Skyrocketing Deficit May Seal Fate of Obamacare Plans

I said this from the begining that this health care would not pass and it wont.



WASHINGTON -- The White House on Tuesday said this year's federal budget deficit will reach $1.58 trillion, less than projected this spring but still historically high — and offered a bleak fiscal forecast that threatens to pose serious problems for President Barack Obama's economic agenda.

"Overall," the new projection "underscores the dire fiscal situation that we inherited and the need for serious steps to put our nation back on a sustainable fiscal path," said budget director Peter Orszag.

The new budget deficit forecast, which is expected to be close to estimates due later Tuesday from the nonpartisan Congressional Budget Office, is below the White House's $1.84 trillion May deficit number for the fiscal year ending Oct. 1, as administration estimates of funding needed for financial industry rescues declined.

But the new budget figure still means the deficit would total 11.2 percent of gross domestic product, an unusually high percentage. And the White House's "mid-session review" of the budget predicted that, during the next 10 years, deficits would total about $9.05 trillion, up from the $7.1 trillion it had forecast.

"The administration's economic projections show that we inherited a deeper recession than projected in February," Orszag said.

The news could provide fresh ammunition for congressional lawmakers already wary of adding billions to the budget to overhaul the nation's healthcare system, and the timing of the new figure's release suggested the administration is fearful of its impact. Not only is Congress in the middle of a monthlong summer break but also Obama is in his third day of his vacation.

The data were unveiled a half-hour after Obama took a brief break from his vacation to announce formally that he was nominating Federal Reserve Board Chairman Ben Bernanke to another term, a move seen as an effort to reassure financial markets that the administration is committed to its economic recovery program. Bernanke, who has chaired the Fed since February 2006, will need Senate confirmation for a new term.

But Democratic uneasiness over the economy may have been evident in the statement of support from Senate Banking Committee Chairman Christopher Dodd, D- Conn.

"While I have had serious differences with the Federal Reserve over the past few years, I think reappointing Chairman Bernanke is probably the right choice," he said. "Chairman Bernanke was too slow to act during the early stages of the foreclosure crisis, but he ultimately demonstrated effective leadership, and his reappointment sends the right signal to the markets."

Tuesday's economic news did not stop Republicans from warning that the new number will cause problems, nor did it stop independent analysts from expressing similar concerns.

"His administration finally admits the real impact his economic plan will have on our nation's fiscal future, an admission that includes roughly $9 trillion in new debt," said House Republican Conference Chairman Mike Pence of Indiana.

"Bottom line: The budget outlook is worse, and dangerous," Douglas Holtz-Eakin, an economist and a campaign adviser last year to GOP presidential nominee John McCain, argued in a memo to House Republican Leader John Boehner of Ohio. "The lower estimate is strictly the result of the administration massaging their budget assumptions, not reality."

Obama faces huge problems when Congress returns. His health care overhaul is already in some trouble, as senators and representatives members battle over the best way to change the system.

One of the major concerns has been cost. Obama is pushing a plan with a price tag of nearly $1 trillion, while other Democratic-authored efforts appear to cost only somewhat less.

One of the White House's major arguments this year is that revamping the health care system ultimately would boost the economy and bring down the deficit.

"In addition to avoiding making the problem any worse, we need to address the key driver of our long-term deficits: health care costs," Orszag said. "The federal government simply cannot be put on a fiscally sustainable path without slowing the rate of health care cost growth in the long run."

"That is why the administration is insistent that healthcare reform not only be deficit neutral over the next 10 years but also incorporate changes that will help reduce the deficit thereafter," he said.