New Estimate Has Deficit Topping $1.8T

The federal budget deficit for the current year will top $1.8 trillion under the latest estimates produced by congressional economists, say Capitol Hill aides briefed on the figures.

The Congressional Budget Office's estimate of President Barack Obama's budget for next year show a worsening picture for 2010 as well, with a deficit of almost $1.4 trillion expected under administration policies. Obama had predicted about $200 billion less.

The aides spoke on condition of anonymity in advance of public release of the figures later Friday.

The latest figures, fueled by the $700 billion Wall Street bailout and diving tax revenues stemming from the worsening recession, would shatter the previous record for a federal shortfall of $459 billion, set just last year.

Democrats insist the huge deficit won't crimp Mr. Obama's ambitious agenda. The White House reminds daily that Mr. Obama inherited a terrible fiscal situation.

Democrats in Congress are readying Mr. Obama's budget for preliminary votes next week, and they promise to cut the deficit in half within five years. Still, long-term deficits equal to 3 percent of the size of the economy have many lawmakers uneasy.

Democrats are likely to curb somewhat Mr. Obama's request for a 9 percent increase in non-defense agency budgets.

Mr. Obama's $3.6 trillion budget for the 2010 fiscal year beginning Oct. 1 contains ambitious programs to overhaul the U.S. health care system and initiate new "cap-and-trade" rules to combat global warming.

Both initiatives involve raising federal revenues sharply higher, but those dollars wouldn't be used to defray the burgeoning deficit.

Republicans say Mr. Obama's budget plan taxes, spends and borrows too much, and they've been sharply critical of his $787 billion economic stimulus measure and a just-passed $410 billion omnibus spending bill that awarded big increases to domestic agency budgets.

The administration says it inherited deficits totaling $9 trillion over the next decade and that its budget plan cuts $2 trillion from those deficits. But most of those spending reductions come from reducing overseas costs for the war in Iraq.

Earlier this month, the Treasury Department said the February deficit reached $192.8 billion. That's a record for the month and up 10 percent from a year ago, but below analysts' expectations of $205.7 billion.

With seven months left in the current budget year, which ends Sept. 30, the deficit already has shattered last year's record annual gap of $454.8 billion.

Spending, meanwhile, was flat last month at $280.1 billion. But total spending in the first five months of the budget year jumped 32 percent to $1.63 trillion compared with the same period last year.

The government has spent $290 billion on the bank rescue program so far this year, the Treasury Department said in a monthly statement. Most of the aid came as capital injections, which the government has provided to nearly 500 banks.

The government receives preferred shares in return for its investment, which carry a 5 percent dividend. The banks paid about $2.2 billion to the government in dividends last month, the department said.

The administration's first budget projected the deficit will drop to $1.17 trillion in 2010, and then to $912 billion in 2011. It projected the deficit will plunge to $581 billion in 2012, and $533 billion in 2013, the year the administration has promised to cut the deficit in half.