White House Forecasts Higher Budget Deficit

The White House on Monday raised its forecast for this year's U.S. budget deficit by $89 billion due to the recession, millions of new unemployment claims and corporate bailouts. The new estimate predicted a deficit of $1.84 trillion, or 12.9 percent of gross domestic product, for the fiscal year ending September 30. It updated the White House's February forecast of a $1.75 trillion deficit, or 12.3 percent of GDP.

White House officials said the gloomier picture reflected weaker tax receipts as the economy declined and higher costs for social safety-net programs such as unemployment insurance. Spending on government rescues for the financial and automobile industries also played a part.

While the Democratic-led Congress has approved the broad outline of Obama's proposed FY 2010 budget that includes initiatives on healthcare, education and other items, many lawmakers are wary about the deficit outlook. "It's clear that there is much more that we can do to protect our children and grandchildren from the unprecedented trillions in additional debt proposed by the administration," Senate Republican leader Mitch McConnell said in a statement.

The White House countered that Obama inherited huge deficits from his Republican predecessor President George W. Bush. The higher deficits "are driven in large part by the economic crisis inherited by this administration," White House budget director Peter Orszag said on his blog.

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

The U.S. economy shrank at a steep 6.1 percent rate in the first three months of this year.

The new White House figures bring the deficit estimates closer in line with the non-partisan Congressional Budget Office, which has forecast a $1.85 trillion deficit this year and $1.38 trillion in fiscal 2010. To allay worries about the deficit and fend off Republican attempts to paint him as a big spender, Obama in the past week has rolled out a series of announcements aimed at showing he is working to stem the red ink. Last week, he said he could wring $17 billion in savings from his budget by cutting waste in areas from weapons systems and education to the cleanup of abandoned mines.

But the cuts in 121 programs amounted to less than one-half of 1 percent of the total budget for 2010 and even the slim list of reductions is likely to face resistance in Congress.

Obama also unveiled a plan to toughen tax policies for multinational companies that invest abroad and to close loopholes on overseas tax shelters. Many businesses strongly oppose the proposed changes for multinational firms.

Obama on Monday highlighted more savings at a White House forum on making the U.S. healthcare system more efficient.

Reuters May 2009

Translate the text into Russian. № 3.8

Us deficit falls faster than expected

The US budget deficit is declining faster than expected as the rebound of the world’s largest economy helps the government collect more revenue from businesses, households and the two mortgage companies it rescued in the financial crisis.

The brighter fiscal outlook comes as other advanced economies are struggling to reduce their deficits through drastic spending cuts and tax rises at a time of weak or negative growth. Growth figures to be released on Wednesday are expected to show that the 17-country eurozone contracted again.

New figures released by the non-partisan Congressional Budget Office showed the US budget deficit falling to $642bn, or 4 per cent of gross domestic product.

The figures were released as the New York Fed said households were continuing to reduce debt, by $110bn in the first quarter of the year. The number of loans that are more than 90 days behind on a payment also fell from 6.3 per cent to 6 per cent. The figures show the improvement in household finances, but also suggest that consumers will only increase their spending slowly.

The much lower government deficits will reduce pressure on the White House and Congress to find a solution to the country’s longer-term debt woes, which remain as America faces soaring projected health and pension costs later this decade.

The improved outlook is partly the result of increased tax revenues worth $105bn compared to the earlier projection from both businesses and individuals, as the economy continued to recover. The housing rebound also allowed Fannie Mae and Freddie Mac, the mortgage finance giants under government control, to make $95bn in payments to the Treasury. Automatic spending cuts known as sequestration were already factored into the CBO’s calculations, helping drive the declining deficits.

The better picture has also shifted the deadline by which the US needs to raise its borrowing limit to avoid a default on its debt from August until October or even November, the CBO said.

The US debt limit will be reached over the coming weekend but the US Treasury can take a series of “extraordinary” cash-management measures to stave off default in the absence of a deal on Capitol Hill.

The later timeframe for the US to raise its borrowing limit means congressional negotiations over a fiscal deal have advanced much more slowly than previously expected. Democrats, who control the Senate, and Republicans, who control the House, have been bickering over the process by which they could reconcile their two vastly different budgets.

The improving economic indicators have removed some of the incentives for President Barack Obama and congressional Democrats to accept the need for additional spending cuts, particularly if they hit popular government health and pension programmes such as Social Security and Medicare. It will also make Republicans even less willing to consider the need for higher taxes since revenues are already rebounding significantly.

House Republicans are meeting this week to discuss their demands for a debt ceiling increase. The congressional tax-writing committees led by Max Baucus in the Senate and Dave Camp in the House are also feverishly working on their tax reform plans, which could spur momentum for a broader deal.

. Although short-term deficits are declining, by the end of the decade the US fiscal picture will darken again, as the retirement of the baby-boomer generation drives sharp increases in health and pension costs.

The Financial Times May 2013

Translate the text into Russian. № 3.9

U.S. Deficit Dilemma: This Time It’s Worse

Gap of $1.4 trillion will likely get bigger, even if economy revives

Conveying the enormity of the U.S. budget deficit is tough. As humor columnist Dave Barry once observed, millions, billions and trillions sound too much alike. Think golf balls, watermelons and hot-air balloons, and you get a better idea. If today’s tax rates prevail, federal benefits are paid as promised and other spending grows at the same pace as the economy, the deficit will be bigger in 2019 than at any time in Barack Obama’s lifetime – and that’s even if the economy revives.

For the fiscal year that ended Sept. 30, the final deficit tally will be about $1.4 trillion. Measured against the size of the economy, that’s 9.9% of gross domestic product, bigger than any year since 1945. As a share of GDP, tax and other revenues are lower (15%) and spending higher (25%) than anytime in the past 50 years.

President Obama says this isn’t his fault. Of the $9 trillion in deficits projected over the next decade, the White House blames $5 trillion on the past – the Bush tax cuts, the wars in Iraq and Afghanistan and the Medicare prescription-drug bill that a Republican Congress passed and George W. Bush signed without any visible means of support.

The White House pins the other $4 trillion on the consequences of the recession and financial crisis. The real problem isn’t how we got here, it’s where we are: Another day older, and deeper in debt.

The U.S. has confronted big deficits before. “Numbers like this will eventually prompt corrective measures, just as a stark but less worrisome budget outlook did in 1990,” Goldman Sachs economists assured clients last week. This time will be tougher. We are starting from a much deeper hole. When the economy began climbing out of the deep recession of the early 1980s, federal debt – the sum of every annual budget deficit – amounted to less than 30% of the U.S.’s GDP, the value of all the goods and services produced in a year. At the beginning of the 1990s, it was less than 40%. Today, it exceeds 50% of GDP and is rising towards 80%, perhaps 100% of GDP over the next 10 years. Even at today’s low interest rates, the federal government spent about $195 billion on interest in fiscal 2009, more than 10 times the entire NASA budget. A rising debt-to-GDP ratio means interest takes an evergreater slice of the budget, much of that going to the foreigners.

But the president has yet to offer a business plan to demonstrate how he will prevent the U.S. from becoming the world’s largest subprime borrower. “We will be showing more about what we intend to do about the deficit when the president’s budget comes out in February,” promised Peter Orszag, the president’s budget director.

Inside the administration, the policy wonks are divided. Those most pessimistic about the economy talk of more deficit-widening stimulus, arguing that reviving economic growth is the imperative. Deal with deficits later. Those who see an improving, if sluggish, economy say the deficit must be addressed before it causes a crisis of confidence among U.S. creditors and provokes a dollar crash or a sharp increase in bond-market interest rates.

The president’s political advisers are hardly deficit phobes by nature, but see rising public angst about the deficit and Republicans scoring points by talking about it. The latest Wall Street Journal/NBC News poll posed a choice: Should Washington “worry about keeping the budget deficit down even though it may mean it will take longer for the economy to recover” or should it “worry more about boosting the economy even though it may mean larger budget deficits now and in the future?” Some 62% chose deficit-fighting; only 30% picked economic revival.

The rub is that the deficit-fearing public doesn’t want tax increases or spending cuts. “Everyone dislikes the deficit, and everyone dislikes the specific steps you have to take to get out of it,” Mr. Orszag says. Any realistic attack on deficits will both restrain spending on benefits and raise taxes on Americans earning less than $250,000 a year, despite the president’s vow not to do that.

The if-I-were-king answer is to give the economy a little more carefully crafted stimulus now and enact spending restrains and tax increases that take effect in three or four years when the economy is healthier. But even if Mr. Obama could talk Congress into that, the fiscal credibility of the U.S. political system is so weak that few would believe that the promised belt-tightening actually would take effect.

The Wall Street Journal October 2009

Translate the text into Russian. № 3.10