Deficit to hit $1.3 trillion in 2010, CBO says

Deficit to hit $1.3 trillion in 2010, CBO says

The U.S. budget deficit will hit $1.3 trillion in 2010, congressional budget analysts estimated Tuesday, in a fresh piece of grim news for President Barack Obama.

The estimate from the Congressional Budget Office assumes current laws and policies remain unchanged.

Economic growth will also probably be "muted" for the next few years, the CBO said in its budget outlook for 2010.

The CBO's estimates come about a week before Obama transmits his fiscal 2011 budget to Congress, on Feb. 1. Obama is under mounting pressure to cut the deficit but also to create jobs, in the wake of last week's victory in a special Senate election in Massachusetts by Republican Scott Brown.

In his first State of the Union address on Wednesday night, Obama is expected to call for a three-year freeze in spending for a portion of the federal budget in a first step toward reining in the deficit.

The federal government recorded a staggering deficit of $1.4 trillion in fiscal 2009 -- more than three times as much as in 2008.

The government has reported a consistent flow of red ink in the past several months. In December, the federal government ran a budget deficit of $91.8 billion, marking the 15th consecutive month in which outlays exceeded receipts.

Obama is planning to outline a series of economy-related priorities in his State of the Union address, including about deficit reduction.

The proposed spending freeze would reportedly stop increases in some categories of federal funding not related to national security but would shave no more than $15 billion off next year's projected deficit of well above $1 trillion.

Meanwhile, the Senate on Tuesday is likely to reject a White House-backed plan to create a commission charged with finding ways to cut the deficit. Obama has told lawmakers that if the vote fails, he'll create such a task force through an executive order.

Before it ran into trouble after Brown's election, the White House-backed health-care overhaul was projected to cut the deficit by between $109 billion and $130 billion over 10 years. But congressional Democrats have had to rethink their strategy for getting health reform proposals approved, following the loss of the party's 60-seat majority in the Senate.

By Robert Schroeder, MarketWatch

7:36 AM

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