Obama's proposed FY 2010 budget would require nearly $9.3 trilion in borrowing over 10 years, according to CBO report

Mar 23 2009

President Obama's $3.6 trillion fiscal year 2010 budget proposal would require borrowing nearly $9.3 trillion over the next decade, or $2.3 trillion more than the White House projected, according to a Congressional Budget Office report released on Friday, the Washington Post reports (Montgomery, Washington Post, 3/21).

According to the AP/Philadelphia Inquirer, the "eye-popping deficit numbers" could jeopardize Obama's "ambitious" agenda, including health care overhaul. However, Obama on Friday said he was undeterred in his agenda, the AP/Inquirer reports. He said, "What we will not cut are investments that will lead to real growth and prosperity over the long term," adding, "That's why our budget makes a historic commitment to comprehensive health care reform" and other initiatives.

According to the AP/Inquirer, Obama's budget would generate annual deficits of nearly $1 trillion from FY 2010 to FY 2019 (Taylor, AP/Philadelphia Inquirer, 3/21). CBO also estimated a budget deficit of $1.4 trillion for FY 2010, compared with Obama's projection of nearly $1.2 trillion. Obama's proposal would increase deficits to more than 4% of gross domestic product each year over the next decade, resulting in the cumulative debt held by the public exceeding 82% of GDP -- double the level in FY 2008 -- by FY 2019, according to CBO (Washington Post, 3/21).

White House Office of Management and Budget Director Peter Orszag said that long-term estimates were more pessimistic than those of the administration, private economists and the Federal Reserve and added that he remains confident that Obama's budget would produce smaller deficits. However, Orszag said that if the CBO projections are accurate, Obama's budget would produce unsustainable deficits (AP/Philadelphia Inquirer, 3/21).

Prospects

"[I]t was clear" that CBO's report "would complicate" congressional Democratic leaders' efforts to pass budget resolutions that preserve Obama's priorities while reducing the budget deficit, CQ Today reports (Krawzak [1], CQ Today, 3/20). Congressional Democratic leaders are completing work on their competing budget resolutions, which they hope to bring to a vote in their respective chambers in the next two weeks. Senate Budget Committee Chair Kent Conrad (D-N.D.), who plans to unveil his resolution proposal on Tuesday, said he has already made "lots of adjustments" to eliminate billions of dollars from Obama's proposals (Washington Post, 3/21). Conrad added, "The reality is we are going to have to make adjustments to the president's budget if we want to keep the deficit on a downward trajectory" (Krawzak [2], CQ Today, 3/20).

However, Conrad and House Budget Committee Chair John Spratt (D-S.C.) said that they will preserve Obama's priorities in their plans (Washington Post, 3/21). Conrad said, "Despite these new numbers, we will adopt a budget resolution that reflects the key priorities of the president," including health care reform and other initiatives. Conrad added, "We can meet those priorities and still take the difficult steps that will be needed to dig out of the fiscal and economic mess this administration has inherited" (Sanchez, CongressDaily, 3/20). Spratt said, "We will follow President Obama's lead and produce a budget that cuts the deficit in half over the next four years but still invests in areas critical to our future such as energy, education and health care" (Washington Post, 3/21).

The report is available online (.pdf).

Reconciliation

Orszag on Friday said that using budget reconciliation to move health care overhaul legislation without threat of filibuster "is not where we want to start, but it is premature to take off the table." He added, "We will have to see what comes out of the House and Senate." Drew Hammill, a spokesperson for House Speaker Nancy Pelosi (D-Calif.), said that no decisions have been made about using the budget reconciliation process (CongressDaily, 3/20).

Obama's Weekly Address

Obama on Saturday during his weekly radio and Internet address said he expects Congress to pass a budget that would finance major programs in his budget proposal, including a down-payment on health care reform, while cutting the budget deficit, the New York Times reports. He said, "As the House and the Senate take up this budget next week, the specific details and dollar amounts in this budget will undoubtedly change. That's a normal and healthy part of the process." He added that "when all is said and done," he expects a budget that will reflect his budget priorities, including health care reform.

Obama said, "To those who say we have to choose between health care reform and fiscal discipline, I say that making investments now that will dramatically lower health care costs for everyone won't add to our budget deficit in the long term; it is one of the best ways to reduce it" (Cooper, New York Times, 3/22). He said that his budget is "a vision of America where growth is not based on real estate bubbles or over-leveraged banks, but on a firm foundation of investments in energy, education and health care that will lead to a real and lasting prosperity" (AP/Dallas Morning News, 3/21). Obama said that he plans to meet with congressional leaders this week and will hold a prime-time news conference on Tuesday to discuss his budget proposal (New York Times, 3/22).

In the Republican response, delivered by Mississippi Gov. Haley Barbour (R), the Republicans said Obama's proposal "spends too much, taxes too much and borrows too much" (AP/Dallas Morning News, 3/21). Obama's address "signal[ed] the start of what promises to be a bruising fight with Congress," the Times reports. According to the Times, "Reducing the deficit while expanding the programs that Mr. Obama wants will be a tough job, particularly given the amount of money that American taxpayers are being asked to pump into the country's besieged financial sector" (New York Times, 3/22).

Editorial

Obama "has offered a host of new spending," including on health care reform, "without calling for much sacrifice from anyone except the top 5% of the income scale," a Post editorial states. The editorial continues, "Obama should treat the CBO report as an incentive to fulfill his repeated promises, during and after the campaign, to make hard choices on the budget."

The editorial states, "Though his emphasis on controlling health care costs is welcome, it's not a substitute for reforming the entitlement programs that are the drivers of long-term fiscal crisis, Medicare and Social Security," adding that Obama "has offered no plan for either and no road map even for achieving a plan." The editorial concludes, "Several members of his own party in the Senate have been expressing doubts about his strategy, and the CBO report will lend credibility to their concerns. He should heed them" (Washington Post, 3/22).