Deficit Projection Hits $1.6 Trillion
Watch for deficit hawks to hit the roof as President Obama proposes a $3.8 trillion budget for fiscal 2011 that shoots up the deficit to $1.6 trillion. According to this plan the red ink goes down to $700 billion by 2013. Deficits will average 4.5% of the economy.
Details of the administration’s budget headed for Congress include an additional $100 billion to attack painfully high unemployment. The proposed $3.8 trillion budget would provide billions more to pull the country out of the Great Recession while increasing taxes on the wealthy and imposing a spending freeze on many government programs.
Administration projections show the deficit never dropping below $700 billion, even under assumptions that war costs will drop precipitously to just $50 billion in some years instead of more than three times that this year and next.
But would conservatives want to overturn tax breaks for the middle class?
On the anti-recession front, congressional sources said Obama’s new budget will propose extending the popular Making Work Pay middle-class tax breaks of $400 per individual and $800 per couple through 2011. They were due to expire after this year.
And will they applaud the pay-as-you-go rules?
Also on the deficit front, the president has endorsed a pay-as-you-go proposal that passed the Senate last week. It would require any new tax cuts or entitlement spending increases to be paid for, and he has promised to create a commission to recommend by year’s end ways to trim the deficits. However, a legislatively mandated panel was rejected in a Senate vote last week. Republicans opposed establishing the panel because it might recommend tax increases to close the deficit.
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