Congressional economists are predicting a slow rebound of the economy, with unemployment averaging 10.1 percent this year as the economy grows by just over 2 percent.
The latest estimates from the nonpartisan Congressional Budget Office see the economy growing only slightly more next year with an unemployment rate of 9.5 percent. But the CBO also projects that the economy will rebound sharply over the period from 2012-2014. That would be good news for President Barack Obama's re-election prospects.
The latest estimates see a $1.35 trillion deficit for the current budget year, dropping to $980 billion next year — but only if a host of tax cuts enacted under President George W. Bush are allowed to expire.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
WASHINGTON (AP) — The latest congressional budget estimates due Tuesday predict a $1.35 trillion U.S. deficit for this year, a top legislative aide says.
The Congressional Budget Office figures confirm the massive problem facing President Barack Obama and his Democratic allies just days before his Feb. 1 budget submission. The White House says Obama will propose a three-year freeze on domestic agency budgets, though the savings would barely make a dent.
The White House is under considerable pressure to cut deficits — the red ink hit a record $1.4 trillion last year — or at least keep them from growing. Encouraged by last week's Massachusetts Senate victory, Republicans are hitting hard on the issue. Opinion polls show voters increasingly concerned as November elections near.
The budget office said the deficit would slide to $480 billion by 2015, CBO says, but only if tax cuts on income, investments and large estates are allowed to expire at the end of this year. Most budget experts see deficits as far higher once tax cuts and other policies are factored in.
The 2010 deficit figure is in line with previous estimates and would be a slight decline from last year's shortfall. But plans afoot on Capitol Hill for a new jobs bill and a coming Obama request for war funds would add to the total.
The figures arrived just hours before the Senate is likely to reject a White House-backed plan to establish a bipartisan task force to recommend steps to curb the deficit.
The spending freeze, expected to be proposed by Obama during the State of the Union address to Congress on Wednesday, would apply to a relatively small portion of the federal budget, affecting a $477 billion pot of money available for domestic agencies whose budgets are approved by Congress each year. Some of those agencies could get increases, others would have to face cuts; such programs got an almost 10 percent increase this year. The federal budget total was $3.5 trillion.
The freeze on so-called discretionary programs would have only a modest impact on a deficit expected to match last year's $1.4 trillion. The steps needed to really tackle the deficit include tax increases and curbs on benefit programs like Medicare, Medicaid and Social Security.
That is the idea driving the Obama-backed plan to create a special task force to come up with a plan to curb the spiraling budget deficit. But the Senate sponsors of the plan say it has attracted too much opposition from the right and left to prevail.
Republicans say the panel — it would try to develop a deficit reduction blueprint after the November elections for a vote before the new Congress convenes — would lead to big tax hikes. Democratic opponents say they don't want to vote on proposals to cut benefit programs like Social Security without being able to shape the plan.
Obama's three-year spending freeze will be part of the budget Obama will submit Feb. 1, senior administration officials said, commenting on condition of anonymity to reveal unpublished details.
It is likely to confront congressional opposition from a handful of powerful lawmakers who write 12 annual appropriations bills. They have become used to hefty increases but now are being asked to tighten their belts. House Appropriations Committee Chairman David Obey, a Democrt,, declined to comment, his spokesman said.
The Pentagon, veterans programs, foreign aid and the Homeland Security Department would be exempt from the freeze.
The savings would be small at first, perhaps $10 billion to $15 billion, one official said. But over the coming decade, savings would add up to $250 billion.
Sen. John McCain, who lost to Obama in last year's presidential election, said he supports any attempt to cut discretionary domestic spending. "We need to do so," he said Tuesday.
But in an appearance on ABC television's "Good Morning America," the Arizona Republican said Obama "has got to veto bills that are laden with pork-barrel spending, earmarks."
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