Friday’s report actually predicts that the deficit for the current budget year, which ends Sept. 30, won’t be as bad as the $1.6 trillion predicted by the administration and will instead register $200 billion less. But 10 years from now, CBO sees a $1.2 trillion deficit that’s almost $400 billion above White House projections.

The White House’s goal is to reach a point where the budget is balanced except for interest payments on the $14 trillion national debt.

Such “primary balance” occurs when the deficit is about 3 percent of the size of the economy, and economists say deficits of that magnitude are generally sustainable.

But CBO predicts that the deficit never gets below 4 percent of gross domestic product.

That means that by the time 2021 arrives, the portion of the debt held by investors and foreign countries will reach 87 percent.

And, as a result, interest costs for the government would explode from $214 billion this year to almost $1 trillion by decade’s end.

FEAR OF EUROPEAN-STYLE CRISIS

“The President’s budget never reaches ‘primary balance,’ meaning that it fails to clear even the low bar the administration set for itself in justifying its claims of sustainability,” said House Budget Committee Chairman Paul Ryan, R-Wis.

White House budget director Jacob Lew said in a blog post that “CBO confirms what we already know: current deficits are unacceptably high and if we stay on our current course and do nothing, the fiscal situation will hurt our recovery and hamstring future growth.”

The estimate adds urgency to calls on Capitol Hill for action on runaway deficits that many economists fear could trigger a European-style debt crisis that could force draconian measures such as cutting federal benefits for senior citizens or forcing broad-based tax increases.

Just Friday, 64 senators – 32 in each party – signed a letter to Obama calling on him to take the lead in coming up with a comprehensive deficit reduction plan along the lines of a plan issued last year by his own deficit commission. That plan would trade dozens of expensive tax breaks for lower individual and corporate rates, curb Social Security benefits and clamp down on spending across the budget.

 

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