AP sources: $2 trillion higher deficit projected

The Obama administration expects the federal deficit over the next decade to be $2 trillion bigger than previously estimated, White House officials said Friday, a setback for a president already facing a Congress and public wary over spending.

The new projection, to be announced on Tuesday, is for a cumulative 2010-2019 deficit of $9 trillion instead of the $7 trillion previously estimated. The new figure reflects slumping revenues from a worse economic picture than was expected earlier this year. The officials spoke only on the condition of anonymity ahead of next week's announcement.

Ten-year forecasts are volatile figures subject to change over time. But the higher number will likely create political difficulties for President Barack Obama in Congress and could create anxiety with foreign buyers of U.S. debt.

Earlier this week, the White House revealed that it expects a budget deficit for the fiscal year ending Sept. 30 to be nearly $1.6 trillion. That figure was lower than initially projected because the White House scratched out $250 billion that it had initially added to the budget as a bank rescue contingency. The administration ultimately did not ask Congress for that money.

Still that number, together with the 10-year projection, represents a huge obstacle for an administration trying to undertake massive policy overhauls in health care and the environment.

Economists predict a slow recovery from the recession, further testing Obama's goal of cutting the deficit to $512 billion in 2013. Even as he seeks higher revenues to pay for new climate change and health care measures, the president could face pressure to increase revenues or make deep spending cuts to tame the deficit.

Earlier long-term estimates released in February and May relied on now-outdated projections of economic growth. Then, the White House predicted the economy would shrink by 1.2 percent this year, but the economy shrank 6.4 percent in the first quarter, the worst in nearly three decades.

Both the White House and the Congressional Budget Office scheduled announcements for Tuesday on their new budget estimates. Relying on more pessimistic economic projections than the White House, the CBO earlier this year predicted deficits totaling $9.1 trillion over 2010-19. Those predictions were based on expectations that the economy would shrink by 2.2 percent this year.

In its earlier projections, the White House said the deficit would be manageable if it slides to 3 percent of gross domestic product. Earlier projections barely met that standard — even after relying on optimistic assumptions like the wars in Iraq and Afghanistan costing $50 billion a year instead of the $130 billion budgeted for 2010.

Now, the deficits could easily exceed 4 percent of GDP, even after cost-cutting efforts or new revenues claimed in Obama's budget.

Such deficits have always prompted Congress and the White House to take politically painful steps to curb them, such as former President Bill Clinton's tax-heavy 1993 deficit reduction plan. A companion effort by Obama could force him to break his promise to not raise taxes on individuals making less than $200,000 a year.

By JIM KUHNHENN and ANDREW TAYLOR, Associate Press Writer