Friday, March 20, 2009

Glimmer of Hope for the Political Element of the PFF ratio; Spending May be Stymied

WASHINGTON (Dow Jones)--The Congressional Budget office Friday substantially downgraded its forecast for the federal government's fiscal position, spelling gloomy news for President Barack Obama as he tries to win support for his $3.55 trillion budget request for fiscal year 2010. The non-partisan congressional number cruncher said that it now expects the federal government's budget deficit to hit $1.8 trillion in the current fiscal year, which ends in September, down from $1.2 trillion it estimated two months ago. Looking ahead to fiscal year 2010, the CBO said the federal government budget deficit will double to $1.4 trillion from the $700 billion it forecast in January. As for the president's budget request, the CBO said it would add $4.8 trillion to the baseline deficit forecast over the next decade. With Republicans and even some Democrats in Congress already questioning Obama's ambitious spending plans, the CBO revision could make the president's job of selling the budget to lawmakers that much more difficult. Congress is set to begin working in earnest next week on its budget resolution where it sets its top line spending figure that allows individual appropriation committees to start working on detailed spending plans. According to a senior administration official, the bleaker numbers from the CBO won't lead to a scaling back of the president's ambitions. The official said the administration was confident that Congress would adopt a budget resolution that closely followed the model set out by Obama's request. The centerpiece of the president's budget is universal health care for all, a plan that the administration said would initially cost a down payment of $634 billion over the next decade. Critics have suggested this figure could double over the longer term. One positive note to come out of the CBO revised forecast is that it expects the recession to end by the autumn due to the impact of the economic stimulus plan and the aggressive efforts by the Treasury and the Federal Reserve to stabilize the financial markets. It said U.S. gross domestic product would drop by 1.5% in fiscal year 2009, before bouncing back sharply by 4.1% in each of 2010 and 2011. The unemployment rate, which has been escalating sharply over the last year, will peak at 9.4% in late 2009 or early next year, the CBO said. It will remain above 7% through 2011. The rate is currently at 8.1%. -By Corey Boles, Dow Jones Newswires; 202-862-6601; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires March 20, 2009 14:28 ET (18:28 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 02 28 PM EDT 03-20-09

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