President Barack Obama’s budget office will announce the government’s deficit for 2009 will total $1.58 trillion, about $262 billion less than forecast in May, according to an administration official.
The White House’s biannual budget review set for release next week will show the outlook for the fiscal year ending Sept. 30 improved primarily because of reduced costs associated with the stabilizing economy. That has allowed the administration to scrap a $250 billion contingency plan to aid the financial industry, the official said.
The reduced deficit is also attributable to fewer bank failures than anticipated, which meant spending at the Federal Deposit Insurance Corp. will be $78 billion less than forecast, said the official, who requested anonymity because the figures haven’t been publicly released.
The deficit figure, as revised, would amount to 11.2 percent of the nation’s economy, the official said. That would be the biggest share since 1945.
“It’s better than we expected but it’s still a huge deficit,” said Stan Collender, a former congressional budget aide who is a partner at Qorvis Communications in Washington. He said the administration deserves “some credit here for managing the financial bailout situation so that they didn’t need another one,” adding that Obama and his aides faced “a very unstable situation when they walked in cheap car insurance.”
The administration’s mid-session review, slated for release on Aug. 25, will update the White House’s economic and budget forecasts with revised estimates of GDP growth, unemployment and future deficits. The administration official declined to discuss any other details in the report.
The nonpartisan Congressional Budget Office, which in June estimated this year’s deficit would reach $1.825 trillion, is also scheduled to release a revised estimate on Aug. 25.
The Obama administration had previously pegged this year’s shortfall at $1.84 trillion and next year’s deficit at $1.26 trillion. Tax revenue this year will total $2.074 trillion, the official said, which would be down 18 percent from last year, a reflection of the slow economy. Spending will grow to $3.653 trillion, which would be up almost 23 percent from 2008.
Federal spending has been driven up in part by the $787 billion economic stimulus package enacted in February, a $700 billion bailout of the financial industry, takeovers of mortgage financiers Fannie Mae and Freddie Mac and the increased costs of running safety-net programs such as unemployment insurance.