U.S. Federal Deficit to hit $1.35 Trillion

Posted Jan 26, 2010 by Michael Bearak
The Congressional Budget Office announced Tuesday that they are forecasting the United State's federal deficit to hit $1.35 trillion.
President Obama proposed a bipartisan task force to handle the ever growing issue of the federal deficit. On Tuesday the U,S, Senate rejected the plan despite the figures that show how far in the red the United States is going to be again this year.
The president's plan was to have a special deficit panel that would attempt to put a plan together that would have tax cuts as well as spending curbs and would be voted on after the midterm elections. In the end the Democrats as well as some anti-tax Republicans were wary of being forced into cutting Social Security and Medicare. The Senate vote against the deficit task force came just a matter of hours after the Congressional Budget Office (CBO) released their projections of a $1.35 trillion deficit for the year.
According to Senator Judd Gregg, R-N.H., "Yet another indication that Congress is more concerned with the next election than the next generation."
The CBO's projection for 2010 is roughly equal to last year's record $1.4 trillion. In the end that means that the government is having to borrow roughly 40 percent to cover the cost of its programs.
The report from the CBO is forecasting a sluggish recovery for the economy and for high unemployment to continue. Both of these will be big problems for both President Obama and the rest of the Democrats as they move into mid-term elections.
If a number of President George W. Bush's tax cuts are allowed the expire the national deficit will drop to roughly $980 billion next year and in five years to $480 billion.
Still most analysts see the deficit hovering around $1 trillion for the next decade after policies and other tax cuts are factored into the equation.
It is expected that President Obama is planning on announcing a three-year freeze on domestic agency budgets in his State of the Union speech on Wednesday. People are also curious whether Obama will propose tax hikes or cuts to a number of groups like Social Security and Medicare.
Even though the CBO's report is less than 2009, there are plans on Capitol Hill for new jobs as well as a request from the president for war funds which would only push the total for the deficit up higher.
The expected call for a freeze would only be affecting a $477 billion pot of money. Most of the groups got 10 percent increases this year. The budgets for these groups are voted upon each year by Congress, so some groups may still get increases while others would see cuts made. The federal budget total was $3.5 trillion. In the end the freeze would have a very modest affect on the overall deficit.