White House forecasts higher U.S. budget deficit

The White House on Monday pushed up its forecast for the U.S. budget deficit for this year by $89 billion, reflecting the recession, a raft of new unemployment claims and corporate bailouts.

A fresh estimate of the deficit showed it coming in at $1.84 trillion — representing a massive 12.9 percent of gross domestic product — in the current 2009 fiscal year that ends on Sept. 30. A prior White House forecast released in February projected a deficit of $1.75 trillion, or 12.3 percent of GDP.

The report may add to the political challenges facing President Barack Obama as he seeks to push through a new healthcare plan and other big domestic initiatives.

A White House official said the gloomier deficit picture reflected weaker tax receipts as the economy declined and higher costs for social safety-net programs such as unemployment insurance. Spending on the government rescues for the financial and automobile industries was also a factor in the higher deficit, said the official, who spoke to reporters on condition of anonymity.

While the Democratic-led Congress has given its approval to the broad outline of Obama's proposed budget for the 2010 fiscal year that includes initiatives on healthcare, education and other items, some moderate Democrats and a number of Republicans have expressed wariness about the deficit outlook.

Republicans contend that Obama's agenda would sharply increase the size of government and add to a mountain of debt but Democrat Obama counters that the enormous deficits are a legacy of President George W. Bush, a Republican.

The report from the White House Office of Management and Budget also revised the deficit higher for the 2010 fiscal year, forecasting it at $1.26 trillion, or 8.5 percent of GDP, and up $87 billion from the $1.17 trillion projection given in February.

After taking office in January, Obama released a bare-bones version of his budget in February that offered a spending plan for 2010 carrying a price tag of $3.55 trillion. The White House revised up the size of the spending plan to $3.59 trillion.