U.S. deficit pegged at $1.2 trillion in 2009
The news that Washington is awash in record amounts of red ink came Wednesday from the Congressional Budget Office, which cited a collapse in government revenue and last year's financial bailout of Wall Street for the unprecedented jump in its deficit projection.
"This is one of the worst budget forecasts I have seen in my lifetime," said Senator Kent Conrad, the Democratic chairman of the Senate budget committee. "President-elect Obama is being handed an absolute fiscal disaster."
As recently as September, the CBO had estimated the 2009 deficit at $440 billion, and its increase reflects the impact of the economic collapse on federal coffers.
For the fiscal year 2010, which begins in October, the CBO has estimated a deficit in excess of $700 billion, which many analysts already believe is too low.
The budget projections deal a political blow to outgoing President George W. Bush, who inherited a federal budget surplus when he took office eight years ago but leaves the White House with the nation facing its highest debt levels in history.
But the deficit numbers, described by Conrad as "jaw dropping," also have the potential to place new political pressures and constraints on Obama. The president-elect is trying to build bipartisan support for a plan to jolt the faltering American economy back to life, through a combination of tax cuts and massive spending programs shortly after he takes office on Jan. 20.
"The deficit estimate makes it clearer than ever that we cannot borrow and spend our way back to prosperity when we're already running an annual deficit of more than one trillion dollars," said Representative John Boehner, the Republican minority leader in the House of Representatives.
At a news conference in Washington, Obama acknowledged the nation's deficit picture would only worsen throughout 2009 because of stimulus legislation expected to be passed by Congress in early February.
"We have an economic situation that is dire, and we're going to have to jump-start this economy with my economic recovery plan, creating three million jobs," Obama said.
"That's going to cost some money, and, in the short term, we will actually see, potentially, additions to the deficit."
Members of Obama's transition team have placed the cost of the stimulus package at about $800 billion, while some economists argue it must reach $1.3 trillion to have any significant impact on the U.S. economy's health.
"We expect that it will be on the high end of our estimates, but will not be as high as some economists have recommended, because of the constraints and concerns we have about the existing deficit," Obama said.
With some Republicans and conservative Democrats already expressing concern about the size of Obama's economic rescue plan, the president-elect on Tuesday sought to allay fears of runaway wasteful spending.
He named Nancy Killefer, a former Clinton administration Treasury Department official, as the "chief performance officer" overseeing a comprehensive review of government departments.
Killefer will conduct a line by line review of all federal spending including high-cost entitlement programs like Social Security and Medicare -- with the aim of avoiding long-term structural deficits, Obama said.
The bad deficit news nearly overshadowed the biggest symbolic event on Obama's calendar Wednesday -- a historic White House meeting with Bush and the three living ex-presidents, Bill Clinton, George H.W. Bush and Jimmy Carter.
The five men assembled at Obama's request for an hour-long private luncheon; it was the first time since 1981 that all living U.S. presidents had gathered at the White House.
"One message that I have and I think we all share is that we want you to succeed," Bush told Obama during a photo opportunity before the lunch.
"Whether we're Democrat or Republican, we all care deeply about this country . . . All of us who have served in this office understand that the office transcends the individual."
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