US Congressional Estimates See Grimmer Deficit Picture Than Obama Administration:

US congressional estimates see grimmer deficit picture than Obama administration:

Fri Mar 5, 5:18 PM
By Andrew Taylor, The Associated Press

http://www.google.com/hostednews/ap/article/ALeqM5ib3KqdpvjY_RfC7wEboQtJRC3YCQD9E8P2180

WASHINGTON - A new congressional report released Friday says the United States' long-term fiscal woes are even worse than predicted by President Barack Obama's grim budget submission last month.

The nonpartisan Congressional Budget Office predicts that Obama's budget plans would generate deficits over the upcoming decade that would total $9.8 trillion. That's $1.2 trillion more than predicted by the administration.

The agency says its future-year predictions of tax revenues are more pessimistic than the administration's. That's because the report projects slightly slower economic growth than the White House.

The deficit picture has turned alarmingly worse since the recession that started at the end of 2007, never dipping below 4 per cent of the size of the economy. Economists say that deficits of that size are unsustainable and could put upward pressure on interest rates, crowd out private investment in the economy and ultimately erode the nation's standard of living.

Still, the Feb. 1 White House budget plan was a largely stand-pat document that avoided difficult decisions on curbing the unsustainable growth of federal benefit programs like the health care program for the elderly and the health progam for the poor and disabled.

Instead, Obama has created an 18-member fiscal reform commission that's charged with coming up with a plan to shrink the deficit to 3 per cent of the economy within five years. But the Republicans to be named to the panel by congressional GOP leaders are unlikely to go along with any tax increases that might be proposed, which could ensure election-year gridlock.

The report says that extending tax cuts enacted in 2001 and 2003 under Republican President George W. Bush and continuing to update the alternative minimum tax so that it will noy hit millions of middle-class taxpayers would cost $3 trillion over 2011-2020. The tax cuts expire at the end of this year and Obama wants to extend them - except for individuals making more than $200,000 a year and couples making $250,000.

For the current budget year, the report predicts a record $1.5 trillion deficit. That is actually a little better than predicted by the White House, but at 10 per cent of gross domestic product, it's bigger than any deficit in history other than those experienced during World War II.

The new report predicts that debt held by investors, including China, would spike from $7.5 trillion at the end of last year to $20.3 trillion in 2020. That means interest payments would more than quadruple over 2011-2020.