US officials paint dim fiscal picture | Shanghai Daily

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August 26, 2009

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US officials paint dim fiscal picture

THE United States federal government faces exploding deficits and mounting debt over the next decade, White House officials predicted yesterday in a fiscal assessment far bleaker than what the Obama administration had estimated just a few months ago.

Figures released by the White House budget office foresee a cumulative US$9 trillion deficit from 2010-19, US$2 trillion more than the administration estimated in May. Moreover, the figures show the public debt doubling by 2019 and reaching three quarters the size of the entire national economy.

Obama's economic adviser Christina Romer predicted unemployment could reach 10 percent this year and begin a slow decline next year. Still, she said, average unemployment will be 9.3 percent this year and 9.8 percent in 2010.

"This recession was simply worse than the information that we and other forecasters had back last fall and early this winter," Romer said.

Obama himself may have drowned out the rising deficit news with the announcement yesterday that he nominated Ben Bernanke to a second term as chairman of the Federal Reserve. The Bernanke news could neutralize any disturbance in the financial markets caused by the high deficit projections.

Big challenge

The deeper red ink and the gloomy unemployment forecast present United States President Barack Obama with an enormous challenge. The new numbers come as he prods Congress to enact a major overhaul of the health care system - one that could cost US$1 trillion or more over 10 years. Obama has said he doesn't want the measure to add to the deficit, but lawmakers have been unable to agree on revenues that cover the cost.

Republicans pounced.

"The alarm bells on our nation's fiscal condition have now become a siren," Senate Minority Leader Mitch McConnell said. "If anyone had any doubts that this burden on future generations is unsustainable, they're gone - spending, borrowing and debt are out of control."

The revised estimates project that the US economy will contract by 2.8 percent this year, more than twice what the White House predicted earlier this year. Romer projected that the economy would expand in 2010, but by 2 percent instead of the 3.2 percent growth the White House predicted in May. By 2011, Romer estimated, the economy would be humming at 3.6 percent growth.

Both Romer and budget director Peter Orszag said this year's contraction would have been far worse without money from the US$787 billion economic stimulus package that Obama pushed through Congress.




 

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