New Deficit Projections Spur Calls for Commission
August 25, 2009 - The Congressional Budget Office (CBO) and White House's Office of Management and Budget (OMB) issued updated figures that depict deepening deficits over the period spanning fiscal years 2010-2019.
Dave Walker, President & CEO of the Peter G. Peterson Foundation, emphasized the need to address the state of the nation's finances. "The deficit projection numbers that were released today by both CBO and OMB note that while the deficit for fiscal 2009 is expected to be somewhat smaller than the last projection, longer range deficit projections have increased significantly. This serves to re-enforce the need to enact a Fiscal Future Commission in order to engage the American people and make a range of recommendations that will start to put our federal financial house in order. The clock is ticking and our foreign lenders are losing patience. The time for action is now," said Walker.
CBO reduced its fiscal year 2009 baseline deficit figures by about $80 billion, while projections for the 2010-2019 period increased by $2.7 trillion. According to CBO, the increase in the longer range deficit figures reflects supplemental appropriations to finance military operations in Iraq and Afghanistan, while reductions in projected revenues and increases interest costs account for the remaining differences. The White House also revised its 2010-2019 deficit projection upward by nearly $2 trillion to reflect a worsening economic outlook.
| 2009 deficit projection | 2010 deficit projection | 2010-2019 deficit projection | |
| CBO Baseline, August 2009 | $1.59 trillion (11.2% of GDP) | $1.38 trillion (9.6% of GDP) | $7.14 trillion (4.0% of GDP) |
| CBO Baseline, March 2009 | $1.67 trillion (11.9% of GDP) | $1.14 trillion (7.9% of GDP) | $4.44 trillion (2.5% of GDP) |
| OMB, August 2009 | $1.58 trillion (11.2% of GDP) | $1.50 trillion (10.4% of GDP) | $9.05 trillion (5.1% of GDP) |
| OMB, May 2009 | $1.84 trillion (12.9% of GDP) | $1.26 trillion (8.5% of GDP) | $7.11 trillion (4.0% of GDP) |
Note: CBO's baseline projections presume no changes in current laws, and therefore spending and revenue assumptions may underestimate deficits. For example, CBO estimates policy alternatives such as extending tax cuts set forth in the Tax Relief and Reconciliation Acts of 2001 and 2003 would increase the deficit by $2.3 trillion over the 2010-2019 projection period.
Sources: CBO, The Budget and Economic Outlook: An Update, August 2009; OMB, Mid-Session Review: Budget of the U.S. Government, August 2009.
CBO's baseline projections for debt held by the public also illustrate an increasingly burdensome longer range debt load for the nation, as debt held by the public is expected to reach 68 percent by 2019. According to CBO, that accumulating federal debt, coupled with rising interest rates, would lead to a near tripling of net interest payments — relative to the size of the economy — between 2009 and 2019.
