Red ink as far as the eye can see

The White House, issuing its new budget deficit projection this morning, said the numbers look better in the short term but worse in the long run.

Budget Director Peter Orszag said that the deficit for the fiscal year ending Sept. 30 is now projected to be $1.58 trillion -- or 11.2 percent of gross domestic product -- down $262 billion from a previously projected $1.84 trillion or 12.9 percent of GDP. That's still an all-time record by far.

And the red ink looks worse in the next decade because of updated economic data that show that "we inherited a deeper recession than projected in February," Orszag wrote in his message. (Read it here.)  

The White House is projecting that the deficit for 2010-2019 will be $2 trillion higher than it forecast in February, now an eye-popping $9.05 trillion.

"During an economic downturn, one wants to allow the deficit to increase, so deficit reduction should be focused on the out-years -- after the economy has recovered," Orszag writes. "That said, the out-year deficits hover in the range of 4 percent of GDP, which is higher than desirable. Getting the out-year deficit under control is a top priority of the Administration."

Republicans are accusing the administration of fudging the numbers to make the deficit appear smaller for the current year, largely by changing assumptions about the costs of the financial bailout.

"Let’s be clear, this is spin and nothing more," economic adviser Douglas Holtz-Eakin wrote in a memo to House GOP Leader John Boehner. "The lower estimate is strictly the result of the Administration massaging their budget assumptions, not reality. The reality is, putting these gimmicks aside, that the FY 2009 deficit is larger. And, even the Obama Administration will have to admit that the deficit for every year after 2009 is even worse than they admitted earlier this year. (Read his memo here.)

But the nonpartisan Congressional Budget Office put out is own figures this morning, and they closely track the White House's in the short term and are actually lower in the long term.

The CBO estimated that the deficit will be $1.59 trillion in fiscal 2009 and $1.38 trillion in fiscal 2010 as the economy recovers. It also lowered its projection of the 10-year budget deficit to $7.14 trillion.

One reason for the CBO's lower 10-year number: It assumes that the tax cuts put into place by the Bush administration will expire as scheduled by 2011, but Obama's projection keeps the tax cuts for families earning less than $250,000 a year.

Republicans are also warning that Obama's agenda will mean even higher deficits, threatening to bankrupt the country.

"The mushrooming federal debt poses a grave danger to America’s prosperity, threatening to plunge our economy and future generations into the abyss of stagnant growth and national decline. But given the reckless way the administration is spending your money, you’d never know that the debt is a cause for concern. Staggering sums of money have been tossed around so casually that the very notion of dishing out 'trillions' of dollars is no longer a shock to many in Washington," Representative Eric Cantor, the No. 2 House Republican, writes in an op-ed for Politico.

American can't afford Obama's health care plan, estimated to cost $1 trillion over the next 10 years, Cantor argues.

"In this economy, as families review their own budgets and adjust accordingly, they expect their government to act in a manner that reflects the challenging times we are in. Much of the public frustration with Washington has been evident in town halls across the country, and many Americans believe the administration’s top priority should be cutting the federal deficit in half by the end of his first term," Cantor writes.

"Instead, the administration seeks to force a massive new government health care program that most people don’t want and certainly cannot afford. And they will do so even if it means imposing new taxes on the middle class and small business job creators. Now is not the time to double down on a deficit that is $2 trillion more than the administration projected, but instead to moderate spending, and move forward responsibly."

Boehner added his criticism in a statement:

“Today’s reports confirm what the White House has been trying to hide: the Democrats’ out-of-control spending binge is burying our children and grandchildren under a mountain of unsustainable debt. Instead of putting the brakes on Washington’s spending habits as they promised they’d do, Democrats have stepped on the accelerator and spent taxpayer dollars with reckless abandon all year, refusing to make tough choices and putting all the sacrifice on future generations. That’s not leadership; it’s negligence.

“The costly government-run health care plan put forth by President Obama and Speaker Pelosi is just the latest in a long line of expensive Democratic experiments that will add to the deficit, raise taxes on families and small businesses, and cost more American jobs. It’s time for the Administration and congressional Democrats to face the consequences of this dangerous fiscal agenda and change course."

UPDATE: Democratic House Speaker Nancy Pelosi, however, blamed the Bush administration for running up the deficits and following policies that led to the need for costly rescue measures, including the $787 billion economic stimulus package that passed without a single Republican vote in the House.

"Today's deficit projections are a legacy of Bush Administration fiscal policies that turned our surpluses into deficits and led the way toward an economic and financial crisis that has required historic short-term intervention. If pay-as-you-go principles had been in place for the last 8 years, this deficit would be $5 trillion smaller over the next decade," she said in a statement.

"We are working with President Obama to restore fiscal responsibility and to ensure that statutory pay-go, already passed by the House, is signed into law. Under President Obama's leadership, we have ended the Bush-era practice of hiding the costs of the wars in Iraq and Afghanistan -- gimmicks and accounting tricks that have no place in our budget process. And working with the President, Congress has laid out a budget blueprint that reduces our deficit, lays a new foundation for job creation and economic growth, and invests in more broadly shared prosperity for all Americans. "But we cannot reduce the deficit in the long-term without getting health care costs under control. Nor can health care reform add to the challenge. That is why our health insurance reform is fully paid for and will not increase the deficit.

"These deficit projections send a clear message: fiscal discipline must be the order of the day as we come out of this recession. Our economic recovery efforts are starting to pay dividends for America's families. Today's announcement that consumer confidence and home prices are on the rise represent new signs that our economy is moving in the right direction. And now, we must remain on-track to tackle our fiscal challenges, advance policies to promote job growth, reinforce the foundation of our prosperity, and return the United States to the days of financial stability."