By Julianna Goldman and Roger Runningen
Jan. 6 (Bloomberg) -- President-elect Barack Obama said the U.S. will soon face a $1 trillion budget deficit and similar shortfalls are in store “for years to come” as the government grapples with a recession and other spending demands.
A “trillion dollar deficit will be here before we even start the next budget,” Obama said after meeting in Washington with his economic advisers, including Peter Orszag, who has been designated as director of the Office of Management and Budget. “Potentially we’ve got trillion-dollar deficits for years to come, even with the economic recovery we are working on.”
Obama is pressing Congress to act quickly on an economic stimulus plan of about $775 billion over two years to pull the U.S. out of a recession. That will add to pressure on the fiscal 2010 budget that Obama will be submitting to lawmakers in the coming weeks. The deficit was $455 billion in fiscal 2008. President George W. Bush’s administration hasn’t released a forecast for this year’s shortfall.
Obama said he wants his budget and economic teams to craft a stimulus plan that stabilizes the economy and begins the process of “getting our budget under control.” That includes barring lawmakers from inserting pet spending projects, known as earmarks, into the legislation, he said.
‘Unsustainable’ Spending
Some congressional Democrats, including Senate Budget Committee Chairman Kent Conrad of North Dakota, are calling the incoming administration to come up with a long-term plan to cut the deficit. Conrad said today on Bloomberg TV that the nation’s financial situation is “unsustainable for the long term.”
A plan for dealing with budget imbalances “has to be put in place” as the new administration and Congress craft a stimulus plan, he said.
Obama said he agrees.
“It’s not just Democratic or Republican colleagues on the Hill that are concerned about this, I’m concerned about this,” Obama said. “I’m going to be willing to make some very difficult choices in how we get a handle on this deficit.”
The Congressional Budget Office will issue an economic snapshot of the budget and economic outlook tomorrow.
Advisers
Along with Orszag, those who took part in the session were Timothy Geithner, Treasury secretary-designate; Christina Romer, director-designate of the Council of Economic Advisors and Lawrence Summers, director-designate of the National Economic Council.
The meeting was called to “review the medium-term budget outlook” and discuss crafting a fiscal 2010 budget that puts the U.S. on a path to deficit reduction as the economy recovers, Obama’s transition office said in a statement.
He wouldn’t give an estimate of how big the 2010 spending plan would be. The most recent budget submitted by Bush was $3.1 trillion for the 2009 fiscal year, which started last Oct. 1.
Obama is likely to submit a broad outline of his 2010 budget plan by mid-to-late February, followed by a full spending blueprint in April, according to budget experts.
“There are no set rules” for presenting a budget in a year of transition, said Brian Riedl, a budget analyst at the Heritage Foundation, a Washington research group promoting free enterprise and small government.
Early Preview
The early preview of Obama’s budget, perhaps running a dozen or so pages, may contain the Obama administration’s “rhetorical assumptions” about the cost of specific programs with little detail, he said.
The Congressional Budget Act requires the president’s budget to be submitted between the first Monday in January and the first Monday in February, said Stan Collender, a budget analyst in Washington.
That presents a challenge for a new president because the February deadline is only about two weeks after Inauguration Day. As a result, the new administration usually submits a brief, top-line budget late in February and then a more detailed submission a month or two afterwards, said Collender, a former House and Senate Budget Committee analyst.
Obama may propose a fiscal 2010 budget of as much as $3.4 trillion for the year beginning Oct. 1, a record, and up about 9 percent from the budget Bush submitted almost a year ago, Riedl estimated. The increase would partly reflect the $700 billion bailout for Wall Street and the economic stimulus package, he said.
