Obama to forecasts $1.75 tn deficit this year in his first budget

President Barack Obama will forecast the biggest US deficit since World War Two in his first budget tomorrow that urges a costly overhaul of the healthcare system and would spend billions to arrest the economy’s freefall.
HT Image
HT Image
Updated on Feb 27, 2009 01:37 AM IST
Copy Link
Reuters | By, Washington

President Barack Obama will forecast the biggest US deficit since World War Two in a budget that urges a costly overhaul of the healthcare system and would spend billions to arrest the economy’s freefall.

An eye-popping $1.75 trillion deficit for the 2009 fiscal year is projected in Obama’s first budget, according to US officials who briefed reporters on the numbers.

That is equal to 12.3 per cent of US gross domestic product -- the largest share since 1945 when the country ran a shortfall of 21.5 per cent of GDP.

Obama will unveil the budget at 11 am EST (1600 GMT). It provides the broad outlines of a more detailed document to be released in April.

The soaring deficit figure sent US Treasury bond prices lower and yields up to three week highs on Thursday.

Gold prices slid to their lowest level in more than a week, after testing all time highs over $1,000 an ounce earlier this month. Spot gold fell to $941.20 an ounce, the lowest since February 17. Stock futures rose.

The budget, for the fiscal year that begins on Oct. 1, 2009, requires passage by Congress to take effect.

While Obama, a Democrat, has broad support with both chambers in Congress controlled by his party, he could face a fight as the sticker shock of huge deficits lead to wariness about more spending for goals such as the healthcare overhaul.


Federal spending is skyrocketing as officials try to jolt the recession-hit economy with public-works spending and tax cuts and bail out the troubled financial industry.

The deficit number reinforced concerns the government will need to sell record amounts of debt to pay for programs aimed at pulling the economy out of a deep recession.

“The budget issue is definitely one for Treasuries because it means greater funding going forward, it means that there is going to be a lot of supply that has to be taken on board by the market,” said Orlando Green, fixed income strategist at Calyon in London.

Obama, who took office on Jan. 20, has pledged to slash the deficit he inherited from former Republican President George W. Bush in coming years, bringing it down to $533 billion, or 3 per cent of GDP by 2013.

Higher taxes on wealthier Americans and a planned drawdown of US troops from Iraq are expected to help rein in the shortfall.

Obama’s budget proposal lays out spending cuts in agriculture subsidies and other areas to meet the deficit-reduction goal.

But spending would increase to meet key objectives.

The budget sets aside $250 billion as a “placeholder” if Obama decides to ask Congress for more money to help the ailing US financial system. No such decision has been made yet, officials said.

The officials said that if the government were to spend $250 billion to inject money into the banking system, that would finance about $750 billion in asset purchases.

The plan also includes a 10-year, $634 billion reserve fund to help pay for the president’s proposed healthcare reforms.

The budget includes billions of dollars in revenues, starting in 2012 and going over many years, from a greenhouse gas emissions trading system, one of Obama’s key proposals to fight global warming.

Obama’s $1.75 trillion budget deficit forecast for this year reflects shortfalls accumulated under Bush as well as new spending proposals under the $787 billion economic stimulus package that the Democratic president signed earlier this month.

His stimulus package and other efforts to revitalize the economy have done little to cheer Wall Street. U.S. stocks prices hit 12-year lows this week.

The United States has experienced 14 months of recession triggered by a financial crisis that has spread across the world. Obama says a big increase in government spending is crucial to avoid economic catastrophe.

A big challenge for Obama will be selling the budget to lawmakers, some of whom may resist cuts to such programs as farm subsidies that are popular in Congress.

“There’s no doubt that there are going to be things that we do that are going to create some political heartburn,” one official said.

“But our fundamental mission is restore the health of the economy, put the budget on a better (footing) moving forward.”

(Additional reporting by Jeremy Pelofsky and Emily Kaiser in Washington and Leah Schnurr in New York, editing by Anthony Boadle and Frances Kerry)

Close Story

Less time to read?

Try Quickreads

  • Brazilian model and sniper Thalito do Valle in a screengrab from her YouTube video. 

    Brazilian model, sniper killed in Russian military strike in Ukraine: Report

    A Brazilian model who had joined the Ukrainian army and trained as a sniper to help fight against invading Russian forces has been killed in combat, according to media reports. Thalita also took part in humanitarian missions and fought the Islamic State in Iraq, according to a report by the Daily Mail. Ex-Brazilian soldier Douglas Burigo, 40, who returned to find Thalita was the only soldier left after the first strike took place, British publication Daily Mail claimed.

  • Residents line up for Covid-19 testing in Shanghai, on Wednesday. Residents of parts of Shanghai and Beijing have been ordered to undergo further rounds of testing following the discovery of new cases in the two cities. (AP)

    Beijing announces first vaccine mandate as Omicron clusters break out in China

    China's capital Beijing will introduce a vaccine mandate for certain public venues from July 11, the first in the country, as millions in China face new curbs and the country tackles fresh Covid-19 clusters including a karaoke lounge-related outbreak in Shanghai and a spreading one in the tourist city of Xian. Restaurants and public transport are exempt. Those who have health problems and cannot be vaccinated are exempt from the mandate.

  • British Prime Minister Boris Johnson speaks during the weekly question time debate, in Parliament in London.

    My job is to 'keep going': British PM amid wave of resignations

    British Prime Minister Boris Johnson defied growing calls for him to step down on Wednesday, telling lawmakers he would "keep going" following a wave of resignations from his government including those of two key ministers. Johnson made the remarks in parliament in response to a question from a lawmaker in his own party who asked if the prime minister thought there were any circumstances in which he should resign.

  • Kalwant Singh, who was convicted in 2016 of bringing heroin into Singapore, is scheduled to be hanged Thursday, July 7.

    Singapore to hang 2nd Indian-origin drug trafficker in 3 months, appeal fails

    An Indian-origin Malaysian drug trafficker, Kalwant Singh, is to be executed early Thursday after a Singapore court dismissed a last-minute appeal to delay his sentence. This comes two months after authorities executed another Indian-Malaysian drug trafficker - Nagaenthran Dharmalingam, 34 - whose lawyers and family appealed on grouDharmalingam, who had been on death row for over a decades he was mentally disabled. He had sought a review on grounds he had given information that helped arrest a key suspected drug trafficker.

  • In a letter to Trudeau, the group, Canadian Hindu Volunteers, said the film “deliberately shows (the) Hindu Goddess in a derogatory manner”. (Shutterstock)

    Kaali movie organisers apologise after uproar over ‘offensive’ poster

    The university responsible for curating the programme and the museum that provided it a platform issued an apology on Tuesday after uproar over a film with a poster found offensive by Hindu groups in Canada. On the other hand, York University, where the film's director is studying, has supported Leena Manimekalai's artistic freedom. A spokesperson for the university also said its logo was used on the controversial poster “without permission”.

Story Saved
Saved Articles
My Reads
Sign out
New Delhi 0C
Wednesday, July 06, 2022