Lawmakers on both sides of the aisle are girding for battle over new deficit estimates due out today — perhaps as high as $2 trillion for 2009.
The non-partisan Congressional Budget Office (CBO) is schedule to release its revised projections on Friday, and the number almost certainly will be much higher than bailout-weary politicians would like to face and hundreds of billions higher than the most recent estimates from the CBO.
Expect the bad news to revive debate over continued help for Wall Street and insurance giant AIG, as well as reconsideration of how much stimulus money is doled out over the coming months.
Meanwhile, the Democratic head of Senate Budget Committee, Kent Conrad of North Dakota, said he expects deficit spending will be $1.6 trillion greater over the next decade than the $7 trillion in red ink President Obama has forecast.
Conrad told reporters that the additional $1.6 trillion over the next decade was based on projections of the Democratic majority's budget committee staff.
House Speaker Nancy Pelosi defended the spending on Thursday, saying that the money was necessary to face down the economic crisis threatening to engulf the United States. On Friday, the OECD said that it expects the world economy to turn negative this year for the first time in six decades.
"You can't say we're going to do less because the numbers are pessimistic. You say, we have to do what we do in light of those numbers," Pelosi told reporters.
"We have to recognize that education, a change in energy policy and healthcare reform are what will turn the economy around, bring money to the Treasury, make us competitive internationally and put the economy on a much more stable footing as we go into the future," Pelosi said.
The White House believes the 2009 deficit will be lower, hitting $1.75 trillion this year. Obama has said he will cut the deficit to $533 billion by 2013.
The spending has been fast and furious, and the totals managed by the CBO and White House don’t count “shadow” spending by the Federal Reserve, which has been printing money overtime since the fall and just announced its own, unchecked spending plan of up to $1.2 trillion.
Part of the rising tide of red is the $787 billion stimulus bill, plus the $410 billion spending package Obama just signed to keep the government running — and expand it. Economists warn that the banking industry will likely need a renewed TARP package soon. And many private observers have shown the U.S. banking industry to be virtually insolvent, despite the billions already stuffed into their balance sheets from the public purse.
Some wonder now if the president’s plans to revamp healthcare, among other priorities, are realistic.
"It's going to be sobering, to put it mildly, and will affect a lot of decisions that will be made around here. It will certainly affect any thought of a second stimulus package or additional money for TARP," said Sen. Joe Lieberman, D-Conn.
Judd Gregg, the leading Republican on the Senate’s Budget Committee, warned that Obama’s long-term plan simply doesn’t add up.
"The budget that was sent up is not sustainable for our nation," Gregg said. "They are creating a structural failure in our economy, in our country, and in our governing."
"If you have debt in 2013, public debt at 67 percent of GDP under the president's score, and you have a deficit of over 3 percent of GDP, and that goes on forever ... you're on a path where you are basically bankrupting the nation," Gregg said.
"And the new numbers from CBO are going to be worse, significantly worse."
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